Module No.

5: International Operations Management

As a business is divided into various functional areas like procurement, production,
operations, marketing, Finance and human resource, in this module we will understand the
key operations performed in an international organization.
Global Supply Chain Management-
Introduction to Global Supply Chain Management (GSCM)
Definition: Global Supply Chain Management (GSCM) involves the coordination and
management of a network of interconnected businesses involved in the provision of
products and services to end consumers across multiple countries.
Scope of Global Supply Chain Management (GSCM): Includes sourcing, production,
transportation, warehousing, and distribution across international borders.
Key Components of Global Supply Chain Management (GSCM)
• Global Sourcing and Procurement: Finding and managing suppliers globally to obtain raw
materials, components, and products at competitive prices.
• Global Production and Manufacturing: Coordinating manufacturing activities that may be
spread across different countries to optimize costs and efficiency.
• International Logistics: Managing the movement of goods across international borders,
including shipping, customs clearance, and warehousing.
• International Distribution and Retail: Ensuring that products reach the end consumers
through various distribution channels, including wholesale and retail.
• International HRM: includes the staffing, training, compensation and management of
employees in an international organization. It studies in detail about expatriation and
repatriation.
• Information Technology: Using technology to coordinate and manage supply chain
activities, including ERP systems, SCM software, and IoT devices.

Challenges in Global Supply Chain Management

• Cultural Differences: Managing diverse cultures and business practices can affect
communication and operations.
• Regulatory Compliance: Adhering to different countries' regulations and standards,
including customs laws, trade agreements, and environmental regulations.
• Risk Management: Dealing with risks such as political instability, economic fluctuations,
natural disasters, and supply chain disruptions.
• Sustainability: Ensuring that supply chain practices are sustainable and environmentally
friendly, considering the entire lifecycle of products.
• Quality Control: Maintaining consistent quality standards across different production sites
and suppliers.
Strategies for Effective GSCM

• Supplier Relationship Management (SRM): Building strong relationships with suppliers

to ensure reliability, quality, and mutual benefits.
• Inventory Management: Using techniques like Just-In-Time (JIT) and safety stock to
balance inventory levels and reduce costs.
• Logistics Optimization: Implementing strategies such as route optimization, multimodal
transport, and third-party logistics (3PL) to improve efficiency.
• Lean Manufacturing: Adopting lean principles to minimize waste and improve efficiency
in production processes.
• Technology Integration: Leveraging advanced technologies like blockchain for
transparency, AI for demand forecasting, and IoT for real-time tracking.

Trends in Global Supply Chain Management

• Digital Transformation: Increasing use of digital tools and technologies to enhance
visibility, coordination, and efficiency.
• Sustainability and Green Supply Chains: Growing focus on reducing the environmental
impact of supply chain activities.
• Reshoring and Nearshoring: Reconsidering the location of production facilities to
mitigate risks and improve responsiveness.
• E-commerce Growth: Adapting to the rise of e-commerce, which demands faster and
more flexible supply chain operations.
• Supply Chain Resilience: Building resilient supply chains capable of withstanding
disruptions and recovering quickly.
Examples and cases:
• Apple Inc.: Known for its complex global supply chain, Apple coordinates thousands of
suppliers worldwide to produce its products.
• Toyota: Uses the Just-In-Time (JIT) production system and lean manufacturing principles
to optimize its global supply chain.
• Amazon: Leverages advanced logistics, robotics, and AI to manage one of the most
efficient and responsive supply chains in the world.
Global Supply Chain Management is a critical aspect of modern business operations,
enabling companies to compete effectively in a globalized market. By understanding and
addressing the challenges and leveraging appropriate strategies, businesses can optimize their
supply chains for efficiency, sustainability, and resilience.

