Answer to Question 1
The make-or-buy decision refers to the firm's choice to make its necessary inputs itself or buy them from outside suppliers. The make-or-buy decision can be influenced by a firm's size, scope of operations, technological expertise, and nature of product. A firm that buys rather than makes retains the flexibility to change suppliers as circumstances dictate. This can especially important when technology is changing quickly as in the PC market. Most personal computer manufacturers, for example, have chosen to buy disk drives, USB ports, and microprocessors from outside suppliers. By so doing, they avoid the risk of product obsolescence and the large research and development expenditures needed to stay on the cutting edge of each of the technologies embedded in the component parts of personal computers or when inflation and exchange rates are fluctuating.
Answer to Question 2
A maquiladora is a factory located in a foreign trade zone in Mexico, usually along the U.S. border. Maquiladoras import unfinished goods or component parts, further process the goods or parts, and reexport them. No customs duties are levied on the unfinished goods as long as the goods are reexported after further processing in Mexico. Maquiladoras also receive preferential tax and customs treatment for their machinery.
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