Effects of Globalisation on Operations Management
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Keywords: operations management and globalization, om globalisation
Global operation management in financial institution has seen unpredictable activities in recent years due to global economic downturn and competition for market share. The key element which underpin global environment will be internationalisation and globalisation. Global operation refers to dynamics which affect the world economy and successful integration of global dispersed function or activities. According to Yip(1995) " global operation can be refer to, among others global sourcing, to have manufacturing or service facilities world wide or to supply drivers of globalisation including global market, each of which increase competitiveness through increase sales by expanding into new market". On the other hand, Slack, et al (2001) argues that globalization is the opportunities for operation managers to develop both supplier and customer relation in different part of the world.
Recent tactics in global competition among organisations require extension of trade internationally by the pattern of foreign direct investment which has resulted emerging newly industrialising nation. In a highly competitive global environment, companies need to set a well define operation objectives and plans to successfully compete in both domestic and global market.
This assignment critically analyses the key global operation management techniques adopted by Barclays bank for its innovative process to distinguish itself as a unique global asset management firm offering tremendous service to institution and individuals. Barclay's global investors are one of the worlds largest asset managers and the world largest providers of structure investment strategies. The company operation strategy should reflect its position in global, economic, political and social environment. (See Appendix one)
According to this assignment there are 8 major key factors for global operation management to be considered below;
- Global Total Quality Management in service industries (TQM gurus)
- Global Inventory Planning and Control Management
- Strategies for Global Change Management
- Global Operation Design and Process
- Global Operations Planning, Scheduling
- Global Distributions and Supply Chain Management
- Strategy for Global Human Resources.
- Global strategy for operation Management
Global strategies for operation management
Operation management is a systematic approach to address all the issues pertaining to the transformation process that convert some inputs into output that are useful and could fetch revenue for the organisation. According to Slack, et al (2001) global operation management is the term used for the activities, decision and responsibilities of operation managers who manage the production and delivered of produce and service. The operation strategy should be part of the organisation total strategy to achieve global dominance. Financial service product faces unique challenges which need customers present during the production and service delivery. This requires Barclays to improve its operation process that will add value to achieve competitive advantage.
Strategy for Managing Global Operation
Effective operation through efficient use of resources world wide drive towards a globalize economic system. Global market imposes new standards on quality and time requires operation managers to think domestic market and penetrate the global market. To achieve its objectives towards globalization, there should be improve communication technologies and open financial system. The company strategy should achieve adequate utilisation of resource and adequate customer service.
This strategy has prove success by positioning itself as customer-oriented organisation and empowering customers world wide to make different choices of innovative financial product to meet their needs.
However, global strategy has the following draw backs;
- To manage multinational operation faces challenges of language and customs difference, different management style and different laws and regulation.
- The current economic downturn has affected consumer spending and confidence in the banking industries.
- Complex global operation by multinational faces ethical and environmental challenges.
Operation Strategy contents
In global operation content, the decision and action should be specific to achieve the objective. The content reflects the four perspectives;
- Operation strategy as top- down perspective
- Operation strategy as bottom-up perspective
- The market requirement perspective
- The operation resources perspective
Global total quality management in financial service industries
Total quality management
The business leaders face immense pressure in today's turbulent competitive environment that's move forward by globalisation, macro-environment factors and advanced technological growth of internet. The strong market forces within this competitive environment have developed global customers who are more aware of changes in the global market.
Total quality management is an important tool in any business to surmount future challenges within the turbulent financial service environment. TQM provides the financial business leaders with a formalised process in setting clear and achievable corporate objectives and at the same time guides the management in planning strategies to maximise resources and to achieve win-win partnership.
Total quality management (TQM) is an organization-wide process that revolves around the Total Quality Triad. It assumes that there is never a state of perfection (Kelada, 1996).
Hence, in order to that plans are developed in an integrated manner, three important total quality principles must be adhered to - participation and commitment by stakeholders and senior management team, employee involvement and continuous improvements to meet customer satisfaction.
