1. Eclectic Theory – OLI Model (J.

Dunning)
The eclectic theory holds that companies will make foreign direct
investment when they meet all three advantages. It is the advantage of location,
the advantage of ownership and the advantage of localization, only when these
three advantages converge will that market become attractive to investors.
1.1 Ownership advantage (O - ownership advantage):
- The company needs to have a unique competitive advantage that can overcome
the disadvantages of competing with foreign companies on their home turf. This
advantage can be branding, owning technology assets, economies of scale,...
- The ownership advantage of a business may be a product or a manufacturing
process that has a significant advantage over other businesses or other
businesses that cannot be accessed, such as patents, action plans, technology and
information, management skills, etc. marketing, organizational systems and
access to markets for final consumer goods or intermediate goods or raw
materials, or access to low-cost capital...
- The company's ownership advantage is understood as the company owns
advantages compared to other companies such as technology, patents, brands,
product marks, management skills,... Ownership advantage is the premise for
FDI activities.
- For example, Caterpillar has all three advantages: brand, ownership of
technology assets, and economies of scale,... when competing with local
companies in Brazil.
1.2 Location advantage (L - location advantage):
- Business activities abroad must be more profitable than domestic business
activities. In addition to the factors of resources, the country's resources also
include socio-economic factors such as market size and market growth and
development, development of infrastructure, culture, laws, institutions and
policies of the Government
- The location advantage obtained when the company invests in one location
brings advantages that help the company grow strongly compared to other
companies.
- Location advantages can come from abundant natural resources, large market
size, low cost of factors of the production process, friendly business
environment,... This is why some countries are more attractive than others, or
companies often choose one location over another.
- For example, Caterpillar manufactures bulldozers in Brazil to have low labor
costs and avoid high tariff barriers for exports from the United States.
1.3 Internalization advantage (I - internalization advantage):
- The company must have more interest in controlling the overseas business than
hiring an independent local company to provide the service. Including: reducing
the cost of signing, controlling and performing contracts.
- The benefit of internalization is to avoid delays in terms of time, both in terms
of buying and selling and buyer shortages
- Internalization advantage is the interaction between 2 advantages. Thanks to
the internalization of operations in one location, it reduces transaction costs
instead of licensing or exporting technology such as the cost of signing and
performing contracts...
For example, a steel enterprise may face a shortage of raw materials and high
transaction costs when it has to buy iron ore from abroad (another country).
However, when this enterprise acquires an overseas mining company, that is, it
carries out internalization: including the purchase of iron ore and transportation
costs, it will eliminate the shortage of raw materials.
All 3 of the above conditions must be satisfied before FDI. The pushing factor
originates from advantages O and I, while advantage L creates a pulling factor
for FDI. These advantages are not fixed but change over time, space and
development, so FDI in each country, region, and period will be different
stemming from which stage these countries are in the development process.
2. Porter's Theory of Competitive Pressures
M. Porter's 5 Competitive Forces model is one of the most widely adopted
methods for strategy development in many industries. According to Porter, the
nature of competition in a given industry can be seen as a mixture of five forces:
- Competition among companies in the industry
- The entry of potential new competitors
- Growth potential of alternative products
- Supplier's right to bargain
- Customer's right to bargain
2.1 Industry Competitors
This pressure is mainly aimed at analyzing market information with
contents such as the competitive structure of the industry, the current structure
of the industry, fences, the number of enterprises in the same industry, and the
products being provided.
There is no industry or business field that does not have competitors. This
competition is expressed through price, number of products, market share,... In a
small market or industry dominated by large enterprises, this competition can
turn into a monopoly, power is in the hands of a single enterprise, it is very
difficult for any business to interfere or threaten this large enterprise.
Normally, industries only include small and medium-sized enterprises, no
unit is in a dominant position. Meanwhile, a concentrated industry is dominated
by a small number of large enterprises, even only a single enterprise is called a
monopoly. The nature and level of competition for concentrated industries is
difficult to analyze and predict.
