"A manufacturer has discovered that a major component supplier is in danger of going into liquidation. Discuss the ways in which the manufacturer might respond to this news."
“A manufacturer has discovered that a major component supplier is in danger of going into liquidation. Discuss the ways in which the manufacturer might respond to this news.”
Possible solutions
As one of the major component suppliers is under threat of going into liquidation there are a few options available to the manufacturer; the first option I will examine is the possibility of the manufacturer expanding to supply the component themselves. This might seem like a simple solution as it would mean that the manufacturer will now have control over the supply of this component and will also be able to control its production more flexibly. The downside of expanding the company though would be that it could lead to diseconomies of scale as the manufacturer would no longer be specialising in just the assembly of the finished article but would now be involved further down the production line. This move away from the businesses core objectives could lead to poor communication within the firm and a loss of corporate awareness which could see productive efficiency decline so as to make this option not worthwhile.
