Influences Flashcards
Globalisation
- Refers to the removal of barriers of trade between nations
• Increasing integration between national economies and a high degree of transfer of capital, labour, financial resources
Globalisation Global sourcing
- Business sources inputs from overseas
- Access to greater volume of inputs → Economies of scale
- Access to higher quality inputs → QUALITY
- Access to unique inputs → good/service differentiation → Comp Ad over domestic businesses
HOWEVER
- Unfavourable exchange rate movements hinder cost savings → therefore the Use of derivatives.
- Quality concerns → Due to poor Quality management → Quality
- Transportation/shipping delays with inputs → Impacts SPEED (Covid)
Globalisation #HOW - Global Web
- Finds a network of suppliers on the basis of lowest overall cost and maximum certainty in quality and timing of supplies.
- Provides opportunities to improve supply chain management → Creating a sophisticated level of trust, and communication → SPEED
- If a Supplier is experiencing delays/shortages for certain inputs, other suppliers could be used → SPEED/DEPENDABILITY.
- Access to unique inputs → good/service differentiation → Comp Ad over domestic businesses
HOWEVER
- Communication may be hindered due to language barriers, miscommunication of orders → SPEED/QUALITY
- Reliability/responsiveness of suppliers → DEPENDABILITY
- Transportation/shipping delays in accessing inputs from overseas → SPEED
Globalisation #HOW - Manufacturing/Production Overseas
- Achieved through manufacturing overseas or outsourcing manufacturing through a specialist manufacturing company
- Access to more skilled workforce and more ideas and knowledge → SPEED/DEPENDABILITY
- Closer Proximity to customer → Reduce transportation costs
- Closer proximity to materials → Reduced transportation costs of finished good → COST/SPEED
HOWEVER
- Communication may be hindered due to language barriers, miscommunication of orders → SPEED/QUALITY
- Quality concerns → Due to poor Quality management → Quality
- Negative publicity and brand image may be created if jobs are moved overseas
Globalisation - CASE STUDY
→ OUTSOURCING
Apple sources from all over the world to assemble their products for consumers.
By doing so, they can access experts in their field, at affordable prices, they can control quality and they can then maximise their profits.
Apple outsources the production of iPhones to Foxconn, Winston and Pegatron in China and India (76% of Apple’s iPhone manufacturing is occurring in India).
Outsourcing not only reduces production costs but increases production speed and capacity i.e. volume (through economies of scale).
→ GLOBAL WEB
Apple has a complex global supply chain that ensures it achieves cost leadership, speed, flexibility, and quality in production.
→ MANUFACTURING/PRODUCTION OVERSEAS
Manufacturing in China instead of the US has allowed Apple to improve their speed and cost with transportation to the Asia-Pacific region, including Australia therefore Apple are able to deliver orders for less (due to a short distance for transportation) and faster (3-4 days faster)
Apple’s GPR increased by 11% indicating effective management of COGS. Expense ratio decreased by 9%.
Technology
- The application of science and knowledge that enables people to do new things or perform established tasks in new and better ways
- A business may use adminstrative technolgy such as computers and software, or established technology such as robotics & automated vehicles to undertake the transformation process.
Established Technologies (CAD, Robotics)
- CAD Increases the accuracy and precision of production methods – Increasing qaulity – reduced wastage – COST & QUALITY.
- Robotics leads to a reduction of labour costs due to Capital Labor substitution – long term cost efficiencies – COST.
HOWEVER
- CAD requries High initial outlay → Negatively impacting S.T costs – COSTS
- Redundancy costs associated with employees who are replaced by Robotics → Impact staff morale and productivity
Administrative technology (Computers and software)
- Computers may Improve efficiency & productivity in the transformation process – improved lead times – SPEED
- Software Reduces defects – Warranty claims – Improved COSTs.
HOWEVER
- Time and cost of training or retraining employees – decreased productivity – SPEED & COSTS.
- Installation and set-up of new technology – Decreased efficiency – decreased lead times – SPEED.