Global sourcing
Concept of Global Sourcing
Global sourcing refers to the practice of sourcing goods and services from the global market,
leveraging the competitive advantages of different countries. This involves identifying and
utilizing suppliers, manufacturers, and service providers across various geographic locations
to optimize cost, quality, and efficiency.
Objective of global sourcing: The main objective of global sourcing is to reduce costs,
improve quality, increase efficiency, and access advanced technologies or unique capabilities
that are not available domestically.
Scope of global sourcing: Global sourcing can include raw materials, components, finished
products, labour, and services. It spans multiple industries such as manufacturing, IT,
pharmaceuticals, and consumer goods.
Strategic Approach: It is a strategic approach to procurement that involves analyzing the
global supply market, evaluating potential suppliers, and integrating them into the supply
chain.

Key Drivers/ Benefits/ advantages of Global Sourcing

• Cost Reduction: Sourcing from countries with lower labor and production costs can
significantly reduce overall expenses.
• Quality Improvement: Accessing suppliers with superior technologies or specialized
skills can enhance the quality of products or services.
• Innovation Access: Leveraging global suppliers who invest in R&D can provide
innovative solutions and technologies.
• Risk Diversification: Sourcing from multiple geographic locations can mitigate risks
related to political instability, natural disasters, or market fluctuations.
• Market Expansion: Establishing relationships with global suppliers can help
businesses enter new markets and expand their global footprint.

Process of Global Sourcing

• Market Research: Conducting thorough research to identify potential global suppliers and
understand their capabilities.
• Supplier Evaluation: Assessing suppliers based on criteria such as cost, quality, reliability,
and compliance with regulations.
• Negotiation: Engaging in negotiations to secure favorable terms and conditions, including
pricing, delivery schedules, and payment terms.
• Integration: Incorporating selected suppliers into the supply chain and establishing
effective communication and collaboration mechanisms.
• Monitoring and Evaluation: Continuously monitoring supplier performance and
conducting regular evaluations to ensure compliance with standards and expectations.

Issues/Challenges of Global Sourcing

• Cultural Differences: Navigating cultural and language barriers can complicate
communication and collaboration.
• Regulatory Compliance: Ensuring compliance with international trade regulations,
standards, and customs laws.
• Logistical Complexity: Managing complex logistics, including transportation, customs
clearance, and warehousing.
• Supply Chain Risks: Exposure to risks such as geopolitical instability, natural disasters,
and supplier reliability.
• Quality Control: Maintaining consistent quality standards across different geographic
locations.
Global sourcing is a critical component of modern supply chain management, offering
numerous benefits such as cost savings, quality enhancement, and access to innovation.
However, it also presents challenges that require careful management and strategic planning.
By understanding the concept and implementing effective strategies, businesses can
successfully leverage global sourcing to achieve their objectives.

Activity box: write in the given columns The global sourcing advantages and disadvantages:
Advantages Disadvantages/ issues / challenges of global
sourcing :
• Tapping skills and resources that are not • Utilizing an efficient supply chain
available in the home nation • Seeking the management system
benefit of alternate suppliers
• Learning global business skills • Meeting competition prudently and
efficiently
• Presence in foreign markets
• Low cost manufacturing • No exposure of international culture,
traditions and beliefs
• Financial and political risks associated
with emerging economies
• Long lead times
• Unnecessary shutdowns and supply
interruptions
• Difficulty of monitoring goods and
services quality
• Difficulty in supervision
• Labor problems and labor related issues
• Risk of losing intellectual properties, trade
secrets, patents and copyrights
• Hidden costs related to different time
zones and languages
Global manufacturing strategies:

International Logistics
Definition: International logistics involves the management and coordination of the flow of
goods, services, and information across international borders to meet customer requirements.
Scope: It encompasses transportation, warehousing, customs clearance, inventory
management, and distribution on a global scale.
Key Components of International Logistics
• Transportation: Selection of appropriate transportation modes (air, sea, rail, road) for
moving goods internationally.
• Warehousing: Strategic placement of warehouses to optimize storage, handling, and
distribution of goods.
• Customs Clearance: Navigating customs regulations, documentation, and procedures to
facilitate the import and export of goods.
• Inventory Management: Balancing inventory levels to meet demand while minimizing
costs and avoiding stockouts or overstock.
• Distribution: Efficiently delivering goods to end consumers or retailers in different
countries.

