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Introduction
The highly competitive nature of many
markets and the likely future prospect of continued economic turbulence as
national and global economic fortunes vary, requires that business
managers continue to look for opportunities to improve performance. This
will primarily be achieved by improving effectiveness in the areas of
winning/retaining customers, developing organizational competence and
financial control. It is vital not to lose sight of the fact that research
reveals that nothing fails like success. This is the paradox facing many
businesses particularly successful ones (Elkin 1998). Research into the
top performing businesses has identified a number of common success
factors. One success factor is leadership and experienced leadership that
involve a thorough understanding of the business and the market /segment
in which it operates. Another success factor is maintaining the small
company culture and this can be done by having good employee relationships
supported by good pay/incentives and close links and strong loyalty.
Moreover a success factor is quality focus
wherein the organization has a strong perception of quality and there is
close contact with customers, excellence of customer handling and a
thorough understanding of needs. A success factor is the business being
market driven wherein the business focus on is ingenuity and innovation in
product and service delivery; good market intelligence identifying what
customers want; and high investment in Research and Development type
activities and brand development. A success factor is the company having
profit focus wherein the company is more interested in profitability than
simple growth in sales volume or sales value, or market share and there
are good management systems to clearly identify true performance and
profitability. Lastly a success factor is a company having control of
borrowings and this can be done by avoidance of borrowing unless essential
for business development (Elkin 1998).
The degree to which business is
internationalized is a function of changes and developments in the world
economy. Central to these developments in recent years is the process of
globalization or increased global interdependence which many think
allegedly took place in the closing decades of the twentieth century.
Globalization has also thrown up new challenges for the world's
international economic institutions like the World Trade Organization (WTO),
the World Bank and the International Monetary Fund (IMF). The
establishment of the WTO in 1995 represented a more extensive and legally
grounded international trading system (Johnson & Turner 2003).The
pressures of globalization imply a need for an even greater shift of
regulation and powers to international institutions. Anti-globalization
protestors singled out international institutions as the servants of
international business and the cause of many of the world's ills.
Many of these ills are said to reside in
the developing world which, according to globalization critics, is
excluded from any benefits of greater international integration and, at
worst, exploited for the benefit of wealthier countries (Johnson & Turner
2003). Johnson & Turner (2003; p.3) stated that “For those who welcomed
the supremacy of markets and economic liberalism, globalization offered
the possibility of boundless growth and prosperity, not only for developed
countries but also for those developing countries brave enough to embrace
rather than resist globalization in all its manifestations.” For
others, globalization threatened rising inequality, economic anarchy and a
surrender of political control. In developed countries, job losses and the
unraveling of social progress were anticipated as a result of greater
competition from low-cost countries whereas developing countries feared
that their former colonial subjugation had been replaced by the dominance
of market forces and its agents in the form of multinational corporations
(MNCs) (Johnson & Turner 2003). The paper will discuss about Global
businesses and Logistics management or what is more popularly known as
Supply chain management. The paper will also discuss about the Development
and implementation of cost reduction strategies in logistics systems of
Global businesses. The information acquired will then be used to create a
conclusion.
Global Businesses
Global Businesses or International
business activity does not just happen. It is the result of conscious
decisions made by public and private businessmen in various countries
whose usual major interest is in profiting from activities in various
other countries. While virtually any firm can take part in international
activities in almost any country, it is typically true that certain basic
pressures and economic-political characteristics plus the desire for
profitable operations on the part of the firms have led to most
international business occurring under a rather narrow set of conditions.
It is usually true that if the environment of the firm does not follow
these conditions, relatively little international activity, particularly
that requiring foreign management, will take place. However, the mere
existence of these basic conditions does not automatically insure that
international business firms will enter the given country. The actual
decision of a firm to enter a nation will depend on the more detailed
structure of the environment which directly affects the firm (Farmer &
Richman 1966).
It is typically true that doing business
locally is much simpler than performing international business functions.
