Accounting Across the Organization

Accounting Across the Organization - Answer: Possible...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Accounting Across the Organization Consider the make-or-buy decision faced by Superior Industries International, Inc., a big aluminum-wheel maker in Van Nuys, California. For years, president Steve Borick had ignored the possibility of Chinese manufacturing. Then Mr. Borick started getting a blunt message from General Motors and Ford, with whom Superior does 85% of its business: Match the prices of Chinese wheel suppliers. Both auto makers said separately that if Superior could not agree to the lower prices, they would go directly to Chinese manufacturers or turn to other North American wheel-makers. Stories like this, repeated in various industries, illustrate why manufacturers engage in overseas off-shoring (outsourcing). For example, compare the relative labor costs in major auto-producing nations, in dollars per hour, to see why incremental analysis often leads to outsourcing production to countries like China. What are the disadvantages of outsourcing to a foreign country?
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Answer: Possible disadvantages of outsourcing are that the supplier loses control over the quality of the product, as well as the timing of production. Also, the company exposes itself to price changes caused by changes in the value of the foreign currency. In addition, shipping large, heavy products such as tires is costly, and disruptions in shipping (due to strikes, weather, etc.) can cause delays in final assembly of vehicles. As a result of the outsourcing, the company will have to reassign, or even lay off, many skilled workers. Not only is this very disruptive to the lives of those employees, it also hurts morale of the remaining employees. As more U.S. employers begin to use robotic automation in their facilities, they are able to reduce the amount of labor required, and thus are beginning to be able to compete more favorably with foreign suppliers....
View Full Document

This note was uploaded on 11/08/2011 for the course ACCOUNTING ac 202 taught by Professor - during the Fall '11 term at Montgomery.

Page1 / 2

Accounting Across the Organization - Answer: Possible...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online