global factors

the four global factors are:
?

• Global sourcing
• Economies of scale
• Scanning and learning
• Research and development (R&D)

Global sourcing

• Global sourcing is :: a broad term that refers to businesses purchasing supplies or services without being constrained by location.
• Global sourcing as an operations strategy involves the sourcing of any factor related to the operations of a business that provides cost advantages.
• The benefits of Global sourcing includes:
  • Cost advantages
  • access to new technologies
  • advantages of expertise
  • labour specialisation
  • access to other resources
  • the ability to operate over extended hours.

Economies of scale:

• Economies of scale refers to :: cost advantages that can be gained by increasing the size, or scale, of production
  • → businesses can lower their per unit input costs.

Scanning and learning

• All businesses can benefit from scanning the global environment and it is an effective global operations strategy
• Much of contemporary business practice is influenced by the post-WWII industrial success of Japanese businesses
• kaizen (Japanese for ‘improvement’) emphasises :: continuous improvement in all areas of a business, from the way the CEO manages to the way assembly line workers perform their jobs.

Research and development (R&D):

• Proactive companies allocate resources to research and development (R&D)
• R&D helps businesses to create leading edge technologies, and to create innovative products and solutions

Review Questions: Global factors

1. Identify and describe the four global factors that provide opportunities for operations managers?
   Global sourcing; establishing operations through purchasing suppliers without being restricted to a location

   economies of scale; businesses gaining cost advantages by increasing their scale of production, leading to lower cost per unit

   scanning and learning; businesses researching market positions and continuous development in all areas of the business

   research and development; the allocation of resources to the research of new and innovative technology & products, often incentivised by Government Subsidies

2. Outline the advantages of businesses sourcing globally?

3. Discuss the benefits and challenges associated with global sourcing.

4. Distinguish between financial and contractual concerns associated with global sourcing.

5. Define the term ‘economies of scale’.

6. Describe the relationship between economies of scale and profitability?

7. Explain why successful managers continually scan the business environment.

8. How can research and development assist a business in achieving its goals?