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2 (25 pts): MedTech Instruments manufactures specialized surgical equipment for hospitals and clinics. throughout the world. One of MedTech' most popular products, comprising 40% of
2 (25 pts): MedTech Instruments manufactures specialized surgical equipment for hospitals and clinics. throughout the world. One of MedTech' most popular products, comprising 40% of its revenues and 35% of its profits, is a blood pressure measuring device. Average production and sales are 400 units per month. MedTech has achieved its success in the market through excellent customer service and product reliability. The manufacturing process consists primarily of assembly of components purchased from various electronic firms, plus a small amount of metalworking and finishing. The manufacturing operations cost $600 per unit. The purchased parts cost MedTech $800, of which $300 is for parts which MedTech could manufacture in its existing facility for $100 in materials for each unit, plus an investment in labor and equipment which would cost $175,000 per month. Also, MedTech is considering outsourcing to another firm, Universal Concepts, Inc., the marketing, distribution, and servicing for its units. This would save MedTech $75,000 in monthly materials and labor costs. The cost of the contract would be $125 per product. Question 2.1. (15 points) Prepare a value chain analysis for MedTech to assist in the decision whether to manufacture or buy the parts, and whether to contract out the marketing, distribution, and servicing of the units. Question 2.2. (10 points) Should MedTech continue to: purchase the parts or manufacture them? provide the marketing, distribution and service, or outsource this activity to Universal? Explain your answers
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