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IB 3101 (20)
Lecture 12

IB 3101 Lecture 12: Week 12 – Chapter 15 – Global Production and Outsourcing
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Department
International Business Admn
Course
IB 3101
Professor
Susan Feinberg
Semester
Spring

Description
Week 12 Chapter 15 Global Production and Outsourcing Production primary activity in the valuation chain of the firm, activities involved in creating a product Logistics supporting activity, procurement and physical transmission of material through the supply chain, form suppliers to customers Strategy Production and Logistics 1. Lower costs of value creation a. Production can improve reliability of a product JIT arrival 2. Add value by better serving customer needs Production Location (centralization vs decentralized production) 1. Country factors a. Skilled labor and supporting industries b. Trade barriers c. Future exchange rate changes d. Transportation costs e. Regulations affecting FDI 2. Technological factors a. Level of fixed costs i. High fixed costs, makes sense for the firm to serve the world market from a single location or from a very few locations b. Minimum efficient scale i. Goes with higher fixed costs ii. The higher the MES the fewer factories a company can produce in c. Flexibility of the technology lean production i. Mass customization ii. Flexible machine cells iii. Reduce set up times for complex equipment iv. Increase the utilization of individual machines through better scheduling v. Improve quality control at all stages of the manufacturing process 3. Product factors a. Products value to weight ration b. Whether the product serves universal needs Value to weight Low weight high value o Pharmaceutical o Tech o Low transportation costs, expensive products o Ok to decentralize product, exceptions cars
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