Source: Bradford University
Total quality management in global financial services environment
In the global financial services environment, Total Quality Management (TQM) provides the overall concept that fosters continuous improvement in an organization. The implementation of a Quality Management System (QMS) does not equate to self-generated results.
Continuous improvement of the QMS is of paramount importance for meeting and satisfying clients' ever changing needs and requirements. The purpose of the project is to identify quality improvement through Kaizen program, performance measurements; benchmarking with appropriate key performance indicators; and essentially designing a balanced scorecard to achieve continual improvement.
Practices by non-financial organisation
Good practices implemented by construction organizations in strategic partnerships alliances and knowledge management was identified and developed recommendations for improvements to gain competitive advantage in the construction industry.
TQM not suitable for financial services environment
TQM is not really suitable for any service organisations but it really helps the service organisations to focus on the participation of senior management team, involvement of all employees and managing internal process towards achieving customer satisfaction.
Long Term client relationship
In global financial services environment business strategy is building on long-term client relationships. Over 90 percent of the work is repeated business from loyal clients. This strategy yields cost advantages, profits, and growth, allowing them to attract and retain investors and thus fuel further growth.
There are a number of writers whose work dominates the quality movement. Their ideas and approaches have stood the test of time and have come to from a body of accepted knowledge, to lead and advise their own movement in quality.
They have become known as 'gurus'
- Crosby Philip B.
- Deming W. Edwards
- Feigenbaum Armand V
- Ishikawa Kaoru
- Juran Joseph M
- Oakland john S
- Shingo Shigeo
- Taguchi Genichi
All the above Gurus have presented their own work on quality management and have made a significant impact on the world through their contributions to improving not only businesses, but all organizations including national governments, public organizations, educational institutions, healthcare organizations, and many other establishments and organizations.
Global inventory planning and control management
What is planning and control?
The purpose of planning and control is to ensure that operations are working effectively and the production of products and services as required. There is another purpose of planning which is to minimise uncertainty and risk and a clear view of future forecasting.
Financial planning and control
It is a well known fact that a successful business helps organisations to generate enough cash in order to cover costs and make some profit.
The difference between sales and cost is profit. The businesses are not always expected to be profitable from the very first day but there should be an expected plan for them to become profitable.
There should be proper financial controls for all the businesses. The records should be accurate and complete and should fulfil the legal requirements. The tight financial control always helps the financial organisations or any organisation to monitor their current situation and always predict the future environment.
The information derived from financial statement analysis can be used to establish future operating goals (financial planning) and to determine how to meet established goals (financial control).
Developing pro forma financial statements is an important part of the planning and control processes.
Inventory planning and control in financial services environment
Inventory planning and control in financial services environment is the method of organising the difference between demand and supply of financial products and services.
Inventory control is not a small matter from a financial perspective way. Inventory is really important and major current asset for any business including financial services organisations.Â As a result, there are always policies of businesses to keep the inventory as low as possible because too much cash hold up in inventory. The objective of reducing the inventory can be accomplished with modern inventory management processes that are working effectively.
INVENTORY PLANNING AND CONTROL
- Operations resources
- Customer requirements
Global change management strategies in financial environment
In today's world of economic and technological development, the organisations have changed significantly. The change had only been possible through restructuring, technological improvement and merging with other businesses.
The most important challenge for the organisations is to implement such change to achieve the behavioural and cultural change that is most likely required to achieve the planned benefits.
Behavioural change does not just happen in the organisation. Change will only occur if there is leadership, clear goals and planned benefits for its stakeholders. All of these should be properly communicated in a timely manner.
Strategy for Change
Three important principles to manage change are:
- Change management is not the goal in itself:
For an organisation to be successful, change management plays an important role. Change management is all about managing the process effectively and leads to an environment where an improvement in performance are realised.
- The change targets must play an active role in realising the change:
Change in projects will identify and successfully communicate the image, therefore letting the employees know that the planned benefits have changed and play an active role in realising those planned benefits.
- Employees are the greatest asset for any organisation:
Employees are potentially the greatest challenge for any organisation. The image or goal of any purpose can only become reality if the employees believe in the project and have the desire to achieve it.
