Global Supply Chain Management - Essay Example

? International Business Management Question a) Marketing Mix -Marketing mix consists of Product, Price, Place, and Promotion. Each of them is discussed at length below. Product Product is generally defined as, any good or service that have monetary value and has been an adaptation and production process related to the cultural and social conditions of production. In marketing, a product is anything that can be offered to the market, which fulfills the market needs. Now days, every company is adopting the phenomenon of creativity and innovation to provide the new and unique product to the market with holds the USP and distinctive qualities. There is a process for it which is termed as New Product development, which means it is the process that helps an organization to develop new products and services. There are two parallel paths involved in the process: One involves the idea generation, product design and detail structures, the second step focuses on market research and market analysis. Price Pricing is a very complicated issue and has far reaching effects on a company’s prospects in a market. There are different pricing benchmarks for different markets. So it is not a straight forward task to price a product. Company has to survey the market and analyze what prices other competitors are offering. Cost of Raw Material and Cost of transportation are taken into account for setting the price. If a company sets very low price in relation to their competitors, then there is a threat of being perceived as a bad quality. Willingness to purchase a product is directly related with the price. If the price is affordable, customer would instantly buy the product. Placement Placement of the product assumes wider magnitude when we talk about international marketing. If customers come to buy a product, and it is not available instantly than customers would get interested in competitors. For timely availability of the product, it is very necessary to make use of warehouses and other storing places. It is essential to make placement decisions in line with the product’s position in the market. Company need to decide whether our product will be perceived as a high end product or a low end product. Promotion Promotion is a multi-component phenomenon, which operates as a interacting channel with other elements of the marketing mix, aiming to achieve the communication process caused between what companies offer goods or services or ideas working to satisfy the needs and desires of consumers from individuals or institutions according to their potential. There are number of international promotional tools such as advertisement, sponsorships, price promotions and etc, but every firm prefers to use push and pull strategy. Pull is the relationship of the goods or pieces of information that moves the product from producer to the customers, while the "push" is to bring the goods to their customers "pool". Sometimes it become difficult to draft a promotional strategy for a brand because of its USP, then brand decisions are taken. Brand decisions are the art of creating and maintaining a brand. Branding makes customers committed to a business and provides them sense of loyalty. Question 1 (b) Company Global Hyatt Corporation is a US based organization that operates the business of hotels and motels. There are two hotel companies with the name of Hyatt Hotels Corporation and Hyatt International from which Global Hyatt Corporation operates all their businesses. Hyatt hotels leases, franchises and operates a number of hotels and resorts. Besides hotels, Global Hyatt Corporation also runs the business of casinos. The servicing mix of Global Hyatt Corporation is extended by three points: the processes, the individuals and the physical evidence.      Processes A process is a set of actions which connects all the operations of a business to each other with an aim to achieve a specific result. Usually, Process includes value creating strategies for internal or external customers, segmentation, clustering and other strategies too. Process also defines the usage of all available resources so that all should be availed effectively and efficiently in order to get the USP and core competencies. In all product and service oriented organizations, the firm needs to ensure that they have a proper channel of handling customer complaints and addressing all the queries of the customers. Some customers may need information about the product or service and hence the customer relationship department should be active and should be well versed with their job roles.      People Any company’s person coming into contact with the customer has an impact on their satisfaction with the performance. In particular, the occurrence and the (technical) skills are crucial in this context, because the customer often does not separate the actual service of the people nor their behaviors. Sustainable quality of service depends on the processes and the people involved. Therefore, the formation of trust and satisfaction is of great importance. The basis of customer satisfaction in hotel industry depends upon appropriate staff training, and often creating a meaningful corporate identity (corporate image). Physical Evidence It is an essential element of servicing mix, which customers can actually see or experience when they use a service, and which contribute to the perceived quality of the service. In hotel industry, the service is not physically tangible, experiences of the customer is an important criteria for assessing the quality. Alternatively, the service provider may attempt to establish a physical relation on appropriate measures. Physical Evidence also caters the environment in which a service is provided, as well as printed materials and other physical items can make a service more appealing. As, services are essentially intangible, although they may be associated with tangible elements. Examples: decoration of a hotel room, the comfort of a bed, a restaurant hygiene and appearance of the shop attendants. Generally, customer judges the service by its physical evidence, if it seems good, customer get satisfied, but if physical evidence fails to attract the customer then his next step will be at competitors’ door. Question 2 (a) Inventory According to the concept of Supply Chain, any product, goods or other elements which are in the custody of an organization or an agent in their warehouse or store is known as Inventory or Stock. Usually, it lies in the domain of logistics, warehousing and inventory management. Due to the boom in