National Institute of Technology 2009-1st Sem M.B.A International Business IV Sem - - Question Paper

Organizational structure of a firm also influences its location decisions. For example, adoption of a global area structure decentralizes authority to area managers. These managers, seeking to maintain control over their area, likely to favour locating factories within their area to produce the goods sold there.

Location decisions are affected by inventory management policies of a firm, Inventory management is a complex area, which all operations managers must confront. They must balance the costs of maintaining inventory against the risks of running out of stock of finished goods. Good inventory management is often the mark of well-run organizations.

Facility location affects the level of inventory that firms must hold because of the distances and transit times involved in shipping goods. For example, the Daewoo auto major opted Chennai for locating its facility in India because the city is flush with manufacturers of auto-parts. Compaq computer has chosen to locate its primary assembly plants in the US, Scotland, Singapore, and Brazil so as to improve service to its North American, European, Asian, and South Asian customers respectively, while minimizing overall inventory levels.

Factory location becomes particularly critical when a firm adopts the JIT inventory management system as is done in Toyota.

Make or Buy Decision at the Boeing Company:

The Boeing Company is the world’s largest manufacturer of commercial jet aircraft with a 55 to 60 percent share of the global market. Despite its large market share, in latest years Boeing has obtained the going tough competitively. The company’s issues are two-fold. First, Boeing faces very aggressive competition from Europe’s Airbus industry. The dogfight ranging from Boeing and Airbus for market share has enabled major airlines to play the 2 companies off against every other in an attempt to bargain down the price for commercial jet aircraft. Secondly, several of the world’s major airlines have gone through a few very rough years during the 199’s and man lack the financial resources needed to purchase new aircraft. Instead, they are holding onto their used aircraft for much longer than has typically been the case. Thus, while the typical service life of Boeing 737 was once reckoned to be about 15 years, many airlines are flow making the aircraft last as long as 25 years. This translates into lower orders for new aircraft. Confronted with this new reality, Boeing has concluded that the only way it can persuade cash-starved airlines to change their used airlines with new aircraft is if it prices very aggressively.

Earning:   Approval pending.