Case 3: Scott Miracle Gro: The Spreader Sourcing Decision Objectives 1.) To demonstrate that even simple, non-core products are not always outsourced-when all facts are considered, it is not apparent that outsourcing or offshoring even a simple product such as a lawn spreader will offer substantial cost savings 2.) An opportunity to discuss the various risks and tradeoffs associated with ownership and outsourcing of production as well as domestic and non-domestic production 3.) An illustration of the critical importance of considering not only production and governance costs, but also changes in macroeconomic variables such as exchange rates and labor rates in international outsourcing decisions. Ensure your team reviews the decision thoroughly that Scotts is faced with. It is important to pin down the exact activity in your focus: the manufacture (injection molding) of the spreader buckets and the assembly of these with all other parts to produce a finished spreader. Questions 1.) What are the strategic risks and benefits of outsourcing production of the Temecula plant to a contract manufacturers) in China? Use any frameworks that you feel are relevant to assess this decision at the strategic level. * Risks should include the known financial risks, the uncertain financial risks, and the non-financial risks. Benefits should include the known financial benefits, the unknown financial benefits, and the non-financial benefits 2.) Create a TCE Framework model (a 4 square). Name the main drivers for each as you fill in the squares. Uncertainty both directly influences transaction costs and interacts with asset specificity. Describe what Asset Specificity is. Describe what Uncertainty is. Asset Specificity Low Low High Uncertainty 3.) Financially compare two of the options (stay in Temecula, outsource to China). Include all possible relevant financial measures and explicitly state important factor not included in the financial analysis. Provide a brief assessment of the offshoring option 4.) What should Scotts do? Defend your answer. Include calculations if your group has utilized such in making their decision. Show a compare and contrast model to support how you arrived at your decision