fe_23jan2013

INTERNATIONAL MANAGEMENT 1

st Semester 2012/2013

Prof.ª Sónia Dahab Dr.ª Helena Peres Final Exam – A – Regular Period 23

rd January 2013, 08h00m – Time: 2h00m

International Management 1


1 / 12 Final Exam – A – Regular Period

23rd January 2013, 08h00m

ANSWER SHEET

Name: _____________________________________________________ Number: ________

Group I (10 points)

Read the case and answer the questions bellow. Use only the lines available.

1. Market expansion in individual countries, especially when the demand in those countries

becomes significant might conduct companies to implement what kind of manufacturing strategy? Give examples of what Samsonite has done in terms of manufacturing configuration.

2. Once the company determines the manufacturing configuration it will use, it must adopt a

control system to ensure that company strategies are carried out. Describe what Samsonite has done about this matter and how Electronic Data Interchange and company-specific standards has contributed to it.





ANSWER SHEET

Name: _____________________________________________________ Number: ________

Group II (10 points)

Multiple choices: only one answer is valid.

A B C D

1

2

3

4

5

6

7

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9

10





Group I (10 points)

CASE Samsonite's Global Supply Chain

The Samsonite Story

Samsonite, the world's biggest luggage maker, is a U.S.-based company that manufactures

and distributes luggage all over the world. The company was founded in 1910 in Denver, Colorado,

and it took many years for it to become a global company. In 1963, Samsonite set up its first European

operation in the Netherlands and later, in 1965, began production in Belgium. Shortly thereafter, it

erected a joint-venture plant in Mexico to service the growing but highly protected Mexican market. By

the end of the 1960s, Samsonite was manufacturing luggage in Spain and Japan as well. In addition

to its manufacturing operations, Samsonite was selling luggage worldwide through a variety of

distributors.

In the 1970s, business began to take off in Europe. In 1974, Samsonite developed its first real

European product, called the Prestige Attaché, and business began to expand in Italy, causing the

country to rival Germany as Samsonite's biggest market in Europe. Although the U.S. market began to

turn to soft-side luggage in the 1980s, the European market still demanded hard-side luggage, so

Samsonite developed a new hard-side suitcase for Europe called the Oyster case. At that point, soft-

side luggage began to increase in importance, although Europe was still considered a hard-side

market. In the 1980s, Samsonite opened a new plant in France to manufacture the Prestige Attaché

and other key products.

With the fall of the Iron Curtain in the early 1990s, Samsonite purchased a Hungarian luggage

manufacturer and began to expand throughout Eastern Europe. During this same time period,

Samsonite established several joint-venture companies throughout Asia, including China, to extend its

reach there.

Strategies for the 1990s

The Quality Initiative

To establish products of high quality, Samsonite embarked on two different programs. The

first was an internal program in which Samsonite conducted drop, tumble, wheel, and handle tests to

determine if its products were strong enough and of sufficient quality for customers. The second was

composed of two different, independent quality-assurance tests:

• The European-based ISO 9002 certification

• The GS Mark, which is the number-one government-regulated third-party product test mark

(similar to brand) of Germany

The GS Mark, Gepruefte Sicherheit (translated "Tested for Safety"), is designed to help

companies comply with European product liability laws as well as other areas of quality and safety. To

enhance quality, Samsonite introduced state-of-the-art CAD-CAM machinery in its plants. Samsonite

also introduced a manufacturing technique in which autonomous cells of about a dozen employees

assembled a product from start to finish.





As you can see in Exhibit 1, Samsonite has three company-owned production facilities and

two headquarters offices in Europe. In addition, it has subsidiaries, joint ventures, retail franchises,

distributors, and agents set up to service the European market. Although Samsonite initially serviced

the European markets through exports, the transportation costs were high, and the demand for

luggage soared in Europe, so Samsonite decided to begin production in Belgium in 1965.

Exhibit 1: Where Samsonite Operates in Europe

The products that Samsonite sells in Europe are made at production facilities located in Europe. Six of these

facilities are company owned, and one is a joint venture. In order to serve its European market the company also

maintains subsidiaries and retail outlets and deals with distributors and agents.

