Operations Management, 11e (Heizer/Render)
Chapter 2 Operations Strategy in a Global Environment
Section 1 A Global View of Operations and Supply
Chains
1) Boeing's development of the 787
Dreamliner is an example of a company obtaining a competitive advantage through
product differentiation/innovation.
Answer:
TRUE
Diff: 1
Key Term:
NAFTA
AACSB:
Dynamics of the global economy
Learning Outcome: Discuss the influences of the global
competitive environment on operations management
2) NAFTA seeks to phase out all trade and
tariff barriers among Canada ,
Mexico , and the United States
Answer:
TRUE
Diff: 2
AACSB:
Multicultural and diversity understanding
3) The World Trade Organization has helped
to significantly reduce tariffs around the world.
Answer:
TRUE
Diff: 2
Key Term:
World Trade Organization (WTO)
AACSB:
Dynamics of the global economy
Learning Outcome: Discuss the influences of the global
competitive environment on operations management
4) Production processes are being
dispersed to take advantage of national differences in labor costs.
Answer:
TRUE
Diff: 2
AACSB:
Dynamics of the global economy
Objective:
LO2
Learning Outcome: Discuss the influences of the global
competitive environment on operations management
5) NAFTA seeks to phase out all trade and
tariff barriers between the United States
and Asia .
Answer:
FALSE
Diff: 2
Key Term:
NAFTA
AACSB:
Dynamics of the global economy
Learning Outcome: Discuss the influences of the global
competitive environment on operations management
6) One reason for global operations is to
gain improvements in the supply chain.
Answer:
TRUE
Diff: 1
AACSB:
Dynamics of the global economy
Learning
Outcome: Discuss the influences of the
global competitive environment on operations management
7) One reason to globalize is to learn to
improve operations.
Answer:
TRUE
Diff: 1
AACSB:
Dynamics of the global economy
Learning Outcome: Discuss the influences of the global
competitive environment on operations management
8) To attract and retain global talent,
and to expand a product's life cycle, are both reasons to globalize.
Answer:
TRUE
Diff: 2
AACSB:
Dynamics of the global economy
Learning Outcome: Discuss the influences of the global
competitive environment on operations management
9) A product will always be in the same
stage of its product life cycle regardless of the country.
Answer:
FALSE
Diff: 2
AACSB:
Dynamics of the global economy
Learning Outcome: Discuss the influences of the global
competitive environment on operations management
10) The World Trade Organization helps
provide governments and industries around the world with protection from firms
that engage in unethical conduct.
Answer:
TRUE
Diff: 2
Key Term:
World Trade Organization (WTO)
AACSB:
Ethical understanding and reasoning abilities
Learning Outcome: Discuss the role of operations management in
corporate social responsibility and sustainability
11) Which of the following statements
regarding the Dreamliner 787 is true?
A) Boeing has found partners in over a
dozen countries.
B) The new aircraft incorporates a wide
range of aerospace technologies.
C) The new aircraft uses engines from not
one, but two manufacturers.
D) Boeing will add only 20 to 30 percent
of the aircraft's value.
E) All of the above are true.
Answer:
E
Diff: 2
AACSB:
Dynamics of the global economy
Learning Outcome: Discuss the influences of the global
competitive environment on operations management
12) Boeing's new 787 Dreamliner:
A) is assembled in Washington , D.C.
B) uses engines from Japan
C) has its fuselage sections built in Australia
D) has increased efficiency from new
engine technology.
E) results from a partnership of about a
dozen companies.
Answer:
D
Diff: 2
13) Cost cutting in international
operations can take place because of:
A) lower taxes and tariffs.
B) lower wage scales.
C) lower indirect costs.
D) less stringent regulations.
E) all of the above.
Answer:
E
Diff: 1
AACSB:
Dynamics of the global economy
Learning Outcome: Discuss the influences of the global
competitive environment on operations management
14) Which of the following did the authors
NOT suggest as a reason for globalizing operations?