Pressure from competitors will be shown through:
- The level of concentration of the industry
- Barriers if you want to "get out" of the industry
- Fixed or value-added costs
- The growth status of the industry
- Differences between product types
- Conversion costs
- Variety of competitor types
Example: Milo: The two main competitors in the FMCG industry in milk
powder are Milo and Ovaltine. The marketing war between the two brands has
always been a topic of discussion for many years. Milo and Ovaltine are similar
in size, with similar products and strategies. The level of difference between
these two nutritional product lines is also low. Therefore, the "green-red" team
battle in terms of price and market share of these two brands is very fierce.
- Starbucks: Currently, the fast-food and coffee restaurant industry is especially
thriving. Starbucks' competitors include Dunkin Donuts, McDonald's, local
stores, and cafes. Starbucks is currently the market leader with more than 40%
market share in the US. However, Starbucks' industry competitors are now
working continuously to innovate, specialize, and build competitive strategies
that aim to attract even more customers. At the same time, very low conversion
costs for customers make the competition even more intense. Many types of
coffee, drinks... which is being offered by Starbucks is also being offered by
other competitors. However, there are still some Starbucks "unique" products
that have helped Starbucks build customer brand loyalty. In short, the
competition in Starbucks' industry is very high.
- Shopee: In Vietnam, when starting to enter the e-commerce market, Shopee
had to deal with many significant competitors with the same target market such
as Tiki and Lazada. If Tiki promotes 2-hour delivery service policies to attract
sellers on their platform, Lazada proposes to reduce commission fees by 50%
for each successful order and support delivery during 2 major shopping
occasions at the end of the year. The race between these 3 players is always
tense, not yet won or lost. In order to regain market share from the two giants
who came before them, Shopee has launched many consecutive sales and
supported 100% of shipping fees to attract users to the platform. At the same
time, Shopee is also pursuing a long-term strategy of focusing on building image
and product differentiation quality.
2.2 Potential rivals
These are current businesses that are not yet competitive in the same
manufacturing industry, but are likely to be competitive if they decide to enter
the industry. As with any business, if you want to enter a new industry, you need
to consider some of the following factors:
- Cost advantage
- Input Factor
- Government policy
- Capital requirements
- Business Transition Costs
- Distribution channels
- Competitiveness in the industry
- Exclusive products
The easier the industry to join, the higher the competition rate, in which
the important thing is the decisive cost barrier. This threatens existing businesses
and the level of competition will become more fierce. Therefore, in order to
create a position in the industry, businesses need to create barriers to entry such
as:
- Differentiated products
- Economies of scale benefit to reduce production costs.
- Maintain loyal distribution channels and expand new distribution channels.
Example:
- Milo: The dairy industry in Vietnam is growing with the entry of many new
brands. The Vietnamese milk market is rich in potential, making the demand for
products increasingly high. Up to now, our country has about 54 milk
production, import and trading. Therefore, the competition rate from Milo's
potential competitors is quite high. With products in the same dairy industry and
aiming at the same segment towards children of the same developmental age as
Milo, such as: Ovaltine, Dutch Lady milk, Vinamilk fresh milk... Fierce
competition has led consumers to face many different options in choosing the
right nutritional products for their children.
- Starbucks: There are certain barriers to entering this industry, setting up a huge
chain of stores like Starbucks requires a huge investment as well as taking a lot
of time to develop the brand and gain brand loyalty. Meanwhile, now that the
Starbucks brand has made customers feel and enjoy its products, it is not easy to
join and attract Starbucks customers. However, it is possible to start a single
store with a moderate investment. In fact, there are many coffee shops at the
local level that have succeeded in growing their customer base in their area. In
short, the threat from newcomers to Starbucks is average.
2.3 Customer - Customer's right to bargain
This pressure in the 5 competitive pressures model evaluates the
customer's ability to reach the selling price and quality of the product/service.
Customers here can be understood as the final consumer, distributor or industrial
buyer. When there are many businesses in the market, consumers have more
power over the product as well as the ability to change their choice from one
brand to another.
