THE ENVIRONMENTAL ANALYSIS FRAMEWORK APPROACH

TO INTERNATIONAL LOCATION

GLOBAL SOURCING & MANUFACTURING LOGISTICS: Superimposing Complexities

SUPPLY SOURCESSUPPLY SOURCES

PRODUCTION UNITS

DISTRIBUTION

CONSUMERSCONSUMERS

GLOBAL SOURCING & MANUFACTURING LOGISTICS: Superimposing Complexities

SUPPLY SOURCESSUPPLY SOURCES

PRODUCTION UNITS

DISTRIBUTION

CONSUMERSCONSUMERS

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GLOBAL SOURCING & MANUFACTURING LOGISTICS: Superimposing Complexities

SUPPLY SOURCESSUPPLY SOURCES

PRODUCTION UNITS

DISTRIBUTION

CONSUMERSCONSUMERS

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$/£ FOREIGN EXCHANGE$/£

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Third Party

AlliancesSubcontractors

Joint Ventures

Local, Intra-firmLocal, Intra-firm

GLOBAL SOURCING & MANUFACTURING LOGISTICS: Superimposing Complexities

SUPPLY SOURCES

PRODUCTION UNITS

DISTRIBUTION

CONSUMERSCONSUMERS

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JVs, Third Parties, etc.

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

TECHNOLOGY DRIVERS

COSTDRIVERS

POLITICAL & ECONOMIC DRIVERS

MANUFACTURING PROCESS

INTERNATIONALIZATIONPOTENTIAL

MARKET DRIVERS

AGGRESSIVE ENTRANCE OF FOREIGN COMPETITORS IN DOMESTIC MARKET

SIGNIFICANT GROWTH IN FOREIGN DEMAND

CHANGING COMPETITIVE PRIORITIESFROM 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 INCENTIVESINTEREST 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 LEVELBilateral Agreements, Multilateral Agreements and Industries

COUNTRY LEVELMacroeconomic Conditions, Government Strategies and Policies

INDUSTRY LEVELLocal and Global

COMPANY LEVEL

AVAILABLE TOOLS OF ANALYSIS

COUNTRY LEVELEconomic Framework for Comparative Advantage of Important Production FactorsFrom Competitive Priorities, Derive Important Dimensions for Country Comparisions

INDUSTRY LEVELFive Forces Model & “Mega-Force” for Feasibility AnalysisInternational Strategy Frameworks

COMPANY LEVELValue Added ChainManufacturing Strategy Framework

• Corporate Objectives • Marketing Strategy• Order Winners & Qualifiers • Process Choice• Infrastructural Decisions

PRIORITIESPriceQuality (labor related)Product FlexibilityDelivery

DIMENSIONSLabor CostLabor Skill

LaborSkill

High

High

Low

LowLabor Cost

JAPAN

KOREATAIWAN

THAILAND

CHINA

MATRIX OF IMPORTANT VARIABLES TO ASSESS SPECIFIC PROPOSALS VARIABLES: Country Environment

Competitive EnvironmentCompany Characteristics

MARK THE FAVORABLE CONDITIONS FOR YOUR PROPOSAL

PROPOSAL MIGHT INVOLVE DECISIONS ONDEVELOPMENT OF MANUFACTURING FACILITIESTECHNOLOGY CHOICECHOICE OF ALTERNATIVE ENTRY MODES

• Exporting, Licensing, Subcontracting, Joint Ventures

COUNTRY ENVIRONMENT LOW HIGH

ECONOMIC FACTORS

Market Size and Growth EX MF

Labor Cost MF/LI EX

Labor Skill EX MF/AUTO

Local Managerial Capacity MF

Infrastructure Adequacy EX MF

POLITICAL FACTORS

Risk MF EX

Government Receptivity to Mfg. Inv. EX MF

Import Controls on FG EX MF/JV

Capital Controls EX EX

Price Controls MFImport Controls (on RM) FM EX

CULTURAL FACTORS

Compatibility EX MF

NOTE: MF = Manufacturing Facilities AUTO = Automation EX = Export LI = Labor Intensive

COMPETITIVE SITUATION

Industry Concentration -- MFRelative Competitive Strength EX MFLocal Barriers to Entry MF EX or MF/JVLocal Competitors’ Strength MF EXGlobal Competitors’ Strength MF EXSupplier Availability EX MFLocal Substitutes MF EXGlobal Substitutes MF EXStrength of Customers FM EXGovernment Strategies Volatility MF EXGovernment’s Strength as:

Buyer -- FMSupplier FM EXEntrant MF EX

Low <<<>>>High

MARKETMaturity MF EXBrand image (quality) Sub MF OR EXProduct Flexibility MF EX or MF/AutoTime Delivery EX MF

Service Intensity EX MF

TECHNOLOGYMatutity MF --Stability EX MFComplexity MF --

RESOURCESCapital EX MFManagement EX MFSimilar Venture Experience EX

COMPANY CHARACTERISTICS

Low <<<<<>>>>>High