October 2017 (Revised September 2022)
Teaching Note
HBS Case Collection

Fuyao Glass America: Sourcing Decision

Format:Print
| Language:English
| Pages:20

Abstract

This case is about globalization: a Chinese company has decided to locate a production facility close to its customers in the U.S., but a recent contract bid means it will lose money, at least initially, by supplying product from that factory. The purpose of this case is to expose students to the key drivers of sourcing location choices in a global economy and the trade-offs associated with local versus offshore sourcing. It provides an opportunity to examine labor arbitrage and factor costs, as well as the practical questions of when it makes sense to ship products great distances. This is foundational for understanding international trade and globalization today, and provides the motivation for the structuring of global supply chains. Though the numbers in the case are scaled and therefore disguised, they offer a rare opportunity for students to examine realistic labor and factor cost differences between China and the United States, and to consider the broader implications of labor arbitrage, trade, and government policy. Teaching Note for HBS No. 618-007.