Coursework Header Sheet

158867-198

Course BUSI1357: Global Business Course School/Level BU/PG

Coursework Take-home Test Assessment Weight 100.00%
Tutor Y Kim Submission Deadline 08/12/2009

Coursework is receipted on the understanding that it is the student's own work and that it has not,
in whole or part, been presented elsewhere for assessment. Where material has been used from
other sources it has been properly acknowledged in accordance with the University's Regulations
regarding Cheating and Plagiarism.

000585366
Tutor's comments

Grade Awarded___________ For Office Use Only__________ Final Grade_________

Moderation required: yes/no Tutor______________________ Date _______________

Question Three
What steps can managers take to minimize the risks of global sourcing? Explain with proper
cases.
Tauhidul Islam, ID-000585366 1|Page
Answer:

Out sourcing:
Outsourcing is the contracting of work, previously performed in-house, to a third party.
Ideally, companies leverage outsourcing relationships to deliver a faster go-to-market
strategy and build a more flexible and scalable service delivery model. Whether pursuing
outsourcing, shared services or a hybrid strategy, organizations have three options when
choosing a location for business processes:
• Onshore sourcing—within the organization’s home country.
• Offshore sourcing—outside the home country.
• Near-shore sourcing—Close to the home country (in terms of physical distance and/or
time zone). Near-shore locations typically are countries that offer a lower-wage workforce
but have economic, political, language, or other links to the home country.
An outsourcing strategy is not static and has to continually respond to the changing
environment and align itself with the business strategy.

Some risks should be considered in generally and for each specific offshore sourcing effort in
a business. Should to consider this following list:

Risk of Time:
Elements such as input/ ingredient/equipment lead times, technology advance lead times,
enrolment, consumer/ consumer testing, capacity start-up, quality issues, and other factors
can all impact the time equation. Lead times for investments or developments are often
relatively extensive, and much can modify from project inception to market introduction.
Time considered as money in these situations.

Risk of Financial:
Monetary risks that come from basic operations, global sourcing carries other financial risks
that differ from domestic sourcing. Those include currency fluctuations, cancellation or delay
cost, and supplier solvency/continuity risks.
Risk of Supply/Operational:

Tauhidul Islam, ID-000585366 2|Page

Factors which impact supply/operational risk include the extent of exclusivity to company,
whether it is a sole source/single plant strategy, volume/supplier capacity commitments,
rights of first refusal for further capacity, inventory plans, logistics execution.
Risk of Regulatory:
Regulations can change with time and be harder to assemble than expected, leading to delays.
Consider both technical rules and regulations.
Risk of Demand/Market:
This risk is tightly aligned with the timing risk. Business Competitors do not stand still, nor
do customer or consumer tastes and utilization.
Risks of Brand/Environmental: Off shoring can lead to quality problems that if not well
managed that can smash up the company’s brands, in addition to extracting a huge financial
penalty.
Risk of Intellectual Property:
A growing concern elsewhere, as proprietary knowledge regarding invent, engineering,
materials and other elements can too easily walk out the door or companies may even find
their own offshore suppliers suddenly competing with them with knock-off goods.
Some Tools to Manage these for Buyers:
Risks Given the complexity, uncertainty, and cross functional interaction required in these
risk management scenarios, a structured thought process that manages the risk is essential.
Penetrate and recognize:
Think through the seven types of risk, their probability, impact, and potential
interdependence.
Quantify measure:
To the extent possible, quantify in probability and financial terms different risk scenarios.
The reality is that doing this well can easily kills some low cost country sourcing initiatives
with marginal returns.
Planning:
Out of the accepting steps comes the need to create mitigation and contingency plans for
technical, physical, financial, and communication implications of these risks.
Syndicate making:
Classic risk management theory includes syndication to multiple parties.
Portfolio Management: Risks are viewed in two ways- in individual projects and across
multiple projects a portfolio view.

Tauhidul Islam, ID-000585366 3|Page

And also some measurements are given following:
1. Planning Safety stock.
2. Comply, Mitigate Risk, and Thrive
3. Synchronize Supply and Demand
4. Demand planning and forecasting
5. Support Strategic Planning and Decision Making
6. Maximizing Global Potential
7. Increased domain expertise
A case for the emergence of Central and Eastern European (CEE) countries as a source
destination is a result of the changing dynamics of sourcing in Continental Europe to examine
their current outsourcing footprint in the context of a portfolio aligned to their business
imperatives.
Portfolio Management: Too few companies take this broader portfolio perspective Project
risk falls into three stages: project can-
However, portfolio risk requires four data views:
Commitments of Aggregate: Commitments of company or business unit across all its
projects
Competing Commitments: Commitments of two projects or more with parallel
commitments that could cancel each other out or delay each other
Sequential Commitments: Commitments for next generation project that will make the
current commitments obsolete before they are paid out
Aggregation of Supplier Project: No of projects does a single supplier have that do to the
supplier and risk profile in multiple failures and successes.

Risks are usually inherent in business, and especially so in global supply chains. By wholly
analyzing all the major risk categories for global sourcing initiatives, taking mitigating
actions, and viewing risk across the entire portfolio of projects and products, companies can
greatly reduce their exposure.

