2
The Global Environment
and Operations Strategy
PowerPoint presentation to accompany
Heizer and Render
Operations Management, 10e, Global Edition
Principles of Operations Management, 8e, Global Edition
PowerPoint slides by Jeff Heyl
© 2011 Pearson Education
2-1
Outline

Global Company Profile: Boeing

A Global View of Operations

Developing Missions And Strategies

Achieving Competitive Advantage Through Operations
strategy (differentiation ,cost ,and response)

Ten Strategic OM Decisions

Strategy Development and Implementation

Global Operations Strategy options (international –
multinational – global - transnational )
© 2011 Pearson Education
2-2
Learning Objectives
By the end of this chapter you should
be able to:
1. Define mission and strategy
2. Identify and explain three strategic approaches
to competitive advantage
3. Identify and define the 10 decisions of OM
4. Understand the significant key success factors
and core competencies
5. Identify and explain four global operations
strategy options
© 2011 Pearson Education
2-3
Global company
Some Boeing Suppliers (787)
Firm
Latecoere
Labinel
Dassault
Country
France
France
France
Messier-Bugatti
Thales
France
France
Messier-Dowty
Diehl
France
Germany
© 2011 Pearson Education
Component
Passenger doors
Wiring
Design and
PLM software
Electric brakes
Electrical power
conversion system
and integrated
standby flight display
Landing gear structure
Interior lighting
2-4
Some Boeing Suppliers (787)
Firm
Cobham
Rolls-Royce
Smiths Aerospace
Country
UK
UK
UK
BAE SYSTEMS
Alenia Aeronautics
UK
Italy
Toray Industries
Japan
© 2011 Pearson Education
Component
Fuel pumps and valves
Engines
Central computer
system
Electronics
Upper center
fuselage &
horizontal stabilizer
Carbon fiber for
wing and tail units
2-5
Some Boeing Suppliers (787)
Firm
Fuji Heavy
Industries
Kawasaki Heavy
Industries
Country
Japan
Component
Center wing box
Japan
Teijin Seiki
Mitsubishi Heavy
Industries
Japan
Japan
Forward fuselage,
fixed section of wing,
landing gear well
Hydraulic actuators
Wing box
Hafei Aviation
China
Parts
© 2011 Pearson Education
2-6
Some Boeing Suppliers (787)
Firm
Korean Aviation
Saab
© 2011 Pearson Education
Country
South
Korea
Sweden
Component
Wingtips
Cargo access doors
2-7
Global Strategies
 Benetton – moves inventory to stores
around the world faster than its
competitors by building flexibility into
design, production, and distribution
 Sony – purchases components from
suppliers in Thailand, Malaysia, and
around the world
 Volvo – considered a Swedish company
but until recently was controlled by an
American company ( Ford).
© 2011 Pearson Education
2-8
Growth of World Trade
35 –
30 –
Percent
25 –
Collapse of the
Berlin Wall
20 –
15 –
10 –
5–
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0 –|
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 (est*)
Year
Figure 2.1
© 2011 Pearson Education
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Reasons to Globalize
Reasons to Globalize
Tangible 1. Reduce costs (labor, taxes, tariffs, etc.)
