DEPARTMENT OF BUSINESS ADMINISTRATION-BBA (GENERAL)
COURSE CODE: BBA 6.3
NAME OF THE COURSE: INTERNATIONAL BUSINESS
SEMESTER & SECTION: 6TH SEM B and D
PREPARED BY : Prof. Sumalatha N
MODULE : 5- International Operations Management
Global Supply Chain Management (GSCM)
Meaning and Definition
Global Supply Chain Management refers to the systematic coordination and integration of
business activities such as sourcing, production, logistics, and human resource management
across different countries. It ensures that goods, services, information, and finances move
efficiently from suppliers to manufacturers and ultimately to customers worldwide. The
primary aim of GSCM is to reduce costs, improve quality, and ensure timely delivery while
operating in a global environment.
Global Sourcing
Meaning and Definition
Global sourcing is the process by which a company procures raw materials, components, or
services from suppliers located in different countries. Instead of relying only on domestic
suppliers, firms search globally to find the most cost-effective and high-quality inputs. This
approach helps businesses remain competitive in international markets.
Objectives of Global Sourcing
The main objective of global sourcing is
1. Cost reduction by purchasing materials from countries where production costs are
lower.
2. It also aims to improve quality by accessing advanced technologies and skilled
suppliers.
3. To ensure the availability of scarce or specialized resources that may not be available
locally.
4. Companies use global sourcing to gain strategic advantages such as innovation and
supplier diversity.
Advantages
Global sourcing provides several benefits.
1. It reduces production costs due to cheaper labor and raw materials in some countries.
2. It improves product quality as companies can choose from the best suppliers
worldwide.
3. It also increases flexibility by offering a wider supplier base, which reduces
dependency on a single supplier.
Disadvantages
Despite its advantages, global sourcing has certain risks.
1. There may be delays in delivery due to long transportation distances.
2. Currency fluctuations can affect the cost of imports.
3. Political instability, trade restrictions, and legal differences in foreign countries can
also create challenges.
4. Communication barriers and cultural differences may further complicate supplier
relationships.
Global Manufacturing Strategies
Meaning and Definition
Global manufacturing strategies involve decisions regarding where, how, and in what
quantity products should be manufactured across different countries. These strategies are
designed to optimize production efficiency, reduce costs, and meet global market demands
effectively.
Types of Global Manufacturing Strategies
Centralized Manufacturing
In this strategy, production is concentrated in one country, usually where costs are lowest or
expertise is highest. The finished products are then exported to other countries. This helps
achieve economies of scale but may increase transportation costs.
Decentralized Manufacturing
Under this approach, manufacturing units are set up in multiple countries. This allows
companies to be closer to customers, reduce transportation costs, and respond quickly to local
demand. However, it may increase operational complexity.
Contract Manufacturing
In this strategy, companies outsource production to third-party manufacturers in foreign
countries. It reduces capital investment and operational costs but may lead to quality control
issues.
Flexible Manufacturing
Flexible manufacturing allows companies to adjust production levels and processes based on
changing market demand. It uses advanced technology to produce different products
efficiently in response to customer needs.
Factors Affecting Manufacturing Location
Several factors influence the choice of manufacturing location.
1. Labor cost is a major factor, as companies prefer countries with lower wages.
2. Availability of raw materials and infrastructure also plays an important role.
3. Government policies such as taxes, incentives, and trade regulations affect decisions.
4. Political stability and access to markets are also key considerations.
International Logistics
Meaning and Definition
International logistics refers to the planning, implementation, and control of the movement
and storage of goods across international borders. It ensures that products reach the right
place, at the right time, and in the right condition.
Components of International Logistics
Transportation
Transportation involves moving goods through various modes such as air, sea, rail, or road.
The choice depends on cost, speed, and nature of goods.
Warehousing
Warehousing refers to the storage of goods until they are needed. Proper storage ensures
product safety and availability.
Inventory Management
Inventory management involves maintaining the right quantity of goods to avoid shortages or
excess stock. It helps in reducing costs and improving efficiency.
Packaging
Packaging protects goods during transit and ensures they reach customers without damage. It
also plays a role in branding and compliance with international standards.
Customs Clearance
Customs clearance involves documentation and approval from government authorities to
import or export goods. It ensures compliance with international trade laws.
Importance
International logistics is important for ensuring timely delivery of goods, reducing
operational costs, and facilitating global trade. Efficient logistics improves customer
satisfaction and business performance.
Challenges
There are several challenges such as complex documentation, customs regulations, risk of
delays, damage to goods, and high transportation costs. Political instability and natural
disasters can also disrupt logistics operations.
International Human Resource Management
(IHRM)
Meaning
International Human Resource Management refers to managing employees in a global
organization. It includes recruitment, training, performance management, and compensation
of employees working in different countries.
Staffing Policy
Meaning
Staffing policy refers to the approach adopted by multinational companies to recruit and
manage employees for international operations.
Types of Staffing Policies
Ethnocentric Approach
In this approach, key positions in foreign subsidiaries are filled by employees from the home
country. It ensures control and consistency but may lead to cultural issues.
Polycentric Approach
Under this approach, local employees from the host country are hired to manage operations.
It reduces costs and improves local responsiveness but limits career opportunities for home
country employees.
Geocentric Approach
This approach selects the best talent regardless of nationality. It promotes global integration
and diversity but may be expensive and complex to manage.
Regiocentric Approach
In this approach, employees are hired from a specific region rather than a single country. It
balances global integration and local responsiveness.
Determinants of Staffing Policy
Several factors influence staffing decisions.
The nature of the business determines whether local or international expertise is
required.
Cost considerations play a major role, as expatriates are expensive.
Availability of skilled employees in the host country affects hiring decisions.
Cultural differences and government regulations also influence staffing policies.
The overall business strategy of the company determines the approach adopted.
Expatriation
Meaning and Definition
Expatriation is the process of sending employees from the home country to work in a foreign
country for a specific period. These employees, known as expatriates, help manage
international operations, transfer knowledge, and maintain control over foreign subsidiaries.
Repatriation
Meaning and Definition
Repatriation refers to the process of bringing expatriate employees back to their home
country after completing their international assignment. It involves reintegrating them into
the organization and utilizing their international experience effectively.