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Global Production Collision

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Racing through the parking lot at work, I carry out my ritual of counting import versus domestic cars.  Like the Olympics, I hope that the home team would win.  During my ritual, domestic cars often lose to their foreign competitors in the number of cars. However, it would be difficult to identify what an American product is because of the transformation of the world due to globalization.

In June, the Dow Jones Industrial Average sank into the red for the year after a dismal U.S. job report. Stocks globally have been on a downward spiral since the beginning of May due to worries about Europe’s debt troubles and China’s economic engine which has begun to stall.  Many people hope that companies like General Motors can jumpstart the American economy.  

Like Detroit, Knoxville would embrace the return of the manufacturing industry.  According to a recent Brookings Institute report, “Locating American Manufacturing: Trends in the Geography of Production,” manufacturing jobs in the Knoxville Metropolitan area increased 9.9% from 2010 to 2011. 

In fact, this manufacturing gain was more than 3 times the national average, ranking Knoxville 6th in the nation.  However, many globalization critics argue that weak international trade agreements destroy manufacturing jobs in developed countries like the United States.  The net results are American businesses move operations to countries with cheaper labor.  

Charles Hills, author of International Business, argues, “In the past few years, the same fears have been applied to services, which have increasingly been outsourced to nations with lower labor costs.” Most businesses attempt to stimulate growth through a variety of efforts, including technology investments, acquisitions, and major market campaigns. Companies hope that customers will purchase their products and services due to the value component. 

Robert Jacobs, Richard Chase, and Nicholas Aquilano, authors of Operations & Supply Management remark, “Companies today have found how essential great operations and supply management are to the success of the firm.” 

However, globalization has further linked the financial welfare of each country’s constituents.  In May of 2012, HP announced it would slash more than 27,000 jobs, which is 8% of its worldwide workforce by 2014 in hopes of saving billions of dollars against fierce competition.  

It is the largest restructuring campaign in HP’s 73 year old history. At the time, former HP CEO Meg Whitman stated restructuring was “absolutely critical for the long-term success of the company.”  The downsizing of HP’s workforce was the third largest in tech history.  However, other high tech companies have also been impacted.  IBM downsized 60,000 jobs and AT&T downsized 40,000 employees in the mid-90s. 

At the same time of dealing with global production, each country seeks to increase exports of goods while spearheading job creation in their own markets.

With globalization upon us, can domestic products be considered American when some components are made abroad? