International Logistics, Part 1: Supply Chain Management

Supply chain management encompasses the planning and mangement of all activities involved in sourcing and procurement, conversion, and logistics. It also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third party serivice providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies.

Advances in information technology have been crucial to progress in supply chain management. Consider the example of Gestamp (Spain’s leading supplier of metal components for car manufacturers), which used electronic data interchange technology to many reports increased manufacturing productivity, reduced investment needs, increased efficiency of the billing process, and led to a lower rate of logistic errors across the supply process after implementing a supply chain system. Globalization has opened up supplier’s ability to provide satisfying goods and services will play the most critical role in securing long-term contracts. In addition, the physical delivery of goods often can be old-fashioned and slow. Nevertheless, the use of such strategic tools will be crucial for international managers to develop and maintain key competitive advantages. An overview of the international supply chain is shown below:

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The TPP: International Law and Geopolitics

After seven years of negotiations, the Trans-Pacific Partnership (or TPP) has finally been agreed upon by the twelve signatories. The parties involved are the United States, Canada, Mexico, Singapore, Brunei, New Zealand, Chile, Australia, Peru, Vietnam, Malaysia, and Japan. There has been significant controversy regarding the TPP from within the United States, with naysayers arguing that the benefits accruing from the TPP are minimal, and that the US already has bilateral trade agreements with most (if not all) the participating countries, making the bulky agreement redundant. Yet there do exist considerable advantages for the US from the conclusion of the TPP negotiations. To name but a few, the TPP has ensured the updating of the frameworks applied to multilateral trade agreements. It also allows for the harmonization and regulation of standards across a global and dispersed supply chain.

A significant worry has been the investor-state dispute settlement mechanism (ISDS), key buzzwords thrown about by the American and international media. The inclusion of the ISDS in the TPP has been regarded by some, most notably Elizabeth Warren, senator from Massachusetts as a threat to regulatory sovereignty. It allows for corporations to sue governments for changes in the regulatory environment that have adverse impacts upon the former. The legal provision, however, does not allow the reverse, i.e. governments cannot take legal action against firms. Nevertheless, the inclusion of the ISDS is a major development for international law precedent, which has typically been restricted to matters of interstate disputation.

The glaring exclusion of China from the agreement has been highly debated in the intellectual circles of Washington. Some have argued that the nation chose to stay aloof – that the Chinese economy has outgrown the “meager” benefits that could accrue to it from the TPP that pale in comparison to the restrictions and conditions that China would have to meet if it joined. Optimists hope that the coalition of participating countries will be able to contain, offset and challenge China’s rapid relative economic ascent. They suggest that the success of the TPP will lead to a clamor by countries like China and India to be included, the conditions of which would be set by the triumphant and advantaged existing members. Whatever the future of China in relation to the TPP may be, its current exclusion clearly limits its geopolitical reach.

 

Michael R. Czinkota (czinkotm@georgetown.edu) teaches international business and marketing at Georgetown University’s McDonough School of Business. His key books is International Marketing, 10th edition.

Birmingham Insights on Asia – (4) International Strategic Alliance Performance (High Technology Industry in Taiwan)

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This comment is based on Jo-Chun Chieh’s Dissertation written under the supervision of Prof. Michael Czinkota at the University of Birmingham, UK.

3, Organizational culture differences have more influence than national culture differences on International Strategic Alliance (ISA) performance, from the Taiwanese managers’ perspective. Two of the organizational cultural dimensions, professional and pragmatic orientation, ranked as the first two elements of importance when cooperating with a foreign partner, while two of the national cultural dimensions, uncertainty avoidance, long-term orientation, was ranked subsequently. Pothukuchi et al. (2002) addressed a similar concept with differences in organizational culture, compared to differences in national culture, considerably facilitating conflict and impeding cooperation between alliance partners.

