12 - Chap016
Short Description
International Business...
Description
Chapter 16 - Global Production, Outsourcing, and Logistics
Chapter 16 Global Production, Outsourcing, and Logistics True / False Questions
1. Production denotes both service and manufacturing activities. True alse
!. "fficient suppl# chain management reduces the amount of inventor# in the s#stem and decreases the inventor# turnover. True alse
$. The firm that improves %ualit# control &ill also reduce its costs of value creation. True alse
'. ( firm can lo&er costs b# dispersing production to locations around the globe &here each activit# can be performed most efficientl#. efficientl#. True alse
). The principle tool that most managers no& no & use to increase the reliabilit# of their product offering is T*+. True alse
6. The T*+ philosoph# &as first adopted b# the (merican companies True alse
. ( statisticall# based philosoph# that aims to reduce defects, boost productivit#, productivit#, eliminate &aste, and cut costs throughout a compan# is no&n as /O 0. True alse
16-1
Chapter 16 - Global Production, Outsourcing, and Logistics
2. "uropean 3nion firms must compl# &ith /O 0 standards in their manufacturing processes and products before the# &ill be given access to the "uropean 3nion maret. True alse
0. Countr# factors, technological factors, and product factors, all influence the decision of &here to produce. True alse
1. 4hen a currenc# depreciates, a lo&-cost location can be turned into a high-cost location. True alse
11. ( relativel# relativel# high level of fi5ed costs can mae it uneconomical to perform a particular activit# in several locations at once. True alse
1!. The level of output at &hich most plant-level scale economies are e5hau sted is referred to as the minimum efficient scale of output. True alse
1$. (s a plant output e5pands, unit costs decrease. True alse
1'. The smaller the minimum efficient scale of a plant relative to total global demand, the greater the argument for centraliing production in a single location or a limited number of locations. True alse
16-!
Chapter 16 - Global Production, Outsourcing, and Logistics
2. "uropean 3nion firms must compl# &ith /O 0 standards in their manufacturing processes and products before the# &ill be given access to the "uropean 3nion maret. True alse
0. Countr# factors, technological factors, and product factors, all influence the decision of &here to produce. True alse
1. 4hen a currenc# depreciates, a lo&-cost location can be turned into a high-cost location. True alse
11. ( relativel# relativel# high level of fi5ed costs can mae it uneconomical to perform a particular activit# in several locations at once. True alse
1!. The level of output at &hich most plant-level scale economies are e5hau sted is referred to as the minimum efficient scale of output. True alse
1$. (s a plant output e5pands, unit costs decrease. True alse
1'. The smaller the minimum efficient scale of a plant relative to total global demand, the greater the argument for centraliing production in a single location or a limited number of locations. True alse
16-!
Chapter 16 - Global Production, Outsourcing, and Logistics
1). Producing greater product variet# from a factor# implies longer production runs. True
alse
16. Lean production is another term for fle5ible manufacturing technolog#. True alse
1. +ass customiation describes the abilit# of companies to use fle5ible manufacturing technolog# to reconcile lo& cost and product customiation. True alse
12. ( grouping of various t#pes of machiner#, a common materials handler, and a centralied cell controller is a fle5ible machine cell. True alse
10. le5ible manufacturing technologies can help a firm improve efficienc#, lo&er costs, and customie products to small marets. True alse
!. ( product7s value-to-&eight ratio affects the firm7s transportation costs. True alse
!1. 8ecause of the lo& value-to &eight ratio of man# pharmaceutical and electronics products, there is great pressure to produce these products in the optimal location location and serve the &orld from there. True alse
16-$
Chapter 16 - Global Production, Outsourcing, and Logistics
!!. Concentrating production at an optimal location is more attractive &hen a product serves universal needs. True alse
!$. Concentration of production maes most sense &hen trade barriers are high. True alse
!'. 9ecentraliation of production is appropriate &hen the product serves universal needs. True alse
!). 9ecentraliation of production is appropriate &hen the product7s value-to-&eight is lo&. True alse
!6. ( ma:or aspect of a transnational strateg# is a belief in the idea that valuable no&ledge does not reside :ust in a firm7s domestic operations. True alse
!. The mae-or-bu# decision involves deciding &hether a firm should mae or bu# the component parts that go into the final product. True alse
!2. ;istoricall#, most outsourcing decisions have involved the manufacture of service products. True alse
!0. Outsourcing decisions pose plent# of problems for international bu sinesses but even more problems for purel# domestic businesses. True alse
16-'
Chapter 16 - Global Production, Outsourcing, and Logistics
$. ( firm that has integrated horiontall# is maing all or part of a product in-house. True alse
$1. 4hen one firm invests in specialied assets to suppl# another, mutual dependenc# is created. True alse
$!. 4hen substantial investments in specialied assets are re%uired to manufacture a component, the firm &ill prefer to contract it out to a supplier. True alse
$$. The greatest advantage of bu#ing component parts from independent suppliers is that the firm can maintain its strategic fle5ibilit#. True alse
$'. 4hen political ris is high, sourcing products from independ ent suppliers can be advantageous. True alse
$). ncentive problems that occur &ith indepen dent suppliers do not arise &ith internal suppliers. True alse
$6. ssues of strategic fle5ibilit# and organiational control are greater for purel# domestic businesses than for international ones. True alse
16-)
Chapter 16 - Global Production, Outsourcing, and Logistics
$. /trategic alliances can effectivel# limit a firm7s strategic fle5ibilit#. True alse
$2. ( C(9>>>> is the activit# that controls the transportation of ph#sical materials through the value chain, from procurement through production and into distribution. (. Outsourcing 8. Production C. Logistics 9. 9istribution
'!. >>>>> is a management philosoph# according to &hich mistaes, defects, and poor-%ualit# materials are not acceptable and should be eliminated. (. /cientific management 8. Total %ualit# management C. /O 0 9. Lean manufacturing
16-6
Chapter 16 - Global Production, Outsourcing, and Logistics
'$. The /i5 /igma methodolog#? (. is a direct descendant of the total %ualit# management philosoph#. 8. is a direct descendant of benchmaring. C. &as adopted first b# 8ritish companies and then =apanese companies during the 102s. 9. &as developed b# 9eming, =uran, and eigenbaum.
''. /aving time b# not producing poor-%ualit# products that cannot be sold, lo&ering re&or costs, lo&ering scrap costs, and lo&ering &arrant# costs are the intended results of? (. total feature management. 8. reengineering. C. logistics. 9. total %ualit# management.
'). 8efore a firm is allo&ed access to the "uropean maretplace, the "uropean 3nion re%uires that the %ualit# of the firm7s manufacturing processes and products be certified under a %ualit# standard no&n as? (. total %ualit# management. 8. reengineering. C. %ualit# management s#stem. 9. /O 0.
'6. The modern successor to T*+ is? (. Corporate *ualit# Commitment. 8. /O 0. C. *ualit# Process @ealied. 9. /i5 /igma.
