Location decision

An outlook to the strategic decision of offshoring, outsourcing and

reshoring back.

Prof. Alfredo Valentino

1
What’s an international company?
• Enterprises basically located in the home country but operating
abroad through export and import.

• Companies involved in exporting products and services to other

nations without any other types of foreign investments.

2
What’s a multinational corporation?
• Geographically dispersed network or global factories (Buckley, 2009).

• The geographical dispersion of these units worldwide presents the

MNC with a multitude of environments, creating both challenges and
opportunities (Andersson, Forsgren and Holm, 2002).

3
 Why going international
• Specific motives
• Internal vs. External stimuli

• Proactive vs. Reactive behaviour

• Proactive or aggressive behaviour based on the firm’s interest in exploiting unique
competencies or market possibilities (pull factors)

• Reactive behaviour, that is, the firm responds to internal or external pressures (push
factors), and acts passively.
 Why going international

Internal External
Proactive • Managerial urge • Foreign market
• Economies of scale opportunities
• Unique • Bandwagon effect
product/technology/com
petencies
Reactive • Risk diversification • Small home market
• Excess capacity of • Stagnant or declining
resources home market
 How to evolve international?
• Internationalization is an incremental process of increasing
commitment and knowledge on foreign market (Uppsala Model)

• Internationalizarion is learning about:

• Strategies work in different markets
• Product and market activities adapt to local market conditions
• Preferences in different markets
• Securing managerial and financial resources to support the process
 How to evolve international?

Improvement of
Settlement in a
Entry in a foreign International
foreign market Establishment of
market through position through
through a foreign sales
no regular export foreign
independent subsidiary
activities production/manu
representatives
facturing
How does globalization affect management?

Production/
Markets value chain
activities
Convergence in buyer Dispersal of
preferences in markets production activities
around the world worldwide to minimize
costs or maximize
Global products quality

8
 Benefits of production globalization
• Expanding globally allows firms to increase their profitability and
rate of profit growth in ways not available to purely domestic
enterprises

• Firms that operate internationally are able to

• Expand the market for their domestic products
• Realize location economies by dispersing individual value creation activities
• Realize greater cost economies
• Earn a greater return by leveraging any valuable skills developed in foreign
operations
• Focus on developing strong competences in a narrow niche

9
 Reorganization of the production and export
operations
Px My Produce in country X and sell in
some foreign countries (Y, K, …)
Mx Mk

Py

Px My Produce in the countries

where the Company wants to
Mx Pk sell
Mk
10
 Reorganization of the production and export
operations
Mk
To manufacture in the countries
P4,5
where there are the best
conditions for doing it and for
P3 P5,6 reaching the different final
Mh geographic markets
P1,2,6

Mx Mz
Value creating activities are
located in different geographic
P3 areas
Mj
My
11
Value chain activities are moving abroad

12
Global value chain of a computer enterprise

13
Elica and the globalization of production and export

Elica is an Italian manufacturer of cooker

hoods

It is the main cooker hoods manufacturer and it is leader in

Europe as manufacturer of engines for hot-water heaters

14
Elica and the globalization of production and
export
Elica Spa, Fabriano (Italy)
Elica Group Polska
Sp.zo.o, Poland:
responsible for the
production of electric
engines and cooker
hoods
Airforce Germany:
It sells products for the
German market/sales
subsidirary
ARIAFINA CO., LTD, Japan:
Joint venture controlled by
Elica, created for the
production, R&D and sale of
products for the Japanese
market
ELICAMEX S.A. de C.V.,
Mexico:
it handles the
production of products
for the American
markets Elica Inc, USA:
it has the goal to help the
development of the brand
through the activities of local
marketing and trade
marketing experts/export
office 15
Elica and the globalization of production and export

Elica Spa, Fabriano (Italy)

Exklusiv Hauben Gutmann Zhejiang Putian Electric

GmbH, Germany:
specialized in the
production, and innovation
of tailormade cooker
hoods and export from
Germany in Europe
Co. Ltd, China:
it owns the “Puti” brand,
used for the production
Elica India: and sale of a range of
it produces and sells products
the product of the
company

16
IBM

17
• https://www.youtube.com/watch?v=KJhlo6DtJIk&ab_channel=TheEc
onomist

18
 MNC organizational structure

• “There is no permanent organization chart for the world…. It is of

supreme importance to be ready at all times to take advantage of
new opportunities”.
Robert C. Goizueta
(Former) Chairman and CEO, Coca-Cola Company

19
 MNC organizational structure
• Organizational structures must change to accommodate a firm’s evolving
internationalization in response to worldwide competition

• Managers are faced with how best to attain that fit in organizing the company’s
systems and tasks.

