International Division of Value Creation Flashcards
What are a company’s main strategic goals of internationalisation?
- ) Increase of cash flows
2. ) Reduction of risk
Wha are potential sources of value increase from internationalisation for a company and how can they contribute to the realisation of the main strategic goals?
Increase of Cash Flow
- ) Economies of scale
- -> learning curve effects
- -> common use of resources
- -> increased return to scale - ) Arbitrage
- -> differences in factor prices
- -> differences in institutional conditions
Risk Reduction
- ) Economies of scale
- -> capacity utilisation - ) Arbitrage
- -> access to resources
- -> hedging
- -> corporate foresight
What are potential barriers of value increase from internationalisation for a company and how can these barriers affect the main strategic goals?
Incease of Cash Flow
- ) Transaction costs
- -> costs for flow of capital, goods or information - ) Differentiation costs
- -> heterogeneity of consumer and retail requirements
Risk Reduction
- ) Transaction costs
- -> capital flow restrictions
- -> currency exchange rates
2.) Differentiation costs
–> increased complexity of business strategy and internal
business
Explain the components of a firm’s value chain according to porter
Primary activities
- inbound logistics
- production
- outbound logistics
- marketing & sales
- customer service
Secondary activities
- firm infrastructure
- human resource management
- technology development
- procurement
What are the different strategic option of designing value creation proccesses within a value chain? (give company examples and explain briefly)
- ) Locally centralised value chains (ex. Augusutiner)
- -> complete value chain only in one country
2.) Autarkic (independent) value chain (ex. McDonald’s)
–> value chain is executed in multiple countries
independently
3.) Value network (ex. VW)
–> different parts of the value chain are executed in
different countries
What 4 different types of sourcing are there? (briefly characterise them)
- ) Traditional purchasing
- -> operative national sourcing - ) Strategically oriented sourcing
- -> strategic national sourcing - ) International purchasing
- -> operative international sourcing - ) Global strategic sourcing
- -> strategic international sourcing
What are the the terms for sourcing from one, two or multiple suppliers?
1 supplier –> single sourcing /solo sourcing
2 suppliers –> second sourcing
2 or more suppliers –> multiple sourcing
What are the levels of sourcing decisions within global sourcing?
Strategic decisions
AND
Operative decisions
What do strategic decions entail?
include making decisions on:
- success factors
- demand & sourcing needs
- market selection
- product and supplier selection
- purchasing policies / terms and conditions
What do operative decisions entail?
include decisions on:
- choice of criteria for performance measurement (ex.
Quality assurance)
- purchase controlling (calculation/budgeting)
- order policy & planning
What are critical success factors of global sourcing ?
In which to categories can these success factors be classified?
Strategic success factors
- Purchasing power & partnerships
- Economies of scale
- Supplier & product risk
Operative success factors
- Delivery time
- Reliability
- Performance control
What is the difference between the strategic and operative responsibilities in global sourcing?
Strategic Responsibilities –> CENTRALISED task ownership,
Operative Responsibilities –> DECENTRALISED task ownership
What are the advantages of producing abroad?
Cost Oriented
- reduction of logistics & labour costs
Market Oriented
- access to new customers
- keep up with competition
- increase of reputation
Governmental
- local content
Risk/Flexibility
- arbitrage/leverage
- risk reduction
What are the disadvantages of producing abroad?
Cost Oriented
- possible loss of economies of scale (decentralised
production)
- increase in logistics costs
Market Oriented
- negative firm image (exporting of jobs abroad)
- negavite country of origin effect
Governmental
- import duties
Risk/Flexibility
- reduced quality
- increased uncertainty
- less flexibility
What are the different strategies for international production (characterise them briefly)
- ) National network production
- production in one country
- splitting of production stages - ) International network production
- production in multiple countries
- splitting of production stages - ) National parallel production
- production in one country
- splitting of production sites - ) International parallel production
- production in multiple countries
- splitting of production sites - ) Global market production
- production in one country
- regionally concentrated production
What is the biggest difference between Global Market Production and International Parallel Production?