'. (t si5 sigma, a production process &ould be 00.00066 percent accurate, creating :ust >>>>>. (. $.' defects per hundred thousand units 8. $.' defects per million units C. $' defects per million units 9. 6.2 defects per million units
16-
Chapter 16 - Global Production, Outsourcing, and Logistics
'2. 4hich of the follo&ing statements about /i5 / igma is trueA (. t is a statisticall# based philosoph#. 8. t is easil# possible for a compan# to achieve /i5 /igma perfection. C. (t si5 sigma, a production process &ill have 66 defects per million units. 9. (t si5 sigma, a production process &ould be 1 percent accurate.
'0. actors that help a firm decide &here to locate its manufacturing facilities can be b est grouped under three broad headings. These are? (. political factors, social factors, and legal factors. 8. countr# factors, technological factors, and product factors. C. product factors, service factors, and labor factors. 9. language factors, cultural factors, and transportation factors.
). The creation of a global &eb of value creation activities is the result of? (. location economies. 8. diseconomies of scale. C. shortage of silled labor. 9. informal trade barriers.
)1. dentif# the incorrect statement pertaining to e5change rate movements. (. (dverse changes in e5change rates can %uicl# alter a countr#7s attractiveness as a manufacturing base. 8. Currenc# appreciation can transform a lo&-cost location into a high-cost location. C. Currenc# appreciation can cause firms to move their manufacturing offshore to lo&er-cost locations. 9. ( lo&-cost location can be transformed into a high-cost location because of currenc# depreciation.
)!. 8eing too dependent on one location is particularl# ris# because of? (. floating e5change rates. 8. fi5ed e5change rates. C. lac of movement in currencies. 9. static e5change rates.
16-2
Chapter 16 - Global Production, Outsourcing, and Logistics
)$. (ccording to the concept of economies of scale? (. as plant output reduces, unit costs decrease. 8. as plant output e5pands, unit costs increase. C. as plant output reduces, unit costs remain static. 9. as plant output e5pands, unit costs decrease.
)'. dentif# an advantage of a lo& minimum efficient scale. (. (llo&s the firm to accommodate demands for local responsiveness 8. 9iscounts currenc# ris b# manufacturing all products in one location C. ;elps eep overheads lo& at the e5pense of fi5ed costs 9. ;elps a firm to standardie its products for all marets
)). ( compan# that &ants to reduce set-up time for comple5 e%uipment, increase the utiliation of individual machines through better scheduling, and improve %ualit# control at all stages of the manufacturing process should adopt? (. standardiation. 8. diseconomies of scale. C. fle5ible machine technolog#. 9. minimum efficient scale.
)6. The term >>>>> has been coined to describe the abilit# of companies to use fle5ible manufacturing technolog# to reconcile the goals of lo& cost and product customiation. (. assembl#-line-lie customiation 8. economies of customiation C. mass customiation 9. standardied customiation
). le5ible manufacturing technolog# is also no&n as? (. mass customiation. 8. lean production. C. fle5ible machine cells. 9. minimum efficient scale.
16-0
Chapter 16 - Global Production, Outsourcing, and Logistics
)2. (ccording to the concept of economies of scale &hat is the best &a# to achieve high efficienc# and lo& unit costsA (. Customiing products for each individual maret 8. +ass producing standardied outputs C. Concentrating on production of small volumes of products 9. ncreasing the product variet# dramaticall#
)0Bchoose. This allo&s the compan# to produce a &ider variet# of end products at a unit cost that at one time could be achieved onl# through the mass production of a standardied output. (. Daien 8. /i5 /igma C. Lean production 9. T*+
6. >>>>> challenged the notion that the &a# to increase efficienc# and drive do&n unit costs is to limit product variet# and produce a standardied product in large volumes. (. 8artlett and Ghoshal7s theor# of a transnational compan# 8. +inimum efficient scale C. "conomies of scale 9. le5ible manufacturing technolog#
61. ( >>>>> is a grouping of various t#pes of machiner#, a common materials handler, and a centralied cell controller. (. fle5ible machine cell 8. mass customiation polic# C. lean production s#stem 9. minimum efficient scale cluster
16-1
Chapter 16 - Global Production, Outsourcing, and Logistics
6!. (ll of the follo&ing are the ma:or efficienc# benefits of fle5ible manufacturing technologies e5cept? (. it enables companies to customie products to the demands of small consumer groups. 8. it helps a compan# achieve mass customiation, &hich increases its customer responsiveness. C. it re%uires firms to establish manufacturing facilities in each ma:or maret to provide products that satisf# specific consumer tastes and preferences. 9. it improves capacit# utiliation and reductions in &or in progress and &aste.
6$. 4hen a compan#7s product has a lo& value-to-&eight ratio, the compan# should? (. have a centralied manufacturing location. 8. produce the product in multiple locations close to ma:or marets. C. ignore transportation costs. 9. produce the product in one optimal location and serve the &orld from there.
6'. 4hich of the follo&ing statements about products &ith high value-to-&eight ratios is trueA (. The# are relativel# ine5pensive and &eigh a lot. 8. The# are e5pensive and do not &eigh ver# much. C. Transportation costs usuall# account for a large percentage of their total costs. 9. The# must be produced in multiple locations close to ma:or marets.
6). 4hich of the follo&ing is a characteristic of manufacturing technolog# that should be considered b# a firm contemplating international productionA (. Trade barriers 8. Ealue-to-&eight ratio C. Level of fi5ed costs 9. "5change rates
66. ( compan# might consider decentraliing &hen? (. a product7s value-to-&eight ratio is high. 8. the product serves universal needs. C. trade barriers are lo&. 9. volatilit# in important e5change rates is e5pected.
16-11
Chapter 16 - Global Production, Outsourcing, and Logistics
6. The concentration of production maes most sense &hen? (. volatilit# in important e5change rates is e5pected. 8. the product7s value-to-&eight ratio is high. C. location e5ternalities are not important. 9. trade barriers are high.
62. The concentration of production is favored &hen all of the follo&ing factors are high e5cept (. fi5ed costs. 8. minimum efficient scale. C. value-to-&eight ratio. 9. trade barriers.
60. nitiall#, man# foreign factories are established &here >>>>> are lo&. (. trade barriers 8. inventor# turnover C. mareting costs 9. labor costs
. 9ecisions a firm must mae about &hether to perform a certain value creation activit# themselves, or outsource it to another entit# are best no&n as? (. outsource potential decisions. 8. in-house potential decisions. C. mae-or-bu# decisions. 9. integration decisions.
1. 4hich of the follo&ing is not an argument that supports maing a product in-houseA (. Eertical integration ma# be associated &ith higher costs. 8. Eertical integration ma# protect proprietar# product technolog#. C. Eertical integration ma# facilitate investment in highl# specialied assets. 9. Eertical integration ma# ease the scheduling of ad:acent processes.
16-1!
Chapter 16 - Global Production, Outsourcing, and Logistics
!. ( >>>>> is an asset &hose value is contingent u pon a particular relationship persisting. (. specialied asset 8. common asset C. complementar# asset 9. supplementar# asset
$. ( firm &ill prefer to mae the component internall# rather than contract it out to a supplier, because of all of the follo&ing reasons e5cept? (. it needs to maintain control over its proprietar# technolog#. 8. substantial investments in specialied assets are re%uired to manufacture a co mponent. C. the firm completel# trusts the independent supplier to p la# fair. 9. it runs the ris that suppliers &ill e5propriate the technolog# for their o&n use.