A) reduce costs
B) improve the supply chain
C) pursue stockholder approval ratings
D) understand markets
E) attract and retain global talent
Answer:
C
Diff: 2
AACSB:
Dynamics of the global economy
Learning Outcome: Discuss the influences of the global
competitive environment on operations management
15) Multinational organizations can shop
from country to country and cut costs through:
A) lower wage scales.
B) lower indirect costs.
C) less stringent regulations.
D) lower taxes and tariffs.
E) all of the above.
Answer:
E
Diff: 2
AACSB:
Dynamics of the global economy
Learning Outcome: Discuss the influences of the global
competitive environment on operations management
Operations Strategy in a Global
Environment
Discussion
Questions
1. Global seems the better label for Boeing since authority and responsibility
reside in the U.S.
2. Six reasons to
internationalize: Reduce costs, improve supply chain, provide better goods and services, attract new markets, learn
to improve operations, attract and retain global talent.
to improve operations, attract and retain global talent.
3. No. Sweetness
at Coca-Cola is adjusted for the tastes of indi-
vidual countries.
vidual countries.
4. A mission
is an organization’s purpose—what good or service it will contribute to
society.
5. Strategy
is an organization’s action plan—how it is going to achieve its purpose.
6. A mission
specifies where the organization is going and a
Strategy specifies how it is going to get there.
Strategy specifies how it is going to get there.
7. The answer to
this question will depend on the establish-
ment studied, but should probably include some of the following
considerations:
ment studied, but should probably include some of the following
considerations:
The mission: diagnose
automobile problems and make the neces-sary repair at a fair price for the
local customer.
Points to consider, or
options, within the 10 decision areas are:
Decision: Option:
Product Repair
work of American and/or foreign vehicles; specialized (tune-ups, lubrication,
wheel alignment, etc.) versus general repair; frame and body repair versus
engine and power train repair; repair and maintenance only, versus repair, maintenance, and sales of
fuel; professional staffing versus rental of tools and space for do-it-yourself repair work
fuel; professional staffing versus rental of tools and space for do-it-yourself repair work
Quality Appropriate
level of quality; warranty; method of measuring and maintaining quality (customer complaints, inspection by
supervising mechanic, etc.)
Process Use
of general versus special purpose diag-nostic
and repair equipment (in particular,
the degree to which computer controlled
diagnostic equipment is employed)
the degree to which computer controlled
diagnostic equipment is employed)
Location In-town,
shopping mall, highway
Layout Single
bay/multibay; general-purpose bay
versus special-purpose bay (lubrication/tire
repairs and installation/wheel alignment/
engine and power train repair, etc.)
versus special-purpose bay (lubrication/tire
repairs and installation/wheel alignment/
engine and power train repair, etc.)
Human resources Employment of certified versus noncertified repair persons;
employment of specialists
versus general mechanics
versus general mechanics
Supply Chain Choice of supplier(s) for both general and original
manufacturer parts and supplies
Scheduling Hours of operation (8:00 a.m.–5:00 p.m.;
24-hour towing; weekends/holidays), repairs versus motor vehicle safety inspections, etc.; service by appointment versus walk-in
(or drive-up) service
24-hour towing; weekends/holidays), repairs versus motor vehicle safety inspections, etc.; service by appointment versus walk-in
(or drive-up) service
Inventory Quantity and
variety of repair parts (fan belts,
filters, mufflers, headlights, etc.) to stock; whether to stock generic or original manu-facturer parts
filters, mufflers, headlights, etc.) to stock; whether to stock generic or original manu-facturer parts
Maintenance Bays with hydraulic lifts vs. easier-to-maintain
“basement” work areas. Preventive maintenance of equipment vs. breakdown.
8. Library or Internet assignment:
Student is to identify a mis-sion and strategy for a firm. BusinessWeek,
Fortune, The Wall Street Journal, and Forbes all have appropriate articles.
