A New York Times article (April 23,2011) describes the 42 % net profit increase and sales growth at Swatch, the Swiss watch company. The company is rushing to satisfy demand in Asia and expects to add over 2,000 employees in 2011.  But Swatch is both a watch manufacturer as well as a component supplier.  Given demand for components for its watches, the company plans to cut back on its role as a component supplier to watch competitors, thus increasing competitor costs.  But Swatch continues to focus on manufacturing in Switzerland as a way to nurture innovation, as its current CEO Nick Hayek states.  Is cutting back component supply a long run optimal supply chain strategy for Swatch ? Is Nick Hayek’s claim that domestic manufacturing in Switzerland is a key to sustaining innovation in the watch design valid ? What other industries have the kind of problem that Swatch faces in terms of its role as an OEM and a supplier in the same industry ?