 In addition, consumers are also able to put pressure on each other by
linking together to get a good price or create a shopping trend for the brand. In
case there are many suppliers, they have the right to choose which supplier is
better, so suppliers must compete with each other.
Example:
- Milo: The difference between the two milk product lines Milo and Ovaltine is
not much. The price policy of the two products is comparable. Therefore,
customers often tend to buy products in small quantities, not concentrated in a
specific market. The cost of switching between Milo via Ovaltine is quite large.
Song Milo has a loyal customer base thanks to a consistent marketing strategy
throughout the years. This is a pioneering milk brand in encouraging children to
use products combined with sports, towards an active and healthy Vietnam.
Moreover, Milo's distribution is wide across provinces and cities in the country,
from Ho Chi Minh City. Ho Chi Minh City to Hanoi, Da Nang and rural areas.
Overall customer strength with the Milo brand is average.
- Starbucks: Starbucks is facing stiff competition, which means that consumers
have a lot of choices. If Starbucks or any other brand deliberately raises the
price of a product, the buyer will simply walk away because the conversion cost
is low for the buyer. However, Starbucks' advantage is that the store space and
the unique taste of the product have made it attract many loyal customers to the
brand. However, in general, customers' bargaining power for Starbucks is high
- Shopee: This is the time when e-commerce in particular and online business in
general bring a mixed good and bad experience to consumers. Commitment
policies on the origin of goods, after-sales policies, payment to ensure safety,
and after-purchase care are still unclear. Therefore, customer confidence in the
trend of online shopping is still very low. To solve this situation, to increase
trust in online shopping, Shopee has introduced policies such as: policies to
protect healthy and safe sellers & buyers; expanding many payment methods
(COD, ATM, shopeepay...); shorten delivery times to make customers' online
shopping experience more "real".
2.4 Supplier – Supplier's right to bargain
It is 1 of 5 factors in the 5 competitive pressure model. This pressure shows the
influence of suppliers on product selling prices, directly affecting the profits of
businesses. Products will be created from input materials, so suppliers have a
huge impact on product selling prices, affecting profits and income of
businesses. Suppliers can become a pressure when increasing input prices or
reducing the quality of the products and services they provide.
Thereby, reducing the supply capacity of enterprises, not ensuring sufficient
input factors in terms of quantity and the necessary quality. Moreover, the
number of suppliers in the market is also an issue to consider. The smaller the
number of suppliers in the market, the more power they have, leading to higher
risks for businesses.
Just a supplier can increase the price a little, which can also increase the cost of
production of products. Meanwhile, businesses will not be able to arbitrarily
increase or decrease the selling price of products and of course at this time
businesses will only have a way to reduce profits. Moreover, the price increase
of suppliers is still easier to solve when the quality of input materials is reduced,
resulting in a decrease in product quality. This leads to the risk of businesses
losing customers.
In this case, businesses have 2 ways to handle it, which is to reflect, renegotiate
with the supplier about product quality or go looking for a new supplier to
replace. But both of these methods are not easy and bring quite high risks.
Especially if the business has few suppliers, the greater the power of the supplier
and the more difficult it is for the business.
In particular, the strength of suppliers is also shown through the following key
factors:
- Number of suppliers
- Concentration of suppliers
- Vendor differentiation
- Business Conversion Costs
- The impact of input factors on product differentiation and production costs
- Number of alternative suppliers
- Supply costs compared to the total revenue of the industry
- Supplier affiliation
2.5 Alternative products and services - Threats from alternative products and
services
Substitute products are products that are different from the products that the
business is providing and they have the ability to replace in consumption. The
outstanding component of the current product is replaced by other distinct points
from the alternative product that make customers feel interested, meeting a
certain latent need they want.
Alternative products are other products that can satisfy the same needs of
consumers. Its basic characteristics often have product advantages that are
superseded in distinct characteristics. Nowadays, the products of enterprises
compete with each other through the creation of new values, added value,
perceived value rather than its inherent useful value, and buyers and customers
also spend money to buy those values.