Technology - CASE STUDY
- Foxconn ‘lights out’ factory in shenzhen is highly-automated with robots (Foxbots). deployed across the production line, reducing its reliance on human workers → Upfront initial costs, however → Long term cost efficient.
Foxconn reduced the staff in a single department by 60,000
due to the introduction of ‘FoxBots’,
evidencing the potentially negative implication of technology on a
business’ workforce - However, at apple Robotics and engineering replace repetitive tasks previously done by employees, and through training, enable our employees to focus on higher value-added elements in the manufacturing process, such as R&D and Quality control
- 10.5 Billion on new tech such as, laser sutters, robotics and testing equipment at foxconn
- Apple uses, liam and daisy to recycle products → reducing wastage → COST
Quality expectations
- Refers to the totality of characteristics and features of Goods and services that hears its ability to satisfy stated or implied needs
-
Finding new suppliers in which are high quality
1. Better quality materials → durability → G/S Dif → Comp Ad → DEPENDABILITY/QUALITY
HOWEVER
- Better quality materials, increase the cost of production → hinder ability to achieve cost leadership → Impacting COST
* Conducting quality inspections, with established technologies (Robotics) - Reduction in human error and wastage → Reduction in product defects → Reduce warranty claims → COST
HOWEVER
- Inspections may reduce productivity, potential bottlenecks → less volumed produced → DEPENDABILITY/SPEED.
OUTPUTS
- QA on finished goods, & Well trained staff to deliver customer service
1. QA Provides assurance to consumers of stricts standards → influencing perceptions on quality → QUALITY.
HOWEVER
- QA → Involves Compliance costs with being ISO certified → impacting COSTS
Quality expectations - CASESTUDY
Apple has very stringent quality standard of design and manufacture, innovative design – USA
Manufactures involves predominatley in China, Apple sources the component parts that Foxconn then assembles (control)
Sapphire glass inputs, aluminium, cameras, battery
iPhone 12/13 - durable ceramic shield front to protect the display, a glass back, and flat edges at the side (passes ‘drop test’)
.
90% accuracy (defect rate less than 10%), will send product back if it does not meet its high standard of quality control, use of product service level agreements
2 year warranty
Apple rejects iPhone (iPhone 5 scratches on the back of the phone – sent back)
Foxconn botched a batch of iPhones, which Apple returned to the contract manufacturer because they were not fit for sale. Apple sent back at least five million iPhones, and maybe as many as eight million, “due to appearance of substandard or dysfunctional problems.”
Services
Professionalism – Retail stores, genius bar and concierge system. Physical evidence such as spacious,
sleek stores, glass, white space
Customisation – Book appointments to meet needs
Cost - Based competition
- Derived from determining break-even point and then applying strategies to create cost advantages over competitors.
DESCRIBE
- Applying cost-cutting strategies in response to low cost competitors
– TECHNOLOGIES/AUTOMATION –
- Increased speed → Improve lead times → SPEED/DEPENDABILITY
- Decreased errors/Defects → Decreased wastage → COST → Customer Sat.
HOWEVER
- Significant initial upfront costs → Impact COST
- Maintenance costs for machinery → Decreased productivity → SPEED/COSTS.
– SOURCING NEW/CHEAP SUPPLIERS –
- May lower costs → Reducing production costs → Cost leadership
- Access to greater volume of inputs (May not be able to access large volumes domestically) → Economies of scale
HOWEVER
- Unfavourable exchange rate movements hinder cost savings → therefore the Use of derivatives.
- Quality concerns → Due to poor Quality management → Quality
Cost-based competition - CASE STUDY
Outsourcing between Foxxconn,winston and pegatron
The greatest competition to Apple and samsung are Huawei and oppo, due to producing low cost, affordable smartphones.
Whilst samsung are able to produce their galaxy phone for $10 less, apple will continue to stay consistent with prices and create the main focus towards producing higher quality products then samsung.
Allowed apple to achieve a 7% higher gross profit ratio in comparison to samsung
Assisted apple with product margins, with an increased GPR by 11% in 2021, and increased NPR by 24% in 2021.