1. Transportation in International Logistics: transportation stands a key factor for

international logistics. The logistics cost is added to the final cost of product and
affects the overall sale of the product. Transportation is also related to the quality of a
product sourced from anywhere around the world.
Modes of Transport:
• Air Freight: Fastest but most expensive mode, suitable for high-value or time-sensitive
goods.
• Ocean Freight: Most cost-effective for large volumes, but slower than air freight.
• Rail Transport: Efficient for land-based cross-border trade, especially in regions with
developed rail networks.
• Road Transport: Provides flexibility and accessibility, often used for last-mile delivery.
• Intermodal Transport: Combining multiple modes of transport to optimize cost, speed,
and efficiency.

2. Warehousing in International Logistics

A warehouse is a facility where products/ raw material/semi finished goods/ goods yet to be
assembled/ goods for indirect exporting are sourced and stored with care to ensure the
preservice of their quality and usability.
Types of Warehouses:
• Public Warehouses: Operated by third parties, offering flexibility and lower costs for
short-term storage.
• Private Warehouses: Owned and operated by companies for their exclusive use, offering
more control over operations.
• Bonded Warehouses: Used for storing imported goods that have not yet cleared customs,
allowing for deferred payment of duties.
• Warehouse Management: Involves layout design, inventory control, order fulfillment, and
technology integration (e.g., Warehouse Management Systems - WMS).

3. Customs Clearance
The travel of goods across international boundaries requires custom clearance. It is a kind of
duty/tax that government of country levies on goods inwards.
• Documentation: Key documents include commercial invoices, packing lists, bills of
lading, certificates of origin, and import/export licenses.
• Regulations and Compliance: Adherence to international trade regulations, tariffs, duties,
and customs procedures to avoid delays and penalties.
• Customs Brokers: Specialists who facilitate the customs clearance process by preparing
documents, calculating duties, and liaising with customs authorities.

4. Inventory Management in International Logistics

Inventory is the stock of material and finished goods to ensure there is just right quantity of
them available when required. Excess quality available requires extra warehouse expense
while shortage may hamper the quality of production and sale.
• Demand Forecasting: Predicting future demand to ensure adequate inventory levels.
• Safety Stock: Maintaining extra inventory to buffer against uncertainties in supply and
demand.
• Just-In-Time (JIT): Minimizing inventory levels by receiving goods only when needed for
production or sale.
• Technology Integration: Using systems like ERP and SCM software to track inventory in
real-time and optimize stock levels.

5. Distribution in International Logistics

• Distribution Channels: Pathways through which goods move from manufacturers to end
consumers, including direct sales, distributors, and retailers.
• Last-Mile Delivery: The final step in the delivery process, focusing on speed, cost-
efficiency, and customer satisfaction.
• Reverse Logistics: Managing the return of goods from customers for reasons such as
returns, repairs, or recycling.

Issues / Challenges in International Logistics

• Cultural Differences: Understanding and managing cultural variations in business
practices, communication, and consumer behavior.
• Regulatory Compliance: Adhering to different countries' trade regulations, customs laws,
and standards.
• Logistical Complexity: Coordinating multiple logistics activities across diverse
geographical locations.
• Risk Management: Mitigating risks related to political instability, economic fluctuations,
natural disasters, and supply chain disruptions.
• Sustainability: Ensuring environmentally sustainable practices in international logistics
operations.

Strategies for Effective International Logistics

• Global Network Optimization: Designing and managing an efficient global logistics
network to minimize costs and improve service levels.
• Technology Utilization: Leveraging advanced technologies such as IoT, blockchain, AI,
and big data analytics to enhance visibility, coordination, and efficiency.
• Collaboration and Partnerships: Building strong relationships with logistics providers,
suppliers, and customers to ensure seamless operations.
• Risk Mitigation: Implementing strategies to identify, assess, and mitigate potential risks
in international logistics.
• Sustainable Practices: Adopting eco-friendly practices such as optimizing routes, using
energy-efficient transport modes, and reducing waste.

Example and Case Studies in International Logistics

• DHL: Utilizes advanced technology and a global network to provide efficient and reliable
logistics solutions.
• Maersk: A leading shipping company that leverages its extensive fleet and digital
platforms to optimize international shipping operations.
• Amazon: Implements sophisticated logistics and supply chain strategies to ensure fast and
reliable delivery to customers worldwide.

