THE ENVIRONMENTAL ANALYSIS FRAMEWORK APPROACH TO INTERNATIONAL LOCATION

1
THE ENVIRONMENTAL ANALYSIS FRAMEWORK
APPROACHTO INTERNATIONAL LOCATION
2
GLOBAL SOURCING MANUFACTURING LOGISTICS
Superimposing Complexities
SUPPLY SOURCES
CONSUMERS
3
GLOBAL SOURCING MANUFACTURING LOGISTICS
Superimposing Complexities
SUPPLY SOURCES
CUSTOMS
C
C
C
C
C
C
C
C
CONSUMERS
4
GLOBAL SOURCING MANUFACTURING LOGISTICS
Superimposing Complexities
SUPPLY SOURCES
C
CUSTOMS
C
/
/
FOREIGN EXCHANGE
C
/
C
C
/
C
C
C
/
CONSUMERS
5
GLOBAL SOURCING MANUFACTURING LOGISTICS
Superimposing Complexities
C
Customs
SUPPLY SOURCES
Foreign Exchange
C
/
/
Local, Intra-firm
JVs, Third Parties, etc.
C
/
C
C
/
C
C
C
/
CONSUMERS
6
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

7
INTERNATIONALIZATION POTENTIAL OF THE
MANUFACTURING PROCESS
MARKET DRIVERS
MANUFACTURING PROCESS INTERNATIONALIZATION POTENT
IAL
TECHNOLOGY DRIVERS
COST DRIVERS
POLITICAL ECONOMIC DRIVERS
8
MARKET DRIVERS

• AGGRESSIVE ENTRANCE OF FOREIGN COMPETITORS IN
  DOMESTIC MARKET
• SIGNIFICANT GROWTH IN FOREIGN DEMAND
• CHANGING COMPETITIVE PRIORITIES
• FROM COST TO
• Time Delivery
• Quality
• Product Flexibility
• CHANGES IN THE NATURE OF PLC
• MARKET SOPHISTICATION (STATE OF THE ART MARKETS)

9
TECHNOLOGY DRIVERS

• TECHNOLOGICAL SOURCES OF CRITICAL COMPONENTS
• SOURCES OF PROCESS TECHNOLOGY
• OPPORTUNITIES FOR TRANSFER OF TECHNOLOGY/TECHNOLOG
  Y SHARING
• SOURCES OF HIGH QUALITY TECHNICAL LABOR

10
COST DRIVERS

• DIRECT LABOR
• OVERHEAD
• CAPITAL INTENSITY OF PRODUCTION FACILITIES
• TOTAL QUALITY COSTS
• GOVERNMENT INCENTIVES
• INTEREST RATE SUBSIDIES
• TAX HOLIDAYS
• COST SHARING ON EQUIPMENT

11
POLITICAL ECONOMIC DRIVERS

• EXCHANGE RATE FLUCTUATIONS
• BILATERAL AND MULTILATERAL TRADE AGREEMENTS
• EXPECTED POLITICAL EVENTS
• MAIN MACROECONOMIC VARIABLES

12
ASSESSMENT OF OPERATIONAL STRATEGIES

• INTERNATIONAL LEVEL
• Bilateral Agreements, Multilateral Agreements and
  Industries
• COUNTRY LEVEL
• Macroeconomic Conditions, Government Strategies
  and Policies
• INDUSTRY LEVEL
• Local and Global
• COMPANY LEVEL

13
AVAILABLE TOOLS OF ANALYSIS

• COUNTRY LEVEL
• Economic Framework for Comparative Advantage of
  Important Production Factors
• From Competitive Priorities, Derive Important
  Dimensions for Country Comparisions
• INDUSTRY LEVEL
• Five Forces Model Mega-Force for Feasibility
  Analysis
• International Strategy Frameworks
• COMPANY LEVEL
• Value Added Chain
• Manufacturing Strategy Framework
• Corporate Objectives Marketing Strategy
• Order Winners Qualifiers Process Choice
• Infrastructural Decisions

14
DIMENSIONS Labor Cost Labor Skill
PRIORITIES Price Quality (labor related) Product
Flexibility Delivery
JAPAN
High
KOREA
TAIWAN
Labor Skill
THAILAND
CHINA
Low
Low
Labor Cost
High
15

• MATRIX OF IMPORTANT VARIABLES TO ASSESS SPECIFIC
  PROPOSALS
• VARIABLES Country Environment
• Competitive Environment
• Company Characteristics
• MARK THE FAVORABLE CONDITIONS FOR YOUR PROPOSAL
• PROPOSAL MIGHT INVOLVE DECISIONS ON
• DEVELOPMENT OF MANUFACTURING FACILITIES
• TECHNOLOGY CHOICE
• CHOICE OF ALTERNATIVE ENTRY MODES
• Exporting, Licensing, Subcontracting, Joint
  Ventures

16
NOTE MF Manufacturing Facilities AUTO
Automation EX Export LI Labor Intensive
17
COMPETITIVE SITUATION
Low ltltltgtgtgtHigh

• Industry Concentration -- MF
• Relative Competitive Strength EX MF
• Local Barriers to Entry MF EX or MF/JV
• Local Competitors Strength MF EX
• Global Competitors Strength MF EX
• Supplier Availability EX MF
• Local Substitutes MF EX
• Global Substitutes MF EX
• Strength of Customers FM EX
• Government Strategies Volatility MF EX
• Governments Strength as
• Buyer -- FM
• Supplier FM EX
• Entrant MF EX

18
COMPANY CHARACTERISTICS
Low ltltltltltgtgtgtgtgtHigh