International Sourcing and Production Strategies
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Questions and Answers

Ferdows' research on international production builds upon the work of Bartlet and Ghoshal by specifically addressing which dimension of subsidiary evolution?

  • The potential for production subsidiaries to contribute to the multinational enterprise's firm-specific advantages (FSAs) beyond their local market. (correct)
  • The increasing need for subsidiaries to adapt to local market conditions and consumer preferences.
  • The importance of efficient resource allocation across different types of international subsidiaries.
  • The shift from subsidiaries as implementers of HQ strategies to independent profit centers.

    • Which of the following is LEAST aligned with Ferdows' arguments regarding the evolving role of international production subsidiaries?

  • The accelerated pace of product lifecycles necessitates closer integration of development and manufacturing within multinational enterprises.
  • Modern production requires sophisticated supply chain management and technological integration, emphasizing overall productivity.
  • Decreasing global tariffs have diminished the strategic necessity of establishing factories solely to circumvent trade barriers.
  • The primary driver for locating production overseas remains access to inexpensive labor, irrespective of technological advancements. (correct)

    • In Ferdows' Strategic Matrix, a 'Lead' factory is characterized by high site competence and which primary strategic reason?

  • Achieving economies of scale through centralized production for global markets.
  • Providing rapid response and customized products to meet the demands of a proximate regional market.
  • Gaining access to advanced skills and knowledge clusters within a specific geographic location. (correct)
  • Serving as a pilot plant for testing new production technologies before global rollout.

    • What is the key differentiating factor between a 'Source' factory and an 'Offshore' factory according to Ferdows' framework?

    <p>Source factories are mandated to actively develop firm-specific advantages (FSAs), whereas Offshore factories primarily focus on cost-efficient implementation. (A)</p> Signup and view all the answers

    A 'Contributor' factory and a 'Server' factory both prioritize proximity to market. What distinguishes a 'Contributor' factory from a 'Server' factory in Ferdows' model?

    <p>Contributor factories possess stronger operational and strategic capabilities beyond simply serving the local market, indicating a higher site competence. (B)</p> Signup and view all the answers

    Which factory type in Ferdows' framework is most closely associated with the 'black hole' subsidiary described in some international business literature, focused on intelligence gathering?

    <p>Outpost factory (D)</p> Signup and view all the answers

    According to Ferdows, the 'upgrading' process for foreign factories involves resource recombination across three stages. Which of the following sequences accurately represents these stages?

    <p>Enhancing internal performance → Accessing &amp; developing external resources → Developing new knowledge (B)</p> Signup and view all the answers

    Which of the following is presented as a significant barrier to the 'upgrading' of foreign factories in the provided text?

    <p>Headquarters' reluctance to empower foreign subsidiaries and a tendency to treat them as short-term profit generators. (C)</p> Signup and view all the answers

    Which of the following critiques is LEAST aligned with the text's discussion of Ferdows' perspective on factory roles?

    <p>Ferdows' strategic matrix is too simplistic and fails to account for the dynamic nature of global production networks and evolving factory roles. (A)</p> Signup and view all the answers

    According to the critique of Ferdows, what potential negative consequence can arise from multinational enterprises frequently shifting production locations in response to exchange rate fluctuations and wage differentials?

    <p>It can create instability and hinder the development of long-term capabilities within specific factory locations. (D)</p> Signup and view all the answers

    Flashcards

    Subsidiary Roles

    Subsidiaries can have varied control based on strengths and market importance.

    Competitive Weapon

    A subsidiary can enhance overall competitiveness and FSA for the MNE.

    Ferdows' Changes

    Production subsidiaries evolved due to lower tariffs, complex supply chains, and faster go-to-market times.

    Site Competence Matrix

    A 3D matrix showing relation between site competence and strategic reasons for factories.

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    Lead Factory

    Most important factory type focused on resource recombination and developing new FSA.

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    Offshore Factory

    Factory intended mainly to access low-cost production factors, focusing on exports.

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    Upgrading Stages

    Three stages of upgrading: enhancing internal performance, accessing resources, and developing new knowledge.

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    Fear of Relying

    Hesitance from HQ to depend on foreign subsidiaries for strategic decisions.

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    Permanent Offshoring

    Choosing to keep production overseas for flexibility and low-cost benefits.

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    Factory Treatment

    Overseas factories may be seen as cash cows rather than long-term investments.

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    Study Notes

    International Sourcing and Production

    • Bartlet and Ghoshal (1986) identified different roles of subsidiaries, granting more control based on market importance.
    • Ferdows (1997) noted 3 key shifts in production subsidiaries, moving beyond just cheap labor locations:
      • Decreased international tariffs (GATT/WTO)
      • More complex production systems (supply chain management and planning)
      • Overall productivity, including technology and infrastructure, increasingly important.

    Roles of Foreign Factories: Strategic Matrix

    • Offshore: Access low-cost production factors, exporting goods.
    • Server: Manufacturing specific goods to meet predefined market demand.
    • Outpost: Gathering valuable information from host countries, focusing on input side.
    • Source: Gain access to low-cost input factors, similar to offshore.
    • Contributor: Enhanced server factory capabilities but less significant than lead.
    • Lead: Key in resource recombination, focusing on factory development.

    Upgrading Factories

    • Upgrading involves 3 stages of resource recombination:
      • Enhancing internal performance
      • Accessing and developing external resources
      • Developing new knowledge for overall network benefit

    Critique of Ferdows's Perspective

    • Ferdows advocates for upgrading all factories, which is not universally applicable.
    • Ferdows underestimates the value of low-cost factories in various countries.
    • Maintaining flexibility in offshoring can be beneficial for firms.

    Instability and Government Incentives

    • Shifting production based on exchange rates and wages creates instability.
    • Governments incentivize companies to locate in potentially undesirable regions.

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    Description

    Explore the various roles of subsidiaries in international sourcing and production, as identified by Bartlet and Ghoshal, and the key shifts noted by Ferdows. This quiz delves into the strategic matrix of foreign factories, including offshore, server, outpost, source, contributor, and lead roles. Understand how these concepts are influenced by market dynamics and production efficiencies.

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