International Business Ch. 17 Vocab/Ideas Flashcards Preview

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Flashcards in International Business Ch. 17 Vocab/Ideas Deck (22):


activities involved in creating a product




- procurement and physical transmission of material through the supply chain, from suppliers to customers



Total Quality Management


-aims to reduce defects, boost productivity, eliminate waste, and cut costs throughout the company

Deming identified a number of steps that should be included in any TQM program:

- Management should embrace the philosophy that mistakes, defects, and poor quality materials are not acceptable

- Supervisors should work more with employees and provide them with the tools they need to do the job

- Management should create an environment in which employees will not fear reporting problems

- Work standards should not only be defined as numbers or quotas, but should include some notion of quality


Six Sigma

- Form of TQM

- Production process operating at Six Sigma are 99.99966 percent accurate.
- Only 3.4 defects per million units


ISO 9000

in the EU, firms must meet ISO 9000 standards before gaining access to the EU marketplace

    - Quality standards necessary in the EU.


Minimum Efficient Scale

- the level of output at which most plant-level scale economies are exhausted

- when minimum efficient scale is high, choose     centralized production in a single location or a limited number of locations

- when minimum efficient scale is low, respond to local market demands and hedge against currency risk by operating in multiple locations


Flexible Manufacturing Technology

(Lean Production)

- reduces set up times for complex equipment

- increases the utilization of individual machines

- improves quality control


Mass Customization

- the ability of companies to use flexible manufacturing technology to reconcile 2 goals that were once thought to be incompatible - low cost and product customization.



Flexible Machine Cells

- a grouping (4-6 per cell) of various types of machinery, a common materials handler, and a centralized cell controller (computer). 

- cells are dedicated to the prodution of a familly of parts or products.


Value-to-Weight Ratio

- if the value-to-weight ratio is high, produce the product in a single location and export to other parts of the world

- if the value-to-weight ratio is low, there is greater pressure to manufacture the product in multiple locations across the world


How are Location, Strategy, and Production Related?

Location, Strategy, and Production:


A image thumb

Before making the decision to locate production in a foreign location firms must consider the potential for:

Hidden Costs:

- high employee turnover
- poor workmanship
- poor product quality
- low productivity


Global Learning

- the idea that valuable knowledge does not reside just in a firm's domestic operations

- it may also be found in its foreign subsidiaries.

- Foreign factories that upgrade their capabilites over time are creating valuable knowledge the might benefit the whole corporation.


Make-or-Buy Decisions

- decisions about whether an international business should perform a certain value creation activity themselves or outsource it to another entity.


Why Make?

Vertical integration - making component parts in-house:

1. Lowers costs

- if a firm is more efficient at that production activity than any other enterprise, manufacturing in-house makes sense

2. Facilitates investments in highly specialized assets

- internal production makes sense when substantial investments in specialized assets are required

3. Protects proprietary technology

- in-house production makes sense when component parts contain proprietary technology

4. Facilitates the scheduling of adjacent processes

- planning, coordination, and scheduling of adjacent processes can be easier with in-house production


Why Buy?

Buying component parts from independent suppliers:

1. Gives the firm greater flexibility

- important when changes in exchange rates and trade barriers alter the attractiveness of various supply sources over time

2. Helps drive down the firm's cost structure

- avoids challenges of coordination and control of additional subunits
- avoids the lack of incentive associated with internal suppliers
- avoids the difficulties with setting appropriate transfer prices

3. Helps the firm capture orders from international customers

- can help firms gain orders from suppliers’ countries


Specialized Asset

- an asset whose bale is contingent upon a particular relationship persisiting.

- when substantial investments in specialized assets are required to manufacture a componen, the firm will prefer to make the component in-house rather than outsource.

- Manufacturer relies too heavily on supplier for specialized equipment, gives supplier greater bargaining power.


Dynamic Capabilities

- describe skills that become more valuable over time through learning.

- learned through experience


Do Strategic Alliances Make Sense?

Firms can capture the benefits of vertical integration without the associated organizational problems by forming long-term strategic alliances with key suppliers:

- however, these commitments may actually limit strategic flexibility
- risk giving away key technological know-how to a supplier




-encompasses the activities necessary to get materials to a manufacturing facility, through the manufacturing process,and out through a distribution system to the end user.

The goal is to:

- manage a global supply chain at the lowest possible cost and in a way that best serves customer needs
- establish a competitive advantage through superior customer service   


Just-in-Time (JIT) systems

systems economize on inventory holding costs by having materials arrive at a manufacturing plant just in time to enter the production process

JIT systems:

- generate major cost savings from reduced warehousing and inventory holding costs
- can help the firm spot defective parts and take them out of the manufacturing process

- But, a JIT system leaves the firm with no buffer stock of inventory to meet unexpected demand or supply changes


Electronic Data Interchange (EDI)

- facilitates the tracking of inputs

- allows the firm to optimize its production schedule

- lets the firm and its suppliers communicate in real time

- eliminates the flow of paperwork between the firm and its suppliers