Question

Just as there are pros and cons of buying components and raw materials, there are advantages and disadvantages of making components and raw materials in-house. Car manufacturers can expect which of the following to be considered a disadvantage of in-house manufacturing?

a. Control over quality
b. Control over deliveries
c. Lack of competition
d. Protection of intellectual property

Answer 1

The main disadvantage of in-house manufacturing for car manufacturers is likely the lack of competition, which can reduce pressure to innovate and focus on cost efficiency, contrasting with the benefits seen in intra-industry trade.

Step-by-step explanation:

The disadvantage of in-house manufacturing for car manufacturers is likely to be the lack of competition. When car components and raw materials are produced internally, the company may face less pressure to innovate or reduce costs since it is not competing with external suppliers.

This contrast with economies that enjoy the benefits of intra-industry trade, where extreme specialization, learning, and economies of scale drive competition across borders, thus benefitting consumers with a variety of higher quality products at competitive prices. The in-house production may lead to complacency and efficiency issues, as there is no threat from other suppliers potentially offering better quality or pricing. Aspects such as control over quality, delivery, and protection of intellectual property, on the other hand are typically considered advantages of producing in-house.