s3210058_individual writing exercise_busm 3238-3991

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2010

INDIVIDUAL REPORT

NGUYEN DIEM QUYN

S3210058

BUSM 3238_3991

Global Business Context (MBA)

LECTURER: Dr. Hannarong Shamsub


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RMIT International University VietnamMaster of Business Administration

ASSIGNMENT COVER PAGE

Subject Code: BUSM3238_3991

Subject Name: Global Business Context (MBA)

Location where you study: RMIT SSG

Title of Assignment: Individual Report (Individual Writing

Exercise)

File(s) Submitted: S3210058_Individual Writing

Exercise_BUSM3238-3991.docx

Students Name: Nguyen Diem Quynh

Students Email Address: [email protected]

Learning Facilitator in charge: Dr. Hanarong Shamsub

Assignment Due Date: 26th November 2010

Date of Submission: 26th November 2010

Number of Pages including this one: 12 pages

Word Count: 2878 words (including executive summary)


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Table of ContentsCASE 1: FLAT- PANEL TELEVISIONS AND THE GLOBAL ECONOMY

EXECUTIVES SUMMARY ........................................................................................................... 4INTRODUCTION ........................................................................................................................... 4RESASONS FOR GLOBALIZATION OF PRODUCTION ............................................................... 5

WINNERS AND LOSERS IN GLOBALISATION OF PRODUCTION .............................................. 5THE EFFECTS OF NON- GLOBALIZATION IN PRODUCTION .................................................... 7FUTURE TREND OF GLOBAL PRODUCTION.............................................................................. 7

CONCLUSION ............................................................................................................................... 8REFERENCE LIST....................................................................................................................... 8

CASE 2: LI&FUNG

EXECUTIVE SUMMARY ............................................................................................................. 9INTRODUCTION ........................................................................................................................... 9ROLES OF LI&FUNG................................................................................................................... 9CHOICE FOR SEARCHING SUPPLIERS ....................................................................................10BENEFIT FOR CUSTOMERS FOR WORKING WITH LI&FUNG ................................................ 11CONCLUSION ............................................................................................................................ 12


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CASE 1: FLAT- PANEL TELEVISIONS AND GLOBAL ECONOMY

EXECUTIVESSUMMARY

In these days, the integration between countries around the world has been expanded

significantly. This situation not only happens in the trading in the global market but also having

globalization in production. Based on the case, Flat- panel televisions and the global economy,

the reason for that is companies would like to reduce the cost structure during the production

process as well as to maintain and improve the technology and quality of products. Therefore,

manufacturers today attempt to avoid the high cost locations in developed countries and takes

these advantages from low cost countries around the world and then the products will transport to

everywhere for trading. When manufacturers apply this strategy, there is clearly someone gets

benefits whiles others gain some suffers from that globalization. The manufacturers, labor in

low- cost countries and consumers are considered as the winners while the traditional

manufacturers and employees in high cost locations will be suffered because of unemployment

and inability to compete with other companies. However, if all governments prohibit the

globalization, serious problems would occur throughout the globe. Therefore, in the future,

globalization will expand significantly and every company will attempt to use advantages through

international of manufacturing and service in order to maintain, expand and compete with other

competitors in this tough market and situation.

INTRODUCTION

In these days, globalization has become more popular in the economy. This situation not only

happens in the trading but also in the manufacturing. In this report about the Flat- panel television

and the Global economy, the reasons for international in production will be presented and then the

advantage and disadvantages of globalization and non- globalization in manufacturing based on

the examples in the case. Finally, this report will give the future trend and strategies that are

expected to use by every manufacturers in the competition market.


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RESASONS FOR GLOBALIZATION OF PRODUCTION

The globalization of production refers to the resources of goods and services from variety

locations around globe in order to take advantages of nation differences in cost and quality of

factors in the production process, such as the labor cost, land, capital, technology (Hill, 2009)

In this case, the manufacturing of flat- panel TV migrating sources from different countries.

