MODULE II
FOREIGN MARKET
ENTRY STRATEGIES
Dr. Kavita Kalkoti
Professor and Head,
Department of Commerce
FOREIGN MARKET ENTRY STRATEGIES
• Factors Influencing Selection of Foreign Markets
• Methods of Entry in Global Markets – Direct and
Indirect methods – a) Manufacturer exporter, b)
Foreign Collaborations, c) Joint Venture, d) Franchising,
e) Contract
• Important Components of Logistics in Export
Marketing
Factors Influencing Selection of Overseas
Markets
1. Political factors
2. Economic factors
3. Social factors
4. Technological factors
5. Climatic conditions
6. Legal factors
7. Cultural factors
PEST-CLC
POLITICAL FACTORS
The system under which a country’s government is elected
A. Democracy
B. Republic
C. Monarchy
D. Communism
E. Dictatorship
POLITICAL FACTORS
According to the Merriam-Webster dictionary:
Democracy - government by the people; especially : rule of the majority,
a government in which the supreme power is vested in the people and
exercised by them directly or indirectly through a system of
representation usually involving periodically held free elections
POLITICAL FACTORS
The system under which a country’s government is elected
Republic – In theory, a republic is a political system in which the government
remains mostly subject to those governed. Some scholars define any political system
in which the citizens legitimize the government. There are those that believe that
any form of government that is not based on heritage or authoritarian governance is
a republic. In some cases, a representative democracy (or any form of democracy)
might be considered a republic.
POLITICAL FACTORS
Monarchy – When most of us think of a monarchy, we think of the political
systems of medieval European countries. In a monarchy, a ruler is not usually
chosen by the voice of the people or their representatives. Often a monarch is
the head of state until he or she abdicates or until death. In many cases a
monarch is the final word in government. There may be functionaries to make
decisions and run the political system, but the monarch has discretion with
the laws, and how they are enforced.
POLITICAL FACTORS
Communism – In most cases, a communist state is based on the ideology of
communism as taught by Marx and/or Lenin. However, some argue that these
political systems are not true to the ideals espoused by these revolutionary
thinkers. Communist states are often dominated by a single party, or a group of
people. A planned economy is often part of the governing class, and in many
cases resources are taken and then redistributed to others, at the top of the
system. Sometimes communists call themselves “workers’ states” or “socialist,”.
In a lot of cases, citizens are required to do certain jobs, or have some of their life
decisions — especially concerning where they can live and what jobs they can do.
Communism is often considered an authoritarian political system.
POLITICAL FACTORS
Dictatorship – Normally, a dictator is the main individual ruling the
country. While there are lackeys and others who work for the dictator,
he or she makes most of the decisions, and usually has enforcers.
Dictators are not restricted by constitutions or parliaments. The
governed are usually not consented in any way. Elections held are
usually affairs in which the dictator is the only candidate. One of the
more common types of dictatorship is the military dictatorship, in
which a military organization governs, running the political system.
POLITICAL FACTORS
Mainly two forms are prevailing presently :
A. Democracy – India, USA, UK, France, Germany, Pakistan,
Norway, Sweden, Switzerland, Greece, Italy, Ireland, South Africa, Poland,
Nepal (one of the recent countries to adopt democracy), Australia, New
Zealand, Indonesia, Philippines, Bangladesh etc.
B. Communist – People's Republic of China, Democratic People's Republic of
Korea (North Korea), Socialist Republic of Vietnam, Lao People's
Democratic Republic (Laos), Republic of Cuba
ECONOMIC FACTORS
The system under which a country’s economy is based
An organized way in which a state or nation allocates its resources and
apportions goods and services in the national community
Command Economic System – (Communist)
Market Economic System – (Capitalist)
Mixed Economic System
ECONOMIC FACTORS
•A command economic system is characterized by a
dominant centralized power (usually the government) that
controls a large part of all economic activity. This type of
economy is most commonly found in communist countries. It
is sometimes also referred to as a planned economic system,
because most production decisions are made by the
government (i.e. planned) and there is no free market at
play.
China, Cuba, Laos, North Korea, and Vietnam.
ECONOMIC FACTORS
The system under which a country’s economy is based
A market economic system relies on free markets and does not allow any kind of
government involvement in the economy. In this system, the government does not
control any resources or other relevant economic segments. Instead, the entire system
is regulated by the people and the law of supply and demand.
• The United States of America.
• Canada.
• Chile.
• Germany.
• The United Kingdom.
