Professional Documents
Culture Documents
Business
9e
By Charles W.L. Hill
McGraw-Hill/Irwin
Chapter 17
Global Production,
Outsourcing, and
Logistics
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17-5
17-7
Where Should
Production Be Located?
Firms should locate production so that
production and logistics can be locally
responsive
production and logistics can respond quickly
to shifts in customer demand
Why Are
Country Factors
Important?
Manufacturing
should be located where
economic, political, and cultural conditions are
most conducive to the performance of that
activity
create a global web of activities
global concentrations of activities at certain locations
17-9
Why Are
Country Factors
Firms shouldImportant?
consider
the availability of skilled labor and supporting
industries
formal and informal trade barriers
expectations about future exchange rate changes
transportation costs
regulations affecting FDI
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17-11
17-12
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17-15
17-16
17-18
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Should A Firm
Outsource Production?
Question: Should a firm make or buy the
component parts to go into its final
product?
Make-or-buy decisions are important to
firms' manufacturing strategies
service firms also face make-or-buy decisions
decisions involving international markets are
more complex than those involving domestic
markets
17-20
Why Make?
Vertical integration - making component parts
in-house
1. Lowers costs
if a firm is more efficient at that production activity
than any other enterprise, manufacturing in-house
makes sense
Why Make?
3. Protects proprietary technology
in-house production makes sense when
component parts contain proprietary
technology
Why Buy?
Buying component parts from
independent suppliers
1. Gives the firm greater flexibility
important when changes in exchange rates
and trade barriers alter the attractiveness of
various supply sources over time
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Why Buy?
2. Helps drive down the firm's cost structure
avoids challenges of coordination and control of
additional subunits
avoids the lack of incentive associated with internal
suppliers
avoids the difficulties with setting appropriate
transfer prices
17-24
Do Strategic Alliances
With Suppliers Make
Sense?
Firms can capture the benefits of vertical
integration without the associated
organizational problems by forming longterm strategic alliances with key suppliers
however, these commitments may actually
limit strategic flexibility
risk giving away key technological know-how
to a supplier
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