Reasons 2. Improve supply chain
3. Provide better goods and services
4. Understand markets
Intangible 5. Learn to improve operations
Reasons 6. Attract and retain global talent
7. Cultural and Ethical Issues
© 2011 Pearson Education
2 - 10
Reduce Costs
 Foreign locations with lower wage
rates can lower direct and indirect
costs (salary-electricity ….etc)
© 2011 Pearson Education
2 - 11
Improve the Supply Chain
 Locating facilities closer to
unique resources
 Auto design to California
 Sport shoe production to China
 Perfume manufacturing in France
© 2011 Pearson Education
2 - 12
Provide Better Goods
and Services
 Satisfy the different needs of
goods and services
 On-time deliveries
 Cultural variation
 Improved customer service
© 2011 Pearson Education
2 - 13
Understand Markets
 Interacting with foreign customers
and suppliers can lead to new
opportunities
 Cell phone
design from
Europe
 Cell phone
fads from
Japan
 Extend the product life cycle
© 2011 Pearson Education
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Learn to Improve
Operations
 Remain open to the free flow of
ideas
 General Motors partnered with a
Japanese auto manufacturer to
learn new approaches for
production and inventory control
© 2011 Pearson Education
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Cultural and Ethical Issues
 Cultures and attitude can be quite
different towards
 Child labor
 Lunch breaks
 Environment
 Intellectual property
© 2011 Pearson Education
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Many factors must be
Considered
 National literacy rate
 Work ethic
 Rate of innovation
 Tax rates
 Rate of technology
change
 Inflation
 Number of skilled
workers
 Political stability
 Product liability laws
 Export restrictions
 Availability of raw
materials
 Interest rates
 Population
 Phone system
 Variations in language
© 2011 Pearson Education
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Developing Missions and
Strategies
The Mission statements tell an
organization where it is going
While The Strategy tells the
organization how to get there
© 2011 Pearson Education
2 - 18
Mission
 Mission - where are
you going?
 Organization’s
purpose for being
 Answers ‘What do
we provide society?’
© 2011 Pearson Education
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Merck
Our mission is to provide society with
superior products and services—
innovations and solutions that improve
the quality of life and satisfy customer
needs—to provide employees with
meaningful work and advanced
opportunities and investors with a
superior rate of return.
Figure 2.2
© 2011 Pearson Education
2 - 20
Palmer Hospital
Palmer Hospital for Children provides state-of-the-art, family
centred healthcare focused on
restoring the joy of childhood in
an environment of compassion,
healing, and hope.
Figure 2.2
© 2011 Pearson Education
2 - 21
Factors Affecting Mission
Philosophy
and Values
Profitability
and Growth
Environment
Mission
Customers
Public Image
Benefit to
Society
© 2011 Pearson Education
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Sample Missions
Company Mission
To manufacture and service an innovative, growing, and
profitable worldwide successful communications business
that exceeds our customers’ expectations.
Operations Management Mission
To produce products consistent with the company’s mission
as the worldwide low-cost manufacturer.
Figure 2.3
© 2011 Pearson Education
2 - 23
Sample Missions
Sample OM Department Missions
Product design
To design and produce products and
services with outstanding quality and
inherent customer value.
Quality management
To attain the exceptional value that is
consistent with our company mission and
marketing objectives by close attention to
design, production, and field service
operations
Process design
To determine, design, and produce the
production process and equipment that will
be compatible with low-cost product, high
quality, and good quality of work life at
economical cost.
Figure 2.3
© 2011 Pearson Education
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Sample Missions
Sample OM Department Missions
Location
To locate, design, and build efficient and
economical facilities that will yield high
value to the company, its employees, and the
community.
Layout design
To achieve, through skill, imagination, and
resources in layout and work methods,
production effectiveness and efficiency
while supporting a high quality of work life.
Human resources
To provide a good quality of work life, with
well-designed, safe, rewarding jobs, stable
employment, and equitable pay, in exchange
for outstanding individual contribution from
employees at all levels.
Figure 2.3
© 2011 Pearson Education
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Sample Missions
Sample OM Department Missions
Supply-chain
management
To collaborate with suppliers to develop
innovative products from stable, effective,
and efficient sources of supply.
Inventory
To achieve low investment in inventory
consistent with high customer service levels
and high facility utilization.
Scheduling
To achieve high levels of productivity and
timely customer delivery through effective
scheduling.
Maintenance
To achieve high utilization of facilities and
equipment by effective maintenance of
facilities and equipment.
