What advantages and disadvantages does exporting have?

What advantages and disadvantages does foreign manufacturing have?

3. What are the advantages of employing local personnel and managers when operating overseas?
4. What relevance do currency exchange rates have for foreign trade?
5. What other factors might be relevant?

Transcribed Image Text:6:15 PM ENG 4/8/2021 File Tools View Ivan Case Study ^N1 - Word X UPLOAD BLOCKED We ran into a problem with this file and can't save any new changes. Please save a copy to avoid losing your work. Save a Copy CASE STUDY (LOCATION PLANNING ANALYSIS) conditions, and the huge capital costs to set up an overseas manufactur- ing operation are daunting challenges. Determining the best way to go When the board-games company Bob Moog created in 1985 sought often involves solving a perplexing conundrum. "It boils down to a trade- growth through global expansion 2 years later, Moog faced the usual two off between classic cost-and-time considerations and Eco political fac- options: export the product or manufacture it overseas for local distribu- tors," said Richard Powers, president of Insight Inc., a provider of man- tion. Moog chose the latter. "We decided for a number of reasons to agement support systems based in Bend, OR. With exporting, a company manufacture our board game, '20 Questions,' in Holland for distribution must evaluate the various modes of transportation that would be in- throughout Europe," said Moog, president of University Games Corp. of volved in getting the goods there, and how this relates to the cycle time Burlingame, CA. R ecently the company expanded into Australia. Unlike of putting the product in the marketplace. Some products are time-sensi- the European ventures, however, Moog decided that it was more eco- tive; others are less so. On the other hand, if a company determines that nomical to import its products into Australia from the U.S. manufacturing an overseas manufacturing operation best meets its needs, it must exam- facility because "anticipated initial sales in Australia just did not warrant ine the eco-political factors involved, such as tariff and duty drawbacks a manufacturing operation there at this juncture," Moog said. "If sales and international tax issues. "“It may be less expensive, given these fac- pick up down the line, we may then examine local manufacturing." tors, for a company to incur the logistics costs of exporting than to risk the eco-political costs," Powers explained. In addition to weighing these Moog's dual strategy is not unique. One of the toughest questions a com- pany confronts when pondering an international sales strategy is: to ex- trade-offs, there are other related factors affecting the decision to either port, or not to export? While exporting is often the least risky method of export or locate a plant overseas. To compete in their market, for exam- selling overseas, it frequently involves significant transportation, logis- ple, some countries require that some form of local infrastructure be in tics, and tax-related costs that may make it uneconomical when com- place. "Sometimes you run into government contracts where the only pared with foreign manufacturing. On the other hand, foreign manufac- way to distribute a product in that country is to have it made locally," turing, while potentially a more competitive way of entering an overseas said Fred Ehrsam, vice president at Bain & Co., a Boston based strategy market, has its own bugaboos. Political instability, fluctuating market Screens 6-7 of 16 130%
Transcribed Image Text:6:15 PM ENG 4/8/2021 File Tools View Ivan Case Study ^N1 - Word X UPLOAD BLOCKED We ran into a problem with this file and can't save any new changes. Please save a copy to avoid losing your work. Save a Copy consulting firm. "In China, for instance, you pretty much have to build to do the things you need," Ehrsam added. Many companies enter a for- something there in order to enter that market." Certain products also eign market by first exporting there, but with an eye toward building dictate the international sales strategy to be taken. "If your company overseas in the future. "Exporting will give you a feel for the product and makes drinking glasses, you'll want to manufacture them in whatever its market potential," Powers said. "Instead of jumping in the lake head country you plan to sell them," observed Scott Setrakian, a director in the first, exporting allows you to get your toes wet. It may cost more, but San Francisco office of Mercer Management Consulting. "Drinking you're able to hedge your risks." But CPC International favors full-scale glasses, generally speaking, are pretty cheap to make and expensive to overseas manufacturing to either foreign product assembly or exporting. ship. "We rely on exporting chiefly as a means of entering a new market- place," said Gale Griffin, vice president at the Englewood Cliffs, NJ-based " Political instability is another guiding force in a company's decision- making process. "If you want to sell in Russia, you're facing political insta- Food Company. "We then like to move from an exporting environment into local manufacturing." CPC manufactures such well-known food brands as Hellmann's Mayonnaise and the Knorr's line of soups. Alto- bility as your biggest single operating risk," noted John Koopman, a prin- cipal in Mercer's Toronto office. "In Western Europe, this is not an issue. In Asia, there's a little risk, but in Russia it's a given."... The maturity of gether, the company manufactures 62 of the 110 countries in which it markets its products. C PC uses local personnel and managers almost ex- a company's product affects this decision. A product expected to require clusively when operating overseas. "We look for people who understand design changes, for example, may not fit well with foreign manufacturing the markets and can compete very effectively within them," Griffin said. plans. "It's pretty hard to implement changes to a product when the "They help you understand local government regulations, which can be product is fairly far removed from the product development and engi- tricky. We also let our local managers do their own marketing, figuring neering people," Ehrsam continued. "Tactically, you want to be moving they know their own markets and how to compete there better than products offshore that are relatively stable." Another factor is the skill of Englewood Cliffs does." Finding someone qualified to fill these shoes is as the labor force in the market being considered. "You have to question easy as calling an executive search firm or accessing the Internet. "There whether or not the labor pool-no matter how low-cost-can be trained Screens 8-9 of 16 130%

