Competition in the automobile industry has increased significantly in recent years. As a result customers are demanding high quality products at lower prices, and this is one of the main causes of outsourcing manufacturing of materials to foreign countries. Many automobile manufacturers are producing their materials in Third World countries in hopes of cheap labor and, therefore, the company will have to respond to the industry trend (Duhigg & Bradsher, 2012). Competitors in the automobile industry are desperately trying to increase their market share at any cost. In such a competitive environment, it is not possible for our company not to outsource manufacturing to foreign manufacturers.
Another important cause of taking the outsourcing decision is the inefficiencies in local production. The cost of production in the developed world is increasingly rapidly and, therefore, it is not possible for companies to achieve high level of efficiency. Local employees have to be provided with employee benefits and a range of other facilities. Local employees can also not work for longer shifts continuously. It has also become difficult to increase productivity in a short span of time without sacrificing money while working with local workforce. This is why local production has become inefficient and this is one of the most important causes of outsourcing to foreign manufacturers.
Production is also not very flexible locally which is why it takes a lot of time to respond to market changes (Duhigg & Bradsher, 2012). Specialized manufacturing companies can do this in a lot less time than local companies. Changing production outcomes and redesigning the process is a time consuming process and, therefore, it reduces the flexibility of our company. In today’s competitive business environment, it is essential that firms respond to market changes and customer demand in a very short ...
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