The local firm only has to worry about its own country's law, economics,
labor problems, financial constraints, and so on, while an international
firm faces all of these complexities at home and in the host country, and
in addition must struggle with complex international problems arising out
of the present nationalistic organization of the world. One would expect
that, unless compelling pressures arose at home, most firms would choose
to remain local in orientation, confining their international business
activities to import and export and possibly to the relatively simple
patterns such as licensing of patents and processes. One major reason for
considering international business activities might be that opportunities
at home are getting thin. Profit rates in the sector the firm is in may be
declining, even though the firm is still quite profitable. Incremental
investments are likely to yield lower returns than the company finds
acceptable (Farmer & Richman 1966).
Business activities are becoming
increasingly global as numerous firms expand their operations into
overseas markets. Many U.S. firms, for example, attempt to tap emerging
markets by pursuing business in China, India, Brazil, and Russia and other
Eastern European countries. MNCs, which operate in more than one country
at once, typically move operations to wherever they can find the least
expensive labor pool able to do the work well. Production jobs requiring
only basic or repetitive skills such as sewing or etching computer chips
are usually the first to be moved abroad. MNCs can pay these workers a
fraction of what they would have to pay in a domestic division, and often
work them longer and harder. Most U.S. multinational businesses keep the
majority of their upper-level management, marketing, finance, and human
resources divisions within the United States (Culpan 2002). They employ
some lower-level managers and a vast number of their production workers in
offices, factories, and warehouses in developing countries. Mergers and
acquisitions are also becoming more common than in the past.
With large mergers and the development of
new free markets around the world, major corporations now wield more
economic and political power than the governments under which they
operate. In response, public pressure has increased for businesses to take
on more social responsibility and operate according to higher levels of
ethics. Firms in developed nations now promote and are often required by
law to observe nondiscriminatory policies for the hiring, treatment, and
pay of all employees. Some companies are also now more aware of the
economic and social benefits of being active in local communities by
sponsoring events and encouraging employees to serve on civic committees.
Businesses will continue to adjust their operations according to the
competing goals of earning profits and responding to public pressures for
them to behave in ways that benefit society (Culpan 2002).
Logistics or Supply Chain Management
Currently, many companies are charging
their application development teams with refining existing business
processes through the use of specialized optimization tools. These tools
are based on sophisticated software optimization algorithms, which
traditionally required the skills and expertise of highly trained
mathematicians and operations research professionals. However, vendors,
such as supply chain management, are including these algorithms in their
products, thereby adapting them to their customers’ industries. In the
process, optimization techniques have become more accessible to developers
who may or may not have stellar programming or mathematical skills, but
who have keen business acumen and a drive to improve the company’s bottom
line (Hoctor & Thierauf 2003).
Most businesses do not manufacture the
goods that are sold through their outlets. Even though there are some
notable exceptions to this statement outside supply sources as the
producers of the product range are the mainstays of most retailers'
success. Access to a wide supply base that delivers products at an
acceptable level of quality, on time and in the right quantities goes a
long way towards achieving a retailer's product management objectives, and
stocking products from sources of supply which have particular
meaningfulness for the final consumer, in terms of brand recognition or
product expertise, can be a source of competitive advantage. If the
product range at one retailer is perceived by customers to be better than
that of a rival, it might be because a retail buyer has chosen the
products with more skill and understanding of customers' needs; but it
might also be the result of the buyer having better product ranges to
choose from because the suppliers were more proficient at their jobs too (Gillooley
& Varley 2001).
Supply chain management (SCM) is a modern
management concept; its goal is to improve the efficiency and
effectiveness of a company’s entire supply chain operations. The supply
chain runs from raw material suppliers at one end, right through all the
intermediate processing stages, to the customer at the other (Mcmenamin
1999). The focus of SCM, or logistics management as it is often called, is
on adding value and eliminating inefficiencies at each stage of a
company’s supply chain. This will include, for example, the optimization
of stock or inventory movements; planning for peak activity periods; and
the optimization of transport and distribution systems.
The process seeks to ensure that the right
materials, supplies and personnel are in the right place at the right
time. The emphasis of SCM on adding value at each intermediate stage, has
given rise to the term value chain. Supply chain or value chain management
emphasizes the strategic value-adding and financial role of a company’s
entire logistics management process (Mcmenamin 1999).Supply chain
management has provided retailers with the opportunity to obtain higher
levels of operational efficiency through the alignment of suppliers'
logistical systems with their own. Increased marketing and distribution
efficiency as a result of supply chain management has been the focus of
much of the strategic development of large retailers and their supply
partners in the last decade, but retailer-supplier partnering is not only
available to large organizations (Gillooley & Varley 2001).
