This report analyzes and discusses the business process of Inteva Products, including their logistics and distribution systems, inventory management, and financial and operational performances. It also provides recommendations for improvement and advancement in their operational and financial activities.
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Running head: OPERATIONS AND SUPPLY CHAIN MANAGEMENT Operations and Supply Chain Management Name of the Student: Name of the University: Author’s Note:
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1OPERATIONS AND SUPPLY CHAIN MANAGEMENT Executive Summary: This report is prepared to analyze and discuss about the business process of Inteva Products. Inteva Products is having diverse products and services range and they are having the core competencies in the research and development activities. In this report, their business process, logistics and distribution systems, inventory management and their financial and operational performances have been reviewed and analyzed with the help of the data available in their annual reports and corporate publications. The Inteva Products is a multinational company having their presence in more than 30 countries. They are known for their quality and the innovative and advanced products and service offerings. In this report, all those core competencies of the company have been analyzed and the reasons behind their long-term success have been outlined. In recent years, they have established a business unit in Romania. In this report, the future prospects and profitability for those newly established business units have been forecasted with thehelpofsomeavailablehistoricaldata.Lastly,thereportconcludedwithsome recommendation and suggestions to the company for improvement and advancement in their operational and financial activities.
2OPERATIONS AND SUPPLY CHAIN MANAGEMENT Table of Contents 1. Introduction:................................................................................................................................3 1.1.Brief Overview of the Company:......................................................................................3 2.Analysis of the current situation and issues faced in respective operational segment:............4 2.1.Process analysis and facilities layout:...............................................................................4 2.2.Logistics and Distribution Systems:.................................................................................5 2.3.Estimation and demand forecasting:.................................................................................8 2.4.Inventory Management:....................................................................................................9 2.5.Distribution and warehousing:........................................................................................10 2.6.Performance Measurement:............................................................................................11 2.7.Quality Management:......................................................................................................12 2.8.Project Management:......................................................................................................14 2.9.Overall business performance analysis:..........................................................................15 3.Key issues faced by the Inteva Products:...............................................................................16 4.Proposal of a new procedure:.................................................................................................17 4.1.Franchise agreements and entering into international market:.......................................17 4.2.Application and implementation of new technologies:...................................................18 5.Justification of the Proposals:.................................................................................................19 6.Conclusions and recommendations:.......................................................................................19
3OPERATIONS AND SUPPLY CHAIN MANAGEMENT 7.References and bibliography:.................................................................................................21 1. Introduction: Business organizations are established with some basic objectives and they set their mission and vision to achieve those objectives. Business organizations always might not be able to achieve this targets but some efficient business strategies can led them towards achieving those mission and vision. Certain efficient business strategies can help the business organization to achieve those mission and vision of the business. In this report, such business strategies of the Inteva Products have been analyzed and presented sequentially. Business process includes variousactivitiessuch asprocurements,manufacturing,warehousing, logistics,sales, and management. If an organization is efficient in all those operations and can manage them efficiently then they can earn a significant amount of profit and can achieve their overall organizational goals. There are two financial objectives, which can be followed by every company. One is the profit maximization and the other is the wealth maximization. Wealth maximization objective is considered more preferable than the profit maximization having its superiority in various aspects. In this report, some of such business process of the Inteva Products have been analyzed and discussed in details for better understanding of the business process of Inteva Products. Based on such analysis some strategies have been suggested for the company for improvement in the business process of the Inteva Products. 1.1.Brief Overview of the Company: Inteva is a global manufacturer and supplier of engineered components and systems for automotive industry. Their core competencies are in the quality of their products and services. Their product line includes the closure systems, interior systems, and motors and electronics for