International logistics is a complex and dynamic field that plays a critical role in global trade
and commerce. By understanding its key components, challenges, and strategies, businesses
can effectively manage their global supply chains and achieve competitive advantages in the
international market.

International HRM –
According to Hugh Scullion, International HRM (IHRM) involves the HRM issues and
problems arising from the internationalisation of business, and the HRM strategies, policies
and practices which firms pursue in response to the internationalisation of business.
International Human Resource Management (IHRM) is “the process of procuring, allocating,
and effectively utilizing human resources in a multinational corporation”.
In the words of Edwin B. Flippo, “International or domestic HRM involves the planning,
organizing, directing and controlling of the procurement, development, compensation,
integration and maintenance of people for the purpose of contributing to organizational,
individual and social goals.”
Objectives:
• To manage right people at the right job at the right time irrespective of their country or
origin.
• To manage and secure the performance compensation and career path of employees
• To create a local appeal without compromising on the local identity
• Training upon culture and senility upon Host country
• To manage diversified human capital and reap benefits out of it

Staffing policy and its determinants;

International human resource management is the process of employing, training and
developing and compensating the employees in international and global organizations.
The three parties involved:
The Home country employees - PCN
The host country employees - HCN
The other country employees – TCN

PCNs: Advantages and risks of hiring

 Advantages •Familiarity with the home office goals. Objectives, policies and practices
•Promising managers are given international exposure. •PCNs are the best people for
international assignments because of special skills and experiences
 Disadvantages •Difficulty in adapting to the foreign language and the socio-economic,
political, cultural and legal environment •Excessive cost of selecting, training, and
maintaining expatriate managers and their families abroad •Promotional opportunities
for HCNs arc limited •PCNs may impose an inappropriate HQ style Compensation for
 PCNs and HCNs may differ •Family adjustment problems, especially concerning
unemployed spouses
HCNs: Advantages and risks of hiring
Advantages
• Familiarity with the, socioeconomic. political and legal environment and with
business practices in the host country
•Lower cost incurred in hiring them compared to PCNs and TCNs
•Promotional opportunities for locals and motivation and commitment
•Languages and other barriers are eliminated
•Continuity of management improves since HCNs stay longer in positions
•Salary and benefit requirements may be lower than of PCNs
Disadvantages
•Difficulty in exercising effective control over the subsidiary's operations
•Communication difficulties in dealing with home-office personnel
•Lack of opportunities for the home country's nationals to gain international and cross
cultural experience
•HCNs have limited career opportunity outside the subsidiary
•Hiring HCNs may encourage a federation of nationals rather than global units

TCNs: Advantages and risks of hiring

Advantages
•TCNs may be better informed than PCNs about the countries of assignment
•TCNs arc truly international managers
Disadvantages
•Host country government may resent hiring TCNs
•TCNs may not want to return to their own countries after assignment Host country's
sensitivity' with respect to nationals of specific countries is missing
•HCNs arc impeded in their efforts to upgrade their own ranks and assume responsible
positions in the multinational subsidiaries HCNs or PCNs
EPRG Model
1. Introduction to the EPRG Model

Definition: The EPRG model, developed by Howard V. Perlmutter, stands for Ethnocentric,
Polycentric, Regiocentric, and Geocentric. It is a framework used to describe the orientation
of a company’s international operations and strategic approach to global market expansion.
Purpose: Helps businesses understand and categorize their approach to international markets,
guiding their internationalization strategies and managerial attitudes.
2. Components of the EPRG Model

Ethnocentric Orientation (E)

Definition: Home country-oriented approach where the company's culture, practices, and
products are considered superior and are used in foreign markets without significant
adaptation.
Characteristics:
Key decisions made at headquarters.
Standardized products and practices.
Minimal adaptation to local markets.
Emphasis on home country nationals for key positions abroad.
Advantages:
Consistency in product and service offerings.
Cost savings through standardization.
Disadvantages:
May lead to cultural insensitivity.
Limited understanding of local markets and customer needs.
Polycentric Orientation (P)

