GEB3373Feb28Notes - Geb 3373 Hours 1 and 2 February 28...

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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 flows, the trade of services has gone up largely. How firms decide to Make products or buy products? Down Stream: Firm F (Retailer, manufacturer) Upstream: Firm M (Intermediate products) Firm F and Firm M both remain separate firms. F<------------------ M (import if firms are separate) ( a simple purchase from another firm) F<-------------------M (If firms are joined) (FDI) (Joint Venture, Acquisition, Greenfield operation) (A firm who buys from themselves from another country) The two biggest factors to consider when making this decision is Fixed costs for Firm F and Hold up and incomplete contracts for Firm M. Why bother with FDI, why not just import? Possibility of hold up when importing Ex. auto company needs fuel injector systems, this is a very complicated process, hold up could occur quite easily. Ex. Ford would not want to import its fuel injector systems as this is a risk of technology loss. Chinese factories could sell the manufacturing secrets of ford 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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