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4OPERATIONS AND SUPPLY CHAIN MANAGEMENT the automotive industry (intevaproducts.com 2019). They business operations are based on their headquarter at Michigan and having manufacturing and research and development units in 30 countries. They are having more than 100 industrial customers and they are broadening their reach to their customers virtually. They are having a strong base in the research and development and a wide logistics and distribution network. The company started their business in the US with a limited product portfolio and gradually they have expanded their product portfolio and entered into the international market with (intevaproducts.com 2019). They have been experiencing a rapid growth and expanding their business internationally with the establishment of new research and manufacturing units in various locations cross the border. The company develops tailor made products as per the requirements and specifications of the order and it gained a huge customers’ attraction and gave them the initial pace of business and gave them the opportunity to grow up their business. In this report, the operational efficiencies and operational performance have been analyzed in the following paragraphs (intevaproducts.com 2019). 2.Analysis of the current situation and issues faced in respective operational segment: 2.1.Process analysis and facilities layout: Inteva Products is a customer-oriented company who manufactures and sales various engineered products to the automotive companies. They are mainly known for innovation and advancement in their technologies in their products. They have been investing in their research and development activities and continuously striving to develop new and advanced products and services. Therefore, the core competency of the company is its research and development and the innovation in their products and services (intevaproducts.com 2019). Their whole process of the business depends on their research and development activities. They create customized products
5OPERATIONS AND SUPPLY CHAIN MANAGEMENT and develop customized systems for their customers, which will be used as a major component of the automobiles. Major part of their expenses includes the research and development expenses and it is identified as a revenue expenses as each order requires certain identical product developmental works (Rothaermel 2013). The layout of their business activities can be described after considering their nature of activities and business procedures. Their activity starts with the research activities and then the development of the prototype. After testing the prototype of the products and services and after a proper testing and inspection, it is finalized with the customers. After getting approval from the customers and after getting the confirmation about the units required, the manufacturing process starts and lastly it is supplied to the customers within the stipulated time. Complete these process they need advanced and sophisticated research laboratory and manufacturing unit. They are having such research and manufacturing units in 30 countries and they are continuing their product development, manufacturing activities from those units, and supplying products all over the globe (intevaproducts.com 2019). Therefore, it can be concluded that, their manufacturing process are also diversified and decentralized and products are developed and manufactured in the nearest location and supplied to the markets nearby (Rothaermel 2013). 2.2.Logistics and Distribution Systems: Logistics and distribution system is the whole process of procurement and supply of finished products to the customers. It starts with the procurement of the raw materials and ends with the delivery of the finished products to the customers, and all the activities within are included in the logistics and distribution system. The most important part of the logistics and distribution system is making available the raw materials for the production in time and arranging the smoother delivery of the finished products to the customers. Inteva Products is
6OPERATIONS AND SUPPLY CHAIN MANAGEMENT having more than 30 research and development and manufacturing units in 30 different locations (intevaproducts.com 2019). They have decentralized their manufacturing process for various reasons. Decentralization of the manufacturing process helped them to capture a wide market share and to make easy availability of the raw materials. It also helped them to supply the finished goods to the nearest location for easy and timely delivery of the goods and services (Rothaermel 2013). Logistics and Distribution is an important part of the business process, which can make the business profitable by reaching to the maximum possible numbers of customers and procuring required raw materials in time. Inteva Products is a multinational company and having overseas customers. They are having manufacturing units in more than 30 countries and all those 30manufacturingunitscaterthenearbymarketswiththeirproductsandservices (intevaproducts.com 2019). The decentralization strategy and entering into new markets and establishment of manufacturing units in various countries helped them to make it possible to reach international market and to supply the products and services to their customers in time with the advanced and innovative products and services features and characteristics (Jenkins and Williamson 2015). The market share in the automotive components manufacturing industry can be presented with the help of the following chart.
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7OPERATIONS AND SUPPLY CHAIN MANAGEMENT From the above graph, it can be observed that, the Inteva Products is having almost 15% of the total market share in US in automotive components manufacturing industry. The company was established in the year 2007 and it gained a huge market share and a good response from the market within these 11 years because of their products features and advance technology. Their efficient logistics and distribution strategies helped them to develop and supply tailor made products as per their customers’ requirements. Further, it can be commented that they need to enter into tie-ups and franchise agreements with the regional business organizations to reach out to the more international markets and to reach out to the more number of customers possible. They need to diversify their product portfolio so that a wide range of the customers’ needs can be fulfilled and the business volume could be expanded (Jenkins and Williamson 2015).