• Japan.
• South Korea.
ECONOMIC FACTORS
The system under which a country’s economy is based
A mixed economic system refers to any kind of mixture of a
market and a command economic system. It is sometimes also
referred to as a dual economy. Although there is no clear-cut
definition of a mixed economic system, in most cases the term
is used to describe market economies with a strong regulatory
oversight and government control in specific areas
(e.g. public goods and services).
ECONOMIC FACTORS
According to the Merriam-Webster dictionary:
Socialism – any of various economic and political theories
advocating collective or governmental ownership and
administration of the means of production and distribution of
goods, a system or condition of society in which the means of
production are owned and controlled by the state, a stage of
society in transition between capitalism and communism and
distinguished by unequal distribution of goods and pay
according to work done.
SOCIAL FACTORS
The patterned series of interrelationships existing
between individuals, groups, and institutions and
forming a coherent whole, the formal organization of
status and role that may develop among the members
of a relatively small stable group (such as a family or
club)
SOCIAL FACTORS
SOCIAL
FACTORS –
DIGITAL
COMMUNITIE
S
CULTURAL FACTORS
• Dealing with traditions and habits of the society, festivals, dress habits
etc. form a part of this
TECHNOLOGICAL FACTORS
The internet of things (IoT) is a computing concept that describes the
idea of everyday physical objects being connected to the internet and
being able to identify themselves to other devices.
Industry 4.0 introduces what has been called the “smart factory,” in
which cyber-physical systems monitor the physical processes of the
factory and make decentralized decisions. The physical systems become
Internet of Things, communicating and cooperating both with each
other and with humans in real time via the wireless web.
TECHNOLOGICAL FACTORS
AI
AI and [Link]
CLIMATIC FACTORS
According to the Merriam-Webster dictionary:
A region of the earth having specified climatic conditions. The average
course or condition of the weather at a place usually over a period of
years as exhibited by temperature, wind velocity, a warm,
humid climate.
The prevailing set of conditions (as of temperature and humidity)
indoors.
CLIMATIC FACTORS
CLIMATIC FACTORS
• Polar – Prairies (North America), Pampas (South America), Velds (South Africa),
Downs (Australia) and Steppes (Russia). This dry climate exists in the interior regions
of the North American and Eurasian continents. Moist ocean air masses are blocked
by mountain ranges to the west and south. These mountain ranges also trap polar air
in winter, making winters very cold. Summers are warm to hot.
• Temperate – It stretches as an almost continuous belt across southern Canada,
northern Europe and Russia. The Tundra region lies on the north and the Temperate
Grasslands on the south. The areas are – Southern Alaska, Southern Canada, parts of
Norway, Sweden, Finland, Northern Russia, Northern Siberia, Sakhalin Island.
• Arid - The climatic zone lies in – The Sahara, the Arabia, the Thar, Mohave and
Sonoran (South Western U.S.A.), Kalahari and Namib (South Western Africa), Simpson,
Gibson, Great Sandy (Australia). The climate is dominated by the subsidence of air
masses and marked stability of the sub-tropical anticyclones and hence nearly
rainless. The highest temperatures in the world are recorded here
CLIMATIC FACTORS
• Tropical – The Amazon Basin in South America, Congo Basin in Africa, Guinea coast in
Africa, Java, Sumatra, Malaysia etc. dry tropical – South America: Cuba, Jamaica and
the islands in the Pacific. Africa: The Sudan, large parts of the newly formed Republics
– Senegal, Guinea, Mali, Niger, Chad and also in Ghana, Togo, Kenya, Zimbabwe,
Tanzania, Angola and Uganda. Australia: The northern region and Queensland.
• Mediterranean –This is a wet-winter, dry-summer climate. Extremely dry summers are
caused by the sinking air of the subtropical highs and may last for up to five months.
This climatic region includes European, Asiatic and African lands bordering the
Mediterranean Sea.
• Mountains – the climate on a mountain varies depending on what altitude you are up
a mountain. At the foothills there may be a tropical climate, the peaks may be covered
in ice. The uppermost level of mountains is often bare rock and snow. Tibet and the
Himalayas and other mountain ranges such as the Rocky Mountains or the Andes are
good examples of this. Mountain weather conditions can change dramatically from
one hour to the next. Generally the climate on mountains get progressively colder
with increased altitude. Air pressure decreases with altitude.
LEGAL FACTORS
Property rights - patents, trademarks.
Taxation - taxation schemes will be faced abroad.