Figure 2.3
© 2011 Pearson Education
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Strategic Process
Organization’s
Mission
Functional
Area Missions
Marketing
© 2011 Pearson Education
Operations
Finance/
Accounting
2 - 27
Strategy
 Action plan to achieve
mission
 Functional areas have
strategies
 Strategies exploit
opportunities and
strengths, neutralize
threats, and avoid
weaknesses
© 2011 Pearson Education
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Strategies for Competitive
Advantage
 Differentiation – better, or at
least different
 Cost leadership – cheaper
 Flexibility -rapid response
© 2011 Pearson Education
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Competing on
Differentiation
Uniqueness can go beyond both the
physical characteristics and service
attributes to encompass everything
that impacts customer’s perception
of value
 Safe skin innovative gloves – leading
edge products
 Walt Disney Magic Kingdom –
experience differentiation
 Hard Rock Cafe – dining experience
© 2011 Pearson Education
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Competing on Cost
Provide the maximum value as
perceived by customer. Does not
imply low quality.
 Southwest Airlines – secondary
airports, no frills service, efficient
utilization of equipment
 Wal-Mart – small overhead, shrinkage,
distribution costs
 Franz Colruyt – no bags, low light, no
music, doors on freezers
© 2011 Pearson Education
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Competing on flexibility
 Flexibility is matching market changes in
design innovation and volumes
 A way of life at Hewlett-Packard
 Reliability is meeting schedules
 German machine industry
 Timeliness is quickness
in design, production,
and delivery
 Pizza Hut, Motorola
© 2011 Pearson Education
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OM’s Contribution to Strategy
10 Operations
Decisions
Product
Quality
Approach
DIFFERENTIATION
Innovative design …
Broad product line …
After-sales service …
Experience …
Process
COST LEADERSHIP
Low overhead …
Location
Layout
Effective capacity
use …
Human
resource
Inventory
management …
Supply chain
RESPONSE
Flexibility …
Inventory
Reliability …
Scheduling
Quickness …
Maintenance
© 2011 Pearson Education
Example
Competitive
Advantage
Safeskin’s innovative gloves
Fidelity Security’s mutual funds
Caterpillar’s heavy equipment
service
Hard Rock Café’s dining
experience
Franz-Colruyt’s warehouse-type
stores
Differentiation
(better)
Southwest Airline’s
aircraft utilization
Wal Mart’s sophisticated
distribution system
Hewlett-Packard’s response to
volatile world market
FedEx’s “absolutely, positively,
on time”
Pizza Hut’s 5-minute guarantee
at lunchtime
Response
(faster)
Cost
leadership
(cheaper)
Figure 2.4
2 - 33
Ten strategic OM decisions
OM decision
concept
Product
design
Designing goods and services defines much of the transformation
process ; it usually determine the lower limits of cost and the
upper limits of quality
Quality
The customer’s quality expectation must be determined so that
policies and procedures established to identify and achieve that
quality
Process &
Capacity
design
Process decision commit management to specific technology ,
quality , human resources use , and maintenance, that expenses
determine much of the firm’s basic cost
Location
selection
this decision may determine the firm’s ultimate success
Any error decision may overwhelm any other efficiencies
layout design Material flows , capacity needs, personnel levels, technology
decisions and inventory requirement influence layout
2 - 34
Ten strategic OM decisions
Human resources &
job design
Providing the quality of work life , determine the talented
and skills people
Supply chain
management
Determine what is to be made and what is to be purchased
(quality – delivery - innovation) . Mutually trust between
buyer and supplier is necessary for effective purchasing
Inventory
Suppliers, production schedules and human resource
planning are considered for more inventory efficiency
Scheduling
The demands on human resources and facilities must be
determined and controlled for developing the feasible and
efficient schedules
Maintenance
Decisions must be made regarding desired levels of
reliability and stability .