• The design of an organization, as with any other management function, should be

contingency based, taking into account the variables of that particular system at
that specific point in time.

• IBM has adapted in various ways. After realizing that the company had missed
opportunities for growth initiatives, it developed its EBO (emerging business
opportunities) model into three horizons—current core businesses, growth
businesses, and future growth businesses

20
 The stage model

High Regional division

Global matrix

Foreign product diversity

International
division
Product division
Exports And functional
Low structure

Low Foreign sales as a percentage of High

total sales
From Stopford and Wells
21
 Structural forms

• Domestic structures plus export department

• Typically of small/medium enterprises that start their international
involvement

• Domestic structures plus foreign sales subsidiary

• the firm can take a further step toward worldwide operations by establishing
subsidiaries in one or more countries

22
 Structural forms

• International division
• With this structure, the various foreign subsidiaries are organized under the
international division, and the subsidiary managers report to its head, who is
typically given the title of Vice President, International Division.
• The Vice President directly reports to the CEO.
• It permits managers to allocate and coordinate resources for foreign activities
under one roof and, thus, enhances the firm’s ability to respond, both
reactively and proactively, to market opportunities.

23
 Structural forms

• Global product structure

• It is designed on the basis of the company’s functions—production,
marketing, finance, and so forth. Foreign operations are integrated into the
activities and responsibilities of each department to gain functional
specialization and economies of scale.
• Regional structure
• Each division is headed by its own general manager, and each is responsible
for its own production and sales functions. Usually, each division is a strategic
business unit (SBU)—a self-contained business with its own functional
departments and accounting systems.

24
 Structural forms

• Matrix structure
• is a hybrid organization of overlapping responsibilities. The structure is
developed to combine geographic support for both global integration and
local responsiveness, and it can be used to take advantage of personnel skills
and experience shared across both functional and divisional structures.

25
 The procurement
process and client
preferences differ from
region to region…

Customers are becoming

more global and they want
to see the exact same
supplier organization in
different regions…. 26
 The integration-responsiveness framework
• No matter what the stage of internationalization, a firm’s structural choices
always involve two opposing forces:

• The need for differentiation (focusing on and specializing in specific markets)

• They embrace local responsiveness, managing the firm’s value-chain activities and addressing
diverse opportunities and risks on a country-by-country basis. Local responsiveness
emphasizes meeting the specific needs of customers in individual markets.

• The need for integration (coordinating those same markets)

• Global integration is the coordination of the firm’s value-chain activities across multiple
countries to achieve worldwide efficiency, synergy, and cross-fertilization to take advantage
of similarities between countries.
• They make and sell products and services that are relatively standardized— that is, uniform
or with minimal adaptation—to capitalize on converging customer needs and tastes
worldwide. Such firms compete on a regional or worldwide basis

27
The integration-responsiveness framework

28
 The integration-responsiveness framework
• IBM, for exemple, reorganized to achieve globalization by moving away
from its traditional geographic structure to a global structure from country
managers to centralized industry expert teams.
• As examples, now “IBM’s growth market operations are served by HR specialists in
Manila, accounts receivable are processed in Shanghai, accounting is done in Kuala
Lumpur, procurement in Shenzhen.

• Levi Strauss is an example of a company attempting to maximize the

advantages of different structural configurations.
• Levi Strauss Americas (LSA), based in the San Francisco headquarters
• Levi Strauss Europe, Middle East, and North Africa (LSEMA), based in Brussels
• Asia Pacific Division (APD), based in Singapore

29
 Strategies based on the IR framework

Global Strategy Transnational Strategy

High
P&G
Siemens

Global
integration
International Strategy Multi-domestic Strategy

Bridgstone
Low Starbucks

Low High
Local
responsiveness 30
Different layers of strategic decisions in MNEs

Global corporate
strategy

Regional strategy
Divisions

Countries

Businesses
31
 Different levels of HQs

Corp.
HQs

Different Different
knowledge Reg./Div. activities
HQs

Subs. with
HQs functions

From Ciabuschi, Dellestrand and

Holm, 2012 32
 Intermediary HQ units
• Intermediary HQs are hybrid units – double agency role