The threat of substitutes in this model is expressed through common factors such
as:
- Conversion costs in using the product
- The trend of using substitutes comes from customers
- Correlation between the quality and price of substitutes
Example:
- Milo: Milo faces more and more challenges as more and more alternative
products appear to meet the higher needs of consumers such as less sugar, less
fat, less sweetness but still ensure nutrients. Dairy brands are increasingly
improving from quality to product packaging and price. So the threat from
alternative products to Milo is enormous.
- Starbucks: All products (such as coffee, tea, food, etc.) offered by Starbucks
have substitutes. Among them, there are many substitutes that cost less than
Starbucks products. This makes the threat from alternative products to this brand
is high.
- Shopee: Low consumer conversion costs are the reason why they can easily
switch between brands. For example, consumers can easily decide to buy from
Lazada or other retail establishments instead of Shopee. The availability of
alternative products and low product prices increase the influence of alternative
products on Shopee. As such, brands try to gain a competitive advantage by
offering low prices, better product quality, or through a better overall customer
experience.
3. Kogut's Competitive Advantage Theory – Comparison
Kogut (1985) studies the difference between comparative competitive advantage
by specific location (country) and competitive advantage of enterprises and puts
forward a key concept of "competitive advantage based on comparative
advantage", which is particularly useful in global operations, including global
value chains.
Kogut (1985) stated that the design of global strategies is based on "the interplay
between the comparative advantage of companies and the competitive advantage
of firms". Kogut's three modes of global competition include:
Competitive Mode I: Mainly related to the comparative advantage of countries
Competitive Method II: Based on differences in the comparative advantage
chain between enterprises
Competitive Mode III: Involves reciprocal impact that keeps competitive
advantage and comparative advantage in the value-added chain

Detail
- Kogut's Competitive Advantage – Comparative Framework studies the
difference between location-specific comparative advantage and business-
specific competitive advantage and introduces the key concept of "competitive
advantage based on comparative advantage", which is particularly useful in
global operations, including global value chains.
- The Competitive Advantage Framework – This comparison assumes that the
design of global strategies is based on "the reciprocal impact between the
comparative advantage of countries and the competitive advantage of firms".
- Showing Kogut's three modes of global competition:
+ Competitive mode I is mainly related to comparative advantages between
countries.
+ Competition method II is based on differences in the comparative advantage
chain between enterprises.
+ Competitive mode III relates to the reciprocal impact between competitive
advantage and comparative advantage in the value-added chain.
- Clarify the issue:
+ In the 1st box (region I): right at the position of the vertical column represents
"there is no competitive advantage of enterprises", in the position of the
horizontal column represents "there is an advantage between countries". In this
box, it expresses the appropriateness of the vertical international integration of
companies and inter-industry trade.
+ In the 2nd box (region II): right at the position of the vertical column
represents "competitive advantages of enterprises", in the position of the
horizontal column represents "there is no competitive advantage between
countries". In this position, it expresses the appropriateness of the international
integration in the direction of the industry of companies and the inter-industry
trade.
+ In the 3rd box (region III): right at the position of the vertical column, it
represents "having competitive advantages of enterprises", in the position of the
horizontal column represents "having competitive advantages between
countries". In this cell position expresses the suitability of companies integrating
vertically and horizontally internationally with different market entry
configurations and sourcing locations.
+ In the 4th box: right at the position of the horizontal column represents "no
competitive advantage of enterprises", in the position of the horizontal column
represents "no competitive advantage between countries". In this cell position,
the market is segmented globally.
=> Competitive advantage, sometimes referred to as a specific company
advantage, influences the decision of which activities and technologies in the
value-added chain a company should focus its investments and management
resources on compared to other businesses in its industry. It derives from some
of the company's proprietary characteristics such as the brand name, which
rivals cannot imitate without significant costs and uncertainty. The value-added
chain is the process by which technology is combined with physical and labor
inputs, and then the processed inputs are assembled, marketed, and distributed.