technology, corporate sector has started to use a new phenomenon for inventory management and that is JIT (Just In Time Inventory). The just-in-time is an industrial philosophy that has reversed the "old method" of producing finished products for the warehouse waiting to be sold, which economically hurts the company by increase in the inventory holding cost (called logical push). JIT has a pull logic that is necessary to produce only what has to behold or that are expected to sell quickly (it reduces the economy of inventory holding cost). JIT is that inventory management system which uses current methodologies and aimed at improving the production process, spends inventory turnover, reduces the holding cost and has minimum drawback. In practice this is to coordinate the timing of the actual need of the materials on the production line with their acquisition and availability in the segment of the production cycle and the time in which they must be used. JIT disturbs when it has to deal with international boundaries. Organization It is a social group made ??up of people, tasks and management, which form a systematic structure with interaction of relationship, tending to produce goods or services to meet the needs of a community in an environment to satisfy its distinctive purpose as its mission. An organization only exists when people are able to communicate and who are willing to work together to achieve a common goal. It is a set of positions with rules and standards of behavior to be observed by all its members, and thus generate the means by which a company carried out its operations. The organization is the act of coordinating the available resources (material, human, assets and finance) that’s why an organization is required to have a separate functional department which manage and control all the available resources in the best manner i.e according to the aims of organization. Global Supply Chain Management has forced the organizations to be more effective by every mean, so that they can complete in the fast moving competitive world, where a single second means a million. Communication Communication is an ability to benefit from and participate in the setting and relationships that provide business a long life. In dealing with others, one needs to model and demonstrate effective communication skills so that they can effectively work towards in supportive relationships. People in organization or with other organization are more likely to communicate effectively if they are comfortable with the defined setting of any place, product, policy and personality. It is important to consider the ways in which the positive relationships are being developed; as such relationships are not something to be left on the chance. In a number of different ways, the relationships are built with others in business on a regular basis. As this is an era of technology so companies uses fast and efficient mediums of communications such as internet, which allow them to communicate effectively through long distances i.e. anywhere in the world. Communication through internet or any technological mediums helps the company to make sharp and prompt decisions whenever they are needed. Sometimes companies use EDI system which is a structured transmission of data and communication between organizations by electronic means. It is used to transfer electronic documents or business data of a computer system to another. Global Supply Chain Management ensures the flow of communication to be continued with the consistency so that the information does not breakdown. With the usage of internet and EDI system, firms can manage each and every operation in a best manner. Due to the high importance of information, global supply chain has indulged the best level of efficiency in the field of communication. Question 2 (b) Company General Motors (GM) is one of the largest car makers in the world, manufacturing more than 9 million cars annually in 33 countries. With a company this size, meeting demand and managing capacity can be difficult challenges. For example, while GM lost more than $3 billion in 2005, more than half its sales came from outside the United States, where it sold its second highest volume of cars. In 2006 the auto maker was unable to keep up with demand in central and Eastern Europe and was seeking to buy an old Daewoo Romania plant to add 200,000 units at annual capacity for its line of entry-level vehicles. Meeting the needs of customers with different needs in 33 countries is also a challenge. Communication with Supplier In order to stay with the flexibility mode, GM is required to maintain the dynamic relationship with its supplier, because a company like GM needs to give importance to their vendors so that they can cooperate in very good and harsh situation. General Motors communicate with their suppliers on the regular basis to upgrade and update them regarding their respectable requirements. On the other side, company uses effective communication strategy with its customers. GM uses all modes of communication i.e. advertisements, social media, ATL and BTL activities. Company uses fast mediums of communications such as proper use of internet and electronic systems so that the communication over the long distance can be managed effectively with the leakage of information. Inventory Management General Motors (GM) is one of the early adopters of Electronic Inventory Management System. GM began seeking E-Procurement and Inventory solution in late 1999 and implemented its first version the following year. With a $63 billion procurement and inventory expense, GM expects substantial cost swings through the use of Electronic system. Savings would be captured through reduced prices, better analysis and information, better supplier control, and so on. It was also a logical transition as GM was already familiar with and using EDI. Organization General Motors is one of those organizations which has adopted the phenomenon of globalization and diversity. Company has set a separate functional department to effectively and efficiently manage its all available resources such as human, capital, land, machinery and technology.GM has reached up to the market of more than 35 countries and enjoying the biggest share in auto industry. The organizational models of GM are used by the other companies to follow their path of success. Question 2 (c) Adoption of Technology by General Motors Enterprise Resource Planning and Electronic Systems are widely used in the General Motors, to make it efficient and effective. These systems lie in the subcategory of e-commerce and supply chain