As a new high-tech manufacturing firm, Bit Technology Inc., when it decides to locate the facilities internationally, should consider the locational, systemic, operational, managerial as well as organizational (basic, functional, product based, international, matrix) aspects. As far as locational and operational factors are concerned, target market and production area might become significant factors in relation to the proximity either to the potential or current customers (i.e. close to prospective customers and qualified employees) or to production market (i.e. target market in the US and production market in China). Therefore, the operations manager should compare which market becomes more cost-effective (i.e. automation vs. customization) and time-efficient to be chosen as location. Moreover, the external and internal dynamics of the selected market or location should be scrutinized thoroughly in relation to, for instance, the stability of political conditions and economic indicators as well as social structure and technological capacities (i.e. the attractiveness of the climate and culture). Again, managerial and organizational aspects are related to the managerial culture, and the communication with the local bureaucracy. For instance, the factors that affect the technical feasibility of a high-tech manufacturing firm include building function, equipment, energy costs, maintenance cost, the cost of management and design of the system, human resources costs etc. As a result, the main factors include costs, proximity to center (i.e. transportation, target market, production facilities) and zoning. Bit Technology should also target cost effective strategies of Total Quality Management with well-defined objective, alternative courses of action, completion of the objective despite external challenges, implementation of well-designed modeling and linear mathematical functions to create the optimal ingredient mix of product mix of the firm (Johnson & Turner, 2003; Mourdoukoutas, 1999).
HOW MIGHT THE ORGANIZATION'S IDENTITY INFLUENCE ITS STRUCTURE?
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Considering a variety of organizational structures types, Bit Technology should first identify its organizational identity and structural needs. Bit Technology has a mixed structure with its transnational operations activated by subsidiaries as well as on-site manufacturing arrangements. Since the firm is operating in high-tech manufacturing company; beside headquarters, the firm might be better to subdivide its operations into several locations. The reason of this decision is to benefit from the human resources at the local market and from the workforce diversity as well as from distributing risk through various locations. More importantly, Bit Technology aims to generate employment opportunities at the local market as a challenge to global crisis; and to become a global company that operates internationally. Therefore, since the organizational identity of the firm is to become a global company with its global citizens. As such, despite the decentralized structure, the goals and objectives of Bit Technology will be adopted at every sphere of operations and management. Moreover, not only cultural and corporate values, but also collective resources will be integrated into the line of the firm, such as equipment, human resources, management and supply-chain systems. As a result both formalization and specialization strategies will be adopted. One the one hand, through formalization, Bit Technology will embrace global organizational structures through common strategies and operations with the identical future targets. One the other hand, through specialization, the firm will incorporate local perspective (Johnson & Turner, 2003; Mourdoukoutas, 1999).
EXPLAIN THE LEGAL FACTORS THAT MUST BE CONSIDERED WHEN A COMPANY DECIDES TO LOCATE ITS OPERATIONS IN A FOREIGN COUNTRY.
The legal factors include an in-depth analysis on the attractiveness of the environment through which foreign capital can be invested in a given environment. For instance, Bit Technology might compare to what extent foreign capital or investment sources are treated as the same with domestic investors. Moreover, taxation policies, employment legislation, and FDI regulations constitute main legal factors. Relationally, the foreign country's legal system may not demonstrate a strong motivation toward the removals of restrictions on foreign investments. Such restrictions might include insurance expenses, rigid investment regulations, complexities of regulations and policies. On the contrary, some of legal factors might aim to maximize foreign investment through government initiatives, investment supports, multilateral and bilateral investments, and regional integration. Moreover, not only local legal environment but also international law, labor laws (i.e. ILO regulations), and the regulations particular to a given business or industry (Kogut, 1998) need to be reviewed. Last but not least, the managerial and bureaucratic aspects might also be included in relation to the business culture including the concepts of centralization, formalization, documentation, written directives and way of communication (Hodgetts, Luthans, & Doh, 2006).
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Johnson, D. & Turner, C. (2003). International business: Themes and issues in the modern global economy. London: Routledge.
Hodgetts, R. M.; Luthans, F.; & Doh, J.P. (2006). International management: Culture, strategy, and behavior (6th Ed.). Boston: McGraw-Hill/Irwin.
Kogut, B. (1998). "International business: The new bottom line". Foreign Policy. 152-162.
Mourdoukoutas, P. (1999). The global corporation: The decolonization of international business. Westport, CT: Quorum Books.
The environmental scanning analysis of the company includes an external environmental examination in relation to its opportunities and threats in order to understand how the company will design its international strategy with its expansionary goals in relation to its competencies.
Considering the opportunities, since the production sector has always been significant for not only for the developed countries bur also developing and emerging markets, the steady significance of the industry might be a considerable opportunity to be taken into attention. More importantly, the rapidly changing technology and innovation in the sector might be another opportunity of the company to reach know-how from a multi-centered and diversified workforce.
Considering possible threats and challenges, recently, the global economic and financial crises become significant in the creation and implementation of the strategic factors. As such, following the deep recession in 2008 and the recent arguments on the possibility of the second base of the crisis, the severe competitive environment might damage the advantages of the firm in operating countries that generate low cost like China and India (Som & Poutrel, 2006). Accordingly, high risk in both developed countries where headquarters are located and in developing countries where factories will be located might create further threats. Further possible threats might be included the lack of government support and import substitution and protectionist policies in certain countries, the fluctuating energy costs as well as political instability and lack of intellectual property rights in the developing countries.