Global Market Production
- follows Locally Centralised Value Chain
–> meaning product manufactured in one country and
shipped all around the world
International Parallel Production
- follows Autarkic Value Chains
–> meaning same product is manufactured according to
same value chain in every country
What are 4 different forms of how international network production can look like?
Type 1 –> Value network (each step of value chain
manufactured in different location)
Type 2 –> Only first production stage in every country, all
other stages same country (same product)
Type 3 –> First and second production stage is the same for
every product and is executed in one country.
Thereafter different products are produced in
different countries
Type 4 –> Second stage of production is the same for every
product and is conducted in the same country
Name the advantages of contract manufacturing?
- focus on core competencies
- cost reduction
- production time reduction/productivity increase
- shared risk
- chance to overcome trade barriers
What are some disadvantages of contract manufacturing?
- dependence on partners
- quality concerns
- increase in logistics costs
- possible unused capacity at own site
What is the significance of logistics as a core process?
logistics costs are relatively low when compared to total costs
in retail –> 15,9% of all costs
in industry –> 7% of all costs
What are the Logistics Sub-systems and what do they entail?
- ) Sourcing logistics (receipt of goods/commissioning/storing)
- ) Production logistics (Interim storage/material handling)
- ) Distribution logistics (shipping/commissioning)
What are possible structures of the basic logistics systems?
1.) One step system (direct stream of goods from sender to
receiver)
- ) Combined system (direct & indirect stream of goods)
- -> some goods follow one step system
- -> some are bulked at one point and then sent to receiver
3.) More step system (indirect stream of goods)
–> goods sent via break-bulk point or consolidation point to
receiver
What are some challenges of international logistics?
- infrastructure
- limitations to free transport
- political/ legal influences
- cross-national interdependencies
- geographic distance and climate conditions
What are different logistics service providers (ordered from operative to strategic/regional to worlwide focus)?
- ) Carrier
- ) Haulage (transport) contractor
- ) System Service provider
- ) System integrators
- ) Providers of logistics software
- ) Logistics and strategic consultants
What are the components of the Pipeline Map for the textile industry and what do they represent?
Pipeline length –> sum of horizontal lines (minimum time a
product needs)
Storing time –> sum of vertical lines
Pipeline volume –> time from start to end user (sum of
horizonal and vertical lines)
What are the components of the Speculation & Postponement Strategy (Lampel & Mintzberg) and how can they be characterised?
Speculation (in prodcution process)
- economies of scale - generalisation/standardisation of goods - low cost of marginal production
Postponement (in production process)
- minimalisation of risks due to delaying of investments - customisation of goods - high cost of marginal production
How can the Speculation & Postponement Strategy be characterised?
–> moving from speculation to postponement by switching
from standardisation to customisation and therewith
reducing risk within supply chains
What are the different categories of reasons for going international?
- input oriented
- output oriented
- political/cultural
- efficiency
- external
What are some input oriented reasons for going international?
- qualified employees
- IT-networks
- R&D infrastructure
- local scientific community
What are some output oriented reasons for going international?
- national legal environments
- proximity to different markets
- cost & performance advantages
- lead users and customisation
What are some political/cultural reasons for going international?
- International patents
- subsidies
- lack of demand/acceptance in domestic market
- possible legal limitations in home country
What are some efficiency reasons for going international?
- logistics
- labour costs
- shorter R&D-cycles
- lesser risk of misdevelopment
- flexibility
What are some external reasons for going international?
- Mergers and Acquisitions
- Tax reasons
- Pressure by competition
Name some possible reasons for international cooperation?
- ability to react to demand volatility
- shortening R&D-cycles/expanding R&D know-how
- diversifying risks
- realisation of projects that not feasible otherwise
