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Unformatted text preview: Geb 3373 Hours 1 and 2 February 28 • Moore ʼ s Law: (Slides are online under resources tab) • Microprocessor transistor counts are increasing exponentially • Also, huge increases in international trade fows, the trade o¡ services has gone up largely. • How ¢rms decide to Make products or buy products? • Down Stream: Firm F (Retailer, manu¡acturer) Upstream: Firm M (Intermediate products) • Firm F and Firm M both remain separate ¢rms. • F<------------------ M (import i¡ ¢rms are separate) ( a simple purchase ¡rom another ¢rm) • F<-------------------M (I¡ ¢rms are joined) (FDI) (Joint Venture, Acquisition, Green¢eld operation) (A ¢rm who buys ¡rom themselves ¡rom another country) • The two biggest ¡actors to consider when making this decision is Fixed costs ¡or Firm F and Hold up and incomplete contracts ¡or Firm M. • Why bother with FDI, why not just import? • Possibility o¡ hold up when importing • Ex. auto company needs ¡uel injector systems, this is a very complicated process, hold up could occur quite easily. • Ex. Ford would not want to import its ¡uel injector systems as this is a risk o¡ technology loss. Chinese ¡actories could sell the manu¡acturing secrets o¡ ¡ord to Taiwanese companies. Ford would lose its competitive edge. • Ex. The Chinese do not like being dependent on Middle Eastern Oil....
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This note was uploaded on 03/12/2012 for the course GEB 3373 taught by Professor Crum during the Spring '10 term at University of Florida.
- Spring '10