' Bchoose. ;o& can firms attain tight coordination bet&een different stages in the production processA (. 8# using information technolog# 8. 8# lo&ering the costs of value creation C. 8# implementing /O 0 9. 8# minimum efficient scale of output
). 4hich of the follo&ing is not a reason to outsource productionA (. t can give the firm greater fle5ibilit# 8. t can mae planning, coordination, and scheduling of ad:acent processes easier C. t can help drive do&n the firm7s cost structure 9. t ma# help the firm capture orders from international customers
16-1$
Chapter 16 - Global Production, Outsourcing, and Logistics
6. (n advantage of bu#ing component parts, or even an entire product, from independent suppliers is that? (. the firm can maintain its fle5ibilit# of s&itching orders bet&een suppliers as circumstances dictate. 8. it can mae planning, coordination, and scheduling of ad:acent processes easier for the firm. C. it reduces the ris for the firm that suppliers &ill e5propriate the technolog# for their o&n use. 9. the firm is able to maintain firm control over its proprietar# technolog#.
. Eertical integration ma# raise a firm7s cost structure for all of the follo&ing reasons e5cept? (. the greater the number of subunits in an organiation, the more problems coordinating and controlling those units. 8. the firm that verticall# integrates into component part manufacturing ma# find that because its internal suppliers have an active customer, the# lac the motivation to be more efficient. C. verticall# integrated firms have to determine appropriate prices for good s transferred to subunits &ithin the firm. 9. it maes planning, coordination, and scheduling of ad:acent processes more difficult, as compared to bu#ing from independent suppliers, particularl# &ith :ust-in-time inventor# s#stems.
2. The ma:or costs saving associated &ith =T comes from? (. speeding up inventor# turnover. 8. having materials arrive at a manufacturing plant before the# are needed. C. avoiding production slo&do&ns b# ensuring inven tor# is stocpiled. 9. using &arehouse space to maintain on-hand inventor#.
0. =ust-in-time inventor# s#stems? (. can help firms improve product %ualit#. 8. are fast becoming obsolete. C. re%uire that parts be &arehoused. 9. give firms a buffer stoc of inventor#.
16-1'
Chapter 16 - Global Production, Outsourcing, and Logistics
2. 4hich of the follo&ing is a dra&bac associated &ith a =T s#stemA (. There are high transportation costs involved 8. t leaves a firm &ithout a buffer stoc of inventor# C. t leaves a firm &ith scrap costs associated &ith defective p roducts 9. t increases the &arrant# costs
21. 4ith >>>>>, suppliers, shippers, and the purchasing firm can communicate &ith each other &ith no time dela#. (. a C(9 s#stem 8. a =T s#stem C. a C(+ s#stem 9. an "9 s#stem
Essa Questions
2!. 4hat are the five interrelated issues confronting a firm as trade barriers fall and global marets developA
2$. 4hat is logisticsA 9iscuss the relationship bet&een production and logistics.
16-1)
Chapter 16 - Global Production, Outsourcing, and Logistics
2'. 9iscuss the strategic ob:ectives of the production and logistics functions of an international firm.
2). 4hat is the principle tool used b# most managers to increase the reliabilit# of their product offeringA
26. 4hat does /i5 /igma refer toA
2. 4ho &as 4. "d&ard 9emingA 4hat is his contribution to businessA
16-16
Chapter 16 - Global Production, Outsourcing, and Logistics
22. 9escribe the "uropean 3nion7s efforts to raise product %ualit#. n #our opinion, does the effort represent a trade barrierA
20. 4hat are the three main factors that affect the decision of &here to locate productionA
0. 9iscuss the effect of countr# factors on the decision of &here to locate productionA
01. 4hat is meant b# minimum efficient scaleA 9iscuss the implications of minimum efficient scale.
16-1
Chapter 16 - Global Production, Outsourcing, and Logistics
0!. ;o& does the t#pe of technolog# a firm uses affect its decision of &here to locate productionA
0$. 4hat is mass customiationA
0'. ;o& do fle5ible machine cells &orA 4hat is the advantage of incorporating this t#pe o f technolog# into a strateg#A
0). "5plain ho& the concept of production efficienc# has changed &ith the rise of fle5ible manufacturing technologies.
16-12
Chapter 16 - Global Production, Outsourcing, and Logistics
06. ;o& do product factors affect the decision of &here to locate productionA /uppose #our firm produces refined sugar. 4here should #our firm locate productionA
0. 4hen does concentration of production mae senseA
02. "5plain ho& the role of foreign factories evolves over time.
00. 4h# should a firm consider vertical integration as opposed to simpl# outsourcing the component parts that go into its final productA 4hat are the advantages of maing a product in-houseA
16-10
Chapter 16 - Global Production, Outsourcing, and Logistics
1. "5plain &h# a firm might adopt the :ust-in-time s#stem. 4h# might a firm choose a different inventor# s#stemA
11. 9iscuss the role of information technolog# and the nternet in materials management.
16-!
Chapter 16 - Global Production, Outsourcing, and Logistics
Chapter 16 Global Production, Outsourcing, and Logistics (ns&er De#
True / False Questions
1. (p. 544) Production denotes both service and manufacturing activities. T!"E
AACSB: Analytic Skills Bloom's: Knowledge Difficlty: !asy "ea#ning $%&ectie: *+
!. (p. 545) "fficient suppl# chain management reduces the amount of inventor# in the s#stem and decreases the inventor# turnover. F#L$E
AACSB: ,ale C#eation Bloom's: Comp#e-ension Difficlty: edim "ea#ning $%&ectie: *+
16-!1
Chapter 16 - Global Production, Outsourcing, and Logistics
$. (p. 545) The firm that improves %ualit# control &ill also reduce its costs of value creation. T!"E
AACSB: ,ale C#eation Bloom's: Comp#e-ension Difficlty: edim "ea#ning $%&ectie: *+
'. (p. 544*545) ( firm can lo&er costs b# dispersing production to locations around the globe &here each activit# can be performed most efficientl#. T!"E
AACSB: ,ale C#eation Bloom's: Knowledge Difficlty: edim "ea#ning $%&ectie: *+
). (p. 545) The principle tool that most managers no& use to increase the reliabilit# of their product offering is T*+. F#L$E
AACSB: Analytic Skills Bloom's: Knowledge Difficlty: edim "ea#ning $%&ectie: *+
16-!!
