Deck 17: Global Production and Supply Chain Management

Question 1

H M: The Retail-Clothing Giant





Does it surprise you that the second-largest clothing retailer is selling in stores in only 54 countries plus an additional 10 countries online Why do you think it is not covering more of the world's countries

Answer 1

It is not surprising that the second largest clothing retailer is sold in stores in only 54 countries plus an additional 10 countries online.
Some of the reasons for this situation may be the following:
• Certain countries have foreign direct investment laws which are not conducive to establishing single brand retail stores by MNCs. To illustrate, in India as per law, a 100% owned subsidiary of an MNC cannot enter the business of single brand retail including clothing. Perhaps HANDM may have as their corporate strategy that they enter a foreign market only with a wholly owned subsidiary.
• HANDM are also perhaps clear that their clothing will only be sold through their own outlets. In other words, it may not be possible for someone else to import HANDM brands and sell in the local domestic market.
• HANDM clothes may have designs which are suited to Western tastes and may not be suitable for Eastern or Oriental markets. To illustrate, Indian women wear dresses which are quite different from what the westerners wear. Some of the countries following the religion of Islam may not appreciate their women wearing western clothes.
• Many countries may prohibit imports of clothing. Some other countries may have high import duties for clothing.
• In many countries, where the per capita disposable incomes are abysmally poor, the citizens may not be able to afford branded premium clothing such as those of HANDM.

Question 2

An electronics firm is considering how best to supply the world market for microprocessors used in consumer and industrial electronic products. A manufacturing plant costs about $500 million to construct and requires a highly skilled workforce. The total value of the world market for this product over the next 10 years is estimated to be between $10 billion and $15 billion. The tariffs prevailing in this industry are currently low. Should the firm adopt a concentrated or decentralized manufacturing strategy What kind of location(s) should the firm favor for its plant(s)

Answer 2

The firm should adopt a concentrated manufacturing strategy; $500 million up front fixed costs when the entire market over a decade for all companies in the industry is $10 to $15 billion makes a single factory a good idea. Since tariffs are low, this single factory could supply a lot of markets at little higher cost than multiple factories could.
The firm should favor putting the factory in places where there is little chance the factory will be nationalized or disrupted, where there is a highly skilled workforce, near the firm's industrial/consumer electronics customer's factories, and/or near significant transport nodes like railways or ports.

Question 3

Global Production, Outsourcing, and Logistics
Use the globalEDGE website (globaledge.msu.edu) to complete the following exercises:
The globalization of production makes many people aware of the differences in manufacturing costs worldwide. The U.S. Department of Labor's Bureau of International Labor Affairs publishes the Chartbook of International Labor Comparisons. Locate the latest edition of this report, and identify the hourly compensation costs for manufacturing workers in China, Brazil, Mexico, Turkey, Germany, and the United States.

Answer 3

NO ANSWER

Question 4

H M: The Retail-Clothing Giant





H M does not own any of the factories that produce its clothes. Instead, it relies on some 1,900 factories and 900 suppliers to create what its team designed. These factories and suppliers are mostly in Europe and Asia. How can H M ensure that its customers receive the quality expected in the clothing

Question 5

A chemical firm is considering how best to supply the world market for sulfuric acid. A manufacturing plant costs about $20 million to construct and requires a moderately skilled workforce. The total value of the world market for this product over the next 10 years is estimated to be between $20 billion and $30 billion. The tariffs prevailing in this industry are moderate. Should the firm favor concentrated manufacturing or decentralized manufacturing What kind of location(s) should the firm seek for its plant(s)

Question 6

Global Production, Outsourcing, and Logistics
Use the globalEDGE website (globaledge.msu.edu) to complete the following exercises:
The World Bank's Logistics Performance Index (LPI) assesses the trade logistics environment and performance of countries. Locate the most recent LPI ranking. What components for each country are examined to construct the index Identify the top 10 logistics performers. Prepare an executive summary highlighting the key findings from the LPI. How are these findings helpful for companies trying to build a competitive supply chain network

Question 7

H M: The Retail-Clothing Giant





H M stresses sustainability in its promotional campaigns. How can it ensure that the working conditions are appropriate for the 1.6 million people that serve in its supplier network Is it even H M's role to ensure that the working conditions and environmental impact are great in every market it engages in

Question 8

A firm must decide whether to make a component part in-house or to contract it out to an independent supplier. Manufacturing the part requires a nonrecoverable investment in specialized assets. The most efficient suppliers are located in countries with currencies that many foreign exchange analysts expect to appreciate substantially over the next decade. What are the pros and cons of (a) manufacturing the component in-house and (b) outsourcing manufacturing to an independent supplier Which option would you recommend Why

Question 9

H M: The Retail-Clothing Giant





If you worked for H M, what would you suggest that it focus on to become even larger than it is now Should it have its own factories Should it expand to more than the 64 countries (54 with stores and 10 online) that it is in now Should it control more of the global supply chains

Question 10

Reread the Management Focus on Philips in China, then answer the following questions:
a. What are the benefits to Philips of shifting so much of its global production to China
b. What are the risks associated with a heavy concentration of manufacturing assets in China
c. What strategies might Philips adopt to maximize the benefits and mitigate the risks associated with moving so much production capacity offshore

Question 11

Explain how the global supply chain functions of (a) logistics and (b) purchasing can be used to strategically leverage the global supply chains for a manufacturing company producing mobile phones.

Question 12

What type of interorganizational relationship should a global company consider in the (a) inbound portion of its supply chains if the goal is to buy commodity-oriented component parts for its own production and (b) outbound portion of its supply chains if the goal is to establish a strong partnership in reaching end-customers