Page 273 - DMGT545_INTERNATIONAL_BUSINESS

International Business

notes proprietary solutions obsolete. Less expensive Web based systems are much easier to install and
manage and they dominate the market for supply chain management software. These web-based
systems are rapidly transforming the management of globally dispersed supply chains, allowing
even small firms to achieve a better balance between supply and demand, thereby reducing the
inventory in their systems and reaping the associated economic benefits.

Notes Web-based information systems play a crucial role in modern materials
management by tracking component parts as they make their way across the globe to
word and assembly plant, information systems enable a firm to optimize its production
scheduling based on time, components are expected to arrive by locating component parts
in the supply change, good information systems allow the firm to accelerate production
when needed by pulling key component out of the regular supply chain and having flown
them to the manufacturing plant.

14.2 acquisition of resources

Businesses operating in a foreign market can take advantage of the resources of the area, including
natural and human resources. Business managers looking for an ideal location for an international
branch should consider factors, such as property, raw materials, population and amenities. Many
emerging markets create incentive programs designed to lure and assist foreign business.

14.3 location Decisions

We have seen that countries differ along a range of dimensions, including the economic, political,
legal, and cultural, and that these differences can either raise or lower the costs of doing business
in a country. The theory of international trade also teaches us that due to differences in factor
costs, certain countries have a comparative advantage in the production of certain products.
Japan might excel in the production of automobiles and consumer electronics; the United States
in the production of computer software, pharmaceuticals, biotechnology products, and financial
services; Switzerland in the production of precision instruments and pharmaceuticals; and South
Korea in the production of steel.
For a firm that is trying to survive in a competitive global market, it means that, trade barriers
and transportation costs permitting, the firm will benefit by basing each value creation activity
it performs at that location where economic, political, and cultural conditions, including relative
factor costs, are most conducive to the performance of that activity.
Firms that pursue such a strategy can realize what we refer to as location economies, the
economies that arise from performing a value creation activity in the optimal location for that
activity, wherever in the world that might be transportation costs and trade barriers permitting.
Locating a value creation in the optimal location for that activity can have one of the two effects.
It can lower the costs of value creation and help the firm to achieve a low cost position, and/or it
can enable a firm to differentiate its product offering from the offerings of competitors.
14.3.1 creating a Global Web

One can think of a creation of a global web of value creation activities, with different stages of
the value chain being dispersed to those location around the globe where perceived value is
maximized or where the costs of value creation are minimized. Consider the case of General
Motors’. Marketed primarily in the United States, the car was designed in Germany; key
components were manufactured in Japan, Taiwan and Singapore; assembly was performed in
South Korea; and the advertising strategy was formulated in Great Britain. The car was designed

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