Recourse - possibility and length of action, arbitration.
Labour laws - Working Hours in India: As per the Factories Act 1948, every adult
(a person who has completed 18 years of age) cannot work for more than 48 hours
in a week and not more than 9 hours in a day. According to Section 51 of the Act,
the spread over should not exceed 10-1/2 hours.
LEGAL FACTORS
Australian government introduces law to make Google and
Facebook pay for news
[Link]
Methods of Entry in Global Markets
• DIRECT METHOD
• INDIRECT METHOD
[Link] Points Direct Exports Indirect export
1 First hand Available to exporters Not available to exporters
information
2 Meaning Exporter directly involved in the Exporter has intermediaries in
sale of goods foreign countries. Different
modes are available
3 Investment Exporter has to invest more Investment shared by the
exporter and intermediary
parties
4 Suitability Suitable for specialty products or Suitable where mass production
Small Medium enterprises, where is required and consumer tastes
e-commerce is possible are different from home product
5 Control over Exporter has decision making Exporter relinquishes control to
exports control over the exports intermediaries
S. No
Points Direct Exports Indirect export
6 Reputation Exporter directly gets the goodwill The reputation is shared with
and brand reputation improves intermediaries
7 Benefits of Exporter enjoys the incentives by Exporters may have to forgo
incentives the home government some incentives as partners
from other countries will be
involved
8 Overhead expenses Higher expenses as the sale will be Lesser expenses as sales are
managed centrally management is distributed
9 Risk involved Higher risk as all borne by Lower risk as shared by exporter
exporter, and less knowledge and intermediaries, and parties
about foreign markets have better knowledge of their
home markets
10 Consumer price Lesser price as intermediaries are Higher price as intermediaries
less are involved
Direct Exports
•FDI (Foreign Direct
Investment)
•Manufacturer Exporter
Manufacturer Exporter
Exporting is when a company exports a product from its home country,
without any marketing organisation overseas. Generally, the exported
product is the same as what is sold in the home country. Used more
commonly by small firms which export, it is a less risky proposition.
First time exporters use this mode of entry first to acquaint themselves
with exporting before exporting on a permanent basis.
Manufacturer
In
Exporter
this mode the exporter tries to simplify his process of marketing
activities and avoid product modifications, so as to minimize risks and costs
of selling overseas. This strategy is not suitable if the home country
currency is strong. USA faces problems exporting their products and it also
has tough competition from imports of cheaper products. The stronger the
currency the imports will become cheaper for the consumer.
Indirect Exports
•Foreign Collaborations
•Joint Venture
•Franchising
•Contract
Foreign Collaboration
The survival and growth of the industrial sector depends on
technological advancement. This is possible through collaborations
with developed countries to import their expertise and aid.
Foreign Collaboration
Foreign Collaboration
Foreign Collaboration
Foreign Collaboration
Foreign Collaboration
Joint Venture
A joint venture is a partnership at the corporate level; it can be
domestic or international. As a mode of entry this is used between or
among companies of different countries. It is formed for a specific
purpose. In countries where there is high financial or technological risk
this is a suitable method. Where high level of skill is required for the
production this is useful as the different companies offer their area of
specialization.
Joint Venture
The advantages of joint venture are:
• Best skills of countries can be utilised in one venture
• When wholly owned are prohibited in a country this mode is possible
• The partner companies can function with reduced contribution of
personnel
• The companies can put best use of limited money resources
Joint Venture
The disadvantages are:
• The partners may not be able to create synergies (2+2=5)
• As both are functioning as individual entities there could be conflicts of
interest
• If the decision-making process is not clear there could be clashes or
conflicts between partners
• Decisions will be delayed as both parties from different countries will have
to agree on the same decision
• Objectives and aims may start diverging after some time after the venture
is implemented
• There will be two centres of power which impacts the business activities
adversely
Bharti-AXA General Insurance Co Ltd
Bharti AXA General Insurance Co Ltd is a JV between India’s leading
business group Bharti Enterprises and insurance major from France,
AXA.
Vistara
A great example of Indian Joint Venture with a foreign company is the
airline, Vistara, a Full-Service Carrier. Vistara is the brand name of Tata
SIA Airlines Ltd, a JV between India’s corporate giant Tata Sons and
Singapore Airlines (SIA).
Mahindra-Renault Ltd
Another good example of a Joint venture is between Mahindra-Renault,
founded in 2007 brings together India’s largest automobile
manufacturer Mahindra & Mahindra and world renowned vehicle
maker, Renault SA of France.