4, The study justifies  that ISA practice indeed significantly interferes with the relationship between culture differences and iSA performance. John (1984) indicates that long and sticky partnership between cooperative enterprises reduces that potential for opportunistic behavior while the dissolution of a partnership often leads to poor decision-marketing, interaction and management of inter-organizational relationships. Complementary resources, absorptive capacity, commitment, and trust are important willingness to work together (Day & Klein, 1987). This partnership can evolve positive or negative consequences, depending on how Taiwanese managers implement their managerial practices with foreign partners.

 

Related Article: Birmingham Insights on Asia – (3) International Strategic Alliance Performance (High Technology Industry in Taiwan)

Birmingham Insights on Asia – (3) International Strategic Alliance Performance (High Technology Industry in Taiwan)

birmingham-clipart-256

This comment is based on Jo-Chun Chieh’s Dissertation written under the supervision of Prof. Michael Czinkota at the University of Birmingham, UK.

The study investigated the perspective of Taiwanese managers, thereby examining the impact of national and organizational culture differences and International Strategic Alliance (ISA) practices on ISA performance. Four findings can be concluded as follows.

1, National culture differences partly influence ISA performance, especially in the uncertainty avoidance and long-term orientation dimensions. This finding corresponds to one of the cultural functions proposed by Schneider (1989). He states that culture serves two functions, to solve external adaptation and internal integration problems. Uncertainty avoidance and long-term orientation especially impact on external adaptation. In other words, Taiwanese managers in the high-technology industry emphasize and are good t coping with opportunities and threats from the external environment, as well as being good at developing ISA strategies with foreign alliance partners. on the other hand, power distance, individualism and masculinity influence employee relationships within an organization.

2, Organizational culture differences also partly influence ISA performance, especially in professional and pragmatic (market -oriented) dimensions. Kasper (2001) associates corporate culture and market orientation, claiming that “market oriented organizations are open, employee-oriented, results-oriented, pragmatic, professional…”. This finding reflects that Taiwanese managers in the high-technology industry emphasize the importance of building objectives and obtaining new knowledge when cooperating with ISA foreign partners. Kasper (2001) also associates innovation, stating that customer contacts and customer participation in the R&D procedure are the basis of innovation. This notion implies that Taiwanese managers have high consciousness about global competition and pay attention on balancing innovation and market orientation.

Stay tuned for two more conclusions on our next Birmingham Insights on Asia.

WASHINGTON INSTITUTIONS FOR INTERNATIONAL TRADE

Screen Shot 2015-07-09 at 1.01.23 PMTo paraphrase the Philosopher Ludwig von Wittgenstein: “If you are not part of the discussion you are like a boxer who never goes into the ring.” It is important to be in the ring, and this course will permit students to be situated in the crucial nexus of international marketing and government activities, and allow them an opportunity to become part of the discussion.

We hear a lot about the growth of world trade, globalization, and imbalanced distribution of incomes. Yet, how does one understand all the issues, thoughts and arguments involved? Who decides what information and approaches to use and how to use them? How does one develop a time frame and context for addressing entrenched and novel issues? Misunderstandings can be rife. Only a few decades ago, Bill Gates of Microsoft, on a visit to Georgetown University, pronounced that there was no need for his company to have a Washington office. Oh ye of little faith – today the firm has ‘seen the light’ and supports a major operation in Washington D.C.

In order to learn from the past, we must understand what was done before us, and appreciating the context in which changes occur. Over the past half century, international business and trade have mushroomed in importance, and, in the last two decades, have reached and passed a tipping point. Social and economic shifts have taken us from the backroom discussions of experts to public disputes around the world. From ignorance, we have entered into the stage of too much information. A new sense of transparency and accountability offers new directions to businesses and their executives. The emergence of a public moral sense and scrutiny about international injustices encourages companies and governments to reduce corruption and abandon unsavory practices.

The role of governments has changed drastically, first shrinking in the 1980s and 1990s, but now coming back with a vengeance, dictating the direction and strength of international business activities. After decades of aiming for more open markets, even the liberal trading nations and the trade-supporting politicians within them are developing a tendency to restrict imports and encourage exports. In blatant disregard that someone’s export has to be someone else’s import, governments try to protect home industries and keep their own economies stable and revitalized. Yet, in spite of many efforts to that effect, global imbalances are persistent and distortive.