Financial services environment
In the last decade, financial services sector has undergone major changes. The financial sector is a rewarding field in which there is every chance to make or improve a career, particularly if staff is loyal, hard working and have given the correct back up support. It cannot be ignored that the current process of globalization and market deregulation has often led to restructuring within organisations. If these major changes have been mis-handled, then it would bring job insecurity and resulting increased pressure on work forces, which in turn can lead to higher work related stress, and a possible lack of commitment and motivation.
Change requirement in current financial environment
Capital, currently, is grossly overvalued. Company objectives are all about maximizing value for shareholders, the providers of capital. This can lead to companies adopting strategies that do not necessarily benefit stakeholders such as customers and staff. The same emphasis on capital, and shareholder value, breeds an unhealthy focus on short-term results. Shareholders of stock listed companies want better results every quarter, leading management to take decisions that are not necessarily in the longterm interests of the company and its stakeholders. This needs to change.
Global Operations Design
A global operation must be designed to enable efficiency and effectiveness. It must not happen by default. "To "design" is to conceive the looks, arrangement and workings of something before it is constructed." (Slack, chambers and Johnston, 2007).
Global operations design consist of process design, products or service design, process technologies and layout design.
Slack, Chambers and Johnston, 2007; defined process design as "the overall configuration of a process that determines the sequence of activities and the flow of transformed resources between them". Process design should reflect process objective.
"Processes should be designed so they can create all products and services which the operation is likely to introduce". (Slack, Chambers and Johnston, 2007)
The Volume-Variety Effect of Process Design
Normally, the design of a process for a financial services organisation within a country is based on volume-variety. This also applies globally.
Process type in service operations
Process design will be determined by the volume and variety. When volume is low, there is the possibility that variety will be high. When volume is high, there is the possibility that variety will be low and so there will be standardisation.
Professional services provide high levels of customised services based on customer needs. As a result may have high level of variety and low volume.
Mass services process have a high number of transactions, often involving limited
customisation, example gocompare.com. As a result there will be high volume and so variety may be low.
Service shops process are positioned between professional services and mass services, usually with medium levels of volume and customisation.
In global operations design, FSO falls within the Mass Services category. This is high volume and less variety. Therefore, there is standardisation. This is because;
Due to globalisation, there is more movement of people across the world. It is therefore important to create a uniformity of processes so that customers from different part of the world who have seen such a product or services at other parts of the world could easily identify and understand the processes.
- Cost Saving
In FSO, it cost of money to create a process. Some of the cost are the amount paid to consultants and key management staff to design a process to achieve efficiency and effectiveness. Hence such a process is copied by other branches throughout the world to save money.
There is also a lot of management time in process design. It is therefore better for other branches in other part of the world to copy so that management time will be saved and spent on other activities.
- Human Resource Management
Globalisation has also lead to the movement of staff, especially senior and management staff across the world. To ensure that they fit into the system easily, process are standardised.
- Global Management Strategy
Most FSO now see the world as a global village. For that matter, top management see the world global operation as one unit. As a result, they adopt similar processes across the whole global organisation.
- Products or Service Design
"Products and services are often the first thing that customers see of a company, so they should have an impact." " A good design is to satisfy the customer." (Slack, Chambers and Johnston, 2007). As customer gets satisfied, the organisation can achieve its vision (Lynch and Cross, Performance Pyramid).
According performance pyramid developed by Lynch and Cross (Advanced Performance Management, Essential text, 2007); Customers base their satisfaction on quality and delivery time. The organisation bases their satisfaction on process time and level of waste. This is known as level four.
As level four is achieve, leads to level three. That is customers becomes satisfied, the organisation becomes flexible to meet customers needs and so productivity as whole increases.
Level three leads to level two. The organisation then get market share and high profitability as a result of level three.
Finally, the organisation finally achieve its vision.
Aspects of products and services
"All products and services can be considered as having three aspects". (Slack, Chambers and Johnston, 2007). That is, concept, package and process. The concept, "which is the understanding of the nature, use and value of the service or product".