Firstly, the glass panel used to manufacture the TV screen after that, are produced in high

technology fabrication divided in South Korean, Taiwan and Japan where ensure the absolutely

clean environment and exactly specifications. The reasons of dividing glass- panel manufacturing

process are for producing required numbers of items in the shortest time period to reduce the

inventory turnover. From there, glass panel will be delivered to Mexico to cut into require size of

TV, combined with the electric components from Asia to manufacture the final flat screen TV and

finally, these products will be transported at retail stores in U.S to display for customers.

The objectives for this company apply the globalization of production in their manufacturing

process for their flat- screen TV products are lower overall cost structure (transportation cost,

labor cost) and thus, lower the prices sold to customers in order to compete with other

competitors in TV industry Moreover, this strategy also assist company improve the quality or

functionality of their products For example, the manufacturing of glass panel requires high

standard of technology and company chooses producing them in South Korea and Japan, where

are the leaders and innovators in electronic technology in the world.

WINNERS AND LOSERSIN GLOBALISATION OF PRODUCTION

As the globalization in manufacturing flat panel television industry by migrating different

locations around the world, there are clearly someone gets benefits whiles others gain some

suffers from that globalization.

Firstly, the manufacturer who applies the international for their production is considered as the

winner since company can reduce their production cost but still obtain the high quality flat-panel

TV. Due to the international production, Vizio, one flat- screen TV manufacturer located in

California, reduced cost for employees salary inside US since they only employed 75 employees


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focusing on product design, sale and customer service. All of production and logistic processes

are outsourced across the globe where the salary for manufacturing worker is lower such as China

and Mexico. When the cost for production lower, the selling price also reduces and the products

from that company easily attract more customers. Therefore, Vizio is considered as the cheapest

manufacturers of flat screen TVs sold in many retailers of U.S. The sale of Vizio jumped from 0

in 2005 to $700 million in 2006. The inventory turnover of Vizio only took three weeks, twice as

fast as their competitors.

Consumers are also the winners in the production international. In the story of Vizio, U.S

consumers have benefited from falling prices of flat- screen TVs. In the economic situation

nowadays, people tend to spend much time for searching and comparing products from different

supplier in order to choose the best deal. Price is one of the most factors influenced to customersdecision besides the designs and quality as well as the features of products. When company takes

sources from different locations, the cost and the selling price of final products will decline; while

the standard of quality still be remained or improved. In 2006, price of 40- inch flat- panel TV

sells in US felt from $3,000 to $1,600 and bring much more consumers buying TVs. Due to the

globalization, consumers might get more value from the product- low price but high quality.

Worker from low labor cost countries also receive the benefit when production international

create job for them. In the developing countries where are famous like China, India, the youngpopulation achieve largest percentage; which means there are huge sources of young workflow

for factories. Moreover, according to Dave Abler (2007), compared to the developed countries as

U.S or Europe, the living standard and income level in developing countries are lower with the

low-income of $875 or less; and middle-income from $876 to $10,725 while the average income

in developed countries is from $10,726 or more. Therefore, the demand of global manufacturing

from developed countries will create the job and ensure the regular income for those low- income

people.

On the other hand, in the globalization of manufacturing, losers include the firms who

manufacture the traditional TVs in high- cost locations such as U.S or Europe. Because of the

high expenses paid for workers, production materials plus the low sales in the market due to

uncompetitive pricing set, these firms must shut down their factories to reduce these expenses.

For example, in 2006, Sanyo laid off 300 employees in their factory, and Hitachi shut down their


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plant and laid off 200 employees in U.S. This issue leads to the increase in unemployment of

workers in developed countries, which is the second group of losers.

THEEFFECTS OF NON- GLOBALIZATIONIN PRODUCTION

In the case if the government prohibit international production, there would be many problems

occur in the economic not only in that country but also all the world.

Firstly, companies could not take competitive advantages from resources of different countries

around the world as low labor cost, high technology, and available material resources for

manufacturing. Therefore, companies cannot obtain the low cost structure that would make them

reduce the revenue and profit. Although on balance, the policy of non- globalization in

manufacturing would bring the fair situation for all companies and reduce the unemployment in

U.S, manufacturers are unable to expand or even maintain their business with extreme the high

cost structures in locations as U.S and thus, the issue of unemployment might not be solved.

