COMMERCE 4OB3 Chapter Notes - Chapter 2: North American Free Trade Agreement, World Trade Organization
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Management Operations 3QC3 Jan 19, 2014
Chapter 2: Operations Strategy in a Global Environment
A Global View of Operations
Today’s OM’s must have a global view of operations strategy.
Organizations are hastily extending their operations globally with innovative strategies,
due to globalization.
6 reasons why domestic business operations decide to change to some form of
1. Reduce costs
•Maquiladoras: Mexican factories located along the US-Mexico border
that receive preferential tariff treatment.
•World Trade Organization (WTO): An international organization that
promotes world trade by lowering barriers to the free flow of goods across
•North American Free Trade Agreement (NAFTA): A free trade
agreement between Canada, Mexico, and the US.
•European Union: A European trade group that has 27 member states.
2. Improve the supply chain
3. Provide better goods and services
4. Understand markets
5. Learn to improve operations
6. Attract and retain global talent
Used to outsource to China, but has moved back to the states in California. Companies
are finding it cheaper to produce domestically and better, because they can walk down to
the floors and see what’s happening.
Global Operations Strategy Options
International business: A firm that engages in cross-border transactions
Multinational corporation (MNC): A firm that has extensive involvement in
international business, owning or controlling facilities in more than one country.
OMs of international and multinational firms approach global opportunities with one of
four operations strategies:
International strategy: A strategy in which global markets are penetrated using exports
and licenses. It is the least advantageous, with little local responsiveness and little cost
advantage. It is often the easiest.