AOS 3: Global Considerations

Question 1

What is global sourcing of inputs?

Answer 1

Global sourcing of inputs is when a business sources its inputs from countries outside of its place of origins.

Question 2

What are advantages of global sourcing of inputs?

Answer 2

• Reduces cost
• Opportunity to learn how to do business in a potential market
• Accessing skills or resources otherwise unavailable domestically
• Developing alternative suppliers/sources of inputs
• Increase capacity of total supply

Question 3

What are disadvantages of global sourcing of inputs?

Answer 3

• Hidden costs associated with different countries and time zones
• Exposure to potential high risk both financially and politically
• Long lead times for manufactured goods
• Risk of ports shutting down and interrupting supply
• Difficult to monitor the quality of inputs

Question 4

What is overseas manufacturing?

Answer 4

Overseas manufacturing is where a business produces its goods in a country that is different to the location of their headquarters.

Question 5

What are advantages of overseas manufacturing?

Answer 5

• Takes advantage of another organisations manufacturing experts (increased productivity)
• Lower set up costs as facility may already exists

Question 6

What are disadvantages of overseas manufacturing?

Answer 6

• Business will lose some control over production process
• Can impact quality
• Less control over wages and working conditions which can lead to CSR issues

Question 7

What is global outsourcing?

Answer 7

Global outsourcing is when a part of a business operations is handed over to another person or business located in a different country.

Question 8

What are advantages of global outsourcing?

Answer 8

• Improved quality because of access to expert knowledge and high-quality services
• Business can focus on core activities
• Costs can be reduced
• Production may be quicker as the outsourced provider should be able to focus on the task they specialise in

Question 9

What are disadvantages of global outsourcing?

Answer 9

• Management may have less control over the production process
• It may e difficult to maintain quality
• Loss of local jobs and career prospects, which may result in low morale in local workforce
• There may be security and confidentiality issues
• There may be communication issues that lead to customer service problems