Your firm has developed a global presence with exporting and acquisition of a fe

Question

Your firm has developed a global presence with exporting and acquisition of a few businesses, which are now well integrated into your enterprise. You know there is a growing demand for your products, which consist of large kitchen appliances. As a result, you are considering expanding production. Trade barriers are relatively high in several of your key markets, and you do not foresee any major changes in this area. You know from experience that consumers in several key markets have very different preferences in design but the functionality remains essentially unchanged. You are fairly certain that financial markets will be characterized by volatility rather than stability. The manufacture of your product is not sophisticated.

The larger the minimum efficient scale of a plant relative to the total global demand, the greater the argument for ____________.

a) centralizing production in a single location or limited number of locations

b) decentralizing manufacturing locations to as many markets as possible

c) lowering the value-to-weight ratio

Explanation / Answer

a.centralizing production in a single location or limited number of locations. Efficient scale is the operating output scale of the plant to achieve economies of scale. to achieve higher efficient scale, the number of locations are to be limited.

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