8OPERATIONS AND SUPPLY CHAIN MANAGEMENT 2.3.Estimation and demand forecasting: The Inteva Products have been expanding their business operation to various countries and establishing new manufacturing units with new and innovative products in various countries. They have recently established new manufacturing units in Romania with the same product portfolio. They have marked a significant sales growth in their domestic market and it is expected to have a same response in the Romanian Automotive market as well. Over the last couple of years they have experienced an exceptional growth of 300% in their sales and with the introductions of few new products and with the entry to the electrical and electronics industry they expect a more growth rate in their sales (intevaproducts.com 2019). They have started manufacturing and supply of solar panels and solar powered electrical systems, which will definitely draw an attention of their customers and could create a huge demand as the same industry is still unexplored properly. Therefore, it can be expected and commented that the Inteva Products is having a good market share as compared to their competitors and can gain more market share if they strategically map up their products and services offerings (Arora and Taylor 2016). Therefore, a huge demand potential can be projected for the products of the Inteva Products if they can come up with some innovative and advanced products and with a diversified product portfolio (Jenkins and Williamson 2015). Based on the historical data a lay out for the future sales and expenses can be provided in the following table.
9OPERATIONS AND SUPPLY CHAIN MANAGEMENT Table 1: Projected Income Statement of Inteva Products FY18FY19FY20FY21FY22 Sales$60,380$72,209$1,09,981$1,13,426$93,054 Costofgoodssold$58,798$66,376$99,481$1,01,730$83,204 Materials$ 46,098$ 52,387$77,796$78,627$ 63,551 Material cost$44,150$50,279$74,666$75,464$60,982 Total freight$1,948$2,108$3,130$3,163$2,569 Manufacturing and indirect costs$ 10,994$ 11,849$19,197$20,590$ 17,283 Direct labor$3,606$3,744$5,987$6,422$5,427 Total burden$7,389$8,105$13,209$14,168$11,856 Plant engineering$365$529$667$678$617 Depreciation and amortization$1,341$1,610$1,821$1,835$1,753 Grossprofit$1,582$5,833$10,500$11,695$9,851 Totaloperatingexpenses$1,230$1,569$1,815$1,832$1,734 Corporate engineering department expense$444$665$770$777$735 Corporate selling, general, and administrative$279$355$411$415$392 Plant selling, general, and administrative$508$549$635$641$606 Operatingincome$352$4,264$8,685$9,863$8,117 2.4.Inventory Management: Inventory is the stock of raw materials as well as the stock of finished goods. Raw materials are the main components, which are required for manufacturing of goods. Availability of the raw materials in time helps in efficient and smoother manufacturing process. If the raw materialsaresuppliedtothemanufacturingunitsasandwhenitisneeded,thenthe manufacturing process does not get hampered and it can be completed in time and supplied to the customer in time. On the other hand, stacking of the finished goods is one more aspect of the inventory. Adequate amount of finished goods must be warehoused properly to meet the expected demand and to supply the materials to the customers as and when demanded by them. Inventory management is nothing but the efficient management of such raw materials and finished goods (Rushton, Croucher and Baker 2014). The function of the inventory management
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10OPERATIONS AND SUPPLY CHAIN MANAGEMENT includes procurement of required units of raw materials with good quality and in economic quantity and warehousing the required units of the finished goods to meet the market demand in time. The most important aspect of the inventory management is to make the overall cost of inventory to the lowest possible. In doing so, the cost of purchasing the inventory and the carrying cost of the inventory need to be considered. Raw materials should be procured and warehoused in such a quantity, which will make the total inventory costs to the minimum possible without hampering the manufacturing process (Jenkins and Williamson 2015). Inteva Products are having decentralized manufacturing units and they have decentralized their inventory system. They procure the raw materials from the regional markets and warehouse them in the regional warehouse to supply it to the nearest manufacturing units. They manufacture the products and warehouse them in the regional warehouse to supply it to the regional markets. The decentralized inventory system gives two benefits, one is the savings in transportation costs and another is the reach to the wider market for procurement of the raw materials. They are having such an inventory management system, which helped them to meet all the production requirements and to supply finished products to their customers in time. It also helped them to make a significant amount of cost savings and a wider access to the regional markets for procurement and supplies. Lastly, it can be commented that, still there are some chances of improvement in the inventory management so that the products can be delivered to the locations and a wide market with a minimum time constraint (Rushton, Croucher and Baker 2014). 2.5.Distribution and warehousing: Distribution and warehousing is the process of warehousing the products after it is manufactured and timely delivery of the products to the regional distributors and the retailers of the regional markets. Distribution and warehousing are the main tow activities of the logistics
