What are the pros and cons of (a) manufacturing the component in-house and (b) outsourcing manufacturing to an independent supplier?

Discussion Board Scenario: You work as an analyst in the planning unit of a firm with international operations. From time to time, you might be called to a meeting to discuss certain aspects of international business. As you state your responses to each of the Discussion Board questions, assume that you are in a formal, management discussion. Your manager has asked that you state your sources when citing facts or important concepts, for good order.

Question 1A): Your firm’s Christmas tree division in Oregon wants to export a shipload of finished lumber to the Philippines. The would-be importer cannot get sufficient credit from domestic sources to pay for the shipment but insists that the finished lumber can quickly be resold in the Philippines for a profit. You are being asked to outline the options the division can consider making this export happen. And if you suggest a particular option, you will have to outline the steps to effect the export to the Philippines.

Question 1B): Your firm must decide whether to make a component part in-house or to contract it out to an independent supplier. Manufacturing the part requires a non-recoverable investment in specialized assets. The most efficient suppliers are located in countries with currencies that many foreign exchange analysts expect to appreciate substantially over the next decade. What are the pros and cons of (a) manufacturing the component in-house and (b) outsourcing manufacturing to an independent supplier? Which option would you recommend? Why?

Question 1C): You are part of a group discussion where you are asked to watch at least the first portion of the video below, and pay particular attention to how and where a t-shirt and a computer are made. Some have argued that the fact that only a small portion (think much less than 50%) of the value associated with the manufacturing of a product goes to U.S. companies is a sign of the decline of American competitiveness. Do you agree with this assessment?

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