Operations in Global Business Strategy
Managers working in a global business environment require a strong foundation in operations. When an organization operates in several different countries, it has to take into consideration country specific operational issues. Some of the operational issues that demand the attention of strategy managers in the process of globalization are discussed below.
Management and organization
When organizations expand to new locations, having the right people at the right place is critical for their success. Organizations can select managers from the host country or from other parts of the world. Local candidates bring significant knowledge about the local business environment, while global managers provide considerable inputs due to their international experience. The recruitment decision is also influenced by the management level for which people are being hired. After recruiting the right people, organizations should also consider how the new employees should be trained. Organizations can adopt centralized training at a single location for all its employees located in various geographic locations or train employees at their respective facilities. Organizations can also outsource employee development programs to professional training organizations. Similarly, organizations also have to decide on the performance measure to be used. They can either follow a single performance evaluation method for all its employees or develop country or area specific evaluation method.
Another key decision area is the type of entry method (a wholly-owned subsidiary, joint venture, or alliance) to be used to set up operations at a new location. Though wholly-owned subsidiaries give organizations full control over the operations of their new establishments, they have to start from scratch in every aspect of the business to set up such subsidiaries. Joint ventures and alliances however, give organizations access to local firm's knowledge of the market and allow them to spread the risk among other partners.
Facilities
Facility decisions are taken after checking the suitability of a location. The suitability of a location is dependent on various factors: level of demand for the products or services the company is planning to provide, the markets for which the product is being developed for, the guidelines and regulations of the country that the company is operating in, the infrastructure (roads, electricity, communication facilities, etc.) near the location, and the availability of required manpower.
Capacity
Capacity decisions are influenced by the products that an organization plans to manufacture and the markets it intends to cater to. These decisions are also influenced by the export-import and other trade policies of the country in which the facilities are being developed. These policies help organizations decide whether capacity should be developed for satisfying local demand or for exporting to other countries.
Technology
Organizations that are expanding globally have to decide on the level of technology to be incorporated in their products. This is necessary because certain markets may not be able to absorb technologically advanced products. For instance, some underdeveloped markets may not have the necessary infrastructure to support cell phones with advanced features like MMS.
Innovation
Developing a new technology or product involves considerable inputs in the form of labor, time and money. To gain maximum advantage from such innovations, organizations patent their product so that other organizations cannot copy their products and sell them in the market. This is why organizations examine the patent and copyright laws of the country they plan to operate in.
Integration
Integration decisions are concerned with the flow of materials from one facility to another or from one location to another, the cost of transportation, and the availability of distribution channel. Organizations have to determine the extent to which they should integrate their supply chain. For instance, they may develop their own transportation, distribution and service network or outsource these activities to companies that specialize in those areas. They may also choose to outsource some activities and manage the rest themselves.
Workforce
Workforce decisions are concerned with, among other things, determining whether an organization should have a single personnel policy for all areas or countries or have a separate and specific policy for each country. Organizations need to be aware of the labor policies of the countries they want to operate in. Many countries have conservative labor laws which restrict the freedom of companies in the formulation of the personnel policies. In some countries, strong labor unions may force companies to alter their personnel policies which had succeeded in other countries. The policies of different countries regarding the mobility of employees to other countries should also be considered when expanding globally.
Procedures and planning
When expanding to locations in other countries, organizations can adopt a centralized or decentralized strategy. Organizations need to have a proper control mechanism to ensure the success of facilities in foreign countries. They also need to maintain a balance between authority, responsibility and accountability for smooth operations. Decisions regarding the procedures to be followed for executing various business processes are critical.
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