THE ENVIRONMENTAL ANALYSIS FRAMEWORK APPROACH TO INTERNATIONAL LOCATION
GLOBAL SOURCING & MANUFACTURING LOGISTICS: Superimposing Complexities SUPPLY SOURCES PRODUCTION UNITS DISTRIBUTION CONSUMERS
GLOBAL SOURCING & MANUFACTURING LOGISTICS: Superimposing Complexities SUPPLY SOURCES CUSTOMS C C C PRODUCTION UNITS C C C DISTRIBUTION C C CONSUMERS
GLOBAL SOURCING & MANUFACTURING LOGISTICS: Superimposing Complexities SUPPLY SOURCES C CUSTOMS C $/£ $/£ FOREIGN EXCHANGE C PRODUCTION UNITS $/£ C $/£ C C DISTRIBUTION C C $/£ CONSUMERS
GLOBAL SOURCING & MANUFACTURING LOGISTICS: Superimposing Complexities Customs SUPPLY SOURCES Foreign Exchange C $/£ $/£ Local, Intra-firm JVs, Third Parties, etc. C PRODUCTION UNITS $/£ C Joint Ventures $/£ C Subcontractors C Alliances DISTRIBUTION C C $/£ Third Party CONSUMERS
THE “META-FRAMEWORK” (The Potpourri of all Frameworks) UNDERSTAND THE FOUR DRIVERS OF THE INTERHATIONALIZATION OF YOUR MANUFACTURING PROCESS TO EVALUATE POTENTIAL OPERATIONAL STRATEGIES USE A FOUR LEVELS ANALYSIS PROCEDURE TO ASSESS A SPECIFIC PROPOSAL FOR LOCATING ABROAD USE A MATRIX OF IMPORTANT VARIABLES TO UNDERSTAND AND STRUCTURE THE TRADEOFFS
INTERNATIONALIZATION POTENTIAL OF THE MANUFACTURING PROCESS MARKET DRIVERS MANUFACTURING PROCESS INTERNATIONALIZATION POTENTIAL TECHNOLOGY DRIVERS COST DRIVERS POLITICAL & ECONOMIC DRIVERS
MARKET DRIVERS AGGRESSIVE ENTRANCE OF FOREIGN COMPETITORS IN DOMESTIC MARKET SIGNIFICANT GROWTH IN FOREIGN DEMAND CHANGING COMPETITIVE PRIORITIES FROM COST TO: Time Delivery Quality Product Flexibility CHANGES IN THE NATURE OF PLC MARKET SOPHISTICATION (“STATE OF THE ART” MARKETS)
TECHNOLOGY DRIVERS TECHNOLOGICAL SOURCES OF CRITICAL COMPONENTS SOURCES OF PROCESS TECHNOLOGY OPPORTUNITIES FOR TRANSFER OF TECHNOLOGY/TECHNOLOGY SHARING SOURCES OF HIGH QUALITY TECHNICAL LABOR
COST DRIVERS DIRECT LABOR OVERHEAD CAPITAL INTENSITY OF PRODUCTION FACILITIES TOTAL QUALITY COSTS GOVERNMENT INCENTIVES INTEREST RATE SUBSIDIES TAX HOLIDAYS COST SHARING ON EQUIPMENT
POLITICAL & ECONOMIC DRIVERS EXCHANGE RATE FLUCTUATIONS BILATERAL AND MULTILATERAL TRADE AGREEMENTS EXPECTED POLITICAL EVENTS MAIN MACROECONOMIC VARIABLES
ASSESSMENT OF OPERATIONAL STRATEGIES INTERNATIONAL LEVEL Bilateral Agreements, Multilateral Agreements and Industries COUNTRY LEVEL Macroeconomic Conditions, Government Strategies and Policies INDUSTRY LEVEL Local and Global COMPANY LEVEL
AVAILABLE TOOLS OF ANALYSIS COUNTRY LEVEL Economic Framework for Comparative Advantage of Important Production Factors From Competitive Priorities, Derive Important Dimensions for Country Comparisions INDUSTRY LEVEL Five Forces Model & “Mega-Force” for Feasibility Analysis International Strategy Frameworks COMPANY LEVEL Value Added Chain Manufacturing Strategy Framework Corporate Objectives • Marketing Strategy Order Winners & Qualifiers • Process Choice Infrastructural Decisions
Quality (labor related) Product Flexibility Delivery DIMENSIONS PRIORITIES Price Quality (labor related) Product Flexibility Delivery DIMENSIONS Labor Cost Labor Skill High JAPAN KOREA TAIWAN Labor Skill THAILAND CHINA Low Labor Cost Low High
MATRIX OF IMPORTANT VARIABLES TO ASSESS SPECIFIC PROPOSALS VARIABLES: Country Environment Competitive Environment Company Characteristics MARK THE FAVORABLE CONDITIONS FOR YOUR PROPOSAL PROPOSAL MIGHT INVOLVE DECISIONS ON DEVELOPMENT OF MANUFACTURING FACILITIES TECHNOLOGY CHOICE CHOICE OF ALTERNATIVE ENTRY MODES Exporting, Licensing, Subcontracting, Joint Ventures
NOTE: MF = Manufacturing Facilities AUTO = Automation EX = Export LI = Labor Intensive
COMPETITIVE SITUATION Low <<<>>>High Industry Concentration -- MF Relative Competitive Strength EX MF Local Barriers to Entry MF EX or MF/JV Local Competitors’ Strength MF EX Global Competitors’ Strength MF EX Supplier Availability EX MF Local Substitutes MF EX Global Substitutes MF EX Strength of Customers FM EX Government Strategies Volatility MF EX Government’s Strength as: Buyer -- FM Supplier FM EX Entrant MF EX
COMPANY CHARACTERISTICS Low <<<<<>>>>>High