THE ENVIRONMENTAL ANALYSIS
FRAMEWORK APPROACH
TO INTERNATIONAL LOCATION
GLOBAL SOURCING & MANUFACTURING LOGISTICS:
Superimposing Complexities
SUPPLY SOURCES
PRODUCTION
UNITS
DISTRIBUTION
CONSUMERS
GLOBAL SOURCING & MANUFACTURING LOGISTICS:
Superimposing Complexities
SUPPLY SOURCES
CUSTOMS
C
C
C
PRODUCTION
UNITS C
C
C
DISTRIBUTION
C
C
CONSUMERS
GLOBAL SOURCING & MANUFACTURING LOGISTICS:
Superimposing Complexities
SUPPLY SOURCES
C
C
$/£
$/£ FOREIGN EXCHANGE
C
PRODUCTION
$/£ UNITS C
CUSTOMS
C
$/£
C
DISTRIBUTION
C
C
$/£
CONSUMERS
GLOBAL SOURCING & MANUFACTURING LOGISTICS:
Superimposing Complexities
C
SUPPLY SOURCES
Customs
$/£ Foreign Exchange
C
$/£
Local, Intra-firm
PRODUCTION
$/£ UNITS C
Joint Ventures
Subcontractors
Alliances
JVs, Third Parties, etc.
C
C
$/£
C
DISTRIBUTION
C
C
$/£
Third Party
CONSUMERS
THE “META-FRAMEWORK”
(The Potpourri of all Frameworks)
UNDERSTAND THE FOUR DRIVERS OF THE
INTERHATIONALIZATION OF YOUR
MANUFACTURING PROCESS
TO EVALUATE POTENTIAL OPERATIONAL
STRATEGIES USE A FOUR LEVELS ANALYSIS
PROCEDURE
TO ASSESS A SPECIFIC PROPOSAL FOR
LOCATING ABROAD USE A MATRIX OF
IMPORTANT VARIABLES TO UNDERSTAND
AND STRUCTURE THE TRADEOFFS
INTERNATIONALIZATION POTENTIAL OF
THE MANUFACTURING PROCESS
MARKET DRIVERS
COST
DRIVERS
MANUFACTURING
PROCESS
INTERNATIONALIZATION
POTENTIAL
TECHNOLOGY
DRIVERS
POLITICAL & ECONOMIC DRIVERS
MARKET DRIVERS
AGGRESSIVE ENTRANCE OF FOREIGN
COMPETITORS IN DOMESTIC MARKET
SIGNIFICANT GROWTH IN FOREIGN DEMAND
CHANGING COMPETITIVE PRIORITIES
FROM COST TO:
• Time Delivery
• Quality
• Product Flexibility
CHANGES IN THE NATURE OF PLC
MARKET SOPHISTICATION (“STATE OF THE ART”
MARKETS)
TECHNOLOGY DRIVERS
TECHNOLOGICAL SOURCES OF CRITICAL
COMPONENTS
SOURCES OF PROCESS TECHNOLOGY
OPPORTUNITIES FOR TRANSFER OF
TECHNOLOGY/TECHNOLOGY SHARING
SOURCES OF HIGH QUALITY TECHNICAL
LABOR
COST DRIVERS
DIRECT LABOR
OVERHEAD
CAPITAL INTENSITY OF PRODUCTION
FACILITIES
TOTAL QUALITY COSTS
GOVERNMENT INCENTIVES
INTEREST RATE SUBSIDIES
TAX HOLIDAYS
COST SHARING ON EQUIPMENT
POLITICAL & ECONOMIC DRIVERS
EXCHANGE RATE FLUCTUATIONS
BILATERAL AND MULTILATERAL TRADE
AGREEMENTS
EXPECTED POLITICAL EVENTS
MAIN MACROECONOMIC VARIABLES
ASSESSMENT OF OPERATIONAL STRATEGIES
INTERNATIONAL LEVEL
Bilateral Agreements, Multilateral Agreements and
Industries
COUNTRY LEVEL
Macroeconomic Conditions, Government Strategies and
Policies
INDUSTRY LEVEL
Local and Global
COMPANY LEVEL
AVAILABLE TOOLS OF ANALYSIS
COUNTRY LEVEL
Economic Framework for Comparative Advantage of
Important Production Factors
From Competitive Priorities, Derive Important Dimensions
for Country Comparisions
INDUSTRY LEVEL
Five Forces Model & “Mega-Force” for Feasibility Analysis
International Strategy Frameworks
COMPANY LEVEL
Value Added Chain
Manufacturing Strategy Framework
• Corporate Objectives
• Order Winners & Qualifiers
• Infrastructural Decisions
• Marketing Strategy
• Process Choice
PRIORITIES
Price
Quality (labor related)
Product Flexibility
Delivery
High
DIMENSIONS
Labor Cost
Labor Skill
JAPAN
KOREA
TAIWAN
Labor
Skill
THAILAND
CHINA
Low
High
Labor Cost
Low
MATRIX OF IMPORTANT VARIABLES TO ASSESS SPECIFIC
PROPOSALS
VARIABLES:
Country Environment
Competitive Environment
Company Characteristics
MARK THE FAVORABLE CONDITIONS FOR YOUR PROPOSAL
PROPOSAL MIGHT INVOLVE DECISIONS ON
DEVELOPMENT OF MANUFACTURING FACILITIES
TECHNOLOGY CHOICE
CHOICE OF ALTERNATIVE ENTRY MODES
• Exporting, Licensing, Subcontracting, Joint Ventures
COUNTRY ENVIRONMENT
LOW
HIGH
EX
MF/LI
EX
MF
EX
MF
EX
MF/AUTO
Risk
Government Receptivity to Mfg. Inv.
Import Controls on FG
MF
EX
EX
EX
MF
MF/JV
Capital Controls
Price Controls
Import Controls (on RM)
CULTURAL FACTORS
Compatibility
EX
MF
FM
EX
EX
MF
ECONOMIC FACTORS
Market Size and Growth
Labor Cost
Labor Skill
Local Managerial Capacity
Infrastructure Adequacy
MF
POLITICAL FACTORS
NOTE: MF = Manufacturing Facilities
EX = Export
EX
AUTO = Automation
LI = Labor Intensive
COMPETITIVE SITUATION
Low <<<>>>High
Industry Concentration
Relative Competitive Strength
Local Barriers to Entry
Local Competitors’ Strength
Global Competitors’ Strength
Supplier Availability
Local Substitutes
Global Substitutes
Strength of Customers
Government Strategies Volatility
Government’s Strength as:
Buyer
Supplier
Entrant
-EX
MF
MF
MF
EX
MF
MF
FM
MF
MF
EX or MF/JV
EX
EX
MF
EX
EX
EX
MF EX
-FM
MF
FM
EX
EX
COMPANY CHARACTERISTICS
Low <<<<<>>>>>High
MARKET
Maturity
Brand image (quality)
Product Flexibility
Time Delivery
Service Intensity
MF
Sub
MF
EX
EX
EX
MF OR EX
EX or MF/Auto
MF
MF
MF
EX
MF
-MF
--
EX
EX
EX
MF
MF
TECHNOLOGY
Matutity
Stability
Complexity
RESOURCES
Capital
Management
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