Chapter 16 - Global Production, Outsourcing, and Logistics
6. (p. 545) The T*+ philosoph# &as first adopted b# the (merican companies F#L$E
AACSB: Analytic Skills Bloom's: Knowledge Difficlty: !asy "ea#ning $%&ectie: *+
. (p. 54) ( statisticall# based philosoph# that aims to reduce defects, boost productivit#, eliminate &aste, and cut costs throughout a compan# is no&n as /O 0. F#L$E
AACSB: Analytic Skills Bloom's: Knowledge Difficlty: !asy "ea#ning $%&ectie: *+
2. (p. 54) "uropean 3nion firms must compl# &ith /O 0 standards in their manufacturing processes and products before the# &ill be given access to the "uropean 3nion maret. T!"E
AACSB: Analytic Skills Bloom's: Comp#e-ension Difficlty: edim "ea#ning $%&ectie: *+
0. (p. 54/) Countr# factors, technological factors, and product factors, all influence the decision of &here to produce. T!"E
AACSB: 0eflectie 1-inking Skills Bloom's: Comp#e-ension Difficlty: edim "ea#ning $%&ectie: *+2
16-!$
Chapter 16 - Global Production, Outsourcing, and Logistics
1. (p. 54/) 4hen a currenc# depreciates, a lo&-cost location can be turned into a high-cost location. F#L$E
AACSB: 0eflectie 1-inking Skills Bloom's: Comp#e-ension Difficlty: edim "ea#ning $%&ectie: *+2
11. (p. 543) ( relativel# high level of fi5ed costs can mae it uneconomical to perform a particular activit# in several locations at once. T!"E
AACSB: ,ale C#eation Bloom's: Comp#e-ension Difficlty: edim "ea#ning $%&ectie: *+2
1!. (p. 543) The level of output at &hich most plant-level scale economies are e5hausted is referred to as the minimum efficient scale of output. T!"E
AACSB: Analytic Skills Bloom's: Knowledge Difficlty: !asy "ea#ning $%&ectie: *+2
1$. (p. 543) (s a plant output e5pands, unit costs decrease. T!"E
AACSB: 0eflectie 1-inking Skills Bloom's: Comp#e-ension Difficlty: edim "ea#ning $%&ectie: *+2
16-!'
Chapter 16 - Global Production, Outsourcing, and Logistics
1'. (p. 543) The smaller the minimum efficient scale of a plant relative to total g lobal demand, the greater the argument for centraliing production in a single location or a limited number of locations. F#L$E
AACSB: ,ale C#eation Bloom's: Comp#e-ension Difficlty: edim "ea#ning $%&ectie: *+2
1). (p. 55+) Producing greater product variet# from a factor# implies longer production runs. F#L$E
AACSB: 0eflectie 1-inking Skills Bloom's: Comp#e-ension Difficlty: edim "ea#ning $%&ectie: *+2
16. (p. 55+) Lean production is another term for fle5ible manufacturing technolog#. T!"E
AACSB: Analytic Skills Bloom's: Knowledge Difficlty: !asy "ea#ning $%&ectie: *+2
1. (p. 55+) +ass customiation describes the abilit# of companies to use fle5ible manufacturing technolog# to reconcile lo& cost and product customiation. T!"E
AACSB: ,ale C#eation Bloom's: Knowledge Difficlty: !asy "ea#ning $%&ectie: *+2
16-!)
Chapter 16 - Global Production, Outsourcing, and Logistics
12. (p. 55) ( grouping of various t#pes of machiner#, a common materials handler, and a centralied cell controller is a fle5ible machine cell. T!"E
AACSB: Analytic Skills Bloom's: Knowledge Difficlty: !asy "ea#ning $%&ectie: *+2
10. (p. 55) le5ible manufacturing technologies can help a firm improve efficienc#, lo&er costs, and customie products to small marets. T!"E
AACSB: ,ale C#eation Bloom's: Knowledge Difficlty: edim "ea#ning $%&ectie: *+2
!. (p. 552) ( product7s value-to-&eight ratio affects the firm7s transportation costs. T!"E
AACSB: 0eflectie 1-inking Skills Bloom's: Comp#e-ension Difficlty: edim "ea#ning $%&ectie: *+2
!1. (p. 552) 8ecause of the lo& value-to &eight ratio of man# pharmaceutical and electronics products, there is great pressure to produce these products in the optimal location and serve the &orld from there. F#L$E
AACSB: ,ale C#eation Bloom's: Knowledge Difficlty: edim "ea#ning $%&ectie: *+2
16-!6
Chapter 16 - Global Production, Outsourcing, and Logistics
!!. (p. 552) Concentrating production at an optimal location is more attractive &hen a product serves universal needs. T!"E
AACSB: ,ale C#eation Bloom's: Comp#e-ension Difficlty: edim "ea#ning $%&ectie: *+2
!$. (p. 55) Concentration of production maes most sense &hen trade barriers are high. F#L$E
AACSB: Analytic Skills Bloom's: Knowledge Difficlty: edim "ea#ning $%&ectie: *+2
!'. (p. 55) 9ecentraliation of production is appropriate &hen the product serves universal needs. F#L$E
AACSB: Analytic Skills Bloom's: Knowledge Difficlty: edim "ea#ning $%&ectie: *+2
!). (p. 55) 9ecentraliation of production is appropriate &hen the product7s value-to-&eight is lo&. T!"E
AACSB: Analytic Skills Bloom's: Knowledge Difficlty: !asy "ea#ning $%&ectie: *+2
16-!
Chapter 16 - Global Production, Outsourcing, and Logistics
!6. (p. 55) ( ma:or aspect of a transnational strateg# is a belief in the idea that valuable no&ledge does not reside :ust in a firm7s domestic operations. T!"E
AACSB: Analytic Skills Bloom's: Knowledge Difficlty: !asy "ea#ning $%&ectie: *+
!. (p. 55) The mae-or-bu# decision involves deciding &hether a firm should mae or bu# the component parts that go into the final product. T!"E
AACSB: 0eflectie 1-inking Skills Bloom's: Comp#e-ension Difficlty: !asy "ea#ning $%&ectie: *+4
!2. (p. 55) ;istoricall#, most outsourcing decisions have involved the manufacture of service products. F#L$E
AACSB: Analytic Skills Bloom's: Knowledge Difficlty: edim "ea#ning $%&ectie: *+4
!0. (p. 55/) Outsourcing decisions pose plent# of problems for international businesses but even more problems for purel# domestic businesses. F#L$E
AACSB: Analytic Skills Bloom's: Comp#e-ension Difficlty: edim "ea#ning $%&ectie: *+4
16-!2
Chapter 16 - Global Production, Outsourcing, and Logistics
$. (p. 55/) ( firm that has integrated horiontall# is maing all or part of a product in-house. F#L$E
AACSB: Analytic Skills Bloom's: Knowledge Difficlty: edim "ea#ning $%&ectie: *+4
$1. (p. 55/) 4hen one firm invests in specialied assets to suppl# ano ther, mutual dependenc# is created. T!"E
AACSB: Analytic Skills Bloom's: Knowledge Difficlty: edim "ea#ning $%&ectie: *+4
$!. (p. 55) 4hen substantial investments in specialied assets are re%uired to manufacture a component, the firm &ill prefer to contract it out to a supplier. F#L$E
AACSB: ,ale C#eation Bloom's: Knowledge Difficlty: edim "ea#ning $%&ectie: *+4
$$. (p. 55) The greatest advantage of bu#ing component parts from independent suppliers is that the firm can maintain its strategic fle5ibilit#. T!"E
AACSB: ,ale C#eation Bloom's: Knowledge Difficlty: edim "ea#ning $%&ectie: *+4
16-!0
Chapter 16 - Global Production, Outsourcing, and Logistics
$'. (p. 55) 4hen political ris is high, sourcing products from independent suppliers can be advantageous. T!"E
AACSB: Analytic Skills Bloom's: Knowledge Difficlty: edim "ea#ning $%&ectie: *+4
$). (p. 553) ncentive problems that occur &ith independent suppliers do not arise &ith internal suppliers. F#L$E
AACSB: 0eflectie 1-inking Skills Bloom's: Knowledge Difficlty: edim "ea#ning $%&ectie: *+4
$6. (p. 5+) ssues of strategic fle5ibilit# and organiational control are greater for purel# domestic businesses than for international ones. F#L$E
AACSB: 0eflectie 1-inking Skills Bloom's: Knowledge Difficlty: !asy "ea#ning $%&ectie: *+4
$. (p. 5+) /trategic alliances can effectivel# limit a firm7s strategic fle5ibilit#. T!"E
AACSB: 0eflectie 1-inking Skills Bloom's: Comp#e-ension Difficlty: edim "ea#ning $%&ectie: *+4
16-$
Chapter 16 - Global Production, Outsourcing, and Logistics
$2. (p. 5) ( C(9>>>> has been coined to describe the abilit# of companies to use fle5ible manufacturing technolog# to reconcile the goals of lo& cost and product customiation. (. assembl#-line-lie (. assembl#-line-lie customiation 8. economies 8. economies of customiation C% mass customiation 9. standardied 9. standardied customiation +ass customiation reconciles t&o goals that &ere once thought to be incompatibleHlo& cost and product customiation.
