Company X is making a decision as to whether to produce a component part in-house, or out-source the manufacturing process to an independent supplier. Manufacturing the component part itself requires a non-recoverable investment in specialized assets. On the other hand, the most efficient suppliers are located in countries with currencies that many analysts expect to appreciate substantially on the foreign exchange market in the next few years. (About 400-500 words)

a. What are the Pros & Cons of :

(i) manufacturing the component in-house, and,

(ii) out-sourcing manufacturing process to an independent supplier ?

b. Which option will you recommend, and why ?