Secondly, the consumers will not gain benefits from the product they buy- the selling price is high

and may not affordable while product technology is not improved, especially in the economic

crisis, people mostly focus on finding the affordable price. Therefore, the purchasing power,

particular for the high technological products as TV will reduce significantly. This problem plus

the slowdown of U.S manufacturers affect both the domestic and global economy because any

issues happen with U.S economy affect to the other countries.

FUTURETREND OF GLOBAL PRODUCTION

With the strong and opened integration between countries in economy and the advantages of

globalization, it is forecasted that in the future, more and more companies will choose the

globalization in production applied to their business, especially the manufacturers to reduce the

cost structure and increase the competitive advantages in the market. When every manufacturer

applies this strategy, the unfair in competition mentioned above will eliminate. For example, Sony

and Hitachi although shut down plants in U.S but still make T.V in Mexico and Asia plants and

sell their products in U.S to compete with Vizio Company.


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Before starting implement the global in manufacturing, international companies should consider

those below steps:

Step 1: List out all components, in this case, like the glass panel, electronic chips and other

materials that can be globalized.

Step 2: List out all potential international suppliers of those components and plant around the

world. Then, consider advantages and disadvantages of those suppliers, especially the costs and

other factor affecting to overall cost.

Step 3: Finalized chosen suppliers and plants based on the quality and cost provided. Depending

on the productivity required, companies can choose one or more plants in one countries or

different countries.

Step 4: Order and transport the components to factories for production process. Companies could

chose to deliver components to factories and the finished good to retail stores by themselves or by

outsourcing.

CONCLUSION

In summary, in order to reduce the cost structure during the production process as well as tomaintain and improve the technology and quality of products, manufacturers today attempt to

takes these advantages from different countries around the world, called globalization of

production. This factor brings many advantages for companies and consumers besides some

disadvantages. Therefore, in the future, with more integration between economies from countries,

every company is expected to apply the globalization in manufacturer to obtain the competitive

advantages and compete with other manufacturers.

REFERENCE LIST

y Abler, D, 2007, Economic Condition in Developing Countries, viewed on 9th November,

2010, Penn State University Website, .

y Hill, CWL, 2009, Global Business Today, McGraw- Hill Irwin.


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CASE 2: LI&FUNG

EXECUTIVESUMMARY

Another example of globalization in supply and manufacturing is Li&Fung case, company who

receives order and product concept from business customers, especially in the clothing and

consumer electric industries; and then, the specialized designers of Li&Fung will create the

product samples with detail of necessary material and component. After receiving the approval

from customers, company starts to search the suitable suppliers and manufacturers based on the

balance in quality and overall cost structures as material cost, labor cost, transportation cost and

other information about the supplier and trade barriers Although, Li&Fung does not

manufacture products itself but in charge of logistic, through the wide network around the globe,

Li&Fung has many advantages competitive over other companies having same function andbrings many benefits for customers in the global market as quality assurance, saving overall cost

and reducing the product cycle time.

INTRODUCTION

This case is about the activities of Li&Fung Company, established in 1906, is one of the largest

multinational trading companies in the developing world, with annual sale more than $ 11 billion

in 2007. This company is considered as an expert in supply chain management for their customers

over the world. This part of report will focus on the roles and competitive advantage of Li&Fung

over other companies in the world, the process and role as well as consider number of drives that

company provides services for requirements from customers. Moreover, the report also states out

the benefits customers receive when working with Li&Fung.

ROLES OF LI&FUNG

The customers of Li&Fung include 500 or more in clothing retailers and consumers electric

companies. Li& Fung takes order from customers and then with the network of more than 7000

independent suppliers located in 40 countries around the world. Based on the information about

quality, trade barriers, transportation cost and labor cost as well as the requirements from

customers, Li& Fung will order production material from different suppliers and transport them to


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factories to manufacture the finished products and finally shift them to customers. The mission of

Li&Fung is not manufacturing products by itself but searching the most suppliers and factories to

asking them produce the products.

