Global Business Operations Strategies

Operations Strategies: Strategies crafted to enable businesses to operate more efficiently and compete more successfully.

• Optimise processes: Streamline operations to enhance productivity.
• Reduce costs: Lower expenses while maintaining quality.
• Adapt quickly: Respond swiftly to changing market conditions to maintain competitiveness.

Understanding Global Factors

Global Factors: Essential external elements impacting businesses with international operations.

• Influence on multinationals: Varies by region, influencing strategic approaches.
• Global competitive edge: Necessary for securing advantages in global markets.

Key Global Factors

• Global Sourcing: Acquisition of goods and services from across the globe. It helps lower costs and access diverse and innovative resources.

  • Example: IKEA employs global sourcing to ensure affordability while adhering to design standards.

• Economies of Scale: Enhance production to decrease cost per unit.

  • Example: Toyota capitalises on efficient manufacturing to benefit from economies of scale.

• Scanning and Learning: Integrating insights and practices from the global market.

  • Example: Amazon incorporates global innovations to maintain its edge.

• Research & Development (R&D): Efforts focused on innovation that propel technological advancement.

  • Example: Apple excels in R&D, driving ongoing innovative progress.

Global Sourcing in Detail

• Cost Advantages: Accessing lower labour costs in areas like Asia and Eastern Europe reduces production expenses significantly.
• Supply Chain Management: Enhances flexibility; reduces lead times and increases service levels by optimising supplier and production site locations.
• Quality Considerations: Employ rigorous criteria and performance benchmarks such as ISO certifications to ensure quality.

Notable Examples

• PepsiCo: Establishes local partnerships for regional adaptation.
• IKEA: Utilises a diversified supplier base to promote sustainability.

Exploring Economies of Scale

• Definition: Economies of scale - Advantages gained as production volume increases, leading to reduced per-unit costs.

• Pricing: Lower production costs enable competitive pricing.

• Market Share: Strategically lowering prices can increase market share.

Worked Example: Cost Calculation

• Scenario: A company increases production from 10,000 to 20,000 units.
  • Initial cost: £3 per unit at 10,000 units (Total cost: £30,000)
  • New cost: £2.50 per unit at 20,000 units (Total cost: £50,000)
  • Result: While total cost increases, the cost per unit decreases by £0.50, demonstrating economies of scale.

Scanning and Learning

Definition: Ongoing observation of global markets to identify trends and seize opportunities.

• Adapting Best Practices: Firms adopt globally successful strategies.
• Competitive Advantages: Gained insights help firms anticipate and effectively respond to competitors.

Research & Development (R&D)

• Impact on Innovation: Drives new product development and enhancement.
• Benefits of Collaboration: Global R&D supports cost reduction, faster innovation, and access to diverse talent.

Worked Example: Samsung's R&D Strategy

• Detailed Analysis: Samsung invests heavily in R&D centres globally, with approximately 5% of annual revenue dedicated to innovation. This strategy has enabled them to develop breakthrough technologies in mobile devices and semiconductors, maintaining their competitive position against rivals like Apple.

Interconnections Between Global Factors

Interconnectedness: Describes how global factors support each other within business operations.

• Strategic Integration: Boosts operational efficiency and competitiveness.
  • Example: Samsung exemplifies synergy through R&D, sourcing, and scaling.

Key Takeaways

• Global factors are essential for both academic and business success.
• Strategy development benefits from a comprehensive understanding of these factors.
• Checklist: Identify and list global factors and provide examples of companies using them to gain a competitive edge.