• They help with:

• Information processing between frontline subsidiaries and corporate HQ
• Corporate strategy implementation into the local market
• Help coordinate subsidiaries
• Promote and leverage local strategic initiatives

• Divisional HQs have decision rights for a certain product range

• Regional HQs have decision rights for a range of geographic markets

33
 Center of excellence
• An organizational unit that embodies a set of capabilities that has
been explicitly recognized by the firm as an important source of value
creation, with the intention that these capabilities be leveraged by
and/or disseminated to other parts of the firm (Frost, Birkinshaw,
2002)

• Strong capabilities
• Formal recognition from the corporate HQs
• Greater than unit level contribution

34
• Merck Frosst Canada, the Canadian subsidiary of Merck & Co., is a
center of excellence for drug discovery in the area of leukotrienes.
Although the subsidiary also has a broad set of responsibilities in
terms of manufacturing, sales and distribution, it has gained primary
responsibility within the company for leukotriene research, and has
developed several major products that are now sold by Merck & Co.
35
Excercise step 1
• Visit the websites for Apple (www.apple.com), Coca-Cola (www.coca-
cola.com) and KPMG (https://home.kpmg/xx/en/home.html). From
what you can gather, how do these three firms organize their
international activities? Do they seem to be applying multidomestic,
transnational or global strategy in their sourcing, manufacturing,
product development, and marketing activities? Which type of
organizational structure these firms adopt? What about autonomy,
control, and intermediary HQ units?

36
 Core vs Non-Core activities

Core Activities: i.e. those that are distinctive and crucial for the competitive advantage
and often of more architectural nature, those that the firm performs better than any other company (best-
in-world capability)
Essential Activities: i.e. advanced activities that are complementary and important for the competitive
advantage, those that are needed for sustaining its profitable operations

Non-core Activities: i.e. those that can easily be outsourced, they are low-value activities and are not
crucial for the competitive advantage 37
38
The pyramidal nature of firm advantages

39
 Firm-specific advantages
• Firm-specific advantages (FSA) are defined as proprietary internal
strenghts, such as technological, marketing or administrative
(governance-related) knowledge. These FSA do not stop creating
value across borders.

• They can be embodied in the final products/services that are valued

highly by host country customers (for example, Toyota car: the
outstanding production quality due to superior manufacturing
process and quality control systems).

40
41
 The paradox of FSA transferibility
• Codifiable FSA or codifiable knowledge (i.e. if it can be articulated
explicitly, as in a handbook or blueprint) can be cheaply transferred
abroad….. But also easily imitated by other firms

• Tacit FSA or tacit knowledge instead is difficult to be transferred and

it requires person-to-person communication…. With the consequent
need to send human resources abroad (expensive and time-
consuming)
• The most important bundle of tacit knowledge is contained in the MNE’s
administrative heritage: the key routines developed by the firm since its
inception

42
 Non-transferable firm-specific advantages
• There are 4 types of non-trasferable FSA:
• Stand-alone resources linked to home location advantages, such as a network
of privileged retailers or suppliers.

• Local marketing knowledge and reputational knowledge (e.g. the brand

name)

• Local best practices (i.e., routines considered highly effective and efficient in
one country, such as incentive systems for highly skilled workers or buyer-
supplier relations)

• The firm’s domestic recombination capability

43
 Location advantages
• The MNE’s economic success does not occur in a spatially
homogeneous environment: location matters.

• Many firms are successful internationally because they take

advantage of a favorable local environment.

• Location advantages do not confer an equal strength to all locally

operating firms vis-à-vis firms operating elsewhere.
• But, the more effective and efficient use of such advantages may confer to
them an additional FSA over other locally operating firms

44
Why would an MNE want to engage in foreign
location decision strategies?
• It is possible to identify 4 main motivations:

• Natural resource seeking: the search for physical resources in host

countries. These resources are in principle not proprietary, and their
availability in host countries (which constitutes the location
advantage of those countries) means that investment abroad leads to
higher value creation than investment at home (for example, Total SA)

45
Why would an MNE want to engage in foreign
location decision strategies?
• Efficiency seeking: these firms are looking for cost-related
advantages, like low wages and low cost resources, taxation structure,
tariff barriers, and political and legal environment.

