Country of Manufacture Decision
Alexander’s Electronics has its headquarters in Kansas City, Missouri. Alexander’s manufactures and sells high-end surround sound systems for home entertainment. In 1991, the company moved its manufacturing to Taiwan. Now, given the increase in wages in Taiwan and expected increases in shipping costs to send products back to the United States, Alexander’s Electronics is considering moving its manufacturing operations again.

Alexander’s Electronics is evaluating China and Vietnam. Another option is moving manufacturing back to the United States. Each of these choices has advantages and disadvantages.

China has cheaper labor costs, but weaker legal protection to prevent the theft of trade secrets. Alexander’s does have managers in Taiwan who speak Mandarin Chinese, but these managers are native Taiwanese who may not be accepted in China because of the political problems between the two countries. Wages in China have also been moving up over time. Given the strong international pressure, China soon may have to increase its exchange rate, making it even more expensive to manufacture there.

Although Vietnam has cheap labor, there are concerns about staffing an operation in Vietnam. Vietnamese workers are not as highly skilled as workers in China and Taiwan. In addition, it is difficult to find well-qualified Vietnamese managers. The Vietnamese government is still communistic, and there are high levels of corruption. Vietnam is even farther from the United States than Taiwan, which would increase shipping costs. Distance is also an issue if Alexander’s moves its operations to China.

Moving manufacturing options back to the United States would decrease shipping costs, and there would be no import duties. The company could also advertise that their products are “made in the U.S.A.” Highly skilled and motivated managers and workers are available in the United States, but higher wages could make Alexander’s products less competitive against cheaper imports. Alexander’s managers are meeting to evaluate their alternatives.

Think Critically answer these in the textbox
What should be considered when a manufacturer chooses a manufacturing location? answer in red font

Is being “made in the U.S.A.” an important consideration for this type of product? answer in red font

Should Alexander’s Electronics consider manufacturing in Mexico? What are the advantages and disadvantages of manufacturing in Mexico? answer in red font

What other countries should Alexander’s Electronics consider? answer in red font

What should Alexander’s Electronics do? answer in red font Why? answer in red font