Causes and Effects of Importing Goods from Foreign Manufacturers

As Sheila Austin works out the decision to source from one of the two suppliers that have responded to her request for quotes for a new wiring harness for Autolink, she is faced with a decision to go with an international supplier in China, or from a local supplier. The initial look at the price quotes would steer towards the international source, but the underlying fees and costs associated with the international seller would make her think twice about accepting that deal. The in-depth analysis will steer her in the right decision to which supplier is the better candidate as well as how the cost per

As early as the 1970s Mattel was manufacturing products in China in order to take advantage of lower costs and enable corporate resources to focus on establishing the brand. By 2007, nearly 65% of Mattel products were produced in China. Mattel used a combination of company-run plants and a network of contract manufacturers. Exhibit C displays a simplified example of Mattel’s supply chain after moving production to China. Global production obviously had major benefits for Mattel, the country factors of China gave it a comparative cost advantage over producing in the U.S., and outsourcing enabled Mattel to remain profitable in an increasingly competitive toy industry. However, outsourcing does have disadvantages, a global supply chain increases the challenges to regulate and enforce quality.

Some costs are expensive: freight cost from China, inventory (lead-time increase because of shipping), and quality control (testing shipped products from China in the US require some cost; time and money)

In 2004 according to a report America’s imported as much as Japan, Germany, China and India combined.

With an importance on maintaining a trade surplus, China has heavy defiance towards foreign imports. Moreover, there is a rising trend of preference towards domestic Chinese countries over foreign companies. For instance, General Order No.95 released by the government needs all medical devices imported into China to go through severe safety inspections. However, the same requirements are not applied to Chinese-made products. Firms wishing to introduce new products into the market have to face significant governmental pressure and wait for typically 12 months to have a new piece of equipment permitted. Similarly, the state in Russia is also quite disapproving. In addition to a great degree of bureaucracy, possible changes to legislation that sought to assist the domestic producers instead of foreign firms are likely to take place. In contrast, import of medical equipment has been progressively growing in India, and is consistently to have steady growth in the following years. The level of import defiance in Brazil is the lowermost midst the four countries as Brazil is greatly dependent on import of medical devices. Unlike the other three markets, import tariffs are low, and there are no import duties or value-added taxes on 42 medical devices. In addition, the product

Many businesses in United States manufacture their product overseas. This involves manufacturing products outside United States where the labor cost is cheaper. Because of cheap labor, it is often more economical for a U.S. company to manufacture overseas and pay the shipping costs than to manufacture in the United States. For a company, the savings may be substantial. However, there are negative impacts on U.S. employment, as many jobs in the United States are being outsourced and replaced by overseas positions. The manufacturers outsource production projects to save time, money or resources. The manufacturing is outsourced so as to remain competitive and maintain a steady work flow. Without outsourcing, manufacturing costs could escalate to the point at which no product would sell and all employees would have no work. Outsourcing comes

There are many things that would prevent an American company to outsource to these countries but one of the main ones is that it would simply be cheaper to produce it in America. There are many products that are just easier and more cost efficient to produce here instead of in a foreign nation. Another reason that could prevent an American company from outsourcing with a foreign country are tariffs and taxes.

The reason of the creating competitive pressure to firms is that which from the enhancing the quality but decreasing the price synchronously. The key of success is that the firms and organizations which treat “Global Sourcing” as a weapon fighting with its competitors.

If the labor market is no concern to you then maybe the environment is. Many foreign countries have little to no regulations on their manufacturing facilities to protect the environment. The drawback of this makes it difficult for American companies to compete. Paying fines or accumulating additional costs to meet energy standards is not cost effective. This can affect the

The supply and manufacture of many critical components is performed by sole-sourced third-party vendors in the U.S., China, Germany, Ireland, Israel, Japan, Korea, Malaysia, the Netherlands, the

Just like the other industries such as apparel, electronics, and consumer goods, the automobile industry has accelerated its foreign direct investment, cross border trade and global production. The automobile industry has increased outsourcing and bundled value chain activities in major supplier chains. As a result, more developed countries that serve as suppliers have increased their involvement in trade and FDI. With these increased supplier capabilities, large national suppliers have become global suppliers and are now controlling multinational operations. This is because of their increased capability of providing good and services to various lead firms all over the world. The automotive industry has a distinct firm structure. This

Labor costs in the United States are much higher than in many parts of the world. Consequently, the costs of production for labor-intensive manufacturing can be significantly reduced by moving factories overseas mainly to third world countries this is a common practice of Nike who outsource there manufacturing to other companies in countries such as Thailand and Indonesia.[ ]

And the reason of it was still the cost. Indeed, this former strategices failed to match their product characteristics with their supply priorities. That is, it cannot minimize their product cost. For example, using Japanese suppliers before was twenty to thirty percent more empensive than using Chinese suppliers, not to mention about the trasportation cost. In addition, their original Japanese design was still increasing the cost in China’s factories ----- increase equipment cost cannot make good use of the cheaper labor cost in China; increase producing cost by designing unnecessary function in China.

Moreover, even though producing in Vietnam would suppose a strong saving in cost in the labor-intensive processes, the risk of mold duplications and counterfeits is high. The imitation of the company’s products would eliminate the differentiation that allows them to charge a much higher price than the local manufacturers (15$ compared to 3$). Also, the company lacks of experience establishing a wholly owned subsidiary in a new country.

Case Solution Renault’s Logan Car: Managing Customs and Duties for a Global Production: Amanda Silverman, Prof. Hau Lee (Case: GS-62 Date: 04/29/08) Stanford Graduate School of Business) Topics: International Value Chain, Foreign Trade Related Risks & Trade Barriers