StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Outsourcing of Automobile Materials - Report Example

Summary
The paper "Outsourcing of Automobile Materials" tells us about act of getting materials for a production process. For a production process the materials could vary from human labor to raw naturally found products, rubber in this case study…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER98.9% of users find it useful
Outsourcing of Automobile Materials
Read Text Preview

Extract of sample "Outsourcing of Automobile Materials"

The Causes and Effects of Outsourcing Materials Outsourcing of Automobile Materials The act of getting materials for a production process in a market situated across the manufacturing company’s border is known as outsourcing. For a production process the materials could vary from human labor to raw naturally found products, rubber in this case study. Outsourcing is always done by an organization for a various reasons, all meant to cut down the production cost, improve efficiency and improve quality. The motivation for a nation to import products and services from foreign countries is conceivably less apparent than its exports according to Boone and Kurtz, (1992). Among the many products that us imports from outside are the automobile materials and this is due to various reasons. The major reason as to why US imports automobile parts is due to lack of enough raw materials. Currently compared to other countries such as Japan US lags behind in as far raw materials for automobile materials are concerned. This has forced the country to import this material from foreigners. Another reason the U.S. imports automobile materials is due to lack of highly developed industries which produce large quantities of great quality automobile. The US mostly gets these imports from Japan which possess greatly developed industrial base. This is particularly based on the United States compared to countries like Japan is less capital intensive in order for it to establish these automobile manufacturing industries. The high production cost associated with automobiles is also another cause for these importations. Automobile materials require a lot of technology as well as adequately skilled labor as suggested by Brue and McConnell (1993). As a result countries like the United States opt to import these materials in order to cut on the cost of production. It is also deemed better option and less costly to import the automobile materials rather than importing the technology and the labor associated with their production. Related to this cause are the labor issues. In the US, the cost of labor is high thus leading to the country opting to import automobiles which utilize a lot of labor. In such a case the United States is able to save for other jobs Changes in the market are also another cause for instance after the world war and in the in the early 1970s, the United States was dominant in the automobile industry. However with the increasing technology, the market has changed and now countries like Japan have overtaken in these countries. As a result the United States is being forced to import high quality automobile from the prevailing automobile markets in foreign countries. Additionally, self-imposed restrictions in trade have contributed to the cause for the United States importation of automobile products. These trade restrictions promote a deficiency of automobile products that are produce in the country. As a result the nation is forced to import such products which have deficiency or production in the United States. These restrictions are essential in the country’s economy as enables maximization of both local and foreign opportunities. Effects of Purchasing Automobile Parts from Other Countries The Economy First, the effect of automobile parts imports on the economy depends on whether a country’s balance of payment is in surplus or in deficit and on the power of its currency. If the balance of payment of an importing company is in debit but its currency is powerful, it imports are cheap and are sold more cheaply to the consumers thus inflation decreases and the local economy grows. If am importing country’s currency is fragile, products and services will be costly thus increasing inflation while the local economy undergoes recession. Secondly, outsourcing provides the economy with new products (automobile) which may be cheaper than the domestically manufactured ones. This thus caters for the needs of those in need of automobiles not manufactured locally but highly demandable. The existence of a variety provides one with an opportunity to choose to ones liking and preference rather than be restricted to certain lines of products (automobile) Importation of products creates competition in the economy of the importing country according to Churchill and Peter (1995). This is due to the fact that such imports may be of higher quality and/or sold at a cheaper price compared to the locally manufacture automobiles which on a higher probability are often of a lower quality. This competition would be favorable in a case where the local manufacturers were the sole providers of the product. To be competitive the local manufacturers would be forced to improve on their quality and pricing. Fig 1: The graph above shows the local manufacturers improving on their products quality to match that of outsourced thus increased demand on both of the manufacturers’ products. Courtesy of Valuestream Effects on the Local People People are able to access variety of automobile products which might be of high quality than the locally produced automobiles. In case, people will favor imports more and the local producers will be forced to improve their quality in order to meet people’s preferences hence bringing the products closer to the consumers. Importing of automobiles leads to lack of employment. This is because when the country emphasizes more on imports, there is the possibility of local companies to close their companies due to unfavorable competition. Similarly importing of automobile products means that the local producers are forced to operate as small companies thus minimizing the number of employees. Fig 2: Rate of employment against number of years since importation began Courtesy of CBS News In a situation where the products are imported, the locals would be deprived the chance to have the technological know how when it comes to making automobiles according Czinkota and Ronkainen (1995). In many instances they would only be allowed to assemble the already made parts, a process that does not require much knowledge and expertise than making the automobile from scratch. Conclusively, outsourcing of a product is a much preferred means of trade for any country due to the fact that it creates a good rapport among the trading countries. It also helps in disposing off of in excess materials by the country that is acting as the second fiddle in the production process. The realization of the existence of a better option by the local consumers makes local manufacturers produce goods that near the quality of those outsourced. References Boone, L. & Kurtz, D. (1992). Contemporary Marketing. New York: Dryden Press. Brue, S. & McConnell, C. (1993). Economics. New York: McGraw-Hill. Churchill, G. & Peter, P. (1995). Marketing: Creating Value for Customers. Austen Press. Czinkota, M. & Ronkainen, I. (1995). International Marketing. New York: Dryden Press. Farese, L., Kimbrell, G. & Woloszyk, C. (1991). Marketing Essentials. Mission Hills, CA: Glencoe/McGraw-Hill. Read More