46
47
Why would an MNE want to engage in foreign
location decision strategies?
• Market seeking: reflects the search for customers in host countries. Firms
are market seeking when they conclude that deploying productive
activities and selling in the foreign market confers higher value to the firm
than engaging in alternative projects at home.

• Strategic resource seeking: is the desire to gain access to advanced

resources in the sphere of upstream knowledge, downstream knowledge,
administrative knowledge or reputational resources. The underlying
reasons to engage in strategic resource seeking typically include the goal to
become an established industry player in a set of strategically important
knowledge development centers or output markets (example, IBM).
48
From Ricart and Agnese

49
Ferrero: global value chain

50
Location advantages

51
Location advantages and the centralized
exporter

52
Location advantages and the international
projector

53
Location advantages and the international
coordinator

54
Location advantages and the multi-centred
MNE

55
 Offshoring

• Offshoring is defined as a strategic practice whereby firms relocate their

business functions across national borders previously realized in their home
country (Kedia & Mukherjee, 2009; Manning, Lewin & Massini, 2008)

56
The market of offshored activities

57
Offshoring in China

58
• Twenty to 30 percent of volumes are likely to move back from Asia to near-shore
countries like Romania and Bulgaria.

• “There are some categories where it becomes very interesting [for European
brands] to source in Europe because the difference in prices [with Asia] is a very
low percentage and it’s so much more convenient, you don’t have long to travel,
you don’t have custom taxes and you can be much more reactive,” David
Benichou, a managing director at the global business advisory firm Alixpartners,
said in Paris.

• Producing items in Eastern Europe provides brands from European fashion

capitals with flexibility to produce “very late in the process and to process
additional volumes if necessary,” explained AlixPartner’s Benichou.

• The same dynamic can be seen across the Atlantic. Close to the US — still the
world’s largest consumer market — Honduras, El Salvador and Guatemala
increasingly offer a compelling mix of low wages, technical ability and proximity,
allowing them to compete for business with Asian hubs.
59
 Mode and Location choices
Where

Home Abroad

Other firm Outsourcing Offshore

Outsourcing

How
In-house Insourcing Captive Offshoring

60
Why do firms hand over part or parts of their value chain
activity(ies) to providers located in foreign countries?

61
62
 Drivers of offshoring
• Several drivers:
• Natural resource seeking advantages, such as the availability of raw material
and infrastructure.
• Market seeking advantages, such as proximity to main customers/stakeholders.
• Efficiency seeking advantages, such as cost-related factors like lower
wages/taxes, tariff barriers.
• Strategic asset advantages, like knowledge and synergies due to local presence
and partner

• Imitative driver:
• Bandwagon effect
63
 Example
• Moncler, the Italian maker of down jackets and après-ski wear, makes
around half of its products by value in Italy, where local craftsmen
produce items like leather handbags, scarves and gloves. Its “façon”
manufacturing operation (cut, make and trim), however, is mostly
based in Eastern Europe, where Moncler provides the raw materials
and its plant is entrusted to assemble the product under attentive
monitoring and weekly inspections. This includes Moncler’s core
down jackets. Last year, the brand even established a new
manufacturing hub in Romania and hired 600 workers, having bought
a local supplier the year prior. The technical abilities and quality level
found in Romanian manufacturing is what sparked the move.
64
Different modes of offshoring

Degree of control on the offshored activity

65
Typical functions being offshored/outsourced

66
 The three-stage decision
• Disintagration vis-a-vis integration

• Perform certain functions/activities in the home country or outside

• Externalize those functions/activities to foreign providers (offshore

outsourcing) or internalize those functions to be performed in-house
in the foreign land by setting up units/subsidiaries (captive offshoring)

67
The three-stage decision
Decision

Contribution to competitive
Organizational
advantage (Analysis of
capability (Analysis of
internal and external
internal factors)
factors)

Make BUY overseas MAKE overseas

Continue to invest in Select an Select an

current infrastructure International supplier International location

68
 The internal analysis
• What are the firm’s key internal factors related to developing and marketing its
products/services?

• What are the core and essential activities of the firm that create value for the
final market?

• What internal factors hinder the firm’s development?

• Could these activities be disintegrated without negative consequences on the

sources of the competitive advantage?

• Which advantages and disadvantages does the firm face in the local markets?

