Wednesday, October 9, 2013

International Business and its Challenges

In the past five years, the number of international business transactions of companies has increased dramatically and predicted to be around 35% to 50% of the entire business in the next decade. With the increase in the international business, the supply chains of a company become more complex and expose many challenges for the business managers. The existing problems such as managing inventory and cost, product ownership and the business risk become harder to deal with when international business keeps growing.

One of the most challenging jobs in an international business is to synchronize all of the supply chains. By combining physical, financial and informational supply chains, companies can have a better estimate of a product’s success, and ensure the product ownership. Additionally, having different physical supply chains, such as plants and distributions centers, in different locations around the world and being able to synchronize them in an efficient way is another critical task in the 21st century supply chain. A successful example of a business ensuring the synchronization across its supply chains is Apple; the company produces 90% of the materials of iPhones in Mongolia and China, the remaining in the US, and yet is able to respond to the market demand in an efficient way.

Another key challenge in an international business is to have supply chain solutions that are highly flexible and makes the organizations more lean and agile. While many companies are aiming at outsourcing most of the material work to an international business to lower the costs, the main purpose of such action should be to have a flexible supply chain that may respond the demand. Companies should concentrate on making efficient decisions which would eventually lower their costs, instead of only focusing on lowering the costs. Apple, again, is another good example of making efficient decisions.Tim Cook, CEO of Apple, explains why the company assembles most of its devices in China, saying “it is fast to make decisions in China, not cheap”. [1]

However, all these challenges require effective top management to be solved. Thus, the main challenge is to find the right leadership for the 21st century supply chain. With that in mind, what would be the main difference in the 21st century leadership and the former leadership perceptions? Answering this question will help us understand better the challenges with the 21st century supply chains.

1- Daniel Eran Dilger; “American components in Apple's iPhone supply chain graphically detailed”;; Accessed on 10/7/2013

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