CHECK THESE SAMPLES OF Outsourcing of Automobile Materials

Product Market Cyclicality Exerts a Powerful Influence on a Car Assemblers Sales, and Value Added

The manufacture of automobile uses great quantities of iron, steel, aluminum, and natural rubber.... Access to the resources, information and expertise of external partners can be presented by the in- and outsourcing of different processes.... The product market comprises of items like raw materials, machines, and tools and is concerned with acquisition by company for their own use which may consecutively be used to produce items for the customer market....
6 Pages (1500 words) Essay

Shifting Geographies of Production and Consumption

According to Nobel laureate Krugman (1992), industries agglomerate in geographical regions where access to markets and raw materials coupled with the availability of skilled labour and a network of accessory producing machine shops, is easier.... Globalization has brought with it a slew of strategic shifts in the global automobile industry during the past decade.... Preceding this period of time, a series of dynamic changes took place in the automobile industry through such changes were less noted for their decisive history-making trends by analysts....
7 Pages (1750 words) Essay

Cause and Effects of Importing Materials from Foreign Manufacturers Vis--Vis Automobile Company

"Cause and Effects of Importing materials from Foreign Manufacturers' Vis-À-Vis Automobile Company" paper argues that the cost advantage outsourcing has to offer and the inflexibility of our local industries are some of the reasons why outsourcing material will have a positive impact on the company.... As a result of this increased competition, many firms are now relying on foreign manufacturers for the production of their final products or most of their raw materials....
3 Pages (750 words) Essay

Challenges of Sustainability in the Car Industry

A PESTEL analysis of the global automobile industry reveals that innovation is highly associated with the car industry (Refer to Appendix 1 for a full PESTEL analysis).... A PESTEL analysis of the global automobile industry reveals that innovation is highly associated with the car industry (Refer to Appendix 1 for a full PESTEL analysis).... This implies that competition is rife in the automobile industry.... Certain governments have led the way in supporting automobile manufacturers and consumers in making sustainable car choices....
9 Pages (2250 words) Essay

Jaguar Land Jaguar Land Rover Automotive PLC

It outsources its materials that it uses for engineering at some of its well-established facility in the United Kingdom.... The aim of outsourcing the engineering materials is to its management of stocks as well as makes more savings.... Globalization and restructuring in the auto industry: the impact on the West Midlands automobile cluster.... Vertical restraints and the law: evidence from automobile franchising.... Jaguar Land Rover Company has been successful in outsourcing some of its functions....
10 Pages (2500 words) Term Paper

Decline of the Fiats Performance and Ranking in the Automotive Industry

n order to produce any product, raw materials, different components and labor is provided by the suppliers.... ollution Prevention: The use of environment friendly materials. ... eduction in Waste generation: Using materials that can be reused, recovered and recycled.... The major challenges faced by Fait group are outlined keeping in mind its strengths and weaknesses Fiat Executive Summary Fiat is one of the pioneers in the automobile industry....
14 Pages (3500 words) Assignment

Supply Chain Management in Jaguar Land Rover

Jaguar Land Rover is a leading automobile OEM manufacturer.... The decision-making process is outlined by the reasons for choosing North America as the entry market, an evaluation of the business opportunities for JLR in North America, the choice of entry mode, and prospects of the automobile industry in the country....
21 Pages (5250 words) Case Study

Car Manufacturing - Marketing Potential of the US Automobile Manufacturers

ocusing on the manufacturing activity, Japan is considered as the potential market for the manufacture of passenger cars such that it is estimated that Japan's total export of automobile products to United States for the 2014 period would reach around 1.... Further Japan is taken as key manufacturing center for automobile products such that it operated based on a strong network of automobile firms like Nissan and Toyota.... The organization based in United States would focus on meeting the needs of the above target market through the procurement of automobile parts from Japan to meet their changing needs....
9 Pages (2250 words) Coursework
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us