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Mattel´S Case

In: Business and Management

Submitted By analindag
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1.a. How are the tradeoffs between in-house production and outsourcing?

In Mattel´s case the tradeoffs between in-house production and outsourcing are:

Advantages of Outsourcing (= Disadvantages of In –house production) | Disadvantages of Outsourcing (= Advantages of In –house production) | 1. Low wages and strategic location of the supplier will translate into low prices. Mattel can receive benefits of having as its supplier a company that is located in a country were the wages are low, as this lower production costs will be translated into the final price of the product.In 1988 based on the McKinsey´s study, Mattel created its Vendors Operation Asia (VOA) that consisted of “about 35 suppliers who offered not only low labor costs but also skills and expertise in building relationships with local Chinese government officials and cutting through the Chinese government bureaucracy (…) in 1997, VOA´s manufacturing activities accounted for about 25% of Mattel´s revenues”.Also, if the supplier company is located in an industry cluster like the toy manufacturing industry in Guangdong, where the physical proximity of suppliers and buyers, the possibility to have inventories Just-in-time, easy finding of trained labor force, among others, will help to reduce costs of production of the outside vendors.Mattel had a special strategy to locate its manufacturing plants, as it owned and operated 10 worldwide, 5 located in China, and the other were in Indonesia, Malasya, Thailand and Mexico. In this way Mattel took advantage of low wages but still had to deal with all the costs that are derived from operating and owning a plant.2. Operational flexibility. Enabled Mattel to increase “its operational flexibility, reduce costs and capital commitments, and cushioned its manufacturing operation from the boom-and-bust cycles that characterized the toy industry”. Companies…...

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