CHAPTER 2 Flashcards
Domestic business operations decide to change to some form of international operations for six main reasons
- Improve supply chain
- Reduce costs and exchange rate risks
- Improve operations
- Understand markets
- Improve products
- Attract and retain global talent
Mexican factories located along the U.S.–Mexico border receive preferential tariff treatment.
Maquiladoras
An international organization that promotes
world trade by lowering barriers to the free flow of goods across borders
World Trade Organization (WTO)
A free trade agreement between Canada, Mexico, and the United States.
NAFTA
A European trade group that has 28 member states
European Union (EU)
The purpose or rationale for an organization’s existence.
Mission
—How an organization expects to achieve its missions and goals.
Strategy
three strategic approaches to competitive advantage are:
- Differentiation
- Cost leadership
- Response
The creation of a unique advantage over competitors.
Competitive advantage
Distinguishing the offerings of an organization in a way that the
customer perceives as adding value
Differentiation
Engaging the customer with a product through imaginative use of the five senses, so the customer “experiences” the product.
Experience differentiation
Achieving maximum value, as perceived by the customer.
Low-cost leadership
A set of values related to rapid, flexible, and reliable performance.
Response
A view in which managers evaluate the resources at their disposal and manage or alter them to achieve competitive advantage
Resources view
A way to identify the elements in the product/service chain
that uniquely add value
Value-chain analysis
A way to analyze the five forces in the competitive environment
Five forces model —
Five forces model are:
1) immediate rivals
(2) potential entrants
(3) customers
(4) suppliers
(5) substitute products.
Company strategy: Best period to increase market share, R&D engineering is critical. OM strategy: Product design and development critical, frequent
product and process design changes, short production runs, high production costs,
limited models, and attention to quality.
Introduction
Company strategy: Practical to change price or quality image, strengthen
niche. OM strategy: Forecasting critical, product and process reliability, competitive
product improvements and options, increase capacity, shift toward product focus,
enhance distribution.
Growth
Company strategy: Poor time to change image or price or quality,
competitive costs become critical, defend the market position. OM strategy: Standardization, less rapid product changes (more minor changes), optimum capacity,
increasing stability of the process, long production runs, product improvement and cost-cutting.
Maturity
Company strategy: Cost control is critical. OM strategy: Little product differentiation, cost minimization, overcapacity in the industry, prune line to eliminate
items not returning good margin, reduce capacity
Decline
A method of determining internal strengths and weaknesses and
external opportunities and threats.
SWOT analysis
Activities or factors that are key to achieving competitive advantage.
Key success factors (KSFs)
A set of unique skills, talents, and activities that a firm does
particularly well. A core competence may be a combination of KSFs.
Core competencies
A graphical link of competitive advantage, KSFs, and supporting
activities.
Activity map
Procuring from external sources services or products that are normally part of an organization
Outsourcing
The theory which states that countries benefit
from specializing in (and exporting) products and services in which they have relative advantage and importing goods in which they have a relative disadvantage.
Perhaps half of all outsourcing agreements fail because of inappropriate planning and
analysis
Theory of comparative advantage
Potential risks of outsourcing include
-A drop in quality or customer service
- Political backlash that results from outsourcing to foreign countries
- Negative impact on employees
-Potential future competition
- Increased logistics and inventory costs
—A firm that engages in cross-border transactions.
International Business
A firm that has extensive involvement in international business, owning or controlling facilities in more than one country.
The four operations strategies for approaching global opportunities can be classified
according to local responsiveness and cost reduction.
Multinational corporation (MNC)
A strategy in which global markets are penetrated using
exports and licenses with little local responsiveness.
International strategy
A strategy in which operating decisions are decentralized to
each country to enhance local responsiveness.
Multidomestic strategy
A strategy in which operating decisions are centralized and headquarters coordinates the standardization and learning between facilities
Global strategy
A strategy that combines the benefits of global-scale efficiencies with the benefits of local responsiveness. These firms transgress national
boundaries.
Transnational strategy
