Mike, one of the marketing strategists on your team, stops at your office door w
ID: 410192 • Letter: M
Question
Mike, one of the marketing strategists on your team, stops at your office door wanting to talk. “We use fabrics that are made domestically; however, there are issues with using these same fabrics globally. There are laws and regulations that prevent us from shipping these fabrics to other countries. This is a huge concern. One of our primary selling points is the consistency of quality of our product.” You confirm Mike’s concern, “That’s an excellent point,” you say. “Now you’ve just given yourself and our team more work for the presentation. I’m sure that will come up. One of the board members used to run a textile plant in China.” Mike nods his head in agreement. “I imagine textiles will not be the only resource concern,” he says. Consider the following in your response: Why should resources be a concern in a global strategy? What resources may be a concern in the country you selected? How will this impact the decision to move to the country that you selected? How will this impact your competitive strategy in your global market?
Explanation / Answer
Why should resources be a concern in a global strategy?
Any operation, be it global or domestic , has to work with a certain budget. Budgeting is a process of planned allocation of financial resources within an organisation for a specific department, function or a business objective. Since there is a resource constrain, operational resources should be carefully allocated in order to meet business requirement. Another reason why this is a concern is because it's a part of a company's larger strategic planning. Strategic Planning is the way an organisation defines its strategy. It is a continuous process in which the organisation decides to implement a selected few strategies, details the implementation plan and keeps on appraising the progress & success of implementation through regular assessment taking into account constrains such as availability of resources , delivery timeframes, etc.
What resources may be a concern in the country you selected?
Sourcing high quality textiles may be a concern in China .China's sourcing hub for manufacturing is Shenzhen. However it's known for electronic hardware not textiles. Shaoxing on the other hand is known for textile and fabrics and is a perfect place to source textiles. However there are quite a few concerns in sourcing from Shaoxing.
China ranks very low when it comes to ethical sourcing
Ethics in supply chain management have to do with sustainability and ethical sources of raw materials. Ethical sourcing involves sourcing and working with Vendors who comply with ILO (International Labour Organisation) and Human Rights Standards set by individual host countries and the world. Chinese workers work in conditions that are violate ILO standards.
IP Laws don not apply to Chinese firms or Chinese Nationals
US intellectual property rights have no say in China, which is why they're the world's largest manufacturer of counterfeit goods. Designs , ideas, prototypes are easily stolen or replicated and flood the local and global market. This could pose a serious risk.
Changing Tax Laws in the United States
With the present administration going ahead with the America First policy, the government is trying hard to keep jobs within the country. Which means there might me major over hauls to import and export taxes and laws. So there's a lot of regulatory uncertainty in sourcing from China since the country does not even fall under NAFTA or the North American Free Trade Agreement.
This would impact the decision by creating a long list of checklist like vetting vendors, improving security to protect IP and keeping a closer tabs on trade tariffs and taxes.
How will this impact your competitive strategy in your global market?
- Financial Advantages : Significantly lower Fixed Costs & Variable Costs allowing the firm to reach break even point quickly, ensuring that the factory or the manufacturing unit would be profitable. allowing the company to see its return on investment faster than it would in its parent country
- Low Labour Costs : A through assessment of the labour market in the host country , on how it looks right now and how it will look like in the next decade. factoring in increased competition, inflation, labour unions. demand for skilled and unskilled policies and the country's immigration and expat policies will show that outsourcing costs are cheaper primarily because of the low labour costs.