1 Explain the reasons behind Audis decision to build its QS

1.      Explain the reasons behind Audi\'s decision to build its QS SUV in Mexico rather than in the United States

2. Describe how Audi\'s strategy to train supervisory staff from the Mexican plant in Germany will have a positive impact on the operations at the new facility

3. Audi took the unusual step of preparing a source list for every part of the Q5 model that local suppliers must use. What is the advantage of this management decision? Is there a disadvantage?

Solution

1. Audi has decided to build its QS SUV in Mexico and not in U.S.A. Mexico was always a point of interest for car manufacturers like Audi due to their low wages. When compared to wages in U.S.A the wages in Mexico are significantly lower. But, in the past, Audi avoided building a plant in Mexico due to its poor logistics and infrastructure. However, things stand changed now. The country’s logistics and infrastructure have improved considerably and this together with the lure of low wages propelled Audi to build its SUVs in Mexico. Secondly exports from Mexico enjoy duty-free access to several markets across the globe.

2. Audi’s strategy to train supervisory staff from the Mexican plant in Germany will have a positive impact on the operations at the new facility. This is because the supervisory staff will be given training and exposure on Audi systems. They will be able to experience and learn about the company’s focus on quality on a first hand basis. In other words the supervisory staff will get exposure to best practices being followed and implemented in Germany. After getting training on these best practices the staff can replicate and implement these practices back in Mexico. This will lead to higher efficiencies for Audi in Mexico.

3. The advantages of this management decision are that Audi will be in a strategic position to develop a process in which it will be able to evaluate all raw materials. The company will be in a position to price most of its raw materials in U.S.D (U.S. dollars) and hence will be able to minimize the impact of exchange rate swings.

In terms of disadvantages preparing a source list for every part can lead to unwarranted use of resources. The process will be time consuming initially and may lead to increased overheads and costs.