Systems must be established to maintain that reliability &
stability
2 - 35
© 2011 Pearson Education
Goods and Services and
the 10 OM Decisions
Operations
Decisions
Product
design
Quality
Process
and
capacity
design
© 2011 Pearson Education
Goods
Services
product is usually product is not
tangible
tangible
Many objective
(battery life
)standards
Customers is not
involved
Many subjective
standards (nice
colour)
Customer must
directly involved
Capacity may or
may not match
demand
Capacity must
match demand
Table 2.1
2 - 36
Goods and Services and
the 10 OM Decisions
Operations
Decisions
Goods
Services
Location
Near raw materials and Near customers
selection
labor
Layout
design
Enhances production
efficiency
Enhances product and
production
Human
resources
and job
design
Workforce focused on
technical skills,
consistent labor
standards, output based wages
Workforce must be
able to interact with
customers, labor
standards vary
depending on
customer requirements
Table 2.1
© 2011 Pearson Education
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Goods and Services and
the 10 OM Decisions
Operations
Decisions
Goods
Supply chain Relationship
management critical to final
product
Services
Important, but may
not be critical
Inventory
Raw materials,
work-in-process,
and finished
goods may be
inventoried
Cannot be stored
Scheduling
Level schedules
possible
Meet immediate
customer demand
© 2011 Pearson Education
Table 2.1
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Goods and Services and
the 10 OM Decisions
Operations
Decisions
Goods
Services
Maintenance Often preventive Often “repair” and
and takes place
takes place at
at production site customer’s site
© 2011 Pearson Education
Table 2.1
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Issues In Operations Strategy
 Resources view
 Value Chain analysis
 Porter’s Five Forces model
 Organization’s operating system
 Constant change
© 2011 Pearson Education
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(1)Resource View
 a view in which managers thinking in terms
of financial ,physical, human and
technological resources available and
ensuring that the potential strategy is
compatible with those resources.
Mangers evaluate these resources in order
to achieve competitive advantages
© 2011 Pearson Education
2 - 41
(2)Value –chain analysis
 A way to identify the elements in the products
/services chain that uniquely add value .
 It is used to identify activities that represent
strengths, or opportunities for developing
competitive advantages
 The areas where the firm can add its unique
values through product research , design , human
resources, supply chain management , quality
management , process innovation
© 2011 Pearson Education
2 - 42
(3) Porter’s Five Forces
Model
According to Porter there are 5
potential competing forces:1. Immediate rivals
2. Potential entrants
3. Customers
4. Suppliers
5. Substitute products
© 2011 Pearson Education
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( 4) Organization’s operating
system
 The firm is operating in a system with
many external factors
Political , cultural , legal, product life cycle
...etc are in flux
 The internal changes combined with the
external changes require strategies that
are dynamic
As example the following figure shows us
how the changes in the product lifecycle
can affect the OM strategy
© 2011 Pearson Educatione
2 - 44
Product Life Cycle
Company Strategy/Issues
Introduction
Growth
Best period to
increase market
share
Practical to change
price or quality
image
R&D engineering is
critical
Strengthen niche
Maturity
Decline
Poor time to
change image,
price, or quality
Cost control
critical
Competitive costs
become critical
Drive-through
Defend market
Internet search engines
restaurants
position
iPods
Xbox 360
Sales
CD-ROMs
LCD &
plasma TVs
Avatars
Boeing 787
Ana log
TVs
Twitter
Figure 2.5
© 2011 Pearson Education
2 - 45
Product Life Cycle
OM Strategy/Issues
Introduction
Product design
and
development
critical
Frequent
product and
process design
changes
Short production
runs
High production
costs
Limited models
Attention to
quality
Growth
Forecasting
critical
Product and
process
reliability
Competitive
product
improvements
and options
Maturity
Standardization
Fewer product
changes, more
minor changes
Optimum
capacity
Increasing
stability of
process
Increase capacity Long production
Shift toward
runs
product focus
Product
Enhance
distribution
improvement
and cost cutting
Decline
Little product
differentiation
Cost
minimization
Overcapacity
in the
industry
Prune line to
eliminate
items not
returning
good margin
Reduce
capacity
Figure 2.5
© 2011 Pearson Education
2 - 46
(5) SWOT Analysis
A method of determine, internal
(Strengths& Weakness) and external
(Opportunities & Threats)
The purpose of this analysis is to
maximize the strengths & opportunity
and minimize or avoid the weakness &
threats
According to this analysis strategy will
be performed as shown by the following figure
© 2011 Pearson Education
2 - 47
SWOT Analysis
Mission
Internal
Strengths
External
Opportunities
Analysis
Internal
Weaknesses
External
Threats
Strategy
© 2011 Pearson Education
2 - 48
Strategy Development Process
Analyze the Environment
Identify the strengths, weaknesses, opportunities, and threats.