In the case of transaction between Li&Fung and its customer- The Limited, Li&Fung received the

basic product concept for fashion clothes from The Limited, and researched the market to find the

suitable yarns, dyes, buttons and other materials for clothing manufacturing and send the

sample of clothes to The Limited for approval. After that, based on the network of suppliers

around the world, Li&Fung started to purchase those required material from different suppliers

depending on the quality and price. For example, Li&Fung would purchase yarns from Korean

supplier but then shifted them to Taiwan for dying and weaving. They ordered the zippers in

Japanese company due to the high quality zippers produced. All of materials then transported tofive different factories in Thailand to produce for meeting the deadline from The Limited. After

five week, The Limited received all finished products with color perfect matched as they came

from only factories.

CHOICE FOR SEARCHING SUPPLIERS

Firstly, Li&Fung design the sample based on customers product concept. After receiving the

approval, Li&Fung will design what they have to purchase according the detail of product

sample. When searching the suppliers, the basic drive that Li&Fung makes in choosing favorable

suppliers for customers are quality of material provided as well as the cost factors, including labor

cost, trade barriers, transportation cost.

Moreover, based on the required delivery date the finished products to customers, Li&Fung

decides choosing one or more factories to produce. In case of The Limited, since the short period

for manufacture and transport the finished batch of clothes, Li&Fung decide to divide the

production batch into five factories to reduce the production time.


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BENEFIT FOR CUSTOMERS FOR WORKING WITH LI&FUNG

In the global market, besides the quality and prices of manufacturing the products, the product

cycle time also affects the success and competitive ability of companies, especially in the clothing

because for each season, new styles of fashion clothes should appears based on the need of

customers and in the consumer electric industry, after few years, the new model of products will

be innovated and displayed in the market. Therefore, companies in these two industries must

always follow the quick trends of the faction and technology to attract customers and compete

with other competitors in the market.

In the open market, there are multiples companies produce the component and materials around

the world, some of them charge really high cost while others have low cost. Therefore, when

companies do not know suitable suppliers for balancing the price and quality, they will spend a lot

of inefficient time for searching which cause the in competitive for their business. Working with

Li&Fung, customers could reduce the time for searching the most favorable suppliers for

purchasing the materials because Li&Fung has the network of independent suppliers for clothing

and consumers electric around the world. Moreover, Li&Fung ensures the supplier will provide

high quality but at affordable price and deliver the finished products to customers at the lowest

transportation cost.

COMPETITVE ADVANTAGES OF LI&FUNG

The role of Li&Fung can be considered as one competitive advantage in the global market. There

are few numbers of companies acted as the middlemen who searches and asks foreign suppliers

produce finished products. With this function, Li&Fung differentiate than other companies when

it helps customers reduce the time for product cycles in the tough market as fashion and consumer

electric industries.

Secondly, Li&Fung has the network of 7,500 independent suppliers located in 40 countries.

Therefore, it will reduce the time and cost for searching the right manufacturers who provide

materials and produce the products based on the balance in quality and cost, trading barriers.

Moreover, in the case when one chosen supplier has the problem and could not provide or


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manufacturers as requirement, Li&Fung easily find out another suppliers same quality and cost as

the first one but at the short time.

To better serve the requirement of customers, Li&Fung divides their companies into many

divisions such as Division for The Limited, for Warner Brothers, Gymboree and Children stores...

In each department, there are specialized employees focusing on designing the samples, technical

support, merchandising, searching and purchasing material from suppliers, quality assurance, and

shipping. And these teams also directly link to dedicated staff in Li&Fung branch office in many

countries. This links will ensure which suppliers in those countries are suitable with requirements

of Li&Fung and their customers.

Moreover, the information system for controlling, coordinating, production and shipping process

between receipt of an order from customer and delivery is minimized and thus, reducing overall

cost.

CONCLUSION

Overall, Li&Fung is the company acted as the middleman in purchasing materials and searching

the suppliers and manufacturers that are suitable with the requirements of their business

customers based on the balance in quality and cost structure. Working with Li&Fung, customers

will receive many benefits, by the wide network over the world, Li&Fung assist customers reduce

the time for searching suppliers as well as transporting the finished products to customers

retailer. Therefore, customers of Li&Fung could ensure that their required products will be at the

high quality but at affordable low cost.

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