69
 The internal analysis

High Leverage activities Strategic activities

Essential Control/core

Importance of
the activity

Non critical Bottleneck

Low activities activities

Efficiency Ensure supply

Low Complexity of High

the activity 70
Captive offshore vs Offshore outsourcing

71
 Make or Buy
• A firm decides to offshore its production in a foreign country.
Realizing production in-house (captive offshoring) costs 30 Euros,
while offshore outsourcing to a foreign supplier costs 28 Euros.

• Make or buy? Captive offshore or offshore outsourcing?

72
 Make or Buy
• We have to decompose production costs:

• Raw materials 10 euros

• Labour 11 Euros

• Fix costs
• Structural costs 5
• Transport 4

73
 Cost classification
• Ceasing costs: costs the firm will not bear anymore going from
making to buying

• Emerging costs: costs the firm will bear taking the buy option

• Indifferent costs: costs the firm will bear in both the strategic options

74
 Make or Buy
Ceasing Costs Emerging Costs Indifferent Costs
Raw materials 10
Labour 11

Structural costs 5
Transport 4

Providers’ price 28

Total costs MAKE = 30 Total costs BUY = 32

75
 Exercise
• Due to the strong competition and the absence of specific
competences at home, a hi-tech German enterprise decide to
offshore part of its R&D department in Malaysia. But, its top
managers are discussing the location strategy between captive
offshoring (co-locating this activity in the manufacturing facility the
enterprise already has in the target country) or offshore outsourcing.
After an in depth analysis on the financial aspects:
• Captive costs 1,750 USD
• Offshore costs 1,550 USD

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 Make or Buy
• We have to decompose production costs:

• Raw materials 400 USD

• Labour 750 USD

• Fix costs
• Structural costs 250 USD
• IT systems 350 USD

77
 Make or Buy
Ceasing Costs Emerging Costs Indifferent Costs
Raw materials 400
Labour 750

Structural costs 250

IT systems 350

Providers’ price 1,550

Total costs MAKE = 1,750 Total costs BUY = 1,800

78
 In reality…. More complex….
• Governance or control costs:
• Bargaining costs: these are expenses related to negotiations between parties. Both
time and resources spent on bargaining, and losses that occur due to non-efficient
agreements can be classified as bargaining costs.

• Monitoring costs: these are expenses related to controlling the fulfilment of

contractual agreements

• Maladaptation costs: these are the opportunity costs of not being able to respond
effectively to changes in the environment or due to misleading or delays or defective
items/semi-products/products

• Bonding costs: occur in general due to the need for securing the commitments made
by the parties involved. Such activities could include actions like establishing personal
ties between parties, developing common identities, building incentive systems,
spending time together to solve third party problems, training.
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 In reality…. More complex….
• Hidden costs

• What about competences and firm-specific advantages?

• We have to consider the type of activity:

• Core
• Essential
• Non-core

80
Captive Offshoring versus Offshore Outsourcing
Captive offshoring
• Full control over quality of products
• Maximization of scale and scope advantages and
leveraging of best practices across subsidiaries
• Know-how protection
• Stable pricing and lower supply risk (alleviate
eventual fluctuations in supply or prices)
Offshore outsourcing
• Lower lead time due to use of existing
infrastructure
• Specialized outsourcing companies
• Exploit the advantages of using a subcontractor
more focused on a particolar task
• High long-term flexibility because fewer asset
specific investments have been made
• Lower investments costs – tend to be variable costs
• Often cheaper production
• Integration binds (human and capital) resources
and distracts managerial focus from other activities
81
 Make or Buy
Ceasing Costs Emerging Costs Indifferent Costs
Raw materials 10
Labour 11

Structural costs 5
Transport 4

Providers’ price 28

Control costs 7 3

Total costs MAKE = 37 Total costs BUY = 35

82
 Selection of the captive offshoring
Selection of the captive
offshoring

Costs Incentives Responsiveness Risks

Raw materials
Corporate income taxes Supplier proximity Economic
Labour
Climate Head office proximity Political or country
Transport
Crime rate Customer proximity Cultural
Strucutral costs
Cost of living Borders (customs) Structural or market
Governance costs

83
 Selection of the offshore outsourcing
Selection of the offshore
outsourcing

Costs Functional capacity Relationship capacity Risks

Quality (Certification) EDI system European Union (Schegen

Purchasing Production flexibility Financial transparency + Euro)
Transport ERP system Openness to Economic
Governance costs communication Political or country
Compliance with lead
times Long-term perspective Cultural
CSR/sustainability policy Structural or market