AACSB: ,ale ,ale C#eation Bloom's: Comp#e-ension Comp#e-ension Difficlty: !asy "ea#ning $%&ectie: *+2
16-$0
Chapter 16 - Global Production, Outsourcing, and Logistics
). (p. 55+) le5ible manufacturing technolog# is also no&n as? (. mass (. mass customiation. &% lean production. C. fle5ible C. fle5ible machine cells. 9. minimum 9. minimum efficient scale. le5ible manufacturing technologies allo& the compan# to produce a &ider variet# of end products at a unit cost that at one time could be achieved onl# through the mass production of a standardied output.
AACSB: Analytic Skills Bloom's: Knowledge Knowledge Difficlty: edim "ea#ning $%&ectie: *+2
)2. (p. 55+) (ccording to the concept of economies of scale &hat is the best &a# to achieve high efficienc# and lo& unit costsA (. Customiing (. Customiing products for each individual maret &% +ass producing standardied outputs C. Concentrating C. Concentrating on production of small volumes of products 9. ncreasing 9. ncreasing the product variet# dramaticall# Central to the concept of economies econo mies of scale is the idea that the best &a# to achieve high efficienc#, efficienc#, and hence lo& unit un it costs, is through the mass production of a standardied output.
AACSB: ,ale ,ale C#eation Bloom's: Comp#e-ension Comp#e-ension Difficlty: 8a#d "ea#ning $%&ectie: *+2
16-'
Chapter 16 - Global Production, Outsourcing, and Logistics
)0. (p. 55+) This allo&s the compan# to produce p roduce a &ider variet# of end products at a unit cost that at one time could be achieved onl# through the mass production of a standardied output. (. Daien (. Daien 8. /i5 8. /i5 /igma C% Lean production 9. T*+ 9. T*+ Lean production is another name for fle5ible manufacturing technolog#.
AACSB: ,ale ,ale C#eation Bloom's: Knowledge Knowledge Difficlty: edim "ea#ning $%&ectie: *+2
6. (p. 55+) >>>>> challenged the notion that the &a# to increase efficienc# and drive do&n unit costs is to limit product variet# and produce a standardied product in large volumes. (. 8artlett (. 8artlett and Ghoshal7s theor# of a transnational compan# 8. +inimum 8. +inimum efficient scale C. "conomies C. "conomies of scale '% le5ible manufacturing technolog# le5ible manufacturing technologies allo& the compan# to produce a &ider variet# of end products at a unit cost that at one time could be achieved onl# through the mass production of a standardied output.
AACSB: ,ale ,ale C#eation Bloom's: Comp#e-ension Comp#e-ension Difficlty: edim "ea#ning $%&ectie: *+2
16-'1
Chapter 16 - Global Production, Outsourcing, and Logistics
61. (p. 55) ( >>>>> is a grouping of various t#pes of machiner#, a common materials handler, and a centralied cell controller. #% fle5ible machine cell 8. mass customiation polic# C. lean production s#stem 9. minimum efficient scale cluster "ach cell normall# contains four to si5 machines capable of performing a variet# of operations.
AACSB: Analytic Skills Bloom's: Knowledge Difficlty: edim "ea#ning $%&ectie: *+2
6!. (p. 55*552) (ll of the follo&ing are the ma:or efficienc# benefits of fle5ible manufacturing technologies e5cept? (. it enables companies to customie products to the demands of small consumer groups. 8. it helps a compan# achieve mass customiation, &hich increases its customer responsiveness. C% it re%uires firms to establish manufacturing facilities in each ma:or maret to provide products that satisf# specific consumer tastes and preferences. 9. it improves capacit# utiliation and reductions in &or in progress and &aste. 4hen fle5ible manufacturing technologies are available, a firm can manufacture products customied to various national marets at a single factor# sited at the optimal location.
AACSB: ,ale C#eation Bloom's: Comp#e-ension Difficlty: edim "ea#ning $%&ectie: *+2
16-'!
Chapter 16 - Global Production, Outsourcing, and Logistics
6$. (p. 552) 4hen a compan#7s product has a lo& value-to-&eight ratio, the compan# should? (. have a centralied manufacturing location. &% produce the product in multiple locations close to ma:or marets. C. ignore transportation costs. 9. produce the product in one optimal location and serve the &orld from there. The first is the product7s value-to-&eight ratio because of its influence on transportation costs. +an# electronic components and pharmaceuticals have high value-to-&eight ratiosF the# are e5pensive and the# do not &eigh ver# much. Thus, even if the# are shipped half&a# around the &orld, their transportation costs account for a ver# small percentage of total costs. The opposite holds for products &ith lo& value-to-&eight ratios.
AACSB: ,ale C#eation Bloom's: Comp#e-ension Difficlty: edim "ea#ning $%&ectie: *+2
6'. (p. 552) 4hich of the follo&ing statements about products &ith high value-to-&eight ratios is trueA (. The# are relativel# ine5pensive and &eigh a lot. &% The# are e5pensive and do not &eigh ver# much. C. Transportation costs usuall# account for a large percentage of their total costs. 9. The# must be produced in multiple locations close to ma:or marets. Thus, even if the# are shipped half&a# around the &orld, their transportation costs account for a ver# small percentage of total costs.
AACSB: 0eflectie 1-inking Skills Bloom's: Comp#e-ension Difficlty: edim "ea#ning $%&ectie: *+2
16-'$
Chapter 16 - Global Production, Outsourcing, and Logistics
6). (p. 55) 4hich of the follo&ing is a characteristic of manufacturing techno log# that should be considered b# a firm contemplating international productionA (. Trade barriers 8. Ealue-to-&eight ratio C% Level of fi5ed costs 9. "5change rates Table 16.1 Location /trateg# and Production The other distracters should be considered b# a firm &hile contemplating international production but the# all under countr# and product factors.
AACSB: 0eflectie 1-inking Skills Bloom's: Comp#e-ension Difficlty: 8a#d "ea#ning $%&ectie: *+2
66. (p. 55) ( compan# might consider decentraliing &hen? (. a product7s value-to-&eight ratio is high. 8. the product serves universal needs. C. trade barriers are lo&. '% volatilit# in important e5change rates is e5pected. Concentration of production maes more sense for all the other distracters.
