International issues in operations management

Operations

There are several international issues that are relevant to operations management today. Now that business has become globalized, companies source materials from all over the world, and a lot of production at any given facility will be made for export. For a facility that is producing for export, for example, it must be able to accommodate local market conditions for size, labeling, etc. that will require distinct batches for each country.

The decision to produce for an export market is also something that is important. For example, a company may investigate the idea of producing a maquiladora in Mexico and weigh that option against producing domestically, or even sourcing from further afield. There are a number of considerations, including the quality of the local workers, cost advantages, and various tax and duty considerations as well, and the company often strives to design its production system in a way that delivers the best combination of these variables (Hanson, 2002).

There are other issues where international business meets operations management. For example, the company can look at a variety of outsourcing options. When dealing overseas, however, the company must take into consideration the relative merits of local taxation, costs, labor laws and other factors (Engardio, 2002).

Also, international production is subject to political risk and foreign currency risk. Political risk, for example, is why a large portion of Venezuelan oil is refined in Aruba. Currency exchange rate risk can negate the cost advantages of sourcing from other countries as well, for example inflation in China is causing that country to be less useful as a source of low cost goods than it once was.

2. There are a number of ways to determine demand for my company's new convertible roadster. The first is to estimate the current market size, based on the sales of similar vehicles. This is the starting point for the analysis, however, rather than the end point. Building on that initial market size, the company needs to make a determination as to how much of that market it can capture. If the company has a prototype that it can test with both consumers and automotive critics, then it can more accurately gauge if the new car has competitive advantages that will make it attractive in the marketplace. From this, the company can begin to estimate what market share it will be able to win.

Market segmentation strategies will also help refine the research process. For example, the company needs to understand who will by the roadster and why. By understanding what specific customer groups will be attracted to this vehicle above all others, and understanding the size of those groups relative to the size of the total market, the company formulates better estimates.