9. OM strategy change during a
product’s life cycle: During the introduction stage, issues such as product
design and development are critical, then during the growth stage the emphasis
changes to product and process reliability; from there we move to concern for
increasing the stability of the manufacturing process and cost cut-ting; and finally, in the decline stage
pruning the line to eliminate items not returning good margin becomes
important. Figure 2.5 provides a more expansive list.
10. The text
focuses on three conceptual strategies—cost leadership, differentiation and response. Cost leadership by Walmart—via
low overhead, vicious cost reduction in the supply chain; Differen-
tiation, certainly any premium product—all fine dining restau-rants, up-scale autos—Lexus, etc.; Response, your local pizza
delivery service, FedEx, etc.
low overhead, vicious cost reduction in the supply chain; Differen-
tiation, certainly any premium product—all fine dining restau-rants, up-scale autos—Lexus, etc.; Response, your local pizza
delivery service, FedEx, etc.
11. An operations
strategy statement for Southwest Airlines
would include a focus on efficient, low-cost service with high capital utilization (high aircraft and gate utilization), flexible non-union employees, low administrative overhead, etc. Southwest’s strategy is complicated by the purchase of AirTran. First, there is a major organizational culture issue. Southwest’s culture is unique. The company really does think of itself as a family, with a fun culture. AirTran’s culture is different. Integrating the two cultures will be a challenge. Related to this are human resources issue such as seniority, pay rate, and promotion policies, all of which are complicated by union issues. On the tangible side, Southwest’s use of just Boeing 737s is complicated by AirTran’s use of several other types of planes. To maintain the “one plane” efficiency (pilot training maintenance, inventory, etc.), Southwest is going to have to replace all those planes. This will be expensive, but so will not getting rid of them.
would include a focus on efficient, low-cost service with high capital utilization (high aircraft and gate utilization), flexible non-union employees, low administrative overhead, etc. Southwest’s strategy is complicated by the purchase of AirTran. First, there is a major organizational culture issue. Southwest’s culture is unique. The company really does think of itself as a family, with a fun culture. AirTran’s culture is different. Integrating the two cultures will be a challenge. Related to this are human resources issue such as seniority, pay rate, and promotion policies, all of which are complicated by union issues. On the tangible side, Southwest’s use of just Boeing 737s is complicated by AirTran’s use of several other types of planes. To maintain the “one plane” efficiency (pilot training maintenance, inventory, etc.), Southwest is going to have to replace all those planes. This will be expensive, but so will not getting rid of them.
12. The integration of OM
with marketing and accounting is pervasive.
You might want to cite examples such as developing new products. (Marketing must help with
the design, the forecast and tar-get costs; accounting must ensure adequate cash for development
and the necessary capital equipment.) Similarly, new technology or new processes emanating from operations must meet the
approval of marketing and the capital constraints imposed by the accounting department.
and the necessary capital equipment.) Similarly, new technology or new processes emanating from operations must meet the
approval of marketing and the capital constraints imposed by the accounting department.
13. To summarize
outsourcing trends:
n Not everyone who outsources
is 100% satisfied, and
future arrangements may be revised or insourced.
future arrangements may be revised or insourced.
n IT will be a major
expansion area, according to
Gartner, Inc.
Gartner, Inc.
n More laws may be passed to
protect U.S.
n Foreign firms will increase
their outsourcing to the U.S.
n Outsourcing will continue
to grow.
n Current practices will be
improved.
14. Cost savings in
recent years from outsourcing has been
significant. It may be possible to reduce labor costs by as much 75%. But more realistically, this figure is in the 20%–40% range. Overall savings in the 10%–30% range are possible.
significant. It may be possible to reduce labor costs by as much 75%. But more realistically, this figure is in the 20%–40% range. Overall savings in the 10%–30% range are possible.
15. Internal issue
include:
n Employment—morale may drop,
and employees may lose their jobs.
n Facilities—may need to be
changed if components arrive in different stages of assembly.
n Logistics—now includes
customs, timing and insurance.
16. The company should
identify its own core competencies and then consider a list of candidate
activities and firms for outsourcing. The factor-rating method can be used to
compare various companies on a set of factors that management considers important.