AACSB: ,ale C#eation Bloom's: Comp#e-ension Difficlty: edim "ea#ning $%&ectie: *+2
6. (p. 55) The concentration of production maes most sense &hen? (. volatilit# in important e5change rates is e5pected. &% the product7s value-to-&eight ratio is high. C. location e5ternalities are not important. 9. trade barriers are high. 9ecentraliation of production maes more sense for all the other distracters.
AACSB: ,ale C#eation Bloom's: Comp#e-ension Difficlty: edim "ea#ning $%&ectie: *+2
16-''
Chapter 16 - Global Production, Outsourcing, and Logistics
62. (p. 55) The concentration of production is favored &hen all of the follo&ing factors are high e5cept (. fi5ed costs. 8. minimum efficient scale. C. value-to-&eight ratio. '% trade barriers. The concentration of production of production is favored &hen trade barriers are lo&.
AACSB: 0eflectie 1-inking Skills Bloom's: Comp#e-ension Difficlty: 8a#d "ea#ning $%&ectie: *+2
60. (p. 554) nitiall#, man# foreign factories are established &here >>>>> are lo&. (. trade barriers 8. inventor# turnover C. mareting costs '% labor costs Their strategic role t#picall# is to produce labor-intensive products at as lo& a cost a s possible.
AACSB: ,ale C#eation Bloom's: Knowledge Difficlty: !asy "ea#ning $%&ectie: *+
16-')
Chapter 16 - Global Production, Outsourcing, and Logistics
. (p. 55) 9ecisions a firm must mae about &hether to perform a certain value creation activit# themselves, or outsource it to another entit# are best no&n as? (. outsource potential decisions. 8. in-house potential decisions. C% mae-or-bu# decisions. 9. integration decisions. ;istoricall#, most outsourcing decisions have involved manufacturing ph#sical products. +ost manufacturing firms have done their o&n final assembl#, but have had to decide &hether to verticall# integrate and manufacture their o&n component parts or outsource the production of such parts, purchasing them from independent suppliers. /uch mae-or-bu# decisions are an important aspect of the strateg# of man# firms.
AACSB: ,ale C#eation Bloom's: Knowledge Difficlty: !asy "ea#ning $%&ectie: *+4
1. (p. 55/) 4hich of the follo&ing is not an argument that supports maing a product inhouseA #% Eertical integration ma# be associated &ith higher costs. 8. Eertical integration ma# protect proprietar# product technolog#. C. Eertical integration ma# facilitate investment in highl# specialied assets. 9. Eertical integration ma# ease the scheduling of ad:acent processes. Eertical integration ma# be associated &ith lo&er costs.
AACSB: ,ale C#eation Bloom's: Comp#e-ension Difficlty: 8a#d "ea#ning $%&ectie: *+4
16-'6
Chapter 16 - Global Production, Outsourcing, and Logistics
!. (p. 55/) ( >>>>> is an asset &hose value is contingent upon a particular relationship persisting. #% specialied asset 8. common asset C. complementar# asset 9. supplementar# asset 4hen substantial investments in specialied assets are re%uired to manufacture a c omponent, the firm &ill prefer to mae the component internall# rather than contract it out to a supplier.
AACSB: Analytic Skills Bloom's: Knowledge Difficlty: !asy "ea#ning $%&ectie: *+4
$. (p. 55) ( firm &ill prefer to mae the component internall# rather than contract it out to a supplier, because of all of the follo&ing reasons e5cept? (. it needs to maintain control over its proprietar# technolog#. 8. substantial investments in specialied assets are re%uired to manufacture a co mponent. C% the firm completel# trusts the independent supplier to pla# fair. 9. it runs the ris that suppliers &ill e5propriate the technolog# for their o&n use. (nother argument for producing all or part of a product in-house is that production cost savings result because it maes planning, coordination, and scheduling of ad:acent processes easier.
AACSB: 0eflectie 1-inking Skills Bloom's: Comp#e-ension Difficlty: edim "ea#ning $%&ectie: *+4
16-'
Chapter 16 - Global Production, Outsourcing, and Logistics
'. (p. 55) ;o& can firms attain tight coordination bet&een d ifferent stages in the production processA #% 8# using information technolog# 8. 8# lo&ering the costs of value creation C. 8# implementing /O 0 9. 8# minimum efficient scale of output or international businesses that source &orld&ide, the time and distance bet&een the firm and its suppliers can e5acerbate scheduling p roblems.
AACSB: 6se of 7nfo#mation 1ec-nology Bloom's: Knowledge Difficlty: edim "ea#ning $%&ectie: *+4
). (p. 55) 4hich of the follo&ing is not a reason to outsource productionA (. t can give the firm greater fle5ibilit# &% t can mae planning, coordination, and scheduling of ad:acent processes easier C. t can help drive do&n the firm7s cost structure 9. t ma# help the firm capture orders from international customers Producing all or part of a product in-house is that production cost savings result because it maes planning, coordination, and scheduling of ad:acent processes easier.
AACSB: ,ale C#eation Bloom's: Comp#e-ension Difficlty: edim "ea#ning $%&ectie: *+4
16-'2
Chapter 16 - Global Production, Outsourcing, and Logistics
6. (p. 55) (n advantage of bu#ing component parts, or even an entire product, from independent suppliers is that? #% the firm can maintain its fle5ibilit# of s&itching orders bet&een suppliers as circumstances dictate. 8. it can mae planning, coordination, and scheduling of ad:acent processes easier for the firm. C. it reduces the ris for the firm that suppliers &ill e5propriate the technolog# for their o&n use. 9. the firm is able to maintain firm control over its proprietar# technolog#. This is particularl# important internationall#, &here changes in e5change rates and trade barriers can alter the attractiveness of suppl# sources.
AACSB: ,ale C#eation Bloom's: Knowledge Difficlty: edim "ea#ning $%&ectie: *+4
. (p. 553) Eertical integration ma# raise a firm7s cost structure for all of the follo&ing reasons e5cept? (. the greater the number of subunits in an organiation, the more problems coordinating and controlling those units. 8. the firm that verticall# integrates into component part manufacturing ma# find that because its internal suppliers have an active customer, the# lac the motivation to be more efficient. C. verticall# integrated firms have to determine appropriate prices for good s transferred to subunits &ithin the firm. '% it maes planning, coordination, and scheduling of ad:acent processes more difficult, as compared to bu#ing from independent suppliers, particularl# &ith :ust-in-time inventor# s#stems. t maes planning, coordination, and scheduling of ad:acent processes easier.
AACSB: 0eflectie 1-inking Skills Bloom's: Comp#e-ension Difficlty: edim "ea#ning $%&ectie: *+4
16-'0
Chapter 16 - Global Production, Outsourcing, and Logistics
2. (p. 5) The ma:or costs saving associated &ith =T comes from? #% speeding up inventor# turnover. 8. having materials arrive at a manufacturing plant before the# are needed. C. avoiding production slo&do&ns b# ensuring inven tor# is stocpiled. 9. using &arehouse space to maintain on-hand inventor#. The basic philosoph# behind :ust-in-time B=T s#stems is to economie on inventor# h olding costs b# having materials arrive at a manufacturing plant :ust in time to enter the production process and not before.