A company may consist of only one link in the process, or it may be widely
integrated vertically, such as steel companies that carry out activities from ore
mining to the fabrication of the final product.
4. M. Porter's structural coordination theory
Porter (1986) stated that in order to effectively deal with global competition, a
company must choose to configure the value chain, determine how and where its
activities are performed, and consider the issue of coordination to decide
whether activities should be shared among the units of operation. A value chain
is a system of discrete activities conducted for business. Its activities include key
activities such as logistics, operations, overseas logistics, marketing and sales,
services and support activities such as solid infrastructure, human resource
management, development technology, and procurement.
Porter (1986) developed a framework to address how firms can achieve a
competitive advantage in their value chain through two aspects: configuration
and coordination. The global profile refers to the location and number of
locations of the company's value chain operations located worldwide and in how
many places. Global coordination refers to how and to what extent similar value
chain activities are coordinated between countries to maximize a business's
competitive advantage
Similar value chain activities are coordinated to some extent across countries to
maximize a company's competitive advantage.

Structural model by M. Porter

Global configuration options range from the centralized option, which refers to
the implementation of a value chain operation at one location and serving
foreign locations from there, to the distributed option, which refers to the
implementation of value chain operations in distributed countries, refers to the
implementation of value chain activities in the country. Coordination options
range from zero to high.
The figure above presents four global strategies. The "purest" global strategy is
to centralize the value chain that operates in one country and serves the world
from this main base.
Porter's configuration coordination framework can be applied in the following
areas of global operations strategy (see Porter 1986, p. 18):
- Global manufacturing. Its configuration issues include the location of
manufacturing facilities for components and final products, while its
coordination issues include an international network of factories, process
technology transfer, and know-how manufacturing between factories.
- Global service. Configuration issues include the location of the service
organization partition, while its coordination issues include the similarity of
services, standard services, and processes worldwide.
- Global technology development. Its configuration issues include the number
and location of R&D centers, while its coordination issues include changing
between distributed R&D centers, product development to meet the market, and
the sequence of product introductions around the world.
5. Prahalad and Doz's Theory of Feedback – Integration
The Integrated Responsiveness Framework is an important tool for examining
operational strategies in a global context (e.g., see Prahalad and Doz1987;
Bartlett and Ghoshal1989; Roth and Morrison1990). Roth and Morrison (1990)
empirically analyzed the integrated responsiveness framework in global
industries. Prahalad and Doz (1987) propose the following three strategies:

1. Global standardization strategy. When the pressure to respond to global

integration is high, the pressure to meet local needs is low, If the pressure of
global integration is perceived, this strategy will be applied to highlight global
coordination. With this strategy, the company will produce and trade with
uniform products, achieve economic advantages thanks to scale, coordinate with
SBUs around the world, increase competitive advantages, without encountering
the pressure of separate local needs.
2. Multifocal strategy. When both local responsiveness and integration are
considered important, the "multi-focus" strategy will be used to accommodate
both dimensions (Prahalad and Doz1987). Although this strategy is
characterized by stiff competition and the presence of global competitors,
product standardization rarely exists (Roth and Morrison1990).
3. Localization strategy. When the global integration pressure is low, the
pressure to meet local demand is high. In this strategy, local responsiveness will
be emphasized if industry pressures are primarily perceived at the domestic
level. Roth and Morrison (1990) characterize this strategy by the high level of
customer service required and variable factor costs between locations.
6. Barlett and Ghoshal's theory of localization – globalization.

Based on the strategic framework for meeting integration, Bartlett and

Ghoshal (1987) have elaborated on the framework of globalization -
localization. This framework provides an in-depth analysis of a company's
strategic position in a global environment and has a high practical value for
managing different businesses, functions, and markets. The figure above shows
the framework of globalization - localization. The vertical axis represents the
degree of globalization. A higher degree of globalization means a higher level of
global integration and a higher level of central coordination. The diaphragm
represents the degree of localization and differentiation of countries. In the
image above, the diagram on the left labeled "Business" shows the strategic
positions of different strategic units within a company. For example, Business 3
needs more global integration than Business 4 and higher localization than
Business 1, 2, and 4. The middle diagram labeled "functional" represents the
strategic locations of the various functions of the business 3. For example,
functional "marketing" should be considered when localizing and differentiating
countries more than research. The chart on the right labeled "geo" shows the
strategic location of different countries for marketing functions in this company.
