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Effects of globalization on US automobile manufacturing
Effects of globalization on US automobile manufacturing
Effects of globalization on US automobile manufacturing
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Globalization has brought Chinese companies with four significant opportunities to do business. The first opportunity is the reduction of manufacturing costs, which are mainly caused by scale economy (Bird & Rajan 2001). According to Hitt, Ireland & Hoskisson (2007), the concept of scale economy is that a firm’s unit cost decreases as the output increases. Because globalization leads Chinese companies to expand worldwide, they produce more output and manufacture under the economies of scale. Therefore, the companies’ manufacturing costs could be declined. The next positive aspect of globalization is the improvement of product quality because of the widespread transfers of foreign technologies. One typical example provided by Farug (2010) is that Chinese Sport Utility Vehicle (SUV) producers are now taking full advantages of technology transfers so as to enhance their automobiles’ quality. The third helpful effect is that globalization provides companies an access to external financing through the international financial market. As a result, they can achieve efficient capital manageme...
Introduction: Who here has a license? Who else is tired of overpaying for a car when you will likely want another in a couple years? Well, two Chinese car companies (Geely and Chery) are going to try to help out and offer cars that are much cheaper then any car on the market. The problem is finding a spot in the American car market because of prejudice in American and trouble finding backing. Even though there is a lot of skepticism towards Chinese car companies securing a foothold in the American car market, with the right marketing and not rushing into the market, there is a good chance that the Chinese car companies will follow the Japanese car companies and carve a spot in the American market.
Globalization has caused the world to change. Our country, China has been dramatically changed by globalization. Our people have moved to cities, and our industry has exploded. We have had huge advances in technology along with education improvement. Despite the fact that China has changed so much, there are still many issues that plague it. China faces serious environmental concerns. New diseases and viruses that are not indigenous to China can cause a wide range of sickness in the new area. Despite some of the the improvements in China that are a result of globalization, the negatives that globalization has brought to China are more than the benefits.
US-China share a significant relation in terms of trade which has expanded substantially over past three decades. This can be understood by the fact that total trade between U.S and china grew exponentially from $2 billion in 1979 to staggering $562 billion by year end of 2013. Currently China is United States second largest partner in terms of trading, its third-largest market for export, and its biggest import source. With a total estimate of approximately $300 billion China is one of the biggest market for U.S. firms (this fact is based on U.S. exports to China and sales by US firms which have significant investment in China). In fact for many companies it is important to participate in China’s market to stay relevant and competitive in current business scenario. For example automobile major General Motors (GM) has invested heavily in China, sold more cars in China as compared to United States for year range 2010-2013. Whereas on other hand, consumer in United States benefit greatly from the import of low-cost goods from Chinese manufacturer. Currently China is rated as the largest foreign holder of US Treasury securities (approximately $1.4 trillion as of December 2013). Another major aspect is that because of China’s purchases of US government debt has helped United States in keeping the prevailing interest rates low.
The cost advantages related to raw materials may be explained by better negotiated agreements with suppliers (perhaps due to the larger volumes of purchases – comp. Fig. 5) and possibly less shipping and distribution costs that stem from the fact that Samsung’s fab facilities are geographically collocated (while competitors’ facilities are spread world-wide). In terms of labour productivity only Chinese SMIC outperformed Samsung, but that came hardly unexpectedly: low labour costs in China had been and were to remain unbeatable for some time yet.
In recent years, China's service outsourcing have been expanding from scratch, and gradually expand the field, scope of business mainly related to Information Technology industry, producing services, as well as cultural and creative industries, the target involving Japan, Korea, Europe, America and India. In Shanghai, Beijing and other cities formed a group of outsourcing industry cluster, with significant economic benefits of international service outsourcing park; local outsourcing companies grew rapidly, and gradually change the pattern of the first to foreign-based.
Dierkes Meinolf from New York, Oxford University is an author of various books. In this book, the author stresses on the learning strategies and process of Chinese firms. He argues that the success of the Chinese firms is because of implementation of good organizational and learning knowledge. The Chinese government is well connected to the global market that makes its economy to grow due to the different innovations and qualitative improvement of the existing manufacturing firms. The area where the Chinese economy has improved is on the manufacturing and processing sectors where they range higher than the Americans.