Question

What advantages and disadvantages does exporting have?
What advantages and disadvantages does foreign manufacturing have?

3. What are the advantages of employing local personnel and managers when operating overseas?
4. What relevance do currency exchange rates have for foreign trade?
5. What other factors might be relevant?

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CASE STUDY (LOCATION PLANNING ANALYSIS)
conditions, and the huge capital costs to set up an overseas manufactur-
ing operation are daunting challenges. Determining the best way to go
When the board-games company Bob Moog created in 1985 sought
often involves solving a perplexing conundrum. "It boils down to a trade-
growth through global expansion 2 years later, Moog faced the usual two
off between classic cost-and-time considerations and Eco political fac-
options: export the product or manufacture it overseas for local distribu-
tors," said Richard Powers, president of Insight Inc., a provider of man-
tion. Moog chose the latter. "We decided for a number of reasons to
agement support systems based in Bend, OR. With exporting, a company
manufacture our board game, '20 Questions,' in Holland for distribution
must evaluate the various modes of transportation that would be in-
throughout Europe," said Moog, president of University Games Corp. of
volved in getting the goods there, and how this relates to the cycle time
Burlingame, CA. R ecently the company expanded into Australia. Unlike
of putting the product in the marketplace. Some products are time-sensi-
the European ventures, however, Moog decided that it was more eco-
tive; others are less so. On the other hand, if a company determines that
nomical to import its products into Australia from the U.S. manufacturing
an overseas manufacturing operation best meets its needs, it must exam-
facility because "anticipated initial sales in Australia just did not warrant
ine the eco-political factors involved, such as tariff and duty drawbacks
a manufacturing operation there at this juncture," Moog said. "If sales
and international tax issues. "“It may be less expensive, given these fac-
pick up down the line, we may then examine local manufacturing."
tors, for a company to incur the logistics costs of exporting than to risk
the eco-political costs," Powers explained. In addition to weighing these
Moog's dual strategy is not unique. One of the toughest questions a com-
pany confronts when pondering an international sales strategy is: to ex-
trade-offs, there are other related factors affecting the decision to either
port, or not to export? While exporting is often the least risky method of
export or locate a plant overseas. To compete in their market, for exam-
selling overseas, it frequently involves significant transportation, logis-
ple, some countries require that some form of local infrastructure be in
tics, and tax-related costs that may make it uneconomical when com-
place. "Sometimes you run into government contracts where the only
pared with foreign manufacturing. On the other hand, foreign manufac-
way to distribute a product in that country is to have it made locally,"
turing, while potentially a more competitive way of entering an overseas
said Fred Ehrsam, vice president at Bain & Co., a Boston based strategy
market, has its own bugaboos. Political instability, fluctuating market
Screens 6-7 of 16
130%

Accepted Answer

What advantages and disadvantages does exporting have?
Exporting outside of Northern Ireland has the…