Question

QUESTION: Strategy trade-offs must be considered in operations. Describe what these might be for a high- quality automobile manufacturer and then a low-cost automobile manufacturer.

Answer 1

A strategy trade-off means sacrificing one thing to gain another. This is an essential part of business strategy for manufacturers. Even though it is not possible to generalize things for the automobile industry because there are always exceptions. Anyhow, automobile manufacturers try to cut corners in different ways.

High-Quality automobile manufacturers.

Their customers are loyal and brand conscious so they will be manufacturing critical mechanical components in their in-house production unit. But when it comes to interiors and other plastic parts they try to outsource it from third-party manufacturers to reduce the cost. This is the main reason we can observe some high-end cars often comes with poor quality interiors. Another way to minimize the cost is by reducing the quality of the paint because ihis will not be an easy job to identify it due to the automated robotic paint booths that reduces the exterior orange peel effect.

Low-Cost automobile manufacturers

These companies target those people with less budget. Their customers are very price sensitive so a company needs to save the cost in every phase of the production. It starts with the designing of a model. They implement cost control in R&D hence we can often see low-quality cars with poor aerodynamics design. Mechanical components will be with average quality and all other components usually come with poor quality. The main trade-off here is reliability. Safety features and other features meant for comfort will be lesser in these models. Due to poor quality crumple zone, customers have to compromise with the crash safety as well. These companies often provide average customer service support through their service/dealership networks.