Cardiex is a world-leading manufacturer of implantable defibrillators based in Maastricht (Netherlands). Gustav Lund, Cardiex’s senior vice president for production and logistics, is trying to decide whether to offshore the assembly of defibrillators to the Philippines. Medtronic—Cardiex’s key competitor—offshored more than a decade ago by opening a plant in Shen-Zhen

(China). Moving operations to the Philippines would allow Cardiex to take advantage of considerably cheaper labor costs resulting in lower cost of goods sold (currently at 72% final sales in Maastricht and expected to fall to 67% in the Philippines).

a. What are the strategic factors that militate in favor of domestic manufacturing versus offshoring given that Cardiex’s sales are strictly focused on the European Union with 60 percent to Benelux and Germany?

b. Discuss the analytical framework that you would develop to compare the two contending options.

c. What are the additional factors and risks that need to be taken into account to reach a decision?