Operational Approach Strategies that Management May Use to Respond to Globalisation

Strategies of operational approach give management the ability to respond to an increasingly globalised business environment. Operational strategies refer to the strategies used in the process of transformation from raw materials to products (inputs to outputs). These strategies may include; supply chain management, inventory management, outsourcing, quality management, technology, and global factors. In which refer to or contribute to globalisation. Globalisation refers to the removal of barriers of trade between nations. Increasing integration of capital, labour, financial resources and technology. This essay will focus on the effect that outsourcing, technology and global factors have on a businesses adaptation to globalisation with reference to Tesla, inc. and Apple inc.

Outsourcing is an operational strategy that management may use to respond to an ever increasingly globalised business environment. Outsourcing refers to and involves the use of outside specialists to undertake one or more key business functions. This creates advantages and disadvantages for businesses such as, cost reduction, expertise, and increased efficiency, however this may result in decreased quality, unreliable timelines, and hidden costs. In Spite of this outsourcing internationally increases globalisation this is because it contributes to other nations economies through trade, trade of which include the transfer of labour. An example of outsourcing integrating with globalisation is the use of foreign manufacturing and labour as a result of the other nation having lower labour costs. This allows businesses to maintain competitive from supplying goods at a lower retail price. This is seen within Apple. A majority of Apple’s range is manufactured within China this is as most components made for Apple products are sourced from China this reduces logistic transport costs to manufacture, this is the main reason why Apple relies on Foxconn for their chinese operations. Another reason is the factor that China has less labour rights in combination with lower wages this then reduces production costs, this improves Apple’s profit margins whilst potentially reducing prices for the consumer. Similarities can be seen within Tesla, not in the case of labour but because of the lack of capital. To resolve this they sought partnerships with international companies. Outsourcing Design, body panels and its assembly line for their first vehicle the ‘Roadster’ in which relied on the English auto-manufacturer Lotus Engineering’s and their Hethel factory (United Kingdom). This reduced costs of design, staffing and the acquisition of a factory and assembly line for the newly formed start-up. This in turn provided customers with what could be considered the world’s first electric sports car at a competitive price with quality finishes. In the case of outsourcing business operations, it increases globalisation by trading labour, technology, and finance internationally. This is seen in Apple’s and Tesla’s decision to manufacture internationally to reduce costs whilst maintaining supply and quality.

Technology is another operational strategy that management may use to respond to globalisation. Technology refers to the design, construction and/or application of innovative devices, methods and machinery upon operations processes. This links to globalisation as technology is the operational strategy that supported the increase of globalisation through developments in transportation and communications technologies. Developments in technology can assist in business operations through improvements to efficiency based on an administrative level and on a production level. An example of a production level development is Tesla, Tesla’s primary production facility The Tesla Factory in Fremont California is one of the world's most technologically sophisticated manufacturing plants. Comprising of over 160 robots, 10 of which are the largest in the world, Tesla hold the key to effective manufacturing in the EV market as it limits production to just over 40 steps. This in turn increases productivity and reduces the margin for error. This sees international competitors such as Volkswagen group imitate both Tesla's EV technology as well as seeking development of more efficient manufacturing technologies. This increases international competition as their markets are niche because of this their markets are small but broad internationally. Efficiency in manufacturing for both car makers are essential to their success as the most cost effective is the most cost effective to export from a commercial and retail standpoint due to import tariffs and taxes. This sees technology as a large and significant operational strategy for corporations to use to overcome the complexities of globalisation.

Global factors is the last strategy of operational approach that management may use to respond to globalisation. This is as it is using globalisation is an effective measure to stay competitive. Applying methods of global sourcing, economies of scale, scanning and learning, and research and development allows a business to become competitive in oversaturated markets. Economies of scale is a process in which the quantity of production determines the cost of production. The larger the quantity demanded the lower the cost of production whereas the smaller the quantity the more costly per unit it is to produce a product. This is a strategy that allows Tesla to sell their most recent model, The model 3 at such a competitive price in the current EV market. This is due to Tesla rapidly increasing and expanding their assembly line to cater for the production of more and more vehicles, as in doing so allows their production to become more standardised and allows for the bulk order of third party components. This increases their profit margins over time and/or reduces the prices of their vehicles allowing Tesla to become more competitive in comparison to other international automakers. Another example of Global factors is Global Sourcing, global sourcing is self explanatory in the fact that it is sourcing products and materials from other geopolitical places or countries in order to reduce costs this is mostly similar outsourcing. In which can rely on international manufacturing to reduce costs to stay competitive in an increasingly competitive market due to globalisation. This is seen within outsourcing’s examples of Apple and Tesla. In which Global Factors are a form of Globalisation that allows domestically operating businesses to seek financial potential in cost reductions allowing them to stay competitive in their respective market.

In conclusion Apple inc. and Tesla, inc. Utilise Global factors, technology, and outsourcing as operational strategies to overcome the increasing competition as a result of globalisation. Reducing operating and production costs through outsourcing manufacturing of products overseas, technologically enhancing the production process to be more efficient and utilise the theory of economies of scale. All to reduce the costs of production to maintain competitive or gain competitive advantage.