AACSB: ,ale C#eation Bloom's: Knowledge Difficlty: edim "ea#ning $%&ectie: *+5
0. (p. 5) =ust-in-time inventor# s#stems? #% can help firms improve product %ualit#. 8. are fast becoming obsolete. C. re%uire that parts be &arehoused. 9. give firms a buffer stoc of inventor#. The basic philosoph# behind :ust-in-time B=T s#stems is to economie on inventor# h olding costs b# having materials arrive at a manufacturing plant :ust in time to enter the production process and not before.
AACSB: ,ale C#eation Bloom's: Knowledge Difficlty: edim "ea#ning $%&ectie: *+5
16-)
Chapter 16 - Global Production, Outsourcing, and Logistics
2. (p. 5) 4hich of the follo&ing is a dra&bac associated &ith a =T s#stemA (. There are high transportation costs involved &% t leaves a firm &ithout a buffer stoc of inventor# C. t leaves a firm &ith scrap costs associated &ith defective p roducts 9. t increases the &arrant# costs (lthough buffer stocs are e5pensive to store, the# can help a firm respond %uicl# to increases in demand and tide a firm over shortages brought about b# disruption among suppliers.
AACSB: ,ale C#eation Bloom's: Knowledge Difficlty: edim "ea#ning $%&ectie: *+5
21. (p. 52) 4ith >>>>>, suppliers, shippers, and the purchasing firm can communicate &ith each other &ith no time dela#. (. a C(9 s#stem 8. a =T s#stem C. a C(+ s#stem '% an "9 s#stem irms no& t#picall# use electronic data interchange B"9 via the nternet to coordinate the flo& of materials into manufacturing, through manufacturing, and out to customers.
AACSB: ,ale C#eation Bloom's: Knowledge Difficlty: edim "ea#ning $%&ectie: *+5
16-)1
Chapter 16 - Global Production, Outsourcing, and Logistics Essa Questions
2!. (p. 544) 4hat are the five interrelated issues confronting a firm as trade b arriers fall and global marets developA (s trade barriers fall, and global marets develop, firm face five interrelated issues. irst, &here in the &orld should production activities be locatedA /econd, &hat should be the longterm strategic role of foreign production sitesA Third, should the firm o&n foreign production activities, or is it better to outsource those activities to private vendorsA ourth, h o& should a globall# dispersed suppl# chain be managed, and &hat is the role of nternet-based information technolog# in the management of global logisticsA inall#, should the firm manage global logistics itself, or should it outsource the management to enterprises that specialie in this activit#A
AACSB: ,ale C#eation Bloom's: Comp#e-ension Difficlty: edim "ea#ning $%&ectie: *+
2$. (p. 544) 4hat is logisticsA 9iscuss the relationship bet&een production and logistics. Logistics is the activit# that controls the transmission of ph#sical materials through the value chain, from procurement through production and into distribution. Production and logistics are closel# lined since a firm7s abilit# to perform its production activities efficientl# depends on a timel# suppl# of high-%ualit# material inputs, for &hich logistics is responsible.
AACSB: 0eflectie 1-inking Skills Bloom's: Comp#e-ension Difficlty: !asy "ea#ning $%&ectie: *+
16-)!
Chapter 16 - Global Production, Outsourcing, and Logistics
2'. (p. 544*54) 9iscuss the strategic ob:ectives of the production and logistics functions of an international firm. The production and logistics functions of an international firm have a number of important strategic ob:ectives. ( primar# ob:ective is to lo&er costs. 9ispersing production activities to various locations around the globe &here each activit# can be performed most efficientl# can lo&er costs. Costs can also be lo&ered b# managing the global suppl# chain to better match suppl# and demand. ( second strategic ob:ective is to increase product %ualit# b# eliminating defective products b# both the suppl# chain and the manufacturing process. ( third ob:ective involves meeting demands for local responsiveness. inall#, production and logistics must be able to respond to shifts in customer demand.
AACSB: 0eflectie 1-inking Skills Bloom's: Comp#e-ension Difficlty: edim "ea#ning $%&ectie: *+
2). (p. 545*54) 4hat is the principle tool used b# most managers to increase the reliabilit# of their product offeringA The principle tool used b# most managers to increase the reliabilit# of their product offering is the /i5 /igma %ualit# improvement methodolog#. /i5 /igma is the successor of the total %ualit# management philosoph# that aims to reduce defects, boost productivit#, eliminate &aste, and cut costs throughout a compan#.
AACSB: ,ale C#eation Bloom's: Comp#e-ension Difficlty: edim "ea#ning $%&ectie: *+
16-)$
Chapter 16 - Global Production, Outsourcing, and Logistics
26. (p. 54) 4hat does /i5 /igma refer toA /i5 /igma is the modern successor to T*+. t is a statisticall# based philosoph# that aims to reduce defects, boost productivit#, eliminate &aste, and cut costs throughout a compan#. /i5 /igma is the principle tool used b# most managers to increase the reliabilit# of their product offering. (t /i5 /igma, a production process &ould be 00.00066 percent accurate, creating :ust $.' defects per million units.
AACSB: ,ale C#eation Bloom's: Knowledge Difficlty: !asy "ea#ning $%&ectie: *+
2. (p. 545*54) 4ho &as 4. "d&ard 9emingA 4hat is his contribution to businessA 9eming &as a e# contributor to the development of the total %ualit# management BT*+ techni%ue. 9eming identified a number of steps that should be part of an# T*+ program. ;e argued that management should embrace the philosoph# that mistaes, defects, and poor %ualit# materials are not acceptable and should be eliminated. ;e suggested that the %ualit# of supervision should be improved b# allo&ing more time for supervisors to &or &ith emplo#ees, that management should create an environment in &hich emplo#ees &ill not fear reporting problems or recommending improvements, and that some no tion of %ualit# should be included in &or standards to promote the production of defect-free output. 9eming also argued that it is management7s responsibilit# to train &orers in ne& sills to eep pace &ith changes in the &orplace. (ccording to 9eming, achieving better %ualit# re%uires the commitment of ever#one in the compan#.
AACSB: 0eflectie 1-inking Skills Bloom's: Comp#e-ension Difficlty: 8a#d "ea#ning $%&ectie: *+
16-)'
Chapter 16 - Global Production, Outsourcing, and Logistics
22. (p. 54) 9escribe the "uropean 3nion7s efforts to raise product %ualit#. n #our opinion, does the effort represent a trade barrierA 8efore a firm can gain access to the "uropean 3nion maretplace, the firm must meet certain %ualit# standards. /pecificall#, the "uropean 3nion re%uires that the %ualit# of a firm7s manufacturing processes and products be certified under a %ualit# standard no&n as /O 0. The /O 0 certification process has proven to be bureaucratic and costl# for firms. (t the same time, ho&ever, the standards have focused management attention on the need to improve the %ualit# of products and processes.