Development of cost reduction strategies
in logistics systems
Finding ways to reduce costs sometimes may
be crucial to firms and is a necessity most of the time. The learning
phenomenon and the learning curve offer opportunities for cost reduction
programs in general and in the preproduction planning and the product
redesign areas in particular. In the preproduction planning stage, the
type of learning curve to be used subsequently may be affected by the
level and content of organizational planning. More precisely, the more
preplanning that is done in all aspects associated with the launching of a
new product, the lower the cost of the initial unit. With the cost of the
initial unit being the starting point of the learning phenomenon, the
lower it is through effective preproduction planning, the greater the
savings generated by the resulting learning curve (Holzer & Riahi-Belkaoui
1986). Various studies, including an empirical one, have pinpointed the
impact of preproduction planning on the time taken to produce the first
unit and the dynamic rate resulting during the course of production.
Authors have emphasized the importance of proper preproduction planning
undertaken at the initial stages to lessen the scope of improvement during
the course of production, which results in a flatter function, lying
considerably below one which depicts a smaller amount of preproduction
planning (Holzer & Riahi-Belkaoui 1986).
Global business wants to make sure that
they minimize cost with regards to their logistics systems. Global
business uses different strategies to reach this kind of desire that they
believe can give companies benefits. Different strategies are used that
includes highly organized inventory system, stricter security measures,
strong relationship with suppliers and better transport and distribution
systems. Global business makes use of a highly organized inventory system
to minimize cost in their logistic system. By engaging in an organized
inventory system companies won’t have to worry about buying supplies
constantly thus they can have more savings.
Another strategy to minimize cost in
logistics systems is stricter security measures. By conducting such
strategy supplies tend not to be wasted on useless things and be harmed by
security problems. Moreover a strategy to minimize cost in logistics
systems is strong relationship with suppliers. By having strong
relationship with suppliers companies can convince their suppliers to give
them discounts that can help in minimizing their cost. Lastly a strategy
to minimize cost in logistics systems is by having a better transport and
distribution systems. Transport and distribution system are used in the
delivery and transportation of supplies from one inventory facility to
another. The system should be well organized so that when problems arise
solutions are available and the company will not waste supplies.
Implementation of cost reduction
strategies
Cost reduction strategies would not be
successful without it being properly implemented. Implementation requires
patience by the person using it and it also requires confidence from the
company who wants to make it a part of their system. For global business
the supply chain managers are the ones in the forefront of implementing
the cost reduction strategies. They are the ones who make sure that the
different strategies are followed and are done well for it to give the
business benefits. In implementing the strategies they test some areas of
the supply chain to see if the strategy works or it can adjust to the
different situations. The different areas of the supply chain give the
managers ideas how the strategies affect performance and how it improves
the kind of service they offer. After testing and little by little
implementation of the strategy the supply chain managers look out for
possible flaws in the strategies for them to correct it. The supply chain
managers check the effects of the strategies used and see how it gave
benefits to the company or if the said strategy gave problems to the
company.
Conclusion
Central to different developments in
recent years is the process of globalization or increased global
interdependence which many think allegedly took place in the closing
decades of the twentieth century. Globalization has also thrown up new
challenges for the world's international economic institutions. The
pressures of globalization imply a need for an even greater shift of
regulation and powers to international institutions. While virtually any
firm can take part in international activities in almost any country, it
is typically true that certain basic pressures and economic-political
characteristics plus the desire for profitable operations on the part of
the firms have led to most international business occurring under a rather
narrow set of conditions.
Supply chain management has provided
retailers with the opportunity to obtain higher levels of operational
efficiency through the alignment of suppliers' logistical systems with
their own. Global business uses different strategies to reach this kind of
desire that they believe can give companies benefits. Different
strategies are used that includes highly organized inventory system,
stricter security measures, strong relationship with suppliers and better
transport and distribution systems. Cost reduction strategies would not be
successful without it being properly implemented. For global business the
supply chain managers are the ones in the forefront of implementing the
cost reduction strategies. They are the ones who make sure that the
different strategies are followed and are done well for it to give the
business benefits.
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