Understand the environment, customers, industry, and competitors.
Determine the Corporate Mission
State the reason for the firm’s existence and identify the
value it wishes to create.
Form a Strategy
Build a competitive advantage, such as low price, design, or
volume flexibility, quality, quick delivery, dependability, aftersale service, broad product lines.
Figure 2.6
© 2011 Pearson Education
2 - 49
OM Strategy Development
and Implementation
 Identify key success factors
 Build and staff the organization
 Integrate OM with other activities
The operations manager’s job is to implement
an OM strategy, provide competitive
advantage, and increase productivity
© 2011 Pearson Education
2 - 50
Key Success Factors
Support a Core Competence and Implement Strategy by
Identifying and Executing the Key Success Factors in the Functional Areas
Marketing
Service
Distribution
Promotion
Channels of distribution
Product positioning
(image, functions)
Decisions
Product
Quality
Process
Location
Layout
Human resource
Supply chain
Inventory
Schedule
Maintenance
© 2011 Pearson Education
Finance/Accounting
Production/Operations
Leverage
Cost of capital
Working capital
Receivables
Payables
Financial control
Lines of credit
Sample Options
Customized, or standardized
Define customer expectations and how to achieve them
Facility size, technology, capacity
Near supplier or near customer
Work cells or assembly line
Specialized or enriched jobs
Single or multiple suppliers
When to reorder, how much to keep on hand
Stable or fluctuating production rate
Repair as required or preventive maintenance
Chapter
5
6, S6
7, S7
8
9
10
11, S11
12, 14, 16
13, 15
17
Figure 2.7
2 - 51
Activity Mapping at
Southwest Airlines
Courteous, but
Limited Passenger
Service
Lean,
Productive
Employees
Short Haul, Point-toPoint Routes, Often to
Secondary Airports
Competitive Advantage:
Low Cost
High
Aircraft
Utilization
Standardized
Fleet of Boeing
737 Aircraft
Frequent,
Reliable
Schedules
Figure 2.8
© 2011 Pearson Education
2 - 52
Activity Mapping at
Southwest Airlines
Courteous, but
Limited Passenger
Service
Lean,
Productive
Employees
Short Haul, Point-toPoint Routes, Often to
Secondary Airports
Automated ticketing machines
Competitive
Advantage:
No seat assignments
Low Cost
No baggage transfers
High
Aircraft
Utilization
No meals (peanuts)
Standardized
Fleet of Boeing
737 Aircraft
Frequent,
Reliable
Schedules
Figure 2.8
© 2011 Pearson Education
2 - 53
Activity Mapping at
Southwest Airlines
Courteous, but
Limited Passenger
Service
No meals (peanuts)
Lean,
Lower gate costs at
Productive
secondary airports
Employees
Short Haul, Point-toPoint Routes, Often to
Secondary Airports
High number of flights
Competitive Advantage:
reduces employee
idleCost
time
Low
between flights
High
Aircraft
Utilization
Standardized
Fleet of Boeing
737 Aircraft
Frequent,
Reliable
Schedules
Figure 2.8
© 2011 Pearson Education
2 - 54
Activity Mapping at
Southwest Airlines
Courteous,
but
High number
of flights
Limited Passenger
reduces employee
idle time
Service
between flights
Lean,
Saturate a city with flights,
Productive
lowering administrative
Employees
Short Haul, Point-toPoint Routes, Often to
Secondary Airports
costs (advertising, HR, etc.)
