Transcript Lecture-30.pptx

Management Practices
Lecture-30
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Recap
• Managing in a Global Environment
• Four key questions
I. Global Perspectives
II. Different Types of International
Organizations
III. How organizations go global (Important)
IV. Managing in a global environment
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Today’s Lecture
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Global outsourcing
Exporting and importing
Licensing and Franchising
Foreign subsidiary
Managing in A Global Environment
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Benefits of Global Outsourcing
There are many benefits of outsourcing your business processes to destinations around the world. Some of them
are:
Cost advantages
The most obvious and visible benefit relates to the cost savings that outsourcing brings about.
You can get your job done at a lower cost and at better quality as well. Due to the difference in wages
between western countries and Asia, the same kind of work that is done over there can be done in India at a
fraction of the cost. There is a cost savings of around 60% by outsourcing your work to India. Plus, the
quality of the services provided is high thereby ensuring that low-cost does not mean low-quality.
Increased efficiency
When you outsource your business needs to an outsourcing partner, they bring years of experience in
business practices and expertise in delivering complex outsourcing projects. Thus, they can do the job better
with their knowledge and understanding of the domain. This leads to an increase in productivity and
efficiency in the process thereby contributing to the bottom-line of your company.
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Benefits of Global Outsourcing
Concentration on core business areas
Back office operations of a company require high maintenance and specialized attention. Yet most of them
are critical for the company's everyday activities. By outsourcing their back office operations businesses
can concentrate on their core competencies while their back office operations are being managed
smoothly by a specialized third party company.
World-class technology at lower rates
Investing in new technology is very costly and often risky. As the technology market develops rapidly, it is
difficult to keep up with latest innovations and solutions. Thus outsourcing to companies that have the
resources, expertise and desire to continuously update their technological solutions, offers a true
advantage of outsourcing.
Skilled manpower at affordable prices
Outsourcing gives a company the ability to get access to skilled and trained man power at extremely low
rates. This in turn leads to an increase in productivity as well as cost savings. By outsourcing a company
saves on recruitment, training and other human resource costs it would otherwise have to maintain
internally. Also an advantage of outsourcing is that a company is able to utilize the kind of expertise it
could not internally provide.
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Benefits of Global Outsourcing
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Time zone advantage
Apart from the cost advantage, the other much touted benefit has to do with the time zone
differential between your country and the location you are outsourcing to.
Increased productivity
By employing skilled manpower in larger numbers at lower costs companies can really increase
their productivity. This in turn would result in better customer satisfaction and increased
profitability.
Beat Competition
In today’s fast paced global economy a company needs to provide high-quality services to its
customers in order to retain them, as well as provide the services for cheap prices. Outsourcing in
this case can help the company maintain lower rates with better service solutions, thereby giving
them a better market position or even a competitive advantage.
Tax benefits
By selecting the right BPO destination companies can save up on taxes in turn saving on costs.
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Disadvantage of Global Outsourcing
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Loss of managerial control, because it is more difficult to manage outside service providers than
managing one’s own employees working possibly in the same building.
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Often the hidden costs are difficult to calculate or prepare for. These include legal costs related to
putting together a contract between two companies and the time spent to coordinating the
contract.
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Another disadvantage of outsourcing can be a threat to security and confidentiality. If your
company is outsourcing processes like payroll, medical transcriptions or other confidential
information, a company must be very careful in choosing which process it wants to outsource and
to which provider.
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A possible loss of flexibility in reacting to changing business conditions, lack of internal and external
customer focus and sharing cost savings may also be a disadvantage of outsourcing.
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Other disadvantages of outsourcing may include unfavorable contract lengths, loss of competitive
edge, problems in contract renewal, and contractual misunderstandings.
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But what exactly does global sourcing entail?
• Global sourcing entails identifying, evaluating,
negotiating and configuring supply across
multiple geographies to reduce costs,
maximize performance and mitigate risks.
4–10
Exporting and importing
• Exporting: making products domestically and
selling them abroad.
• Importing: acquiring products made abroad
and selling them domestically.
• Examples: Galanz
4–11
Licensing and Franchising
• practicing and using another person's business
philosophy
• Franchisor, franchisee
• The franchisor grants the independent
operator the right to distribute its products,
techniques, and trademarks for a percentage
of gross monthly sales and a royalty fee
• Example: 7 Eleven
4–12
Strategic alliances and joint venture
• Strategic Alliances
– Partnerships between and organization and a foreign
company in which both share resources and
knowledge in developing new products or building
new production facilities.
• Joint Venture
– A specific type of strategic alliance in which the
partners agree to form a separate, independent
organization for some business purpose.
4–13
Foreign subsidiary
Foreign Subsidiary
– Directly investing in a foreign country by setting
up a separate and independent production facility
or office.
4–14
How to Manage in A Global Environment?
4–15
Managing in A Global Environment
• The Legal Environment
– Stability or instability of legal and political systems
• Legal procedures are established and followed
• Fair and honest elections held on a regular basis
– Differences in the laws of various nations
• Effects on business activities
• Effects on delivery of products and services
4–16
The Economic Environment
• Economic Systems
– Market economy
• An economy in which resources are primarily owned and
controlled by the private sector.
– Command economy
• An economy in which all economic decisions are planned by
a central government.
• Monetary and Financial Factors
– Currency exchange rates
– Inflation rates
– Diverse tax policies
4–17
The Cultural Environment
• National Culture
– Is the values and attitudes shared by individuals
from a specific country that shape their behavior
and their beliefs about what is important.
– May have more influence on an organization than
the organization culture.
4–18
Hofstede’s Framework for Assessing Cultures
Individualism
versus
Collectivism
Long-Term
versus
Short-Term
Orientation
Power
Distance
Culture
Achievement
versus
Nurturing
Uncertainty
Avoidance
4–19
Schermerhorn/Management, 7e
Chapter 5, Figure 05-04
How countries compare on Hofstede’s dimensions of national
culture.
4–20
Global Management in Today’s World
• Challenges
– Openness associated with globalization
– Significant cultural differences (e.g., Americanization)
– Adjusting leadership styles and management
approaches
• Risks
– Loss of investments in unstable countries
– Increased terrorism
– Economic interdependence
4–21
Summary
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Global outsourcing
Exporting and importing
Licensing and Franchising
Foreign subsidiary
Managing in A Global Environment
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Next Lecture
• Revision 1-15 lectures
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