FSO may manage the three aspects mostly through both external and internal environmental analysis by using SWOT Analysis (strength, weakness, opportunity and threat), Porters five forces and Porters Diamond.
Supply network design
Supply network includes suppliers and customers. It also include supplier's suppliers and customer's customers and so on. It is "the network of supplier and customer operations that have relationships with an operation". (Slack, Chambers and Johnston, 2007).
The network has a supply side. That is, network of suppliers, supplier's suppliers that provide resources to an operation. The demand side is, chains of customers, customer's customers that receive the products and services produced by an operation.
The supply network must be designed to reduce time and cost. The shorter network, the shorter the cycle time and so the delivery time to the customers may also reduce.
Sometimes, FSO outsource some activities to reduce the supply network to save cost and increase speed.
Furthermore, information technology has also help to reduce the supply network by eliminating intermediaries. Example, e-procurement can enable FSO to access a pool of suppliers directly. For the demand side, websites like moneysupermarket.com can be accessed by a wide range of customers directly.
Global Operation Planning and Control
Most FSO fail because they fail to plan and control their resources globally. The situation of most banks in the current global recession is a typical example. Apart from HSBC and Barclays Bank to some extent, most banks nearly collapse. Northern Rock and Lloyds TSB are a example of failure to plan and control globally. This shows that planning and control are very important because global operation for FSO is a very high risk. Therefore, planning and control is important. This is to ensure efficiency and effectiveness globally.
The whole world economy is interlinked. There is free movement of capital across the world. As a result, an economic downturn in one part of the world could affect the rest of the world. Example, the downturn of the housing market in U.S.A. nearly leads to the collapse of Northern Rock as a whole. Furthermore, the current recession in Dubai has affected the Lloyds TSB in the U.K.
Some of the things that are planning and control globally are;
- Capacity Planning and Control
This "is the task of setting the effective capacity of the operation so that it can respond to the demands placed upon it"(Slack, Chambers and Johnston, 2007). That is how to deploy resources to able to meet demand. That can be termed as flexibility of resource utilisation. Globally, FSO must be flexible enough to cope with changing levels of operation. Failure in capacity planning and control normally lead to delay of delivering on time. As a result, customers get dissatisfied and the long term effect is lost of market share.
Some of the factors that may affect global capacity planning and control are;
Political - Example are; political instability, government regulations
Economics - Recession, Exchange rate, Foreign exchange control.
Social - Culture, Religion, Availability of staff
Technology - Level of technology
Environmental - Activities of environmental agencies and international policies on environmental issues.
Legal - Legislation like health and safety, anti monopoly laws
- Project Planning and Control
"A project is a set of activities with a definite start point and a definite end state, which pursues a defined goal and uses a defined set of resources". (Slack, Chambers and Johnston, 2007).
It involves five stages. They are;
- Understanding the project environment
- Defining the project
- Project planning
- Technical execution
- Project control
Global project planning and control is difficult and risky. This is because, it is very big, it covers wide area, time differences and it may involve a lot of resources. Poor planning and control of project can lead to failure. That is, more resources may be used than anticipated and the project may also not finish on schedule.
A project can be planned and controlled by techniques such as critical path analysis and Gantt charts.
The introduction of information technology has help to manage global projects. The most popular software for managing global projects is Groupware.
Global Supply Chain Management
Global operations managers of FSO have to look beyond internal view if they want to manage their operations effectively. This is because, an organisation depends on other organisations for survival and so there is the need to manage the supply and distribution of product and service. Decisions have to be made regarding supply and distribution, to ensure that the needs of end customers are met. That is, supplying customers with the appropriate products and services when needed at a competitive price.
The objectives of supply chain management are quality, speed, dependability, flexibility and cost.
Internet and mobile phone have helped most global FSO to make relationship between suppliers and customer work more efficiently and effectively. Through internet, global FSO has gained access to wide suppliers and also has used internet and mobile to deliver banking services to remote customers in different countries.