AACSB: 0eflectie 1-inking Skills Bloom's: Application Difficlty: 8a#d "ea#ning $%&ectie: *+
20. (p. 54/9 549 552) 4hat are the three main factors that affect the decision of &here to locate productionA The decision of &here to locate production is determined b# three main factors. Countr# factors? nclude a countr#7s economic, political, and cultural conditions and their effect on the production of the firm7s product. Technological factors? The t#pe of technolog# a firm uses to perform specific manufacturing activities can be pivotal in location decisions. Product factors? /pecificall#, a product7s value-to-&eight ratio and &hether the product serves universal needs &ill affect &here a firm locates its production activities.
AACSB: ,ale C#eation Bloom's: Comp#e-ension Difficlty: 8a#d "ea#ning $%&ectie: *+2
16-))
Chapter 16 - Global Production, Outsourcing, and Logistics
0. (p. 54/) 9iscuss the effect of countr# factors on the decision of &here to locate productionA (ll other things being e%ual, a firm should locate its manufacturing activities in countries &here the political, economic, and cultural conditions are conducive to the performance of those activities. Other countr# specific factors that pla# a role in location decisions include formal and informal trade barriers and rules and regulations regarding foreign direct investment, e5pected movements in currenc# e5change rates, and also the %ualit# of the local labor pool.
AACSB: 0eflectie 1-inking Skills Bloom's: Comp#e-ension Difficlty: edim "ea#ning $%&ectie: *+2
01. (p. 543) 4hat is meant b# minimum efficient scaleA 9iscuss the implications of minimum efficient scale. +inimum efficient scale of output refers to the level of output at &hich most plant-level scale economies are e5hausted. This is the level of output a plant must operate to realie all ma:or plant level scale economies. The concept suggests that the larger the minimum efficient scale of a plant relative to total global demand, the greater the argument for centraliing production in a single location or a limited number of locations.
AACSB: ,ale C#eation Bloom's: Comp#e-ension Difficlty: edim "ea#ning $%&ectie: *+2
16-)6
Chapter 16 - Global Production, Outsourcing, and Logistics
0!. (p. 54*55) ;o& does the t#pe of technolog# a firm uses affect its decision of &here to locate productionA The t#pe of technolog# a firm uses to perform specific manufacturing activities can be pivotal in location decisions. The three primar# factors that drive location decisions in terms of technolog# are a manufacturing activit#7s level of fi5ed costs, its minimum efficient scale, and its fle5ibilit#. 4hen the fi5ed costs of setting up a manufacturing operation are high, a firm must serve the &orld maret from a single location or from a fe& locations. n contrast, &hen fi5ed costs are lo&, a firm can scatter its manufacturing activities throughout the &orld to better accommodate local marets. The larger the minimum efficient scale of a plant, the greater is the argument for centralied production at a single location. inall#, &hen fle5ible manufacturing technologies are available, a firm can manufacture products customied to various national marets at a single factor# at the optimal location.
AACSB: ,ale C#eation Bloom's: Comp#e-ension Difficlty: edim "ea#ning $%&ectie: *+2
0$. (p. 55+*55) 4hat is mass customiationA The term mass customiation has been coined to describe the abilit# of companies to use fle5ible manufacturing technolog# to describe the abilit# of companies to use fle5ible manufacturing technolog# to reconcile t&o goals that &ere once thought to be incompatible? lo& cost and product customiation. +ass customiation implies that a firm ma# b e able to customie its product range to suit the needs of different customer groups &ithout bearing a cost penalt#. @esearch suggests that the adoption of fle5ible manufacturing technologies ma# increase efficienc# and lo&er unit costs relative to &hat can be achieved b# the mass production of a standardied output.
AACSB: ,ale C#eation Bloom's: Comp#e-ension Difficlty: edim "ea#ning $%&ectie: *+2
16-)
Chapter 16 - Global Production, Outsourcing, and Logistics
0'. (p. 55) ;o& do fle5ible machine cells &orA 4hat is the advantage of incorporating this t#pe of technolog# into a strateg#A le5ible machine cells are a common fle5ible manufacturing technolog#. ( fle5ible machine cell is a grouping of various t#pes of machiner#, a common materials handler, and a centralied cell controller Bcomputer. "ach cell normall# contains four to si5 machines capable of performing various operations. The t#pical cell is ded icated to the production of a famil# of parts or products. The settings on machines are computer controlled. This allo&s each cell to s&itch %uicl# bet&een the production of different parts or products.
AACSB: ,ale C#eation Bloom's: Comp#e-ension Difficlty: edim "ea#ning $%&ectie: *+2
0). (p. 55+*55) "5plain ho& the concept of production efficienc# has changed &ith the rise of fle5ible manufacturing technologies. le5ible technolog#, also no&n as lean production, covers a range of manufacturing technologies designed to reduce setup times for comple5 e%uipment, increase the utiliation of individual machines through better scheduling, and improve %ualit# control at all stages of the manufacturing process. ( firm that adopts fle5ible manufacturing technologies can increase efficienc# and lo&er unit costs relative to &hat can be achieved b# the mass production of a standardied output, &hile at the same time allo&ing the firm to customie its product offering to a much greater e5tent than &as once thought possible. n fact, fle5ible manufacturing technologies allo& companies to produce a &ider variet# of products at a unit cost that at one time could onl# be achieved through the mass production of a standardied output.
AACSB: 0eflectie 1-inking Skills Bloom's: !alation Difficlty: edim "ea#ning $%&ectie: *+2
16-)2
Chapter 16 - Global Production, Outsourcing, and Logistics
06. (p. 552) ;o& do product factors affect the decision of &here to locate productionA /uppose #our firm produces refined sugar. 4here should #our firm locate productionA There are t&o product factors that affect the decision of &here to locate production. irst, a product7s value-to-&eight ratio must be considered because of its effect on transportation costs. /tudents should recognie that sugar has a lo& value-to-&eight ratio, therefore, other things being e%ual, there &ill be pressure to mae these products in multiple locations close to ma:or marets to reduce transportation costs.
AACSB: ,ale C#eation Bloom's: Application Difficlty: edim "ea#ning $%&ectie: *+4
0. (p. 55) 4hen does concentration of production mae senseA There are several situations &hen concentrating production facilities in a centralied location and serving the &orld from there maes sense. Concentration of production maes sense &hen the product serves universal needs, the product7s value-to-&eight ratio is high, trade barriers are lo&, important e5change rates are e5pected to remain stable, e5ternalities from the concentration of lie enterprises favor certain locations, differences bet&een countries in factor costs, political econom#, and culture have a substantial impact on the costs of manufacturing in various countries, and &hen the production technolog# has high fi5ed costs and high minimum efficient scale relative to global demand, or fle5ibilit# manufacturing technolog# e5ists.
AACSB: Analytic Skills Bloom's: Knowledge Difficlty: edim "ea#ning $%&ectie: *+2
16-)0
Chapter 16 - Global Production, Outsourcing, and Logistics
02. (p. 554) "5plain ho& the role of foreign factories evolves over time. The strategic role of foreign factories can evolve over time. nitiall#, man# foreign factories are established &here labor costs are lo&, and at that time, their strategic role is to produce labor intensive products at as lo& a cost as possible. Over time, the strategic role of the factories ma# evolve to one in &hich the factories become important centers for the d esign and assembl# of products for the global maretplace. This change ma# tae place as factories upgrade their capabilities as the factories respond to pressure to improve their cost structures and
View more...
Comments
