When making the make-or-buy decision, international firms must make trade-offs between costs and three other variables. What are they? Explain the nature of the trade-off international firms must make
What will be an ideal response?
International firms must make trade-offs between costs and control, risk, investment, and flexibility. Control: Making a component has the advantages of increasing the firm's control over product quality, delivery schedules, design changes, and costs. A firm that buys from external suppliers may become overly dependent on those suppliers. It can also be expensive to enforce contracts with suppliers. Risk: Buying a component rather than making it has the advantage of reducing the firm's financial and operating risks. Investment: Buying from others lowers the firm's level of investment. By not having to build a new factory or learn a technology, a firm can free up capital for other productive uses. Flexibility: A firm that buys rather than makes retains the flexibility to change suppliers as circumstances dictate.
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Which of the following is an advantage of small businesses?
A) The owners experience insignificant levels of stress. B) The owners do not need to multitask. C) They have an extremely low failure rate. D) They provide freedom and flexibility to their owners. E) They are adequately equipped to cope with growth.
If a company's home currency strengthens, it is:
A) a favorable turn of events for the typical exporter. B) an unfavorable turn of events for the typical exporter. C) a favorable turn of events since the revenues increase in home currency. D) an unfavorable turn of events for exporter's home country. E) neither favorable nor unfavorable turn of events for the typical exporter.