PHYSICS 102 Lecture Notes - Lecture 21: Enculturation, Frictionless Market, Country Risk
Document Summary
The objective of the facilitation session is to understand the reasons and impacts of globalization. Offshoring and reshoring: an update on the manufacturing location decision. Problem statement: factors that affect organizations" manufacturing location decisions overall perceived risks of region. Rising cost of fuel and associated transportation costs. Slowing of the global supply chain due to shipping industry adoption of slow steaming. Balance the cost of market friction (transactions) and specific asset investments with potential risk of buying the item rather than making it. Suggest that firms tend to move to lower cost regions, with less cultural difference and higher intellectual property protection (low potential for opportunism) Global, macro level view: host country cost and risk-related factors (including fdi) Choice primarily determined by costs and benefits of adding value in two locations. Import-substituting manufacturing advantage: material cost, labor cost, market and government trade policies. Export platform manufacturing advantage: low labor cost incentives by host governments.
