Global Economic Environment Essay
Global Economic Environment
(a) How has Apple capitalized on the globalization of production? What advantages does manufacturing in China offer the company? ANS: Globalization has been a heat topic in these past years. Many international companies will use this advantage for their own production, and Apple is definitely one of the significant examples. Below shown are the ways that Apple capitalized on the globalization of production. Firstly, Apple finds and searches subcontractors from places such as Korea, Taiwan, China and even Germany. It keeps expanding itself by improvements as well.
For example, it replaced plastic screens by glass screens in 2004. Secondly, the fact that globalization has made the rules less strict, it becomes easier for Apple to set up factories in different countries. Thirdly, Apple also uses the competitive advantages of foreign locations. For example, this place is an expert of manufacturing particular device then Apple can give this certain task to it and ensures the high quality of the product. Moreover, Apple creates a lot of job opportunities. It employs 43000 people in the states and also supports another 254000 jobs.
Some people may point out that jobs only increase for the workers in developing countries, but still thanks to globalization, Apple creates hope and stable salaries for those non-skilled workers. Lastly, globalization allows Apple to spread its fame to the world. Apple not only based on its own ability, but it is also assisted by the trend of globalization and becoming a legend for years. There is a list of advantages of choosing China as a place to manufacture. The core reason will be its low labor costs comparatively. It is known that workers working in FOXCONN are earning $14 a day, which is lower than those in the states.
It’s also easy to hire engineers in China. It usually just takes 15 days. It may need months to hire engineers in foreign countries. Also, Chinese subcontractors can give quick responses as the factories are all clustered together. The large population of China may not be a main reason of its advantage, since large population doesn’t mean better workers. However, more people that are in that area, more suitable choices that Apple can choose, so this may be one of the minor advantage as well. Besides, China is a developing country where everybody is looking for a stable job.
The workers in China usually wont mind the low labor cost, but they will look for safe and stable ones for their daily necessities. Last but not least, China is claimed to be the location of world factories. It seems to be more experienced in handling complicated machines during the manufacturing process. The above are the advantages that producing in China can offer. (b) Why do you think Apple continues to keep activities like product design, software engineering, and marketing in the United States? ANS: Steve Jobs once mentioned that MacBook is a machine that made in America.
This whole idea comes from American designers. More importantly, these activities are called intellectual activities. Intellectual activities represent the collective corporate culture, identity and history of a company. Keeping these activities in the States can grant Apple industry information, trade secrets or special ability to innovate and bring new and better products and services into the marketplace. Apple fosters creativity by proving a flexible corporate atmosphere. Question 2 (a) What are the benefits to a law firm of outsourcing legal services to a foreign country?
What are the potential costs and risks? ANS: Outsourcing legal services have three main benefits. Firstly, it lowers the firm’s administrative costs, as salaries of Indian workers are lower undoubtedly. Secondly, it increases the diversity of labor in the company. Since India obviously has a different culture comparing to the States, the culture within the firm will be more diverse and more communications will occur. Thirdly, since these Indian workers do not work directly under the American law environment, they will then work in a more free and relaxed environment.
With the existence of the benefits above, there are certain risks that are involved in outsourcing. The workers are not directly supervised by the American law firm therefore the service will then not be guaranteed. If there are any mistakes, the firm will have a worse reputation and image consequently. Also, there may be a chance of exploitation of Indian workers because they have lower bargaining power. In this certain case, the workers will be less devoted during work and have less sense of belonging to that law company. (b) Which group gain from the outsourcing of legal services?
Which group loses? On balance, do you think that this kind of outsourcing is a good thing, or a bad thing? Why? ANS: Using a monetary point of view, the owners of the firm surely gain from the reduction in costs. Besides, the US firms will earn by enlarging its profits. Most significantly, the Indian workers are gaining from this outsourcing activity. They can have a stable profession in the States and they may earn a higher salary comparing to the low skilled jobs provided in India. For the groups that will lose, they are the US lawyers or some of the Indian workers in special cases.
The US lawyers may have difficulties in finding jobs since the Indian workers are hired. There will be then less US lawyers will be considered by those US law firms. Indian workers may also lose at the same time if they are being exploited or not having enough welfare from the law firms. Outsourcing has advantages, but meanwhile also disadvantages. Let’s start with its good deeds. It’s a good thing when it can lower labor cost and enhance labor diversity. It also reduces the money needed in recruitment due to the large amount of suitable candidates in India. It also helps to increase the disposable income of citizens in both countries.
It also links up the two countries that are involved, bonding them with a sense of partnership. However, outsourcing has certain potential harms. Workers face a more intense competition since there are more choices of workers due to outsourcing. Therefore, the Indian workers will feel more stressful in this way. Also, more monitoring work is needed for the quality of work in order to reduce the occurrence of errors. All in all, with balanced managing skills, outsourcing will then be a good deed to grant benefits to both countries involved, which will be India and the States if it’s in this case in this question.
(c) Why were the services in this case outsourced to India, as opposed to another country such as China? What does this tell you about the kinds of factors that are important when a firm is considering whether to outsource a value creation activity, and where to outsource it to? ANS: The reasons include same law systems, amount of law students and the ability of speaking English. Firstly, Indian and US share the same set of laws, then it will be easier for Indian lawyers to handle law cases subcontract from US law firms. For China, it has a different law system with the one in US.