11OPERATIONS AND SUPPLY CHAIN MANAGEMENT and distribution system. Warehousing refers to the safe storage of the materials and the distribution is known as the supply of materials to the distributors and customers in time when there is a demand in the market (Rushton, Croucher and Baker 2014). The Inteva Products is having regional warehouses for storage of their raw materials and finished goods and they have so many tie-ups with some logistics companies to deliver their products to the regional wholesalers and retailers. As it has already been discussed that they have a decentralized warehousing system and the regional warehouses procures raw materials from the regional markets and caters the inputs to the nearby manufacturing units. The manufactured products are stored in the regional warehouses and supplied to the nearby markets. Though they have a strong distribution network, still it can be improved and more remote markets can be reached with the tie-ups and franchise agreements with some regional delivery and logistics companies. If those strategies can be adopted then the company can broaden their distribution network and reach out to more remote and convenient market and can have a large customer base as well (Rushton, Croucher and Baker 2014). 2.6.Performance Measurement: The Inteva Products has been established in the year 2007 with the intention of making innovative and advanced products with advanced features in the automotive industry. They had started their business according to their plan, invested a huge amount in their research and development activities, and invented various advanced and high-tech automotive parts and components, which attracted the interest of the automobile manufacturers and created a huge demand in a very short period (Cappelli and Tavis 2016). They had started their business in the US only thereafter with the increase in the demand for their products in the international markets they had started supplying their products internationally. In doing so, they faced various
12OPERATIONS AND SUPPLY CHAIN MANAGEMENT difficulties, one of the most important challenges to them was the difference in technologies and infrastructures in the countries, for example, the electricity frequency in the countries are not the same in all the countries. Hence, they need to develop and manufacture such products, which will be matching with the technologies and infrastructure of the respective country. To counter those challenges and to develop such products, which will meet the demand of the regional customers, they have established research and development units in those countries and started manufacturing in those locations. This strategy helped them significantly and they made it possible to capture a huge market share within a few years. With the manufacturing and supplying of advanced and quality products and with timely delivery of the tailor made products and services they have achieved the success, broadened their business operation, and expanded their business units globally (Cappelli and Tavis 2016). 2.7.Quality Management: Quality denotes the qualitative characteristics of a particular product or service. To make a product successful the quality of the product must be ensured. It helps in attracting the customer and in creating a huge market for the product. If the quality of the product and services are maintained at a good level, then the customer becomes more loyal to the company and stick to the company for their needs of the same products and services. On the other hand, if the quality of the products and services degrades, then the customers become unsatisfied with the products and services and switch to the other brands and companies’ products or services. The quality of the product and services help in building up of a brand and brand name, for example apple is known for a good personal computer. With the highest quality, they have created a brand and the apple brand name is enough to explain the quality of their products (Goetsch and Davis 2014).
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13OPERATIONS AND SUPPLY CHAIN MANAGEMENT In the same way, the Inteva Products are also trying to achieve the success and they are trying to create a brand in the respective industry. Quality of products and services can be maintained and improved through continuous research and developmental activities and up gradation to the existing products and services. They must always strive to improve the quality of their products and services with such research and developmental activities. In this context, the Inteva Products are in a good mark. The research and development of the Inteva Products are the bas of their manufacturing activities. They have been developing and manufacturing new and innovative products and services through their research and developmental activities. The research and development are the core competencies for the Inteva Products (Goetsch and Davis 2014). The other aspect of the quality management is to reduce the wastage and to ensure the optimum and efficient use of their resources and facilities. They need to utilize their capacities and capabilities to its fuller level and they need to enhance the quality and usefulness of their productsandservices(GoetschandDavis2014).Thequalitymanagementincludesthe improvement in the qualitative features of the products and services. The quality must be retained or maintained to the same level for all the products and services. To ensure that, every company has a separate department known as the quality control and inspection, they always inspectthemanufacturedproductsonsamplebasis.Afterinspectingthesampleofthe manufactured products and after confirming the quality of the manufactured goods with the standards, they approve it for selling it commercially. Therefore, the ultimate quality of the products and services depends on the efficiency in manufacturing process and the testing and process of the quality control and inspection department. They Inteva Products have both these
