Challenges are also substantial Partner selection qualification and monitoring

Challenges are also substantial partner selection

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Challenges are also substantial Partner selection, qualification and monitoring costs Limited influence over manufacturing/service provision processes (esp when 2nd or 3rd tier suppliers used) Limited control over intellectual assets and vulnerability to opportunistic behaviour by supplier Suitable for labour-intensive industries, large-scale manufacturing, standardised processes and technologies, non-IP related activities and the sale of established products with a predictable sales pattern Demands on logistics (Textbook, Ch.17, 509-510) Cost efficiencies and customer satisfaction require seamless integration among suppliers, the firm and intermediaries Demands in terms of inter-organisational coordination (across functions/activities that may be concentrated in different countries) E.g. new product development requires integration of R&D, Marketing, Production Close integration between R&D and marketing to ensure that product development projects are driven by the needs of customers. Integration between R&D and production to help a company design products with manufacturing requirements in mind. HQ as coordinator rather than controller and the use of strong integrating mechanisms Demands on employees (and suppliers): working with team-members in other countries (issues of cross cultural literacy; adjusting to different time zones; travel, esp. for managers with international responsibility); Vulnerability to higher costs Adverse currency fluctuations, hikes in transportation costs (e.g. high oil prices a few years ago); high tariffs and other barriers; higher than anticipated set-up and operational costs (due to poor infrastructure, training) Vulnerability to weak legal environment: inadequate laws and enforcement regarding IP, red tape, corruption Long term: climate change abatement schemes leading to higher transportation costs and change in customer attitudes (e.g. “food miles”) Risk of supply chain interruption More specifically, risk inherent in concentrating one entire aspect in a single location (e.g. natural disasters, political crises, terrorism) Reversal of fine-slicing Increasing trend towards insourcing and captive sourcing. Global labour arbitrage in wage rates declining Increasing industrial automation and digitisation (eg. of manufacturing and marketing) More effective value creation from doing it themselves
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LISA YANG IBUS20002 Business in the Global Economy Reshoring manufacturing to be closer to R&D or onshoring to be closer to big customer markets Rethinking what’s core and non-core (e.g. customer relationship management, IT) Greater reliability in intellectual property protection Opportunity for rich world countries to win back some industries and activities but must improve competitiveness (skills and training, worker flexibility and motivation, supplier capabilities..)
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