Operation Management in International companies | Management Optional Notes for UPSC PDF Download

International Operations Management

1. Global Perspective of Operations Management:

   • Operations Management is now more global.
   • Even if a company sells only in its home country, it can still have international operations.

2. International Business Operations:

   • This means a company might get its materials or products from other countries.
   • It might also produce its goods in other countries.

3. Adapting to Favorable Conditions:

   • Smart companies use good conditions anywhere in the world to benefit their business.

4. Dynamic Business Approach:

   • A lively or dynamic company grabs opportunities worldwide.

5. Defining International Operations Management:

   • This term means the activities that change things in a company that works internationally.

Benefits of Going International

• Going global has several advantages compared to staying within one country.

1. Cost of Production Advantage:

   • Companies operating internationally can benefit from cost advantages in different locations.
   • For example, a multinational company (MNC) can set up a branch anywhere with the lowest production costs. In China, for instance, wages are much lower than in Mexico, and only a small fraction compared to the US or Japan.

2. Scale of Economies Advantage:

   • MNCs can make use of scale of economies, meaning they benefit from producing goods or services on a large scale.
   • An example is Coca-Cola, which sells the same soft drink in over 160 countries worldwide.
   • This approach also takes advantage of the experience curve, where the more you produce, the more efficient and cost-effective you become.
   • Two important considerations for this strategy are: a) the product must meet customer needs, and b) there must be a big enough demand to support large-scale production.

3. Creating Value through International Business:

   • International businesses aim to make new values through their operations.
   • For example, they might group manufacturing for nearby countries to save money on production and shipping costs.
   • Multinational companies (MNCs) can choose cheaper suppliers abroad, reducing transportation costs.
   • They can also sell the same products in multiple countries and move production between plants in different countries based on currency exchange rates.

4. Significance of Operations Management:

   • Operations management is crucial for a company, especially in the international market.
   • It helps a company compete successfully globally.
   • Other important areas include Total Quality Management (TQM), Business Process Re-engineering, New Product Development, Lead Time, Greater Flexibility, Business Process Outsourcing, Six Sigma, and Reduced Cost of Production.

5. Model of International Operations Management:

   • A model of international operations management is like a plan for how companies can operate on a global scale.
   • It involves managing the conversion process efficiently.

Model for International Operations Management

Strategic Issues In International Operations Management

The effective coordination of Operations Management in an international business is crucially tied to the overall corporate strategy. In essence, the firm's corporate strategy should establish the framework for planning and executing activities related to operations management. For instance, in the case of a company adopting a differentiation strategy, the focus of international operations management should be on developing distinctive goods and services to establish a unique position distinct from others or competitors.

International Production Strategies

1. Manufacturing Compatibility:

   • Compatibility means how well foreign investment matches the company's competitive strategies.
   • Strategies include:
     • Cost minimization: Focus on achieving economies of scale and utilizing low-cost labor markets in regions like Asia, Mexico, and Eastern Europe.
     • Dependability: Ensuring trust in the company's products, delivery, and pricing promises.
     • Quality: Consistently meeting or exceeding customer expectations; essential for competitive advantage.
     • Flexibility: Ability to produce different products and adjust output volume, linked to agile manufacturing.
     • Research & Development (R&D): Directed efforts towards scientific knowledge and product/process innovations.

2. Production Configuration:

   • Involves determining the layout of production facilities, considering:
     • Centralized production: One manufacturing facility serves multiple markets.
     • Regional production: Facilities cater to specific regional markets.
     • Multi-domestic approach: Establishing production facilities in various countries to meet local demands.
   • Factors influencing facility location include country resources, technology, product characteristics, government policies, and organizational considerations.

3. Production Coordination:

   • Involves integrating activities across the international supply chain, including purchasing, warehousing, shipment, and inbound logistics.
   • Outbound logistics must also be coordinated effectively to reach customers competitively.

4. Control of Production:

   • Involves measuring performance to respond to changing conditions.
   • Organizational structure should coordinate activities according to the plan.
   • Strategies should be flexible to accommodate deviations from the plan due to uncontrollable factors while minimizing time and cost variations.

International Logistics Management