Definition: Host country-oriented approach where each foreign market is considered unique,
and strategies are tailored to fit local conditions and preferences.
Characteristics:
Decentralized decision-making.
Local products, marketing, and operations adapted to fit each market.
Hiring of local nationals for key positions.
Advantages:
Better market penetration and customer satisfaction.
Increased acceptance and competitiveness in local markets.
Disadvantages:
Higher costs due to customization.
Potential loss of control over brand and quality standards.
Regiocentric Orientation (R)

Definition: Regional approach where the world is divided into regions, and strategies are
tailored to fit regional markets.
Characteristics:
Semi-decentralized decision-making.
Regional products and strategies.
Regional management teams.
Advantages:
Balance between global standardization and local adaptation.
Economies of scale within regions.
Disadvantages:
Complexity in managing regional differences.
Potential conflict between regional and global strategies.
Geocentric Orientation (G)

Definition: Global approach where the company adopts a worldwide perspective, integrating
both global standardization and local adaptation.
Characteristics:
Integrated global strategies.
Best practices from around the world are implemented.
Recruitment of the best talent regardless of nationality.
Advantages:
Global consistency and efficiency.
Enhanced innovation through diverse perspectives.
Disadvantages:
High coordination and integration costs.
Potentially complex management structures.
3. Application of the EPRG Model

Strategic Planning: Helps companies decide the extent of adaptation or standardization of

their products and strategies in foreign markets.
Organizational Structure: Guides the design of the organizational structure to manage
international operations effectively.
Human Resources: Influences hiring practices and talent management in international
operations.
Marketing Strategies: Aids in developing marketing strategies that align with the company's
international orientation.
4. Examples and Case Studies
Ethnocentric Example: McDonald's initially followed an ethnocentric approach, offering the
same menu worldwide, but has shifted towards more local adaptation.
Polycentric Example: Unilever operates with a polycentric approach, tailoring its products
and marketing strategies to fit local tastes and preferences.
Regiocentric Example: Toyota organizes its operations on a regional basis, balancing global
efficiency with regional adaptation.
Geocentric Example: IBM operates with a geocentric orientation, integrating global strategies
with local market needs and leveraging a diverse workforce.
5. Conclusion

The EPRG model provides a valuable framework for understanding and categorizing a
company's approach to international markets. By choosing the appropriate orientation,
companies can effectively manage their international operations, balance global integration
with local responsiveness, and enhance their competitiveness in the global market.

Expatriation and Repatriation (Meaning only).

An expatriate is a person living in a country other than their home country. Expatriates play
important roles like managing operations, transferring skills and knowledge, and developing
management skills. The expatriate assignment life cycle includes determining need, selection,
pre-departure training, arrival orientation, and ongoing training.
Expatriate failure can occur if they have difficulty adjusting to the host culture or have
personal/family issues, leading to an early return home. Repatriation refers to returning to an
expatriate's home country or country of origin at the end of an overseas assignment.
Another critical issue in international HRM is encountered when expatriates are to get re-
entry into their home country. This incident is called as repatriation. Repatriation should be
seen as the final link in an integrated, circular process that selects, trains, sends, and brings
home expatriate managers.
Successful expatriation and repatriation have been taxing issues for multinational companies,
and various scholars and practitioners have endeavoured to identify factors that influence the
success of international assignments. In this chapter, we focus on a relational approach and
highlight the importance of developmental relationships in achieving successful expatriation
and repatriation. Based on our review of 56 empirical studies that examined various types of
developmental relationships of expatriates and repatriates, we present the types of developers,
the types of support, and positive consequences that developmental relationships can bring to
expatriates and repatriates’ experiences and careers. Further, we situate these findings in the
broader literature of expatriation as well as that of developmental relationships and highlight
some major barriers that may prevent employers and individuals from effectively cultivating
and leveraging developmental relationships. Finally, we propose some important questions
for future research and discuss what employers and individuals can do to overcome these
relationship-associated challenges and foster high quality developmental relationships in the
contexts of expatriation and repatriation.