84
 Avoiding scandals…. Bad image
• Ikea opened a manufacturing hub in China in 2013

• Moving part of the production in an offshore plant and part in

offshore outsourcing

• Some suppliers of Ikea were using child labor, raising a scandal in the
public opinion with a strong negative effect on the reputation and the
image of Ikea

85
 Category
Direct costs
Some criteria
Transport costs
Criteria Indicators
Supplier-plant transport cost; plant-
warehouse transport cost;
warehouse-costumer transport cost
Labour costs; production costs; Average wage
operating costs
Cost of land and building; Price per m2
investment costs
Energy costs: electricity, natural gas, Price and availability of different
fuel, etc. types of energy
Financial aspects Income and taxes Corporate income tax rate; local
taxes
Financial incentives Number of financial aid programs;
number of available loans
Country risk Country risk index
Exchange rate risk Exchange rate volatility index;
average 5-year exchange rate
Accessibility of banking system Number of banks
86
 Category Criteria Indicators
Environment Water Water quality and price for
companies
Regulation of industrial pollution Taxes and compensation for
pollution
Environmental pollution Air, water pollution indices
Waste treatment infrastructure Recycling; sewers; treatment plants
Natural risks Risk of natural disaster
Labour Availability of labour Unemployment rate
Manual labour Number of labourers
Skilled labour Number of engineers, literacy rate
Level of education Ration of students who completed
high school, access to higher
education
Unionization Unionization rate
Productivity Time lost per work stoppage;
number of work stoppagges
Workforce potential Techinical level of efficiency, work 87
 Category Criteria
Administrative and political aspects Law and regulations
Political stability
Regulation of industrial pollution
Corruption
Public relations
Technological aspects Development of information
technology
Innovation and engineering
Market Proximity of market
Market size and potential
Urbanization
Competition
Indicators
Number of law and regulations
Average duration of governments
Taxes and compensation for
pollution
Corruption index
Referendums
Internet connection rate
Number of patents filed per year per
country
Marketing costs; opportunity of local
market; proximity to distribution
centres; on-time delivery; transport
time for warehouse and customers
GDP; per capital GDP
Urbanization rate
88
Number of similar firms
Category Criteria Indicators
Suppliers Proximity of suppliers Risk of supply chain disruption; on-
time delivery, supplier-plant travel
time
Quality Available certification
Raw materials Availability and cost of raw materials
Trend Industry trend for suppliers in the
country
Transport Air transport Volume of air freight, distance from
airport, service level
Road transport Volume of road freight; distance
form train station
Rail transport Volume of rail freight; distance form
train station
Maritime transport Volume of maritime freight; distance
form train station
Transport risk Mortality rate; accident rate
(number of accidents per number of
cars on the road)
Road traffic Level of cogestion 89
 Category Criteria Indicators
Financial aspects Income and taxes Corporate income tax rate; local
taxes
Financial incentives Number of financial aid programs;
number of available loans
Country risk Country risk index
Exchange rate risk Exchange rate volatility index
Living conditions Legal status of foreigners Number of foreign nationals; degree
of national preference
Education Number of schools and universities

Safety Crime rate; quality of police services;

presence of terrorist groups
Cost of living Consumer price index

Health Number of hospitals; quality of

medical services
Housing Average price of housing

Social security Social security expenses; premium

compensation 90
 Indexing and Ranking Methodology
for offshoring decision
• Identify the main criteria
• Create judgment matrices
• Assigning scores to criteria for their overall importance.
• For each country/decision, first identify a comprehensive set of
potential indicators and then use one or more of these indicators
to represent a variable.
• Weights are assigned to each variable to establish its relative
importance: The more important a variable, the greater its weight.
• The resulting weighted scores are used to rank the decision.
 Make Buy

Weight Score Total Score Total

Product quality 0.20 4 0.80 3 0.60

Innovation capacity 0.10 2 0.20 3 0.30

Production costs 0.15 4 0.60 5 0.75

Production rate 0.10 1 0.10 2 0.20

Control 0.10 3 0.30 1 0.10

Control costs 0.10 4 0.40 2 0.20

Transport costs 0.20 2 0.40 2 0.40

Proximity to the final 0.05 4 0.20 5 0.25

market

Total evaluation 1 3.00 2.80

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https://www.nytimes.com/2019/11/13/business/tesla-elon-
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musk-berlin.html
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