BMC Global
The entrance of an automotive MNE in China
Behemoth Motors Corp. (BMC) is a major manufacturer of automobiles in the United States. BMC has decided to include a Global Positioning System navigator (GPSN) in all of its Sports Utility Vehicles (SUV) beginning with the 2011 model year. Wally Wizard, the GPSN manager, has been approached by Far East Enterprises, Ltd. (FEE) who has offered to outsource these units for MBC. FEE is a three-year-old electronic manufacturing company located in China and has experienced outstanding growth during that three-year period.
These models are just now being delivered and the GPSN units are manufactured in the Detroit BMC facility. Currently and for the foreseeable future, BMC will need 8,000 GPSNs per month. BMC experiences a high level of quality control over these units with only 2% of total production failing quality control testing. At present, 98% of all units manufactured are installed in SUVs.
Due to competitive demand in consumer market pricing, BMC's global interests involve shifting production of units to a lower cost, outsource manufacturer FEE China. The decision to evolve BMC capabilities as a multinational enterprise (MNE) has been prompted by the advantages presented by the offshore partner. Projected challenges to the strategy will be quality of parts and delivery schedule.
1. Your ability to identify the relevant costs in a decision-making situation and make a recommendation
The total manufacturing cost of the GSPN is $425 per unit calculated as follows:
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Cost...
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