Supply-Chain Decentralization

In the early years, Samsonite had a decentralized supply chain, as illustrated in Exhibit 2,

whereby it operated through different wholesale layers before it finally got the product to the retailers.

As Samsonite's business grew, management decided to centralize its supply chain so that

products were manufactured and shipped to a central European warehouse, which then directly

supplied retailers upon request (see Exhibit 3). This centralized structure was put into place to

eliminate the need to rely on wholesalers.





Samsonite had to worry about transporting manufactured products to the warehouse, storing

them, and transporting them to the retailers in the different European markets. The company invested

heavily in information technology to link the retailers to the warehouse and thereby manage its

European distribution system more effectively. Retailers would place an order with a salesperson or

the local Samsonite office in their area, and the order would be transmitted to the warehouse and

shipping company by modem.

The retail market in Europe began shifting at the turn of the new century, so Samsonite

responded by opening franchised retail outlets in October 2002, beginning in Antwerp and spreading

to other areas. As the vice president of marketing and sales put it, "We are anticipating ashift in the

market, in which the traditional luggage channel will no longer be at the forefront and a wide new retail

opportunity will emerge."

Exhibit 2: The Samsonite European Supply Chain (I): Decentralized, 1965-1974

For about a decade after it had first penetrated the European market, Samsonite shipped products from factories

to factory warehouses and then to national warehouses. From there, products went to wholesalers and, at long

last, to retailers. Needless to say, the system was cumbersome, lengthening the factory-to-retailer process and

bumping up costs at every step of the way.

Source: F. De Beule and D. Van Den Bulcke, "The International Supply Chain Management of Samsonite:' Europe," Discussion

Paper No 1998/E/34 (Centre for International Management and Development, University of Antwerp, 1998): 13.





Exhibit 3: The Samsonite European Supply Chain (II): Centralized, 1975-Mid-1980s

In the mid-1970s, Samsonite decided to streamline the cumbersome supply chain illustrated in Exhibit 2. For the

next decade or so, the company shipped products from factories to a central European warehouse, which then

shipped them, upon request, to retailers located across the continent.

Source: F. De Beule and D. Van Den Bulcke, “The International Supply Chilin Management of Samsonite Europe." Discussion

Paper No. 1998/E/34 (Centre for International Management and Development, University of Antwerp, 1998): 14.

R&D and Product Innovation

As noted earlier, Samsonite sold two basic types of suitcases: hard side and soft side. Most of

the R&D was initially done in the United States, but the need to develop products for the European

market led the company to establish R&D facilities in Europe. Samsonite invested heavily in R&D and

in the manufacture of specialized machinery to help keep a competitive edge. To facilitate the

transportation and storage of suitcases, Samsonite located its production facilities close to the

centralized warehouse.

Soft-side luggage is less complex technologically than hard side, and Samsonite purchased

Oda, the Belgium soft-side luggage company, to enter that market. Then it licensed its technology to

other European companies. By the mid-1990s, 48 percent of Samsonite's sales came from hard-side

luggage, 22 percent from soft side, and 30 percent from attaché cases and travel bags, some of which

were hard side and some soft side. However, by fiscal 2000, soft-side luggage comprised 51 percent

of European sales. In 2001 and 2002, sales of soft-side luggage continued to increase as a

percentage, and hard-side luggage sales declined.





Outsourcing

As Samsonite expanded throughout the world, it continued to manufacture its own products

and license production to other manufacturers. Then Samsonite entered into subcontract

arrangements in Asia and Eastern Europe. In Europe, the subcontractors provide final goods as well

as the subassemblies used in Samsonite factories. The trend to outsource more and more of its

production has been steadily increasing. By 2007, Samsonite had shut down several of its plants in

Europe and decreased internal manufacturing of soft-side luggage from 23 percent in 2004 to just 10

percent in 2007. Although it still produces the majority of its hard-side luggage internally, the company

now sources 90 percent of its soft-side luggage from third-party manufacturers to consolidate its

manufacturing capacities and to achieve cost savings. Exhibit 4 illustrates Samsonite's coordination

of outsourced parts and finished goods, along with its own production.