INTERNAL RESOURCE ANALYSIS
The internal resources analysis requires an in-depth understanding of the internal organizational position of the company in relation to its strengths and weakness in order to enhance its strengths against the challenges of its weaknesses.
As far as the strengths as concerned, the company's efforts for constant development and innovation might constitute both its strengths and competitive advantages. Also, the company's aim to provide strong presences in developing countries might result in cost efficient operations. Moreover, the company's possible involvement in dynamic and emerging markets might attach and integrate active local markets with the global forces in terms of the significance of vertical and horizontal integrations. Relationally, the company aims to adopt into dynamics, tastes and demands of local markets in terms of the familiarity of local market demands and adopting this strength in a business strategy. The plan of central location of factories will create a further competitive advantage in terms of its market expansion. Following, the young population in these locations outside the US as a potential market formation as well as the reliable organizational structure and corporate reputation become further strengths of the company. Similarly, high brand loyalty, consumer commitment and strong supply-chain system constitute further competencies that represent a high importance in terms of very internal organizational strength, especially during the crises (Johnson & Turner, 2003).
As far as the weaknesses are concerned, the company has been in a position to overcome with a temporary decrease in research and development investment as a result of the crisis. The slight decrease in financial position after the crisis might be another weakness (around industry average). Since a high employee turnover might be associated with less employee commitment and loyalty to the company, the high employee turnover is another weakness of the company that is around 28% as opposed to the industry average of 25%. As a result of the recession, the company might confront with the threats of downsizing, if the recession endures for a long period of time.
SHORT-TERM AND LONG-TERM STRATEGIC GOALS
The strategic management plan aims to focus on improving the competitive position of the company. Providing a comparison between external and internal factors, these analyses lead the company to competitive strategy. The company might position itself against all its competitors for its competitive advantage. During the current crisis, for instance, the company might obtain riskless technology investments with a limited access to new markets with a delimited possibility to reduce financial or political risks. Moreover, during today's challenges of global economic downturn, creating a competitive advantage seems to be possible through differentiation with less risky actions. As such, as a reference to Porter's strategies, cost leadership and differentiation might become more feasible for the company through perceived quality on performance, quality, features and reliability as well as with low cost alternatives (Porter, 1990).
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In light of this overview, during today's risky external environment, the objectives proposed by the Precision Part's leaders might be classified into short, medium and long term goals. The 4-year period might be divided into three time spheres: short term time frame of 1-year; medium term time frame of 2,5 year; and long term time frame of 4-year.
Within a year, as part of the overall strategic plan of the company, a riskless stance will be acquired in order to overcome the impacts of the global crisis, at least until it is overtaken. As such, the short-term goals include the increase in the number of employees from 5,000 to 6,000; the completion of feasibility analysis (i.e. market screening, market research, financial analysis, site research; selection of the market etc.) (Gaither & Frazier, 2002) of the new investments outside the US; the decrease in the employee turnover to 25% that is the industry average.
Within the medium time frame, the goals include the launches of the investment outside the US in various markets such as Turkey, Brasil, China, Hungary, Poland, India and Thailand. At the end of this time frame, new facilities and buildings will constitute 45% of the total production facilities outside the US. Following these new investment, the number of employees will be around 8,000 with a market share on small SUVs as 7.5% as well as with the profit margin of 8%. Therefore, the strategic plan aims to increase in current stock prices to around $20 with the assumption of the easiness of today's global crisis. The employee turnover will be aimed to maintain at the same level that is the industry average of 25%. The charity will be increased to 3.5 %.
The long term goals include the increase in the number of employees to 10,000 employees; the expansion of international facilities and buildings outside the US as the 80% of the total production facilities; the increase of the world market share on small SUVs to 9%; the increase in current stock price to $22; the increase in profit margin to 13%; the decrease in employee turnover to 17%; the increase in current charity to 5%.
Following the identification of the above goals, the assessment of location alternatives and national business environment becomes significant in terms of the general indicators of the country at a macro level. However, what is more important is to the clarification of objectives that match with corporate strategies as well as the comparison between revenues and costs as investment leverage (Hodgetts et al., 2006). In other words, the realistic goals should be placed in order to attain the components of the strategic plan thoroughly. For instance, the rise of the profit margin from 6%, as the industry average too, to 13% should be revisited with the reason that the increase of 7 percent, the double of the industry average may not be realized in implementation. The sustainability of the developing countries might be considered in relation to the low cost of labor in production sector (Kim, 2000). The rapid expansionist policies might become in trouble if the targets are sky rocketed. Moreover, the stock prices might be low due to the global crisis; hence, it might be understandable to target it as doubled. However, the employee turnover, as the major weakness of the company, requires a profound human resources strategy to be decreased to 17% that is 8% lower than the industry average.
As a result, the company should create reasonable predictions on the market potential, political and economic risks, investment climate, expected growth, scope of competition and penetration, scientific and technological factors such as major developments and trends, cultural diversity, product match, market size, management and administrative factors such as report procedure, safety and security profile, available financial resources, government's attitudes, potential demand for new investment, capacity to supply, communication and transportation infrastructure, demographic profile, etc. More importantly, the management team might conduct personal visits to reach the final decision on the location with a reference to direct experience of the managers on the location (Gaither & Frazier, 2002; Johansson, 2005). Last but not least, a common analysis on risk governance might be another strategy factor that includes not only the corporate representatives but also governments, branches, customers, manufacturers, suppliers, engineers, social partners etc.