Page 284 - DMGT545_INTERNATIONAL_BUSINESS

Unit 14: International Production and Logistics Management

l z Due to national differences, it may pay a firm to base each value creation activity it performs notes
at that location where factor conditions are most conducive to the performance of that
activity. This strategy is referred to as focusing on the attainment of local economies. By
rapidly building sales value for a standardized product, international expansion can assist
a firm in moving down the experience curve.
l z International expansion may enable affirm to earn greater returns by transferring the skills
and product offerings derived from its core competencies to markets where indigenous
competitors lack those skills and product offerings.
l z A multinational firm can create additional value by identifying valuable skills created
within its foreign subsidiaries and leveraging those skills within its global network of
operations. The best strategy for a firm to pursue often depends on a consideration of the
pressure for cost reductions and for local responsiveness.

l z The lesson explained how efficient manufacturing and logistics functions can improve an
international business competitive position by lowering the costs of value creation and by
performing value creation activities in such ways that customer service is enhanced and
value added is maximized.
l z We also examined closely at three issues central to international manufacturing and
logistics management, where to manufacture, what to make and what to buy, and how to
coordinate a globally dispersed and supply system.

14.7 keywords

Economies of Scale: Cost advantages associated with large scale production.
Flexible Manufacturing Technology: Manufacturing technologies designed to improve job
scheduling, reduce setup time, and improve quality control.
Global Strategy: Strategy focusing on increasing profitability by reaping cost reductions from
experience curve and location economies.
International Strategy: Trying to create value by transferring core competencies to foreign
markets where indigenous competitors lack those competencies.

Mass Customization: The production of a wide variety of end products at a unit cost that could
once be achieved only through mass production of a standardized output.
Materials Management: The activity that controls the transmission of physical materials through
the value chain, from procurement through production and into distribution.
Multi-domestic Strategy: Emphasizing the need to be responsive to the unique conditions
prevailing in different national markets.
Total Quality Management (TQM): Management philosophy that takes as its central focus the
need to improve the quality of a company’s products and services.
Trans-national Strategy: Plan to exploit experience-based cost and local economies, transfer core
competencies with the firm, and pay attention to local responsiveness.
14.8 review Questions

1. What is international logistics? Discuss its main components.
2. In a world of zero transportation costs, no trade barriers and nontrivial differences between
nations with regard to factor conditions, firms must expand internationally if they are to
survive. Discuss.

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