Activity 1. Which is better? Local or global providers?

Description

Students will identify the elements that have an influence when deciding whether to
use a global provider or a local alternative and determine which is the best option by
using cost-benefit criteria.

Objective

To analyze different options of global providers versus local providers to determine

which will be the company’s best choice, using cost-benefit criteria.

Requirements

 A word processor per team, a case to analyze, and a calculator.

Instructions

Part 1

1. First, carefully read the case and answer the following questions, click here to
download it.
a. What is international logistics? Write a definition in your own words.
b. Which do you think are the activities that support international logistics?
Consider that these are the activities that allow the logistics system to
work. Elaborate in your own words.
c. What kinds of international transportation do you know?
d. What do you think are the economic benefits obtained by using foreign
providers versus local providers? Consider marketing aspects such as
logistics, materials, cost, and labor.
e. What opportunities do you think logistics can bring in terms of
increasing efficiency by means of optimizing costs and strengthening the
market?
2. Mention two examples of companies that you consider have good international
logistics and explain why.
3. Analyze the following case and answer the question:

If a company wants to obtain the same profits it attained before, when

it sold the product for 550 MXN:

What would be the maximum quote cost for each of the three options in order to
consider it a profitable business for the company? Indicate the cost in each country’s
currency, using USD for China’s instance.

Part 2

4. In pairs, analyze the following situation:

Mr. Carlon finally received the provider quotes he requested. The prices for each
provider are:

China 30.00 USD

Italy 24.00 EUR
United States of America 34.00 USD

1.
a. Which of the foreign provider options fulfills the profit per piece goal set
by AF1?
b. Among the feasible options, which is the most profitable? Consider the
profit goal in this case.

Before making a decision, Mr. Carlon looked at the current exchange rates in the
newspaper. Consider that exchange rates are different:

MXN/USD exchange rate: 12.25

MXN/EUR exchange rate: 16.10

1.
c. Do you think this information will change the decision to be made?

Mr. Carlon was not familiar with imports, since AF1 markets Mexican products only,
and he forgot to add the calculation on tariffs to his decision. He obtained the
following information:

Tariff on hubcaps of Chinese origin: 15% over customs value.

Tariff on hubcaps of European origin: 5% over customs value.

Tariff on hubcaps of American origin: 0% over customs value.

Customs value is calculated considering the product cost plus the sum of all costs
incurred until the material gets to the customs office of the country that will import it.
 1.
d. With this new information, what do you think will be the final decision
for the most profitable option? Explain how you reached this conclusion.

USA: 461.50 - $37.50

e. If you compare the calculation above to the cost of acquisition with a

local provider, which of the foreign provider options would have a lower
product cost, without considering the profit per piece that AF1 wants to
obtain?

Part 3

5. In class, now that you have elaborated on the options the company has and on
the influence that different factors have on decision-making, discuss the key
elements that help a company make the right decisions and change conditions
that may determine the selection of a different alternative.

 Price
 Quality
 Delivery time
 Prestige
 Duties
 Customer service

6. Conclude about the importance of implementing foreign providers within

companies and the impact it has on the industry and against competitors.

 Facilities
 Treaties
 Convenience
 Security
 New markets
 Multiple option
Note: Consider that your activity must be documented (process) and substantiated.

Evaluation criteria

1. Answers to questions about the case.

2. Analysis of the different options of foreign providers under the conditions
described in the case.
3. Essay that elaborates on the influence of different factors when making
decisions and on the impact foreign providers have on the industry and against
competitors.

Deliverable(s)

A document with answers to the questions and the conclusions reached.