The Indian firm owns 51 percent of this venture while remaining 49
percent stake is held by Renault. This JV has launched several cars from
the Renault stable in India. These vehicles are manufactured in India
with French technology but components made in this country.
Dhirubhai Ambani Aerospace Park
Dhirubhai Ambani Aerospace Park is a joint venture between India’s
corporate giant, Reliance Group and global defense company from
France, Dassault Aviation.
The park is located at Multi Modal International Hub Airport, Nagpur
(MIHAN). Under this JV, Reliance and Dassault will design and
manufacture an array of defence equipment required to meet India’s
growing demand for indigenous military hardware.
Additionally, DAAP will also serve as a hub for exporting military
equipment to friendly countries under the Make In India and Skills India
initiatives launched by the government of Prime Minister Narendra
Modi
• Around 400 acres of land in the MIHAN has been reserved for the
aviation sector, the MADC senior official said. DRAL has been allocated
239 acres of land in MIHAN, he [Link], US aircraft maker Boeing
along with Air India has already set up a maintenance, repair and
overhaul (MRO) facility with an investment of Rs 800 crore in MIHAN,
where the fleet of the national carrier and some aircraft of private airline
SpiceJet are being maintained, Chahande [Link] is a joint venture
between Dassault Aviation and Anil Ambani-led Reliance.
MADC is the nodal agency for setting up of MIHAN.
• As many as 74 companies have invested in the special economic zone
and 28 in the non-SEZ area of MIHAN, MADC's Marketing Manager
Sameer Gokhale said, adding that most of the firms are from the
Information Technology and aviation sectors.“Out of these, 30 to 32
companies in the Special Economic Zone area have begun operations
and are providing direct employment to 11,500 people,” he said.
MIHAN – Multi Modal International Hub Airport, Nagpur
Joint venture Examples
Example 1
Google parent company and the pharma company Glaxo and Smith decided to enter into a joint
venture agreement to produce bioelectric medicines the ratio of the ownership was 45%-55%. The
joint venture lasted and was committed for 7 years with a capital of Euro 540 million.
GlaxoSmithKline has teamed up with Google’s parent company Alphabet to develop miniature
electronic implants for the treatment of asthma, diabetes and other chronic conditions.
GSK, Britain’s biggest drug company, said it would form a joint venture with Verily Life Sciences, a
division of Alphabet, to work on research into bioelectronic medicines. GSK will own 55% of Galvani
Bioelectronics, and Verily will hold 45%.
Galvani will be based at GSK’s global research and development centre at Stevenage, Hertfordshire,
just north of London, and will have a second research hub at Verily’s base in San Francisco. The
companies will combine their existing intellectual property rights and invest up to £540m over seven
years if the collaboration meets certain goals.
Google and GSK form venture to develop bioelectronic medicines
The Guardian, “Britain’s biggest drug company and Verily Life Sciences, a division of Alphabet, have teamed up to tackle chronic conditions”, Sean Farrell,
Mon 1 Aug 2016
Joint venture examples
Example 2
Another example of a joint venture is the joint venture between the taxi giant UBER and the
heavy vehicle manufacturer Volvo. The joint venture goal was to produce driverless cars The
ratio of the ownership is 50%-50%. The business worth was $350 million as per the
agreement in the joint venture.
The ride-hailing company announced that it had entered into an agreement to
purchase tens of thousands Volvo XC90 SUVs, specifically modified for autonomous driving,
between 2019 to 2021. The models will come with some sensors and radar already installed.
Uber will then have to spend additional money to install the rooftop camera and LiDAR rig,
as well as a computer in the trunk to process visual data and power the software that
controls the vehicle.
The cars are designed to be operated without a human, and that's the "goal" at launch,
Miller said. As rival Waymo prepares to launch its first driver-free commercial service, Uber
is aggressively working to make sure its doesn't fall behind. By owning its own cars, Uber
shifts control (and capital responsibility) to itself instead of waiting for its partners.
[Link] , Uber To Buy Thousands Of Volvo SUVs In Big Push To Robot Taxi Future, EDITORS' PICK, Nov 20, 2017
Joint venture examples
Example 3
Sony and Ericson’s example is also a good example of Joint Venture as they
joined hands to manufacture smartphones and gadgets. After several
operating years, Sony eventually acquired Ericson mobile manufacturing
division.
