On the globalization of operations and supply chain strategies: A conceptual framework and its application

Abstract

In a global market, companies do not compete solely as individuals but as part of an entire supply chain, and strategic managers must consider the whole supply chain and fully understand global forces and relevant trends when making operational decisions. We present a conceptual framework through which managers can evaluate the many forces affecting global operating strategies. This framework is composed of four types of forces: global market forces, technology forces, global cost forces, and political or macroeconomical forces. Global market forces, in general, motivate a company to seek a larger market for its goods or services. Technological forces generally ease barriers to globalization or require global operations strategies in order to access cutting edge technology. Global cost forces seek reduced or shared costs through high quality, lower total cost global production sites. Finally, political or macroeconomical forces cause a firm to seek competitive advantages through the careful utilization of exchange rates, regional trade agreements, or nontariff barriers. By using the global forces framework presented here, managers can clearly analyze the various important factors that shape global operations decisions and understand the implications of recent global events and trends on their supply chain strategies. We clearly illustrate the application of our framework in shaping supply chain strategy via a real case study from our consulting practice.