Reference:

Tauhidul Islam, ID-000585366 4|Page

http://www.pwc.com/en_US/us/outsourcing-shared-services-
centers/assets/integrated_sourcing_success.pdf
http://www.sophlogic.com/pdf/sap_logistics/Gaining_an_Edge_with_Global_Sourcing_.
pdf
http://www.gscouncil.org/
(Access date 07-12-09)

Question Four

What makes international business differs from domestic business? You

should answer with each opportunity and threat with case
Tauhidul Islam, ID-000585366 5|Page
Answer:

Domestic Business can be defined as a business whose activities are carried out within the
borders of its geographical position. Domestic company is main aim to improve the sales on
domestically and that company not philosophy about the international if that company to
expand their business to improve only in domestically within own country.

International business may be defined simply as business transactions and dealing that take
place across national borders. This broad definition includes the very small company that
exports (or imports) a small quantity to only one country, as well as the very large global
firms and company with integrated operations and strategic alliances around the world.

Domestic company of a country is one that confines its activities to the local marketplace, be
it city, state, or the country it is in. It deals generally, with one currency, local traditions and
cultures, business laws of commerce, taxes and products and services of a local nature and
policies.
On the other hand, the international company deals with businesses and governments in one
or more foreign countries and is subject to treaties, tariffs. Currency rates, political systems,
cultural differences, taxes, fees, and penalties of each country it is doing business in. It may
also be conducting business and dealing in its home country, but the emphasis and stress is on
trading in the international marketplaces.
International business provides the following benefits, scopes and opportunities to the
company but where domestic business fields are confined.

Differences in the various fields:

Lots of Scope: Scope of international business is quite wide and board which includes not
only merchandise exports but also trade and deal in services, licensing, franchising as well as
foreign investments.

Wide Benefits: International business benefits both the nations and other firms.

Different nations gain by way of earning foreign exchange, more efficient use of domestic
resources, greater prospects of growth and formation of employment opportunities.

Influence in Market Fluctuations: Different Firms and cpmpanies had to face this situation
which results in low profits and in some cases losses either.

Modes of entry in business: A firm or company desirous of inflowing into international

business has several options available to it.
Tauhidul Islam, ID-000585366 6|Page
Sharing of Technology and skill : International business and dealing provides latest
technology which is innovated in various firms across the border this way improve the mode
and quality of the production.

In Political relations: International business will obviously improve and can develop the
political relations among the nations which give rise to Cross-national cooperation and
agreements.

In a case study of McDonald’s doing business from the field of domestic to international
business sphere lots of opportunities and threats have to face this company.

McDonald's Corporate Overview & History in a view

With more over of 31,000 restaurants over 119 countries, the McDonald's Corporation is the
largest chain of fast-food restaurants in the world wide.

Opportunities of McDonald’s

McDonald’s still has lots of plans for more international expansion. McDonald’s still wants
to penetrate in many countries especially in Europe, Asia and Latin America.

• Joint ventures with retailers and sellers (e.g. supermarkets).

• Consolidation and utilization of retailers likely, so better locations for franchisees.

• Use of CRM, database advertising to more accurately market to its consumer target
groups.

• The new formats Mc-Cafe, having Wifi internet tecnology links should help in
attracting segments. Also installing children’s play-parks and its spotlight on
educating consumers about health, fitness etc.

• Continued focus on company social liability, reducing the impact on the environment
and community linkages.

• International extension into promising markets of China and India

Threats:

McDonald’s is uncovered to changes and improve in the global economy. The Fast food
industries are becoming increasingly competitive sectors.
• Social changes - Government, consumer groups encouraging balanced meals, 5 a day
fruit and vegetables.
• Focus by consumers on nourishment and healthier lifestyles.
• Antagonistic pressures on the high street as new entrants offering value and greater
product ranges and healthier lifestyles products. E.g. subway, supermarkets, M&S.

Tauhidul Islam, ID-000585366 7|Page

 • Dejection or down turn in economy may affect the retailer sales, as household budgets
tighten reducing spend and number of visitors.
• Fast food marketplace of the American has become increasingly competitive as rivals
such as Burger King, Domino’s, Wendy's and Taco Bell fight to maintain their market
share.

Conclusion:

One of the major challenges and obstacles faced by strategic planners in multinational
organizations is to identify and assess different types of risks involved in the rapidly growing
and changing global business markets. Management of risks embedded in the global business
environment is an essential part of strategic planning and management process and
development. Failure to exactly identify and measure risks may result in market blunders,
policy disasters, and or organizational crisis. It is necessary for achievement to identify,
assess and adapt in their strategies to the business environment.

References:
http://www.businessteacher.org.uk/business-resources/swot-analysis-database/mcdonalds-
swot-analysis/
http://new.stjohns.edu/media/3/56b4dec8650c44b7adcc81d25da93148.pdf
http://www.iamebt.com/yahoo_site_admin/assets/docs/BT_Case_Study_1.46232302.pdf

Tauhidul Islam, ID-000585366 8|Page

http://www.akotler.com/images/mcdonalds_report.pdf
http://www.mindbranch.com/McDonald-Corporation-SWOT-R313-52690/
http://www.shop.potatopro.com/datamonitor-mcdonalds-corporation-swot-analysis-p-
335.html
http://wiki.answers.com/Q/How_does_domestic_business_differ_from_international_busines
s
http://www.referenceforbusiness.com/management/Gr-Int/International-Business.html
(Access date 08-12-09)

Tauhidul Islam, ID-000585366 9|Page