STRATEGIES FOR GLOBAL HUMAN RESOURCES
Human resources have got a key role in entering in to a new market to find out the risk and opportunity of the market. Human resources are concerned about staffing, recruiting and retain employees, training and development, cultural compatibility, communication and technology, and policies, procedures and structure.
As organizations expand worldwide, human resource management has become increasingly more complex and challenging. The global business needs highly skilled and educated people for the operation and the HR management support these people to work as a team.
Many companies have developed technological tools to address and overcome the HR challenges. In the global operation the HR managers struggled to communicate with the entire workforce effectively as they are spread all over the world. Many businesses develop innovative tools to communicate effectively to the workforce.
Some years before the managers are sending from the headquarters to the overseas business. With efficient HR management many companies recruiting people from local area and employing managers without concerned of their origin.
The HR managers have to understand the issues arise in the global operation. Global human resource management mainly focussed on recruiting key professional. By establishing ethical standards and maintain these standards HR involved in the new operation, mergers and acquisition.
The human resource management should have a thorough knowledge of companies' business strategy, product and services to be successful in global business development. If the HR managers have no business knowledge their role will be limited to administrating and staffing. If the HR takes initiative responsibility for developing resource plans and solution for staffing they will have a key role in global business development.
When staffing for global operation the HR management should taken consideration of the timelines of establishing the new operation, the skills and expertise required the long term and short term staff requirement, the availability of local candidate and the position which need to be filled soon.
The terms and condition of the employment includes payroll and compensations has to make clear before recruiting the employees. As in the global business many countries have different rules and regulations and its HR managers responsibility to change the terms and condition according to the country in which it operates business. The HR has to maintain a policy to all employees regardless of the place they work.
There are four principle alternative between local adaption and global integration. They are international strategy in which knowledge transfer from head quarters. It is suitable for the when there is only few foreign business. The second one is multinational strategy which is local adapted. The next alternative is globalisation strategy which is centralised strategy for all the global operation. The final alternative is the transnational strategy.
The HR manager should involve in the due diligence process before acquisition or merger occurs. The due diligence includes analysing the experience and expertise of the proposed merging management, the employment practices and the pay and benefit practices.
The consistent HR strategy would improve the efficiency of workforce and can retain trained employees which will reduce the recruiting and staffing cost. The HR should establish a consistent HR strategy as well as a consistent localisation strategy. Without a consistent HR strategy it is hard to recruit, retain and train employees.
GLOBAL OPERATIONAL IMPROVEMENT
All the operations have got scope of improvement regardless of how well they managed. The managers should know their business and need to know how well they are operating at the present. The five performance objectives- quality, speed, dependability, flexibility and cost can be measure how well they are operating at the moment. The customer satisfaction is other tool for measuring the performance.
The performance measures should be compared with a target. The target can be historically based, external performance based or absolute performance target. It can be also done by bench marking which is comparing with own performance or some others in the similar industry.
The priority for improvement can be assessed from their performance and importance. The important-performance matrix can be used for this, which is a technique to compare the relative importance and performance to prioritize the improvement. Some other methods are using for improvement, such as break through improvement which is innovation based improvement, and the continuous improvement method as the name says it following the gradual improvement method. The business process re-engineering process is another method of improvement which recommends redesign of process to fulfil customer needs.
To improve the operation, it should know the cause of failure of the operation. There are many reasons for operational failure. It could be design failures, facilities failures, people failure like errors and violation, supplier failures, customer failure and environmental disruption. Most of the failures root cause is human failures. As the failures can be controlled and improve the failures are an opportunity. Once the failures cause and effect understand the next step is try to prevent the failure in future. By maintaining the operation with care will minimise the chances of failure.
The Total Quality Management could be use to improve the operation, by inspecting, controlling and assuring the operation will lead to improve the operation.
The companies are improving their operation and product by experience and learning from the world to be competitive in the global business. The companies have to innovate new product and service to win the world. The traditional operational functions have to be change with the demand of the global economy for multinational organisations.