Sony Ericsson is a joint venture established on October 1, 2001 by the Japanese
consumer electronics company Sony Corporation and the Swedish
telecommunications company Ericsson to make mobile phones. The stated
reason for this venture is to combine Sony's consumer electronics expertise with
Ericssons technological leadership in the communications sector. Both
companies have stopped making their own mobile phones. Sony Ericsson was
created in 2001 from "two companies which were bleeding" in the handset
business. For a while the joint venture was profitable, but the advent of
Apple's iPhone in 2007, and then of cheap handsets running Google's
Android software, destroyed its high-end market share.
[Link] Sony takes full control of Sony Ericsson joint venture, Gaurdian, ‘Sony pays £1.05bn to buy out handset
manufacturer, and pledges to integrate its content onto the 'four screens' – smartphones, consoles, PCs and TVs – it manufactures’
Joint venture examples
Example 4
The 2008 Joint venture of NBC Universal Television Group (Comcast) and Disney ABC Television Group
(The Walt Disney Company). The objective of the joint venture was to create a video streaming
application or a website named “HULU”. This product provides streaming quality content which is on
computers, laptops or mobile phones. The product became a huge success with the offering lining upto
$1 billion.
The Comcast Corporation is currently the world’s largest media corporation with headquarters in
Philadelphia, USA. In 2011, more than 23 million customers in the United States relied on cable services
offered by Comcast. During its 40-year existence, Comcast evolved from a cable operator to a modern
communication and media company. Apart from a broadband infrastructure, Comcast’s fields of
business expertise include video on demand services (VoD), digital telephony and high speed Internet.
Since the merger with NBC Universal in early 2011, Comcast now owns two TV networks, 26 TV
stations, 20 cable channels, several production facilities (amongst other things the Universal Studios).
The cable division comprises 15 national cable networks US — USA Network, Syfy, CNBC
and nine other international networks. The rest of Comcast's media revenue comes from its
cable which gets an allocation of ad slots within the cable networks it transmits to
customers. Comcast also owns video streaming service Hulu. Disney also owns a 50%
stake in digital media company Fusion and it has a 33% stake in video streaming platform
Hulu. [Link]
Joint venture examples
Example 5
Another famous example of joint venture formation is the agreement between Kellogg and
Wilmar International Limited. Kellogg International entered the market in order to expand its
presence in the Chinese market to sell cereals and other snack foods to consumers in China.
Joining hands together with Wilmar resulted in a profitable synergic relationship for both the
companies as Wilmar International provided extensive distribution and supply chain network to
Kellogg International and also Kellogg managed to enter into a new geography with this
agreement and relationship.
Kellogg Company entered into a partnership with Singapore-based palm oil producer Wilmar
International to manufacture and sell cereal and other snacks in China.
Kellogg said Wilmar will contribute infrastructure, supply chain scale and its sales and distribution
network to the 50-50 joint venture, which will market Kellogg’s and Pringles branded product.
Kellogg had acquired a majority interest in China’s Navigable Foods in 2008, however the business
recorded operating losses, resulting in Kellogg disposing its stake in the cookies and crackers
manufacturer in early 2012.
Source: [Link] in JV with Wilmar to expand in China’ September, 24, 2012.
Franchising
Franchising is an agreement that permits a foreign company to use the
property of a company. The agreement specifies the property that can
be used by the foreign entity – patents, trademark, copyrights,
technical know-how and skills, architectural or engineering designs or
a combination of any of these. The franchisor company allows the
franchisee company to manufacture and sell the company’s product in
the franchisee’s home country in exchange of royalty/fees. The
franchisor exercises control and monitors the franchisee.
This is a less risky compared to FDI and less expensive than exporting.
McDonald, KFC use this mode of entry. Since they are edible and
perishable products they prefer to have more monitoring of the
products sold with their brand name.
Franchising
The advantage is that
∙ research and development facilities can be spread to different countries;
∙ increased incomes are achieved with negligible expenses used when
capital resources are scarce;
∙ it is a good technique when a country is sensitive to foreign investment
∙ it useful when a country has stringent trade barriers to foreign companies
∙ where transport cost is high this is a better method
∙ if the country has a difficult or non-receptive consumer behaviour, then a
local seller is a better bet
Franchising
The disadvantage of this method is that
∙ it is the least profitable of entry modes
∙ the licensee may become a competitor in future with inside knowledge of licensor
company
∙ franchisee may perform poorly
∙ brand image in the hands of foreign entity which is not as committed as the licensor
∙ the franchisee may not adhere to the product standards
∙ different product qualities may be observed for same product in different countries
Contracts
The company enters into a contract with a local company to manage its
business in the foreign country. This mode is generally used by hotel
chains. It reduces the political risk factor in business. In this mode the
returns are less. If the governments are hostile and force companies to
shut down or leave the country then companies can adopt this
strategy. The advantages and disadvantages are similar to franchising.
