What criteria should the company use to make a decision on where to manufacture the device Assume the role of top management at a major global electronics company that is developing a wireless...
What criteria should the company use to make a decision on where to manufacture the device
Assume the role of top management at a major global electronics company that is developing a wireless device capable of on-demand music and video downloads from anywhere on the globe.
Ideally, to maximize shareholder wealth a company should choose to manufacture the product in a nation that has the least cost of operations. A large part of the operational costs involved in manufacturing most products is labor costs. But for a device like the one mentioned it may be possible to use automated machinery to complete most of the product creation. In such a case to decide where the device should be manufactured the company has to look at other costs, that include procuring raw material, transportation of raw material to where the device is being manufactured and transportation of the finished product to the country where it would be consumed. The taxation policy of the nation is also something that should be considered as taxes make a large contribution to the total cost of the device.
Also, consumers now are very particular about the policies of companies. Many consumers would prefer to use a product made in the same country as that increases employment and contributes to economic development. Also, products manufactured in low-cost nations that have the same quality are looked down upon and considered inferior.
A company has to consider all these aspects to ensure that not only can they produce the device at the lowest cost but also ensure a good demand for it among their prospective customers.