14OPERATIONS AND SUPPLY CHAIN MANAGEMENT units and both of them are efficient enough to ensure and maintain the quality of their products and services (Goetsch and Davis 2014). 2.8.Project Management: Every business organization needs to expand their business operation through extension of the product lines and service offerings. Each such expansion and extension requires some new investment and it involves some sunk costs. It requires investment of a significant amount of fund. Therefore, before investing such amount of fund into the expansion project, the cost and benefits of such a project must be analyzed and the feasibility of the investment must be checked (Meredith, Mantel and Shafer 2017). If the feasibility of the project or the investment could be justified then only the project should be adopted and the fund should be invested into the project. The process of finding new business opportunities and analysis of the costs and benefits and finally making the decision about the investment is the process of project management. Behind the success of the business expansion and the profitability of the project, such investment appraisal or the project management is important (Meredith, Mantel and Shafer 2017). It can be observed from the Inteva Products case study, that the company is expanding theirbusinessoperationsandinvestingfundsintonewestablishmentsandresearchand development.Theconducttheresearchanddevelopmentcontinuously,forcreatingand developing new and advanced products or to upgrade the existing products and services. Inteva Products have been successfully establishing new research and developments units and new manufacturing houses in various locations. It can be commented that, due to the correct prediction and efficient project management, most of their new establishments are working successfully and generating profit for the company and serving their customers with their desired products and services. Their project management is efficient enough to manage make appraisal
15OPERATIONS AND SUPPLY CHAIN MANAGEMENT of the new expansion and establishment projects and they have been performing well in this aspect, which reflects in the success of their new projects and growth of their business volume (Meredith, Mantel and Shafer 2017). 2.9.Overall business performance analysis: Every business organizations are established with some basic objectives, which are described by their mission and vision statements. They always formulate such business strategies and plans which will help them to achieve those business objectives and mission and vision. The success of the company is measured by the achievement of those mission and vision, which are set by the company itself. The mission and vision of the company was to develop and manufactureadvancedandhigh-techautomobilecomponents.Thecompanyhavebeen developing and manufacturing advanced car components and high tech electrical systems for the automotive industries. Therefore, they have achieved the objectives and mission of their business organization. With the increase in competition in the market, they have diversified their product portfolio and entered into various international markets by establishing new research units and manufacturing houses. There are two overall objectives of the business, one is the profit maximization and the other is the wealth maximization. The wealth maximization objective is more preferable than the profit maximization as it keeps a balance between the profitability aspects of the business with the stakeholders’ interest aspect. The profit maximization objective can affect the stakeholders’ interest to maximize the profit of the business organization. To maximize the amount of profit, dishonest corporatist might adopt some of such strategies, which would affect the stakeholders’ interest very badly. On the other hand, the wealth maximization strategy requires the company to maximize the value of the business by increasing the wealth of the business organization.
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16OPERATIONS AND SUPPLY CHAIN MANAGEMENT Indirectly it talks about the shareholders’ wealth maximization, which can again be achieved through the maximization of the wealth of the business organization (Meredith, Mantel and Shafer 2017). It can be observed from the case sturdy of the Inteva Products that they are having a wealth maximization objective and they have been implementing their strategies accordingly. Theyhavealwaysgivenimportancetothecustomers.Customersatisfactionandthe development and supply customer oriented products are the prime objective of the Inteva Products. They also take care of the after sales services and support services to their customers after the products are sold. Enjoying the benefits of the wealth maximization strategy, they have been earning a significant amount of profit and experiencing a rapid growth in their business. Therefore, strategically they are efficient enough and with their core competencies in the research and development, they are able to adopt changes in technologies and to have a rapid and sustainable growth in their business. 3.Key issues faced by the Inteva Products: The Inteva Products is a multinational company in the industry of car components manufacturing and supplying. With the highly mechanized and advanced research and developments units and production houses in more than thirty countries, they have been performing well and expanding their business with a rapid growth rate. From the above analysis and discussion, some the key issues, which can be observed, are described follows. With the changes in technologies and advancement in the technologies, the company needs to upgrade their existing products and services. They need to enter into new product
