Transcript BA 447 day 5.ppt

BA 447
• Agenda
– Film on Wal-Mart (PBS, Frontline)
– Discuss chapters 5, 6, 7, 8
• Insights from Wal-Mart film
• Major points of each chapter
• Are there conflicting information? How can we
resolve these?
– Summary of issues (my opinion)
Ch 5: America and Free Trade
• Focus of this chapter is whether
outsourcing/off-shoring is good or bad for
the country. His views are obvious
• Global view
– US receives outsourced jobs from other
countries, e.g. services
– Outsourcing is a global phenomenon: lots of
jobs from different countries looking for lower
cost locations
In small groups . . .
• What are general conclusions made by
author?
• Important assumptions?
• Your opinion.
Chapter 5
• Benefits of offshoring to a US company?
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–
–
–
Retain competitiveness in US and foreign markets
Flexibility
Differentiation
Long-term survival
• Benefits/harm to society?
– Cheaper goods
– Lost jobs
– Foreign exchange
NIKE Example
Categories
Factories
o Running
o Korea
o Basketball/Brand Jordan
o Taiwan
o Training/Walking
o China
o Soccer
o Thailand
o Cleated/Golf
o Vietnam
o Outdoor
o Indonesia
o Tennis
o Italy
o Active Life
o Kids
Where We Manufacture
Italy
Pusan, ROK/China
Qingdao, China
Fuzhou, Putien and
Shanghai, China
Taichung, Taiwan
Guangzhou, China
Bangkok, Thailand
Ho Chi Minh, Vietnam
Jakarta, Indonesia
Our World - The Manufacturing Pie
o Currently contract approximately
37 Factories
o 5 Manufacturing Leadership Partners
(T2, PC, FT, PA, CS) Represent
Approx. 50% of NIKE Capacity
o Footwear Demand in FY04 = 202 mil pr
Avg. PO 16.8 million pr.
o Avg. 265 new Footwear Projects per
Season
A Factory
o LN (made up of 4 sub-factories)
o Average Capacity 1.2 million pr/mo
o 25 Lines
o Models per PO: 60 SKU
o Average Daily Output 43,000 prs per day
o Number of Employees 25,000 +
Offshoring: general comments
• Does it result in net loss of jobs?
– Claim: 3.3m jobs lost to outsourcing, over several
years
– Jobs may also be created in the sense of company
remaining competitive, other jobs becoming more
practical
– Jobs may also be lost because of productivity
improvements, e.g. reengineering, rightsizing
– Scale: there are 150 million jobs in US economy and
it creates a couple million jobs a month
The beat goes on . . .
India now outsources
Chapter 6
• What is America’s source of competitive
advantage?
–
–
–
–
Industrial/scientific base
Individual ambition, drive
Universities
Immigrants
• Are these advantages being eroded?
• Effect of foreign exchange regimes and trade
practices are suggested in Wal-Mart film
In small groups . . .
• What are general conclusions made by
author?
• Important assumptions?
• Your opinion.
Chapter 7 & 8
• Quiet crisis?
– The gap between the knowledge base relative
to rest of the world is narrowing
• What is the challenge?
– Consumers vis employers?
– Aspirations and opportunities
• Easier to make a living here
• In developing countries, limited opportunities to
make money, usually in manufacturing or exports
Offshoring, global competition, etc.
• As we discuss chapters 5, 6, 7, 8
• Insights from Wal-Mart film
• Major points of each chapter
• Are there conflicting information? How can we
resolve these?
• Also think of this as part of a process of
understanding China
• Film on Wal-Mart (PBS, Frontline)
Comments on film
• Premise behind opening of US-China relationship –
market for US goods.
• Reality is a bit more complex:
– Disparity in incomes between the two countries
– Profit opportunities for industries with few players – the retail
industry is not an example of perfect competition
– Chinese markets could be served by production from within
China and neighboring countries, with participation of US
companies
– Foreign exchange regimes in both countries
– Comparative advantage evolves over time
• Other comments?
In-class
• Friedman: countries like China will (eventually)
consume US products if they have not already
doing so.
• Wal-Mart film: the Clinton administration
assumed that China would provide a market for
US produced goods. However because the
disparity of income, the US ended up to be a net
importer of Chinese-made goods.
• Resolve
Suggested issues for further study
• There seems to be a focus on India and China
as far as outsourcing is concerned. Are there
others? What do they do?
• Political risk and doing business in these
developing countries.
• Governance and corruption: are these countries
truly democracies? what rules apply? how can
we understand these?
• Role of multinationals (American, Taiwanese,
Korean, Japanese, UK, etc.) and entrepreneurs
like overseas Chinese.
Related Topics
• China in the WTO:
– The WTO is a major agreement among trading
partners to facilitate trade.
– Product or raw material affected by tariff reduction
discussions – positive or negative
• Managing expatriate managers: problems of
managing managers from different countries
• Energy/Crude oil outlook and other raw
materials; implications on trade and movement
of products
Broader issues
• Changing geopolitical roles of the US and
developing countries like China
• Increasing role of a country’s economy
and its link to global business in political
decisions
• Limits to growth in Chinese economy
Issues - continued
• Will a developing country like China be a
net importer of US goods or will it always
be a net exporter to the US?
• Show how other industries have actually
been moving from low-wage and “friendly”
location to another since the 1950s.
• What challenges, opportunities do large
Chinese or Indian firms pose to US firms?
(Pick one, for example, in automobiles.)