A Case Study in Globalization.

As the globalization process disperses around the globe, more and more companies choose to replace local manufacturing with cheaper foreign resources. According to Brian Ambrozy (2012) some of the companies, like Element Electronics, outsource only part of their business processes, while others, like Vizio, don’t even have their own factories; they place orders for every part of their flat-panel TVs overseas, including assembling and logistics.

There are several reasons that entice U.S. companies to move their manufacturing abroad. The main reason is the cost of flexible, diligent, and industrial skilled labor which can be many times lower than in the U.S.A. According to International Labor Comparison annually made by Bureau of Labor Statistics of United States Department of Labor (2012), manufacturing hourly compensation in the U.S.A. in 2012 was 35.67 $, meanwhile in Mexico it was only 6.36$ , and 2.10$ in Philippines. The second reason is that well developed equipment is readily available abroad and can be easily adapted to serve any needs in a short time. Finally, giving its orders to a foreign outsourcer, an U.S. company can focus on the most important business competencies such as increasing customer base and creating new products and technologies.

Globalization of the flat-panel display industry benefits all the stakeholders of the operation. Vizio, as a producer, is able to offer their product at a much cheaper price than many of their competitors and sell a larger quantity as well. Direct sellers like Costco and Sam’s Club can increase their profit for the same reason. The beneficiaries of companies that outsource earn wages by selling their services. The economies of those countries benefit by a higher employment level which increases the amount of paid taxes. Finally, U.S.A. consumers get more affordable flat-screen TVs.

The globalization process also leads to several major issues. By moving manufacturing outside the country, Vizio decreases possible employment opportunities for American employees. According to The Alliance for American Manufacturing (2013), 239 600 jobs were lost in Texas between 2001 and 2010 years due to trade with China. If those employees are unable to find other work, this leads to smaller amount of taxes paid to the U.S. government each year. Those factory workers who remain employed in the U.S. may have their salaries cut in order to be able to compete with a foreign labor force, which can lead to a lower standard of living. Another problem, very well described by The Philadelphia Trumpet columnist Robert Morley, is that “every time an American manufacturer closes and then reopens elsewhere, the foreign country gains American technology. Not having to spend resources developing technology, foreigners can focus on improving or beating it.” (The Death of American Manufacturing, 2005, paragraph 19).

In theory, the U.S. government could require that flat-panel displays sold in the United States have to also be made in the United States. If this were imposed, citizens would once again earn salaries and the government would see a direct benefit as well, as the tax money would return to the U.S. treasury. After an increase in the amount of paid taxes, Americans could see improvements in the infrastructure of the cities they live in. However, as consumers, Americans could face increased prices and deficit of some kinds of goods, especially electronic ones, because the U.S.A. manufacturing power is a lot less then Asian, Indian, or Latin American. Though, a lot of Americans are ready to pay higher prices in order to support local manufacturers.

The regions being outsourced to would face disaster at the same time. There are whole cities like Xiamen in China which are extremely dependent on fulfilling orders for Western companies. The economics of entire regions could be ruined. U.S. producers and sellers would have to raise prices in order to cover their expenses, which could mean that most of the electronic goods, such as flat-screen TVs would become more expensive.

Living in the USA, I understand and respect the opinion of the locals, saying “no” to globalization and supporting local manufacturers, but as a citizen of the globe, I tend to agree with the necessity of globalization in order to prevent fragile third world countries’ economies from chaos.

The future of production in an increasingly integrated global economy consists of four major factors: increased production speed, superior quality, affordable price, and proper marketing. Outsourcing is the main instrument to combine all four factors, and the company which can do all of the above is destined for success. This is exactly what Vizio is able to accomplish. They outsource their business processes to speed them up, increase quality, lower their own expenses, which enables them to offer the consumer an inexpensive product that is desired.

References.

Ambrozy, B.(2012). Made in Detroit: HDTVs from Element. Icrontic. Retrieved from

http://icrontic.com/article/made-in-detroit-hdtvs-from-element

Bureau of Labor Statistics of United States Department of Labor (2012). Databases, Tables &

Calculators by Subject. International Labor Comparisons. Retrieved from

http://data.bls.gov/cgi-bin/surveymost?in

Morley, R. ( Dec, 2005). The Death of American Manufacturing. The Philadelphia

Trumpet.

The Alliance for American Manufacturing.(2013). Information About Your State: Texas.

Retrieved from http://americanmanufacturing.org/in-your-state/TX

Wang, W. (2007). How I Did It: William Wang, CEO, Vizio. Inc. (magazine). Retrieved from

http://www.inc.com/magazine/20070601/hidi-wang.html

Date: 2015-12-17; view: 762