The new technologies and sources able the companies to discover and access knowledge before their competitors. Therefore multinational companies have to act up on quick to the new knowledge they gain to sustain in the industry. The companies need to practice to learn from wherever the knowledge is generated. Once the knowledge is brought together it should be turned as an innovative product service or process which will help in global operation. The globally successful companies have the ability to spread their innovation across the global market.
The companies have to obtain wide range of technology and techniques to be successful in global operation.
GLOBAL OPERATIONAL CHALLENGE
The challenges of operational management are many, but the major challenges are the impact of the globalization of markets, the changing view of the social responsibility, the environmental responsibility of businesses, the influence of technology development on operations management and the emergence of the concept of knowledge management.(Nigel slack, Stuart chambers, Robert Johnston).
The challenge for operation is that it has to understand the changes in the economy and business and respond to that as quickly as possible. In the global operation the supply chain has to extend to the whole world to be successful.
The different countries have got different management principles according to their culture. As the people are the king in the market, the managers who don't know the culture and attitude will fail in the global business market. The organisational culture is the way things are done regular. The political and environmental difference between countries to country is a great challenge for the managers.
The people decisions are related to their social rules and laws. Some places the people buying patterns depend on their status, so the management need to have good knowledge of the customer needs according to their status.
When designing a product or services it should fit to the culture. The availability of technology and skills are a challenge for global operation and the labour cost and skilled labours. The transportation and the storage capabilities are other challenges for global operation.
The managers need to understand and analyse overseas organisations, suppliers and customers regularly. Understanding the working relation between suppliers and customers in each area will give the strength and weakness of the supply and chain and can improve the global operation by analysing third party organisation.
The main recommendations are about how Barclays bank implement its key global operation management policies to achieve better result and become global super power in financial service.
1. As a long-term growth strategy, it recommended that total quality concept should be adopted that will foster continue improvement in its operation. Although TQM it not suitable for financial service environment, it will help formation of quality circle involving all employees and senior management to focus on achieving customer satisfaction, loyalty and customer retention.
2 .It is also recommended that Barclays bank empower and support its staff for change management. As a result of globalization and market deregulation, financial sector often undergo constant restructuring and government intervention.
3 .It is recommended that the bank researches into variety of product and process design to maintain status as world leading innovator in financial service. This will enable the company to win customers from different part of the world to get market share and high profitability.
4. Failure of good long-term planning lead to collapse of Northern Rock, as a result it is recommended the implementation of effective and efficient long-term planning and controls to overcome environmental uncertainty in the banking industries.
5. It is recommended for investment of improve advance information technology to keep track of supply network and e- procurement.
Recent global economic crises in the financial industries has put immense pleasure on operation managers to implement and developed suitable strategies to maximise resource to gain competitive advantage and establish global brand.
Barclays bank sees opportunity in the global market to gain market share over its competitors by continuous improvement on quality and product innovation to meet customer's satisfaction and needs.
To improve the level of global dominance, the operation management team has evaluated the key operation factors and chosen change strategy to manage behavioural and culture change at different part of the world to achieve the planned benefit. Uncertainty in the financial industries, the bank will use the right forecasting methods and effective inventory management that will monitor changes and respond to action needed to minimize cost.
Barclays bank is a diversified financial service group with headquarters based at Canary Wharf London. It was founded 300 years ago focus on global operation in banking, investment banking and investment management
Barclays is FTSE 100 Company listed on the London Stock exchange and is the fourth largest bank in U.K. It is a global bank with operation in sixty countries and 850 international branches. It operates in Europe, United State of America, Africa and Asia.
The company offer broad range of financial product and services to consumers, small business and commercial clients these are personal loans, savings, investment, Barclays card, current account, mortgages, insurance, premier banking, mobile banking, asset management and auto finance.
To achieve it global dominance it has segmented its operation into seven strategic business units of Barclays International, Barclays Africa, Barclaycard, Barclays Capital, Barclays Global Investors , Barclays Private client and U.K retail banking.
Barclays bank main competitors in U.K are HBOS plc, HSBC Holding plc and Lloyds TSB group.
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