Government policies
- Government policies are announcements and political decisions by the government which can impact business operations.
Policies can include changes to:
• COVID-19 restrictions. • Public health orders
• Trade and industry
- COVID-19 Lockdown restrictions
• Public health orders forced people to work from home
- Some Employees enjoy working from home – Increased productivity – SPEED.
- Encourages business to invest in established technologies such as robotics for labour capital subsitution
HOWEVER
- Significant decrease in sales as stores are shut – tightened budjets –
- employees may decrease productivity at home working on zoom – Decreased SPEED.
- Free Trade Agreements
- Where the countries agree on certain obligations that affect trade in goods and services
- Establishes stronger trade agreements between the Australia countries involved
HOWEVER
- When negotiations for such agreements collapse, it can negatively affect a business’ ability to supply and receive products with global customers (e.g. USA and China)
- Encourages business to invest in assets e.g. machinery, vehicles, IT which can improve operations (link to speed, quality, cost, dependability)
- Govt policies could result in competitive advantage – competitors may incur higher levies/costs
HOWEVER
- Costs incurred to comply with the policy
- Difficulty keeping up-to-date with new / changing policies, particularly for TNCs who are operating in multiple countries
Government policies - CASE STUDY
Apple and Foxconn are required to continually review their operations and make amendments to new/changes in government policy.
Foxconn assembly-line workers are paid $2.50 per hour This exceeds minimum wage rates (government policies) of $1.74 per hour (March 2018)
Government restrictions on number of hours worked were reduced in China which required Apple and Foxconn to reduce the assembly-line workers’ maximum weekly hours to 60 → Required Foxconn to hire more employees to meet the growing demand for Apple products
In 2020, Foxconn stopped ‘almost all’ of its production in China for a few weeks due to the coronavirus outbreak.
Changes were made in retail stores to comply with government policies - i.e. social distancing, temperature checks, QR sign in and limiting the number of customers
legal regulations
- Legal regulation refers to laws that influence how practices and processes are conducted within operations.
• May affect the use of labour, technology, machinery, energy and finance within operations.
Work Health and Safety Act 2011
- Ensures that the workplace environment is safe, Appropriate information, training and supervision is provided.
- May encourage a positive customer view of the business
- Safe Materials such as non-toxic chemicals create a safe working environment – Employee satisfaction – Increased productivity.
HOWEVER
- Training employees - Decreased productivity - Decreased production costs
Environmental Protection and Biodiversity Conservation Act 1999
- Provide for the protection of the environment
- States that hazardous waste, chemicals and fuels must not enter the environment
- Sets in place standards for waste management and influences how and where firms can acquire natural resources for the production process
- Seeks to ensure that all operations processes have a minimal impact on the environment
- Specifies protected areas free from exploitation
– Competition and Consumer Act 2010 –
- Seeks to promote competition, fair trading as well as providing protection for consumers.
- Goods need to comply with environmental standards
- Goods need to comply with safety standards
- Composition and contents
- Methods of manufacture of goods
- Design and construction of goods
- Finish and packaging rules such as country of manufacture & ingredients
- May encourage a positive customer view of the business
- In the long term, best practice/legal regulation may reduce costs of business
- Keeps employees safe and improves worker satisfaction (impact on productivity)
HOWEVER
- Compliance or face prosecution/penalties
- May increase short term costs as expenses are associated with compliance or structural changes to processes/practices
- Training employees - Decreased productivity - Decreased production costs
Legal regulations - CASE STUDY
China Labour Watch published a report claiming that Apple and Foxconn violated workers’ rights in Foxconn’s Zhengzhou factory, the biggest iPhone factory in the world.
Investigators went undercover for as long as four years to uncover working conditions in the factory.
In August 2019, 50% of the factory’s workforce was made up of temporary workers, even though Chinese law caps the proportion of temporary workers at 10%, the report said.
Some of Apple’s outsourcing partners, including Foxconn, have been subject to investigations in China relating to breaches in labour and environmental laws.