Competitive
Advantage:
per passenger
for that
city
Low Cost
Pilot training required on
Highonly one type of aircraft
Aircraft
Reduced maintenance
Utilization
Standardized
inventory required
because
Fleet of
Boeing
of only one type737
ofAircraft
aircraft
Frequent,
Reliable
Schedules
Figure 2.8
© 2011 Pearson Education
2 - 55
Activity Mapping at
Southwest Airlines
Pilot training required on
Courteous,
butaircraft
onlyLimited
one
type
of
Passenger
Service
Reduced
maintenance
inventory required because
Lean,
Short Haul, Point-toProductive of only one type of aircraft
Point Routes, Often to
Employees
Secondary Airports
Excellent supplier relations
with Boeing
has aided
Competitive
Advantage:
financing
Low
Cost
High
Aircraft
Utilization
Standardized
Fleet of Boeing
737 Aircraft
Frequent,
Reliable
Schedules
Figure 2.8
© 2011 Pearson Education
2 - 56
Activity Mapping at
Southwest Airlines
Courteous, but
Limited
Passenger
Reduced
maintenance
Service
Lean,
Productive
Employees
High
Aircraft
Utilization
inventory required because
of only one type of aircraft
Short Haul, Point-toPoint Routes, Often to
Flexible employeesSecondary
and
Airports
standard planes aid
Competitive Advantage:
scheduling
Low Cost
Maintenance personnel
trained only one type of
Frequent,
Reliable
aircraft
Schedules
Standardized
20-minute
gate turnarounds
Fleet of Boeing
737 Aircraft
Figure 2.8
© 2011 Pearson Education
2 - 57
Activity Mapping at
Southwest Airlines
Automated ticketing
Courteous,
but
machines
Limited Passenger
Service
Empowered
employees
Lean,
Productive
Employees
High employee
Short Haul, Point-toPoint Routes, Often to
compensation
Secondary Airports
Hire for attitude, then train
Competitive Advantage:
High
level of stock
Low
Cost
ownership
High
Aircraft
Utilization
High number of flightsFrequent,
Reliable
reduces employee idle time
Schedules
Standardized
Fleetbetween
of Boeing flights
737 Aircraft
Figure 2.8
© 2011 Pearson Education
2 - 58
International business &
A multinational corporation
(MNC)
 International business is a firm that engage in
cross- border transactions.
 A multinational corporation (MNC) is a firm with
extensive international business involvement
 MNCs buy resources , create goods & service
and sell the production in a variety of countries
 IBM is a good example of an MNC that imports
electronic components to the USA from over 50
countries and exports components to over 130
countries , it has facilities in 45 countries and
earns more than half its sales and profits abroad
© 2011 Pearson Education
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International Operations
Strategies
According to local responsiveness and
cost reduction, four operations strategies
have been performed for the global and
MNCs
1. International strategy
2. Multinational strategy
3. Global strategy
4. Transnational strategy
© 2011 Pearson Education
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International Strategy
(little local responsiveness and little cost
advantages )
It depends on using the exports and
license to penetrate the global
market
It is the least advantages with little
local responsiveness and little cost
advantages
It is the easiest strategy
© 2011 Pearson Education
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Multi-Domestic Strategy
(significant local responsiveness but little
cost advantages )
Organizationally , these organization
are typically subsidiaries , franchise
,or joint ventures
The advantages of this strategy is
maximizing the responsiveness for
the local market
The disadvantages , it has no cost
advantages
© 2011 Pearson Education
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Global Strategy
(little local responsiveness but significant
cost advantages)
It has a high degree of centralization
with headquarters coordinating the
organization by which it can achieve
the economic of scale
This strategy is appropriate for cost
reduction
While it has no recommended when
the demand for local responsiveness
is high
© 2011 Pearson Education
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Transnational Strategy
(significant local responsiveness and
significant cost advantages)
It exploits the economic of scale and
learning as well as high responsiveness
Its basic “ core competence doesn’t