For example, countries 1 and 2 are important markets for the company, so the
company's marketing function will take into account when localization is higher
and global coordination is higher.
II. PUSH-PULL STRATEGY
Traction strategy: Engage consumers
With a traction strategy, businesses will use Digital Marketing tools to entice
consumers to use products and services. Commonly used methods include:
advertising (applied on many channels such as newspapers, television, Internet,
leaflets, etc.); direct contact with customers through the organization of events;
strong public relations communication... This strategy is mainly used in the
retail industry. Suitable for retail businesses, providing services directly to
customers. Suitable for small-scale businesses with few employees. The cost of
marketing, advertising, and doing events is high. A pull strategy is a strategy
that involves driving marketing efforts to the end consumer.
With this strategy, businesses want their brand to gradually make an impression
in the hearts of customers, creating a psychology of curiosity and need to learn
about the product. Then, when there is a need, they will voluntarily buy and use
the business's products.
Push strategy: "Push" the product closer to the customer
Different from the Pull Strategy, the Push Strategy focuses on building a
distribution system, building agents so that products reach customers more
conveniently. This marketing strategy is often applied in wholesale businesses.
The principle of this strategy is based on discounts between dealer levels, each
intermediary stage will enjoy some profit if the product is consumed. Just like
that, they will always be motivated to bring the product to consumers, or
subordinate agents. To do this, businesses/agents must build quality and
professional human resources in all stages, from production, sales, customer
care, management, etc.
When to "pull", when to "push"?
With its own characteristics, businesses can use one of the two marketing
strategies, or skillfully apply both to promote customers to use their products.
However, when to "pull" and when to "push" is still a question for many
managers.
● Traction strategy: suitable for retail businesses, providing services directly
to customers. Suitable for small-scale businesses with few employees. The cost
of marketing, advertising, and doing events is high.
● Push strategy: used in wholesale businesses. Marketing costs are low, but
it makes up for the payment for large agents and intermediaries.
III. OTHER THEORIES
1. How does the external environment affect the company's international
business strategy?
The external environment directly affects the company's international business
strategy, each element of the external environment has different effects on the
company's international business, specifically:
Macro environment (economic, political, socio-cultural, natural, population and
technological environment).
Microenvironments (Customers, suppliers, current competitors, potential
competitors and substitutes...)
Affecting the decision on foreign investment methods of enterprises. Depending
on the micro environment, macro environment and international business
environment in the country, businesses will have different investment strategies,
direct investment – indirect investment, joint venture or direct investment of
100% capital
2. How does the internal environment of the enterprise affect the international
business strategy of the enterprise?
The internal environment of the enterprise directly affects the international
business strategy of the enterprise, specifically reflected in the following
aspects:
- Human resources (quantity, quality, demand, encouragement...)
- Financial capacity (capital, capital mobilization/allocation/control/use of
capital, balance of payments...)
- Research and development capabilities (technical improvement, application of
new science and technology, new product development, etc.)
- Production and business capabilities (production scale, equipment lines,
operating systems, techniques/technology, production costs,
quality/price/service...)
- Governance activities (qualifications, organizational ability, etc.)
- Marketing activities (capacity, effectiveness, programs...)
- Organizational culture (standards, stereotypes, traditional values...)
Aspects of the internal environment will positively and negatively affect the
company's choice of business strategy when investing internationally. Internal
environmental factors will affect the choice of international business methods of
enterprises: Direct investment or indirect investment, joint venture or direct
investment of 100% capital...)
