Reference no: EM131945700

Economics- Competition and Industry

Assignment

Please read the following articles

(1) Which Five Companies Do The Most Overseas Manufacturing?
(2) Manufacturing Offshore Is Bad Business
(3) Pros and cons of outsourcing your manufacturing in the international business environment
(4) Donald Trump: I'll take jobs from China, Mexico (CNN interview with Chris Cuomo)

Using the above articles as background material and your knowledge you are required to answer the following questions which revolve around the trend of offshoring and outsourcing private business and manufacturing jobs from rich economies to emerging Asian economies like India and China.

(i) According to the articles, China, India, and other Asian countries have become the primary offshoring destinations. Arrive at five key determinants of a good offshoring partner by comparing relevant conditions in these Asian countries to those in South America and Africa. You will need to cite appropriate information sources and news items to support your argument.

(ii) The article "Manufacturing offshore is bad business" suggests that a firm that experiences economies of scale need not necessarily benefit by moving some of its domestic production to a foreign country.

(a) Explain the economic rationale behind this argument.

(b) Suppose that a firm's production function exhibits increasing returns to scale. Using a suitable diagram, illustrate how a firm's input choices and costs would vary between producing the whole output at home versus off-shoring a portion of the output to a foreign country that has relatively cheaper labour.

(c) Suppose that a firm's production function is QQ = KK2LL2 with MMMMLL = 2KK2LL and MMMMKK = 2LL2KK. The firm wants to produce an output level of 100 units. In the firm's home country, the wage rate is $20 per hour and rental on capital is $40 per hour. In contrast, at a foreign location the labour cost is $10 per hour while the capital cost is the same.

Suppose that the firm needs to choose between producing the entire output at home or producing half the output at home and half abroad. Determine the total cost of production for each of these options. Which one should the firm choose?

(d) What other options might be available for a firm to retain its international competitiveness other than off-shoring?

(iii) The current U.S. president Donald Trump campaigned heavily on bringing manufacturing jobs back to the United States, particularly by renegotiating America's trade deals, such as NAFTA. By researching and citing appropriate news items, discuss three policy initiatives put forward towards bringing back manufacturing and discuss your view on their effectiveness in achieving this goal.

To cite additional references, you must correctly use the Harvard style of referencing.

Attachment:- Competition and industry assignment.rar