reside in just the home country but can
exist anywhere in the world”
These firms have the potential to pursue
all three operation strategies
(differentiation- low cost – response )
© 2011 Pearson Education
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Four International
Operations Strategies
International
Strategy
Cost Reduction Considerations
High
Figure 2.9
 Import/export or
license existing
product
Examples
U.S. Steel
Harley Davidson
Low
Low
High
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
© 2011 Pearson Education
2 - 65
Four International
Operations Strategies
High
Cost Reduction Considerations
Figure 2.9
International Strategy
 Import/export or
license existing
product
Examples
U.S. Steel
Harley Davidson
Low
Low
High
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
© 2011 Pearson Education
2 - 66
High
Four International
Operations
GlobalStrategies
Strategy
Figure 2.9
Cost Reduction Considerations
 Standardized
product
 Economies of scale
 Cross-cultural
learning
International Strategy
 Import/export or
Examples
license existing
product
Texas Instruments
Examples
U.S.Caterpillar
Steel
Harley Davidson
Otis Elevator
Low
Low
High
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
© 2011 Pearson Education
2 - 67
Four International
Operations Strategies
High
Figure 2.9
Cost Reduction Considerations
Global Strategy
 Standardized product
 Economies of scale
 Cross-cultural learning
Examples:
Texas Instruments
Caterpillar
Otis Elevator
International Strategy
 Import/export or
license existing
product
Examples
U.S. Steel
Harley Davidson
Low
Low
High
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
© 2011 Pearson Education
2 - 68
High
Four International
Multidomestic
Operations
Strategies
Strategy
Figure 2.9
Cost Reduction Considerations
Global Strategy

Use existing
 Standardized product
 Economies
of scale
domestic
model
 Cross-cultural learning
Examples:globally
Texas Instruments
Caterpillar
 Franchise, joint
Otis Elevator
ventures,
subsidiaries
International Strategy
 Import/export or
license existing
product
Low
Low
Examples
Heinz
Examples
U.S. Steel
McDonald’s
Harley
Davidson
The Body Shop
Hard Rock Cafe
High
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
© 2011 Pearson Education
2 - 69
Four International
Operations Strategies
High
Figure 2.9
Cost Reduction Considerations
Global Strategy
 Standardized product
 Economies of scale
 Cross-cultural learning
Examples:
Texas Instruments
Caterpillar
Otis Elevator
 Import/export or
license existing
product
Multidomestic Strategy
 Use existing
domestic model globally
 Franchise, joint ventures,
subsidiaries
Examples
U.S. Steel
Harley Davidson
Examples
Heinz
The Body Shop
McDonald’s Hard Rock Cafe
International Strategy
Low
Low
High
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
© 2011 Pearson Education
2 - 70
High
Four International
Operations
Strategies
Transnational
Figure 2.9
Strategy
Global Strategy
Cost Reduction Considerations
 Move material,
people,
ideas
Examples:
Texas across
Instruments
national
Caterpillar
Otis Elevator
boundaries
 Economies of scale
Multidomestic Strategy
International
Strategy
 Cross-cultural
 Use existing
domestic model globally
 Import/export or

Franchise, joint ventures,
learning
license
existing
subsidiaries
product
 Standardized product
 Economies of scale
 Cross-cultural learning
Examples
Coca-Cola
Nestlé
Examples
U.S. Steel
Harley Davidson
Low
Low
Examples
Heinz
The Body Shop
McDonald’s Hard Rock Cafe
High
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
© 2011 Pearson Education
2 - 71
Four International
Operations Strategies
High
Cost Reduction Considerations
Figure 2.9
Global Strategy
Transnational Strategy
 Standardized product
 Economies of scale
 Cross-cultural learning
 Move material, people, ideas
across national boundaries
 Economies of scale
 Cross-cultural learning
Examples:
Texas Instruments
Caterpillar
Otis Elevator
Examples
Coca-Cola
Nestlé
 Import/export or
license existing
product
Multidomestic Strategy
 Use existing
domestic model globally
 Franchise, joint ventures,
subsidiaries
Examples
U.S. Steel
Harley Davidson
Examples
Heinz
The Body Shop
McDonald’s Hard Rock Cafe
International Strategy
Low
Low
High
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
© 2011 Pearson Education
2 - 72