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A very good example is provided in Section 5.4 --- the authors present an example of technology choice based on an actual case from 1986.
A very good example is provided in Section 5.4 --- the authors present an example of technology choice based on an actual case from 1986. John Deere is one of the leading manufacturers of agricultural and construction equipment in the world. Although they had been building large farm tractors for over 20 years, they decided to purchase the technology from a Canadian company called Versatile. The authors illustrate this decision by using some unrealistic but simple numbers (they acknowledge these simplifications in the text), but some key details are missing. In particular, what product price do the authors use to generate this example?
Also, the authors do not mention that the competing technologies are not identical. John Deere products had earned a reputation as premium quality equipment that included lots of features -- by analogy, large John Deere tractors were akin to Lexus or Mercedes automobiles. In contrast, Versatile tractors were known to be reliable but less sophisticated and were akin to Honda or Hyundai automobiles. Based on the discussion of the extent decision presented in Chapter 4, would we expect John Deere to charge the same price for in-house product as they would for outside technology from Versatile? Finally, do you find any other problems with this example in Section 5.4?