Since China joined the WTO in 2001,which has significantly further opened up the massive Chinese market for foreign investments and trading. China has witnessed a remarkable economic growth and due to its huge population, China has become a major player in the world economy. Furthermore, China has a huge potential consumer market due to a dramatic expansion of the middle class in China (KPMG, 2004). Therefore, China appears to be one of the most attractive markets for many multinational companies (KPMG, 2004). Since 2003, China has become the biggest target country for international investments following by the United States (KPMG, 2004). In addition, China has recently further liberalized the government regulations and restrictions toward foreign business operation in China. These basically allow foreign firms to pursue their preferred entry mode choices. However, the Chinese market is heterogeneous, large, complex and not easily accessible (MOFCOM, 2013). Therefore, the choice of the entry mode is significantly considered as a frontier issue in the international marketing (Root,
Where as, Intra-industry trades are “two-way exchanges of similar goods” (Krugman et al., 2015). Hence, intra-industry trades are “not based on comparative advantage” (Krugman et al., 2015). The main difference between inter- and intra- industry trade is that inter-industry trade occurs because of comparative advantage, while intra-industry trade happens because of lower costs from economies of scale and the wider variety of products for consumers. For example, there is intra-industry trade in the US auto industry (Turkcan, & Ates, 2010). Turkcan and Ates (2010) point out that the increase in outsourcing in the automobile industry has increased intra-industry trade; outsourcing has allowed manufacturers to get parts from the “best suppliers” which results in “lower unit costs”. They also indicate that companies “benefit from economies of scale” when outsourcing (Turkcan, & Ates, 2010). Another difference is that since monopolistic competition cannot predict which country will import and export in intra-industry competition, differentiation of goods may create comparative advantage which may determine which country will import and export a certain variety of a good. For example, Japan mainly makes family cars, like Toyota, while Germany mainly makes sports cars, like Audi; therefore, Germany will have a lower unit cost for sports cars and Japan will have a lower unit cost for family cars (Dudovskiy, 2012). In
Before doing business in China, there’s a few things needed to know about this to-be home away from home for the company. A completely different world from that of the United States, this second largest supplier is as simple as our own in business etiquette, and a few simple things can go a long way. Social-cultural, economy, legal-political, and managerial differences are just a few categories of information to be taken into consideration when pursuing a business agenda in China.
Wei, J. Q., & Rowley, C. (2009). China. In C. Wankel (Ed.), Encyclopedia of Business in Today's World (Vol. 1, pp. 268-272). Thousand Oaks, CA: Sage Publications Inc. Retrieved from http://0-go.galegroup.com.library.dcccd.edu/ps/i.do?id=GALE%7CCX3201500172&v=2.1&u=txshracd2500&it=r&p=GVRL&sw=w
Firstly, Brand X invested small amounts of capital in China from the early 1990s but without considering a business strategy based on factors unique to the under-developed Chinese system of commerce. Since China is developing countries, the legal system, infrastructure and guideline are developing.(xi) Brand X cannot only invested small amounts of capital in China and without considering a business strategy based on factors unique to the under-developed Chinese system of commerce because China’s undeveloped infrastructure, government regulations, and regional protectionism fragment distribution channels throughout China.( https://wweb.uta.edu/insyopma/prater/IJPDLM%20logistics%20in%20China.pdf) For example, the legal system in China is improving and it cannot protect the foreign investors at this moment. Also, because of the unperfected infrastructure, foreign investors are difficult to find the distribution in China. The product production is also affected since the system in China is not effective enough. The unclear guidelines are the main problem that is faced by the foreign investors since they do not know how to follow the guidelines. (xi)
Chinas Economy China has experienced major economic growth in the past forty years, but how did it develop into the economically powerful country that it is today? China has been through many difficulties and complications to get to the place it is today. China’s government is called the People’s Republic of China and it operates on a socialist market economy. The culture of China is very diverse, it has fifty-six minority groups and many cultures have their own languages. However, the Chinese culture is trying to transition from traditional Chinese culture to a more modernized version of Chinese culture.
Though foreign manufactures typically are not able to produce the good at a lower cost because of the economies of scale, foreign producers due have many advantages that they can utilize to compete in the foreign country’s home market. Already, the original manufacturers have researched, developed, tweaked, and mostly perfected the product; thus the foreign manufacturer is saved time and money, allowing them to proceed almost straight to production. The foreign manufacturers also has home-field advantage given that their prices do not need to accommodate for import tariffs and freight costs. While the foreign manufacturer is not necessarily able to export the good at a price that can compete with the original country’s price, foreign manufacturers are able to chip away at the original country’s exports. As more foreign firms appear and grow in different markets, the original country will start to see their export growth slipping until the point their market share begins to
Production is very essential in the growth and development of the economy. For the economy to grow and have a wide development, the production sectors need to work with the aim of getting the maximum. The location and site at which the production is carried out determines much on whether the firm will earn more profits or not. However, for the case of China, some of her production industries had to shift to the United States of America due to conducive working and production environment. It is as a result of the relatively reduced production costs and favorable profits earned. Hence, below are the related production costs that will favor the profits to increase effectively.
The growing integration of global trade markets has brought about the fragmentation of production activities, namely in manufacturing, with companies trending towards outsourcing to overseas counterparts due to the profitable benefits (Feenstra, 1998 p.31). This modern model of production characterizes the breakdown of the “vertically-integrated mode of production” also known as the “Fordist” mode specifically relating to Ford cars’ manufacturing process (Feenstra, 1998 p.31). In order to recognise the shifts in production, the conceptual frameworks relating to outsourcing activities must be taken into consideration. Ethier (1982) explores the growth of specialization across nations and the significant efficiency gains in regards to trade. By shifting production offshore, companies can reduce costs and timelines thus creating greater profits. Shenzhen can be considered an exemplary city when studying the rapid growth of a city’s economic sector.