Logistics
Logistics refers to the overall process of managing how resources are
acquired, stored, and transported to their final destination. Logistics
management involves identifying prospective distributors and suppliers
and determining their effectiveness and accessibility. Logistics managers
are referred to as logisticians.
"Logistics" was initially a military-based term used in reference to how
military personnel obtained, stored, and moved equipment and
supplies. The term is now used widely in the business sector, particularly
by companies in the manufacturing sectors, to refer to how resources
are handled and moved along the supply chain.
Role of Logistics
• Logistics play a huge role in the smooth operations of a business.
However, at scale, it is extremely difficult to run a flawless logistics
division due to the sheer number of variables and demands that such a
system is subject to.
• Logistics can be thought of as the business function responsible for
“getting the right item in the right quantity at the right time at the
right place for the right price in the right condition to the right
customer.” Thus, it is imperative that companies invest in their logistics
divisions to ensure maximum customer satisfaction and overall
productivity.
Components of Logistics in Export
Marketing
Procurement Outbound
and Manufacturing Customer
and
Process Service
Inbound Distribution
Inbound Logistics
• Inbound logistics refers to the internal logistics (Physical movement) tasks
and activities that businesses need to complete in order to operate.
Inbound logistics usually refers to the logistical operations of companies
that operate B2B.
• For example, consider being a car manufacturer. The manufacturer’s
inbound logistics would entail the sourcing of raw material inputs (sheet
metal, glass, wiring, plastics, etc.), how to store the materials in
preparation for and during the assembly process, and how to manage the
flow of manufactured automobiles that leave the factory.
Steps of the Manufacturing Process
1. Develop the Product Vision
2. Research the Vision
3. Design the Product
4. Finalize the Design
5. Finalize the Design
6. Manufacture the Product
Manufacturing Process
In general, you can divide the manufacturing process into five types.
Manufacturing has come a long way since the assembly lines and noisy
machinery. These processes are found in industries as varied as food
manufacturing, textile product mills, apparel manufacturing, wood product
manufacturing, chemical manufacturing and computer and electrons product
manufacturing.
1. Repetitive Manufacturing
This is for manufacturing that runs all day and night, all year round, producing
the same or similar product. There is little setup and changeover and production
speed can be sped up or slowed down as needed to meet demand.
2. Discrete Manufacturing
Here is another assembly or production line type of manufacturing. Because the
products can be similar or different in design, there are various setups and
frequent changeovers. Discrete manufacturing can be found in factories that
make automobiles, furniture, airplanes, toys and smartphones.
Manufacturing Process
3. Job Shop Manufacturing
Instead of an assembly line, job shop manufacturing is made up of various production areas that produce
smaller batches of custom products. These are either made to order or made to stock. By organizing these
workstations, manufacturers can make one version of a custom product or more, in batches. This is good
for work that is project-to-project.
4. Batch Process Manufacturing
Similar to discrete and job shop manufacturing, the batch process depends on consumer demand. After a
batch is produced, the equipment is cleaned and prepared for the next batch, which is usually continuous.
Product materials tend to be similar.
5. Continuous Process Manufacturing
Like repetitive manufacturing, this one also runs 24/7. But the raw materials make this a different
manufacturing process, as they are gases, liquids, powders or slurries. This type of manufacturing occurs in
industries such as oil refining, metal smelting and some food productions, such as peanut butter.
Outbound Logistics
• Outbound logistics refer to the tasks and activities involved with moving the
product to the end user. Such logistic duties usually apply to players that
operate relatively downstream, which are usually the last party in the supply
chain. The duties include the storage of manufactured inventory, the
transportation of manufactured goods to the point of sale, and sometimes, the
shipping and handling involved to get certain products to the end user.
• Going back to the auto manufacturer example, the parties involved with the
outbound logistics of that supply chain would be the wholesalers and dealers.
The factory operations would be in charge of assuring that the right amount of
ordered inventory arrives at the dealer at a given time.
In turn, the dealer would be in charge of coordinating the storage and upkeep of
the vehicles on its lots, as well as the shipping and handling of vehicles that are
ordered by customers that live in faraway areas.