If China is chosen, every procedure will be difficult to handle. Secondly, India beats China due to the relatively large amount of law students. More suitable candidates can be chosen in India more than in China. Thirdly, which is an important reason that Indian young lawyers have better English skills than ones in China. English is the mother language of the Indian, it’s easier for them to browse documents or draft contracts for the US law firms. For those in China, they have lower education levels and can only good to perform factory work.
Also, US and India share the similar culture while China has a complete different one. This will make the young lawyers easier to communicate with their bosses and share the same common culture with some other US co-workers. There are a few factors that have to be considered while deciding whether to outsource or not. The first one will be the ability and costs of labor. Costs include transportation costs and cost of communication between main firm and subcontractors. If the cost will be lowered in a large proportion, outsource will then be considered.
Also, regulations of different locations are core factors as well. Outsourcing needs to focus on different cultures and rules in order to avoid errors or unnecessary violations. The main firm’s own financial status is also another core factor. With more financial power, the certain firm can have a more flexible managing skills and can decide whether outsourcing can really help itself or not. For the choice of locating outsourcing services, developing countries will always be appropriate places due to their low cost labor, which makes everything easier.
For example, the most popular two choices would be Indian and China, with many suitable candidates and low standard of living. Question 3 (ai) What are the important challenges faced by managers specifically in an international business? ANS: International business enjoys a large economy of scale, but it suffers from challenges at the same time. First, it requires a long time in reaching consensus between different contractors and departments. It is because parts of the manufacturing are too dispersed. It’s hard for them to communicate or reach consensus.
They may need to make numerous phone calls or hold long period of conference video to reach a final decision. Secondly, international business tends to have more conflicts due to the different culture adopted in different places. Contractors may argue about some rules and have different opinions due to different religions. Thirdly, international business can no longer produce standardized product. They need to produce different types of product to satisfy the demand of different cultures. For example, for McDonald, they change their menu in India and produces rice in Hong Kong for people who need to have quick lunch.
Last but not least, international business also needs to spend more effort on deciding where should they set up their factories. It’s hard for them to decide. They need accurate measurements and discussions to find perfect locations for their factories. In order to stay competitive, international business has to make sure that it can handle these challenges by overcoming it and also solving it with appropriate and efficient measures. aii) In this context, how is managing an international business different from managing a purely domestic business?
ANS: In terms of law and regulations, international business needs more effort to deal with these issues in satisfying every demand of different countries. In contrast, local domestic business needs not to consider, it can just focus on itself and think creative ways to attract its domestic buyers. International business and local business share different ways of promotion and employment. International business needs much more expenses on promotion. It needs to spread its fame to every corner of the world, which means that more promotion fees will needed to be paid.
Also, international business has a larger structure. It needs more people to work for them than the domestic ones. They may need managers, associates and overseas managers. More people needed to be hired and meanwhile more employment will be paid by the international business. Besides, international business sometimes will be less unique as they will always produce standardized products while domestic ones will be more able to remain its own special features and attract customers in the same way. Also, international business is always harder to run. It needs to overcome more challenges then domestic ones do.
It must use a proper way to enter the market which to avoid violations and conflicts. The above are the differences between international business and domestic business. (b) Analyze the arguments for and against globalization with regards to: (i) Jobs and income ANS: Globalization creates lots of job opportunities for both skilled and non-skilled workers, but it may cause a small group of people to become unemployed due to the shifting of jobs. Job efficiency may be attained as well since globalization allows a better utilization of workers. It also enhances more stable job positions.
Globalization leads to competitive working environment. Everyone fights for a better job and reputation. The intense competition will make some companies to cut off some deadweight. Some unlucky employees may lose their jobs in this way. In terms of income, people enjoy an increased disposable income, meaning they have a better living standard. However, intense competition may lower the income levels of certain employees as some companies may cut cost in both hiring and welfare. (ii) Labor and environmental protection ANS: Social responsibility is a main issue of globalization. It may provide a better working environment for employees.
For example, Google is a perfect example. It’s such a huge organization that creates an enormous working campus for its workers. It hires so many experts as it provides a technological and comfy place for them to work in. Labor there can enjoy welfare from work. Globalization grants companies better resources from all over the world that they can have more abilities to protect their own workers. In the contrary, globalization may lead to a worse environment of the world. Less focus will put on the environment issues since every company is just thinking ways to earn profit. Waste and pollution may increase.
Those international companies may just ignore the fact that they are producing much harm to the environment around, but they will just remain their pace of production. They will aim at efficiency no matter it is underproduction or overproduction. All in all, for those who support globalization, they are usually richer and tougher. They also rule themselves with stricter regulations. They also will claim that globalization can enhance specialization and also division of labor. They enjoy the comparative advantage that globalization grants and try their best to enter the global economy.
Reference: News Report: 3 More FOXCONN Employees Commit Suicide http://www. pcmag. com/article2/0,2817,2419223,00. asp Videos: World Business: Legal Outsourcing in India 12/11/2010 http://www. youtube. com/watch? v=EKuVICAdwB0 Made in China: The Real Reasons Why Apple Won’t Build iPhones in the US http://www. youtube. com/watch? v=kikwfJ5BGVE Inside Foxconn: Exclusive look at how an iPad is made http://www. youtube. com/watch? v=5cL60TYY8oQ Readings: http://citeseerx. ist. psu. edu/viewdoc/downloaddoi=10. 1. 1. 202. 9503&rep=rep1&type=pdf