17OPERATIONS AND SUPPLY CHAIN MANAGEMENT segment and need to develop new and innovative products. The Inteva Products are having a very few number of products in their product portfolio (intevaproducts.com 2019). With the revolution in the business, the market is wide and open to all the companies hence worldwide trading and business opportunity is still unutilized (intevaproducts.com 2019). It can be observed that, the Inteva Products are having different product offerings in different countries, which might be because of technological and infrastructural differences in the respective countries but still they can supply their core products in all of those countries, which can give them a cost effectiveness and cost efficiencies (intevaproducts.com 2019). It can be observed that, they are operating through their own research and manufacturing units and even they are selling their products through their own factory outlets. There is a possibility of reaching to the more number of customers and capturing a large market through the franchise and tie-ups with some local and regional small business units in different locations (intevaproducts.com 2019). 4.Proposal of a new procedure: 4.1.Franchise agreements and entering into international market: To solve out the issues faced by the company, it can be suggested that, they should enter into the international market with more updated and advanced products and services offerings. They should develop new products and extend their product lines to compete with their competitors. To grab the opportunity of the wide market, to attract more customers, and to capture more market share they need to go for franchise and tie-ups with the local and regional business units. The most important thing in the technologies industry is the change and
18OPERATIONS AND SUPPLY CHAIN MANAGEMENT innovation, without innovation a business organization in the technologies industry cannot survive for a longer period. Therefore, the Inteva Products need to be more innovative and bring more up gradation and innovations in their products and services 4.2.Application and implementation of new technologies: Technologies are ever changing and subject to improvement and innovation. Their initial objective was to develop and manufacture automobile parts and. Later on, the technologies have been changed and with the advancement in the technologies, they have introduced various innovative products and services into their products and services portfolio. Tests and preferences in the various countries are not the same, it is different in every countries. Moreover, the infrastructure facilities and the technological specifications are not the same in all the countries. Therefore,thecompanyhadtoproducetheirproductsaccordingtothetechnological specifications and the infrastructural facilities in the respective country. A business organization inthetechnologiesindustryneedtoconsiderallthosefactorswhiledevelopingand manufacturing a product commercially (Cappelli and Tavis 2016). Technologies market is changing rapidly and competitors in the same industry are coming up with new and innovative products and services frequently. As and when a company introduces a completely new and innovative product in the market, they enjoy the benefits of early entrants, and can earn a huge amount of profit initially. Gradually, the competitors start to imitate the technology, offers substitute products in the market, and the market again comes to an equilibrium situation. If an organization fails to do that, which means if an organization fails to invent new products or fails to counter the competition of the competitors with some substitute products then they lose the relevancy in the market and at certain point of time, they become bankrupt. The primary objective of the Inteva Products was to develop and manufacture the
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19OPERATIONS AND SUPPLY CHAIN MANAGEMENT motor engine and car electronic systems. They have been doing well with this limited objective and later on with the objective of expansion of business, they have started to develop and manufacture some other products and systems. Recently they have given importance on the renewable energy and related products. They have developed various small and big solar energy generation systems and started manufacturing it commercially and supplying it worldwide. It can also be observed that, the companies have started producing various other products such as solar bulbs and some electrical components, which will be used in industrial purposes. 5.Justification of the Proposals: If the company expands their business units to more countries as there is increasing demand in the market for their products, a little bit more innovation and expansion of their business in new and international market can help them to achieve a success and to have a sustainable growth for a long term. Though the Inteva Products is manufacturing diversified products and offering wide range of services to their customers, there are still some chances of or more diversifications and production of new and more innovative products. To keep the same pace with the changes in technologies and advancement in business, they need to become more innovative and create more advanced and developed products with their research and developments activities. 6.Conclusions and recommendations: From the above discussion and analysis, it can be concluded that, every business organization should follow certain business strategies to achieve their mission, vision and overall business objectives. The Inteva Products is also having certain efficient business strategies, which helped
20OPERATIONS AND SUPPLY CHAIN MANAGEMENT them to attract huge customers in the international market and to earn a significant amount of profit over the last couple of years. The company is achieving their targets and objectives and successfullyexpandingtheirbusinessinternationallywiththepresenceinmorethan30 countries. The company could have gained more market share and can lead the respective industry if they go for tie-ups and franchise agreements with the local and regional small business units in the same industry.
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