Over the long haul, we can distinguish patterns of ebb and flow in the international business and trade arena. Publicly, we are often told one thing – such as the need for the free flow of international trade – but when looking at actual decision patterns, actions might differ from pronouncement. Just like Saint Augustin who prayed in about 400 A.D., “Lord, make me chaste, but not yet,” policymakers and government executives often develop strong, if not nontransparent measures to delay or even defeat the easing of international trade flows. There are also times when change cannot happen quickly enough, when everyone aims to streamline and fast-track legislation and international accords by limiting the influence of deliberate legislative votes.

There are the subtle and not so subtle efforts at sanctions and disruptions of trade flows, yet they are often met by opposing interest levels, which sometimes negate such restrictions. Repeatedly we see one side, which is losing contracts, blaming it all on the corruption and nepotism on part of the winners. Particularly in the international arena, cultural differences can lead to very different ways of doing business. Just think of countries where competitiveness plays a key role, and compare them to nations where closeness to and support of family members is crucial for business. Business decisions and partners are likely to be evaluated in a very different fashion. In such instances, administrative actions and laws can be seen as rigorous structural supports for economic development, or as substantial barriers to growth.

The use and meaning of terminology also has its (often temporary) major effects. For example, for decades, the use of the term “Most Favored Nation (MFN)” status in international trade negotiations has led to demonstrations and even street battles. Now, the problem has gone away, since governments have changed the terminology and only speak of “Normal Trade Relations” (NTR), a goal that seems to be acceptable to all. Definitions which shape our understanding of core issues such as “fairness”, “market gaps”, “dumping” and “natural” can be changed or amended, and thus present us with new realities. Nowadays, one discusses and often re-evaluates the meaning and adjustment of key business pillars such as risk, competition, profit, and ownership, which perhaps gradually prepares us for a new environment. Many of today’s business executives discover that their activities are but one integral component of society. Politics, security, and religion are only some of the other dimensions that historically, and maybe again in the future, are held in possibly higher esteem than economics and business by society at large. Those who argue based on business principles alone may increasingly find themselves on the losing side.

We all need to work on including in our considerations the restauration of the future. Just consider how different things will be in a mere 25 or 50 years—keeping in mind that the ballpoint pen only came to the U.S. market in 1945, the computer game Pong only entered the market in 1972, and electronic or email on personal computers only advanced in the late 1980s. Will we look as retro to our descendants as our ancestors appear to us today (if we bother to look)? Yet, at the same time we are only a brief constant in a world of change.

We complain about the new phenomenon of pirates in Somalia—though such a profession was very popular in the Caribbean or during Roman times in Sicily (which is where Pompeius earned his early reputation when he brought about their demise). We highlight the disruptions from terrorism but neglect that already the crusaders had been writing home about their fear of terror. We debate new approaches to teaching and communication, but don’t stop to think what effect Gutenberg’s printing press, wireless telegraphy, or the introduction of radio had on monks, business and society. We deplore the differentiation of groups based on religion, but conveniently forget the impact of Torquemada and the inquisition, of Luther’s theses on the church doors of Wittenberg, of the persecution of Jews or Mormons.

By enhancing our understanding of what Washington-based institutions dealing with trade do to maintain influence and achieve growth, we will learn how to cope with government in our business activities down the road. We will also obtain input regarding impending changes, both highly and lowly visible. In this course we will be cognizant of one of Secretary Rumsfeld’s key policy pronouncements: “There are known knowns, which are things we know that we know. There are known unknowns; that is to say, there are things that we now know we don’t know. But there are also unknown unknowns; these are things we do not know we don’t know.” It is expected that we develop a better understanding of the known unknowns, and perhaps also enter the business and policy chambers of unknown unknowns.