Econ of production

Econ of production - Chapter 2 Globalization means that...

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Chapter 2 Globalization means that domestic production and exporting may no longer be a viable business model; local production and exporting no longer guarantee success or even survival. There are new standards of global competiveness that impact quality, variety, cusomization convenienc,timeliness, and cost. SIX REASONS WHY DOMESTIC BUSINESS OPERATION DECIDE TP CHANGE TO SOME FORM OF INTERNATIONAL OPERATION. 1) REDUCE COSTS 2) IMPROVE THE SUPPLY CHAIN. 3) PROVIDE BETTER GOODS AND SERVICES 4) UNDERSTAND MARKETS 5) LEARN TO IMPROVE OPERATIONS 6) ATTRACT AND RETAIN GLOBAL TALENT I) REDUCE COSTS - Foreign locations with lower wages can help lower both direct and indirect costs.Opportunities to cut the costs of taxes and tarrifs alsoencourage foreign opertions. Maquiladoras- (Free trade zones)- Allows manufacturers to cut their costs oftaxation by paying only on the vaue added by mexican workers. Trade agreements have also helped reduce tarrifs and thereby reduce the cost of operting facilitiesin foreign countries. WORLD TRADE ORGANIZATION – has helped reduce tariffs from 40% in 1940 to less than 3% today. NAFTA( North American Free Trade Agreement) – Seeks to phase out all trade and tariff barriers amoung Canada,Mexico,and U.S Other trade agreements are
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1) APEC, 2) SEAT 3) MERCOSUR 4) CAFTA. European Union (EU)- The europian Union has reduced trade barriers among the participating Eurpean nations through standardization nd a common currency, the euro. In other words, A europian trade group that has 27 members. Is also placing some restriciveconditions o n products sold in the EU. 2) Improve the Supply Chain: The supply chain can often be improved by locating facilities in countries where unique resources are available. These resources may be expertise, labor, or raw material. 3) Provide better goods and services: Goods and services can be objective and measurable, but they can also be less subjective and les measurable. Need an even better understanding of different cultures and of the way business is handled in different countries. Providing them with quick and adequate service is often improved by locating facilities in their home countries. 4) Understand markets: International firms inevitably learn about opportunities for new products and services. Knowledge of these markets not only helps firms understand where the market is going but also helps firms diversify their customer base, adds production flexibility, and smooth the business cycle. Another reason to go into foreign markets is the opportunity to expand the life cycle stages a product foes through. Mature products in the U.S might be introductory stage in many developing countries. 5) Learn to improve Operations: Learning does not take place in isolation. Jointly building and running can improve operations. 6)
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This note was uploaded on 04/07/2011 for the course ECONOMICS 300 taught by Professor Sani during the Spring '11 term at Rutgers.

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Econ of production - Chapter 2 Globalization means that...

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