IV. COMPETITIVENESS
1. Cost-based competitiveness
1.1 Concept
Considered as core competencies; Some companies use a defensive, cost-based
strategy to survive and gain market share; Others use an aggressive, cost-
effective leading strategy to achieve growth and build a leading position in the
global market. A cost-based strategy is achieved by maintaining low prices to
attract price-sensitive customers in the target market segment or through a low
price-performance ratio. Generally, products or services with a lower price ratio
will be more competitive, in order to succeed in the market by offering the
lowest price while still achieving high returns and return on investment, a
company must be able to operate at a lower cost than its competitors.
For example, after Lars Olofsson became CEO, in 2009, Carrefour revived its
low-price strategy in hypermarkets as an anti-dumping measure. While
Carrefour stores used to have banners that carried the slogan "quality for all",
most store ads focused on "lowest prices". Carrefour has used low costs to gain a
leading position in terms of costs in the global market.
1.2 Method
Cost-based GOS can work to reduce four types of expenses. In a factory, the
cost of production includes both the costs associated with scale and the costs
associated with diversity. For more complex production systems and for
production networks in global operations, cost-based GOS can cut both the total
cost of landing (TLC) and total cost of ownership (TCO). The company can
adopt cost-based technology, cost-based processes, labor and raw materials, and
cost-based facilities to achieve cost capacity.
- Cost-based on scale: The most common approach to cost reduction is to reduce
scale-related costs in initial production systems.
For example, Ford did by putting it into mass production. As production
volumes increase, the costs associated with scale decrease. The company can
use mass production and assembly lines to reduce scale-related costs.
- Diversity-based costs: As the variety of products increases, set-up, conversion,
ingredient handling, toasters, and overhead costs all increase.
- Total cost directly related to the procurement process (TLC: total landedcost):
is the total cost, from input to final product. A global logistics system or global
supply chain should take action to reduce TLC, not just production costs. TLC is
primarily used to inform sourcing decisions at the manufacturing site.
- Total costs of ownership (TCO): includes all costs associated with purchasing
and owning an asset over the life of a device or product. TCO covers all costs
included in TLC as well as post-purchase costs such as maintenance, repairs,
and training.
- Technology-based costs: Technological innovation can allow a company to
provide a cheaper product in the context of global manufacturing. For example,
Mitsubishin Electric uses robots to reduce production costs in various industries.
Technology can also help eliminate repetitive or wasteful steps in service
delivery. For example, information technology has been used to reduce after-
sales service costs.
- Process-based costs: MNEs (Multinational Enterprises) can restructure
production and service processes to reduce costs. For example, Deloitte uses a
"tax-compliant supply chain" and KPMG uses a "tax-compliant supply chain
management" system to restructure global supply chains to reduce taxes. The
company can use outsourcing of production and services to reduce labor costs
and purchasing costs. Dell, Zara, and Benetton all use a late customization
strategy to delay product differentiation, in order to reduce the costs associated
with diversity.
- Resource-based cost: 1 company can try: access to low-cost labor and raw
materials; setting up factories in locations with obvious cost advantages (for
example, Foxconn set up factories in China to take advantage of available cheap
labor); hiring migrant workers (for example, construction companies in Dubai
have long hired workers from South Asia); set up procurement centers in low-
priced locations for used products (e.g., Carrefour and Walmart have set up
poaching centers in China); and, building procurement subsidiaries in locations
deemed raw material rich (e.g., steel companies establishing procurement
subsidiaries in Brazil and Australia to purchase iron ore).
- Cost-based facilities: Cost-based facilities are related to the facility's resources,
the facility's planning process, the facility's logistics, and production technology.
For example, Walmart has built cross-connect distribution centers to reduce
their logistics and LTC costs. Fashion and clothing companies have built
Automated Storage/Retrieval Systems (AS/RS) in an effort to reduce both the
costs associated with scale and the costs associated with the diversity of
warehouse operations. Foxconn has built a large-scale electronics manufacturing
town, capable of accommodating more than 300,000 workers while providing
several assembly lines, to reduce (scale-related costs) in Shenzhen, China.