Option 1: Manufacturing rethinks outsourcing

The economic recession has resulted in original equipment manufacturers (OEMs) seeking to drive
down costs by re-examining their manufacturing strategy, with many companies increasing their
level of outsourcing, writes Ronnie Darroch, Plexus regional president (EMEA) in Electronics
Weekly. He argues that OEMs can be of benefit to electronic manufacturing service (EMS)
providers (like Plexus who provide electronics design, manufacturing and after-market services to
companies with high complexity products) as OEMs undertake strategic reviews and decide to
outsource manufacturing to an EMS provider. Outsourcing all or a portion of their manufacturing
allows OEMs to convert internal fixed costs to external variable costs, leaving it more able to deal
with changes in end market demand, particularly during periods of economic instability. This can
create a win-win for both companies with growth opportunities for the EMS provider and the OEM
left to focus on its core competencies.

Think about:

(1) How can outsourcing change the cost structure of an organization?

(2) What are the major benefits and limitations of outsourcing?

Option 2: Opening and Closing New Stores

Asda is staging a major push south opening 11 new stores in the greater London region over the
next few months with plans for a further 150 by 2018. Two of the new stores will be a trial of a
new smaller format. These will be Asda’s first “High Street” stores, set on main thoroughfares at
a time when many retailers are abandoning the heart of towns for retail parks. The retailer will also
open seven standalone petrol filling stations, not attached to any existing stores, and two new
superstores.

Arch rival Tesco has announced 43 store closures, Morrisons 23 stores and Sainsbury’s has
abandoned 40 new supermarket projects and cut 500 jobs. Discounters Aldi and Lidl are still
growing. Aldi plans to open around 60 new shops.

Craig Bonnar, the Asda director responsible for store development, said: “We have set out a clear
five-year strategy which includes expanding further into London and the South East, and we
anticipate this will include opening 150 petrol stations and 1000 Click and Collect sites by 2018”.

Think about:

(1) How might management of the above supermarkets determine which stores should be closed?
(2) How might Asda management determine which stores to open?

Note: Pick either Option 1 or Option 2 to perform an in-depth case study and present your group
findings during the case class.