17. Bad
outsourcing decisions may result in:
n Higher transportation cost
n Loss of control
n Future competition from the
provider
n Negative impact on
employees
n Quick gains at the expense
of long-term objectives
18. McDonald’s fits the categorization in the text
as a multidomestic, as opposed to international, global, or transnational. This is the concept of
exporting the management talent and process allowing
flexibility in the product itself. In the case of McDonald’s, this export is operations management
expertise, which it has
implemented world-wide. Interestingly, McDonald’s likes to call itself multilocal.
implemented world-wide. Interestingly, McDonald’s likes to call itself multilocal.
Ethical Dilemma
Here is an
interesting scenario. A firm can save $10 million in pro-duction costs per year. All it has to do is locate manufacturing in China Vietnam
End-of-Chapter
Problems
2.1 The three methods are cost leadership, differentiation, and
response. Cost leadership can be illustrated by Walmart, with low overhead and
huge buying power to pressure its suppliers into concessions. Differentiation
can be illustrated by almost any
restaurant or restaurant chain, such as Red Lobster, which offers a distinct menu and style of service than others. Response can be illustrated by a courier service such as FedEx, that guarantees specific delivery schedules; or by a custom tailor, who will hand make a suit specifically for the customer.
restaurant or restaurant chain, such as Red Lobster, which offers a distinct menu and style of service than others. Response can be illustrated by a courier service such as FedEx, that guarantees specific delivery schedules; or by a custom tailor, who will hand make a suit specifically for the customer.
2.2 Cost leadership: institutional
food services, such as
Sodexho, provide meal service to college campuses and similar institutions. Such firms often get their contracts by being low bidder to provide service. Response: a catering firm (the customer picks the menu, time, and date). Differentiation: virtually all restaurants seek differentiation in menu, in taste, in service. This is particularly true of fine dining restaurants, but also true of fast food restaurants. For instance, Burger King likes to talk about meals “anyway you want them,” and McDonald’s has a playground or seating area for children.
Sodexho, provide meal service to college campuses and similar institutions. Such firms often get their contracts by being low bidder to provide service. Response: a catering firm (the customer picks the menu, time, and date). Differentiation: virtually all restaurants seek differentiation in menu, in taste, in service. This is particularly true of fine dining restaurants, but also true of fast food restaurants. For instance, Burger King likes to talk about meals “anyway you want them,” and McDonald’s has a playground or seating area for children.
2.3 Arrow; Bidermann International, France
Braun Household Appliances; Procter &
Gamble , U.S.
Volvo Autos; Geely, China
Firestone Tires; Bridgestone ,
Japan
Godiva Chocolate; Campbell
Soup, U.S.
Haagen-Dazs Ice Cream;
great globalization discussion example: Haagen-Dazs was established in New York City ; now owned by Pillsbury (U.S.A.), which is owned by
General Mills (U.S.A.), but Nestlé SA (Switzerland )
is licensed to sell Haagen-Dazs in the U.S.
Jaguar Autos; Tata , India
MGM Movies; Credit Lyonnais , France
Lamborghini; Volkswagen , Germany
Goodrich; Michelin , France
Alpo Pet Foods; Nestlé ,
Switzerland
2.4 (a) The maturing of a product may move the OM function
to focus on more standardization, make fewer product changes, find optimum capacity, stabilize the manufac-turing process,
lower labor skills, use longer production runs, and institute cost cutting and
design compromises.
(b) Technological innovation in the manufacturing
process may mean new human resources skills (either new personnel and/or
training of existing personnel), and added
capital investment for new equipment or processes. Product design,
layout, maintenance procedures, purchasing, inventory, quality standards, and
procedures may all need to be revised.
(c) A design
change will, at least potentially, require the same changes as noted in (b).
2.5 Specific answers to this question depend on the organization
considered. Some general thoughts follow:
(a) For a producer with high energy costs, major oil prices
change the cost structure, result in higher selling prices, and, if the company
is energy inefficient compared to other producers, result in a change in 
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