Exhibit 4: The Samsonite European Supply Chain (III): Globalized, 1996-Present

As it expanded production throughout Europe, Samsonite was soon obliged to establish arrangements with

subcontractors (who provided both final products and subassemblies). Because the company now had to

coordinate outsourced goods and parts in addition to production from its own factories, it reconfigured its supply

chain once again: Today, all products and parts, whether company produced or outsourced, go to a central

European warehouse and, from there, straight to retailers.

Source: F. De Beule and D. Van Den Bulcke. "The International Supply Chain Management of Samsonite Europe,". Discussion

Paper No. 1998/E/34 (Centre for International Management and Development, University of Antwerp, 1998): 21.





The Future of Samsonite

The slowdown in international travel and consumer spending in 2008 to 2009 nearly drove

Samsonite under. It is owned by private equity firm CVC, and a deal between CVC and Royal Bank of

Scotland injected enough cash in the business to save the company. CVC's goal is to push Samsonite

more aggressively into Asia, where a growing middle class loves to travel. More than half of

Samsonite's sales are generated outside the United States, and the emerging markets appear to be

the wave of the future. One approach Samsonite is taking is to enter into strategic joint ventures to

distribute its products internationally. The company signed an agreement with Turkish firm Desa and

Philippine company Rustan Group to penetrate those markets. In addition, it has other joint-venture

arrangements in Thailand, Australia, and Chile that will help with its expansion in those countries. Of

course, Samsonite will have to figure out how to organize its supply chain, as it did in Europe, but in a

larger, more complex international environment. However, the experience in Europe should help the

company as it establishes its supply chain worldwide.■

QUESTIONS 1. Market expansion in individual countries, especially when the demand in those countries

becomes significant might conduct companies to implement what kind of manufacturing strategy? Give examples of what Samsonite has done in terms of manufacturing configuration.

2. Once the company determines the manufacturing configuration it will use, it must adopt a

control system to ensure that company strategies are carried out. Describe what Samsonite has done about this matter and how Electronic Data Interchange and company-specific standards has contributed to it.

Read the case and answer the above questions. Please write your answer in page 1. Use only the lines available.





Group II

(10 points) Multiple choices: only one answer is valid.

Please write your answer in page 2. 1) Host country losses due to FDI include ________.

A) the transfer of capital and technology B) enhanced capacity or capability of existing companies C) loss of management experience and process technologies D) displacement of local entrepreneurs

2) Assume that two countries can increase their combined output through specialization and trade.

The two are most apt to do so if each perceives it will ________. A) be satisfied with the share of increased output it receives relative to what the trading partner

receives even though their shares may be unequal B) receive some share of the increased output C) exchange low-value production for high-value production D) reduce unemployment through trade

3) Terms of trade refers to ________.

A) the quantity of imports that a given quantity of a country's exports can buy B) specific requirements placed on imports at the port of entry C) terms agreed upon by two countries to regulate bilateral trade between them D) a statement of accounts showing the sum of imports and exports for a country during a specified

period of time, usually one year 4) The goal of a ________ is to abolish all tariffs among member countries.

A) customs union B) common market C) free trade agreement D) common internal tariff

5) Which of the following is NOT among the five forces in the Five-Forces Model of Industry Structure?

A) Governments B) buyers C) potential new entrants D) suppliers of raw materials





6) In which of the following situations would tax rate differences among countries likely be most important for deciding where to place an investment? A) Companies find advantages in being located near specialized private and public institutions. B) Companies are faced with a comparison of whether to use labor- versus capital-intensive

production technologies. C) Companies wish to serve an entire region within a regional trading bloc. D) Companies must deal with difficult regulations for starting and closing their business.

7) Increasingly, we see newly formed companies begin exporting sooner in their life cycle, led by a

new generation of entrepreneurs and managers with a keen awareness of export opportunities. These sorts of firms are generally referred to as ________. A) first-stage exporters B) geocentrics C) born globals D) geo-expos

8) A company that makes a foreign investment largely to acquire knowledge is most likely to use

________ as a means of expansion. A) a greenfield investment B) internalization C) an acquisition D) a licensing agreement

9) The ________ the level of the company at which managers make decisions, the more that

organization is ________. A) higher; decentralized B) lower; centralized C) higher; centralized D) higher; unstructured

10) Natives of the country where an overseas subsidiary is located are ________.

A) expatriates B) locals C) third-country nationals D) home-country nationals





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