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SUMMARY â– A global production strategy involves the storage and movement of goods
from the source of raw materials to the production of components, to the assembly of goods, to the distribution to consumers.
â– The international firm differs from the domestic one in that goods in intermediate or final form may move from country to country rather than remain in one particular country.
■International sourcing of goods—primarily in the area of purchasing—differs from domestic sourcing in terms of language, distance, currency, wars and insurrections, strikes, political problems, and tariffs.
â– Foreign sourcing is often undertaken to obtain lower costs and high quality. However, U.S. firms are beginning to compete with foreign firms in both dimensions.
â– Firms must be involved in procedural as well as strategic decisions in order to import successfully. Familiarity with customs procedures is necessary and firms often require the help of specialists.
â– Foreign trade zones (FTZs), long popular outside of the United States, are being used increasingly as a place to import and assemble goods for domestic consumption as well as final export.
â– Manufacturing strategies include servicing the world from one production facility or from many by using multiple plants that specialize in products or processes or by interchanging components for eventual assembly.
â– Many firms are using offshore manufacturing centers to take advantage of cheap labor and materials. Then the finished goods are sold in the local market, shipped to the United States, or sold in third-country markets.
â– The Japanese have perfected the concept of just-in-time (JIT) inventory management, which means that inventory shipments are planned to coincide as closely as possible with their use. This cuts down the size of inventories held and therefore the carrying costs. JIT is being used increasingly by U.S. firms and is having a dramatic impact on sourcing decisions for raw materials and components in the manufacturing process.
â– Firms new to exporting (and also some experienced exporters) often make lots of mistakes. One way to avoid making those mistakes is to develop a comprehensive export strategy that includes an analysis of the firm’s resources as well as market opportunities.
â– Exporters may deal directly with agents or distributors in a foreign country or indirectly by using export management companies or other types of trading companies.
â– Trading companies, such as the Japanese sogo shosha, can perform many of the functions that manufacturers lack the expertise to do. In addition, exporters can use the services of other specialists, such as freight forwarders, to facilitate exports.
â– Governments provide a variety of services for exporters. The U.S. government operates through the International Trade Administration (ITA) of the U.S. Department of Commerce.