Group Written Assignment 1
Global Trends: Manufacturing and Outsourcing
Over the past decades various businesses across the globe have made shifts in the way manufacturing is handled in their companies. Some have outsourced the full scope of their manufacturing. While others have done partial outsourcing, where partial assembly is returned to the US industry. When manufacturing is outsourced, whether for goods or services, many companies downsize their work force. This creates a loss of jobs for the American industries while increasing jobs in places such as China, India and Indonesia, just to mention a few. Outsourcing, undoubtedly has ...view middle of the document...
It is not scientific, that companies such as Apple would outsource the manufacturing of their iPhones. The clothing industry also benefits greatly from China’s cheap labor. Major brands such as Louis Vuitton, Versace, Michael Kors and the likes manufacture their products in China.
Nonetheless, there are disadvantages and negative consequences with outsourcing and global manufacturing. In US for example, some companies closed segments of their company and outsourced work overseas. According to Susan Adam’s article in the 2011 issue of Forbes Magazine on outsourcing jobs, “US multinationals, like General Electric, Caterpillar, Microsoft and Wal-Mart employ one fifth of all American workers. In the 2000s, these sorts of giant companies shrank their US workforce by 2.9 million, while upping their overseas employment rooster by 2.4 million.” The writer received the statistics from the US Commerce Department’s Bureau of Economic Analysis. Other companies such as Apple has “…700,000 people engineer, build and assemble iPads, iPhones and other Apple products. But almost none of them work in the United States. Instead, they work for foreign companies in Asia, Europe and elsewhere, at factories that almost all electronics designers rely upon to build their wares,” Duhigg and Bradsher. Yet, the US population contributes tremendous to Apple’s gross revenue.
Also, low wages and labor productivity has comparative advantages with outsourcing. In China and other developing nations, there are lower standard of living and national wage levels. Therefore, these regions can pay low wages than US industry. However, highly productive and skilled workers will also enjoy higher wages. Take for example innovative Engineers in China are very productive because of their skills. So overall, productivity is the primary factor that gives the trading countries the comparative advantages. According to the textbook International Economics, “The principle of comparative advantages is based on the importance of opportunity costs. The principle states that a country will export products that it can produce at low opportunity costs in return for imports of products that it would otherwise produce at high opportunity costs.”
Heckshcher-Ohlin theory explains “a country will export the products that use its relatively scarce factor(s), intensively and imports the product (or products) that use its relatively scarce factor (s) intensively.” The Stopler and Samuelson theory predicts that, “real...