management. At a basic level, it involves chasing merchandise or services through a Web site. At a more global level, e-procurement provides an efficient, paperless solution for purchasing goods and services by allowing the end over to order an Item from a computer or other internet connected device, such as a cell phone, kiosk, television top box (i.e., Microsoft's X-Box), and so on, and using an electronic payment system while storing necessary information for future analysis. The Center for Innovation, Business, and Manufacturing in Australia nicely summarizes e-procurement: "E-Procurement is the use of the Internet to connect buyers with suppliers to facilitate the purchasing of goods and services focusing on business-to-business (B2B) and business-to-government transactions (B2G)." Question 3 (a) Currency Risk The uncertainty in exchange rate is known as currency risk, in economics it is termed as the risk arising from the uncertainty about future exchange rates. Exchange rate uncertainties, increase transaction costs for investors, entrepreneurs and consumers and thus it affects international trading of goods and capital. The uncertainty of the exchange rate would be greater, if the observed exchange rate’s volatility will be greater and it is parallel to the phenomenon that it would be an issue for the future of any foreign currency. Currency risks for entrepreneurs can be divided into: Translation risk The risk arising from the conversion of currency is considered as the biggest risk of the current era, as from the conversion of the values ??of assets, liabilities, revenues or profits of a foreign subsidiary in the determination of net income , it would highly affect the operations and statements. This risk also includes non-cash items but thus less important than the cash items. It also affects variables such as margin, the EBITDA margin, revenues and earnings. Conversion or translational risk generates results for both assets and liabilities, and both can be denominated or declined due to the risk attached with foreign currency. The cash will be received at a later date with previously unknown exchange rate. Any exchange rate fluctuates results fully profit-margin scenario. Surgical risk It refers to future, anticipated, forecasted risk that does not exactly affect the fixed cost but also affects the business activities. This can affect future cash receipts from sales or outgoing payments from cost items denominated in foreign currencies. The effects are fully in future earnings and margins effectively so that foreign currency cash outputs and inputs in the amount not offset and Time lined (natural hedging). Competition risk Long-term and strategic risk with a product due to currency fluctuations for a longer period of time, for the sack of development is known as competition risk. Investors are exposed to the risk that wins not only their basic investment in value or loss, but also the investment currency as compared to the domestic currency increases in value or loss. This is comparable to translation risk, but close, with the difference those investors regularly in a much shorter period and close out their positions. To ensure that this risk is cash, companies typically hold investments for years and decades, so translation risks become payable only in the transfer of assets between companies (dividends, capital injection). Question 3 (b) Effects of Currency risk on a MVP Trading Company Exchange rate uncertainty can be considered both an opportunity as well as risk. They enable market participants’ additional profits; they also endanger their return if the exchange rate moves in an unfavorable direction. The Nobel laureate Robert Mendel holds exchange rate uncertainty principle for dangerous: "An unstable exchange rate Means unstable financial markets, and a stable exchange rate Means more stable financial markets" (German: An unstable exchange rate is unstable financial markets, a stable exchange rate in more stable financial markets.) Regardless of the risk attitude of the individual, however, exchange rate uncertainty for foreign traders and investors act as transaction costs and thus a barrier to trade. Managers of MVP Trading Company has employed a number of foreign exchange hedging strategies in order to protect against exchange rate risk. Transaction exposure is often managed either with the use of the money markets, foreign exchange derivatives such as forward contracts, futures contracts, options, and swaps, or with operational techniques such as currency invoicing, leading and lagging of receipts and payments, and exposure netting. Firms may exercise alternative strategies to financial hedging for managing their economic or operating exposure, by carefully selecting production sites with a mind for lowering costs, using a policy of flexible sourcing in its supply chain management, diversifying its export market across a greater number of countries, or by implementing strong research and development activities and differentiating its products in pursuit of greater inelasticity and less foreign exchange risk exposure. Question 3 (c) Countermeasures In addition to the deliberate taking outright positions (speculation) there are a number of security options: One of the widely used counter strategies for currency risk is currency swap. It is a financial derivative in which two parties exchange interest and principal payments in different currencies. A currency swap is similar to an interest rate swap. In this, payments are given in same currency. In addition, the notional amounts are exchanged for currency swap. Other prominent counter measures are Lead Strategy and Lag Strategy. Lead strategy is to increase the production capacity on the basis of the expected increase in demand. It is an offensive strategy designed to lure buyers and try to keep them away from buying competitors' products. Lag strategic policy, which means adding new capacity after the means of production that has reached the maximum level due to increased demand. This strategy is a conservative strategy. They reduce the possibility of not selling products, but they may lead to the loss of some customers. The most economic schools prefer countertrade policy which combines operations, within which there shall be reciprocal obligations of exporters, importers purchase products or services on a part or the full cost of the goods that are exported. However, fixed exchange rates between paper currencies historically have not been successful. Stable exchange rates would be best maintained by the binding of currencies to precious metals. Read More