International Business Globalization free essay sample

The shipping costs are much less than it would be to perform these tasks in one country. This is called absolute advantage, where someone is great at one thing. With this in mind you will get a product that has the best resources available at the lowest cost, which is comparative advantage. Finally, specialization is where everyone is doing what they do best and pulling their resources together to make one incredible product. Q-2. Use the theory of comparative advantage to explain the way in which Logitech has configured its global operations. Why does the company manufacture in China and Taiwan, undertake basic Ramp;D in California and Switzerland, design products in Ireland, and coordinate marketing and operations from California? ANSW. Logitech is very brilliant when it comes to comparative advantage. It does basic Ramp;D work in Switzerland with 200 employees, its headquarters are in Fremont, California with 450 employees as well as some Ramp;D, the ergonomic designs are developed in Ireland, and the products are manufactured in Taiwan and China. We will write a custom essay sample on International Business Globalization or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page The comparative advantage is that it is the most cost effective to break up the business in many different countries that specialize in a certain job. Q-3. Who creates more value for Logitech, the 650 people it employs in Fremont and Switzerland, or the 4,000 employees at its Chinese factory? What are the implications of this observation for the argument that free trade is beneficial? ANSW. The 650 employees in Fremont, California and Switzerland create more value for Logitech. It is where all of the Ramp;D and designs are developed. The 4,000 employees of China add $3 to the Wanda product, which is almost nothing in comparison to the remaining $37. Free trade is beneficial because labour costs can be brought way down. O-4Why do you think the company decided to shift its corporate headquarters from Switzerland to Fremont? ANSW. America specializes in Ramp;D. The headquarters were moved because of the company’s global marketing, finance, and logistics operations. That is what Americans do best. O-5To what extent can Porter’s diamond help explain the choice of Taiwan as a major manufacturing site for Logitech? ANSWThere are four parts to Porter’s diamond: (1) factor of endowments, which is a nation’s position in factors of production such as skilled labor or the infrastructure necessary to compete in a given industry; (2) demand conditions, which is the nature of home demand for the industry’s product or service; (3) relating and supporting industries, which is the presence or absence of supplier industries and related industries that are internationally competitive; (4) firm strategy, structure, and rivalry, which are the conditions governing how companies are created, organized, and managed and the nature of domestic rivalry. Taiwan’s factor of endowments was that it had a science-based Industrial Park in Hsinchu. The demand conditions were that the Taiwanese were already trained to deal with technology. The relating and supporting industries were that Taiwan was the best as building technology as the lowest cost. The firm strategy, structure, and rivalry were that Taiwan had no domestic rivalry; they provided the lowest cost. Q-6Why do you think China is now a favored location for so much high technology manufacturing activity? How will China’s increasing involvement in global trade help that country? How will it help the world’s developed economies? What potential problems are associated with moving work to China? ANSW Chinese labourers are some of the cheapest in the world. Even though the workers are not treated very well, they are starting to rise up and demand more wages. The increase in foreign trade for China has helped to increase their economy. The world’s developed economies will benefit because of the globalization of production. The potential problems are that Americans are losing jobs to foreign markets. Case 2 Q. what do you think are the economic benefit of liberalizing the EU energy market? Who stands to gain the most from liberalization? The economic benefits of liberalizing the EU energy are followings. First, greater efficiency leads to lower costs and prices, which is improving competitiveness. It is also crucial for companies that are competing in a more global market. As liberalization and the introduction of competition becomes more widespread across Europe this should lead to further efficiency gains, costs reductions and the potential for lower prices. A completely open European market will allow all consumers to benefit from the cheapest available sources of energy and will drive companies’ costs down based on economic scales. Second, it ensures a secure and stable energy supply in Europe. It can stimulate the competition between the energy companies and attracts more investments on the European internal energy network. For instance, when Russia and Ukraine â€Å"show off† their gas line’s time once more, the EU energy market is helpful in reducing Eastern European country energy supply risk such as Bulgarian and Hungary’s shortage of energy. Moreover, it increases the ability to fight with the Russian energy monopoly among their energy companies. In conclusion, competition ensures competitive prices. It is able to balance the issues of competition, energy security and environment protection in the EU energy market. For most industries, energy is essential to the cost base and competitiveness. The European industries compete internationally. Increase in energy costs cannot be transferred to customers without risking reduction in market share. Once EU’s energy market can be established, energy’s cost and the price will be dropped largely. The energy exporting country and the country of consumption will obtain the high income. 2. What are the implications of liberalization for energy producers in the EU? How will the environment they face change after liberalization? What actions will they have to take? ANSW: Implications: Replace the markets of its 27 member states with a single continent wide market for electricity and gas. The majority market shares would be acquired and dominated by a large single enterprise eg: Electric de France. Changes in environment after liberalization: There are a lot of acquisitions and mergers in the energy markets. Politicians and governments try to protect their firms from other competitions with regulations. Bigger firms will try to acquire firms in local country. Actions: Government would impose conditions to stop foreign companies from acquiring local companies. The local authorities would try to protect the local company advantages. 3. Why is the de-integration of large energy companies seen as such an important part of any attempt to liberalize the EU energy market? ANSW: I think that de-integration of the bigger companies will encourage the smaller companies to be more active and permit the market to be fair and equal. It could also increase affordability and dependability of the service by permitting new introduction of new operators within the energy market. Q-4 why do you think progress towards the liberalization of the EU energy market has been fairly slow so far? ANSW. May be this could be relevant For several years now the European Union, the largest regional trading block in the world, has been trying to liberalize its energy market, replacing the markets of its 27 member states with a single continent wide market for electricity and gas. The first phase of liberalization went into effect in June 2007. When fully implemented, the ability of energy producers to sell  electricity and gas across national borders will be improved, increasing competition. The road toward the creation of a single EU energy market, however, has been anything but easy. Many national markets are dominated by a single enterprise, often a former state owned utility. Electricity de France, for example, has an 87 percent share of that countrys electricity market. Injecting competition into such concentrated markets will prove difficult. To complicate matters, most of these utilities are vertically integrated, producing, transmitting, and selling power. These vertically integrated producers have little interest in letting other utilities use their transmission grids to sell power to end users, or in buying power from other producers. For the full benefits of competition to take hold, the EU recognizes that utilities need to be split into generation, transmission, and marketing companies so that the business of selling energy can be separated from the businesses of producing it and transmitting it. Only then, so the thinking goes, will independent power marketing companies be able to buy energy from the cheapest source, whether it is within national borders or else where in the EU, and resell it to consumers, thereby promoting competition. For now, efforts to mandate the disintegration of utilities are some way off. Indeed, in February 2007 national energy ministers from the different EU states rejected a call from the European Commission, the top competition body in the EU, to break apart utilities.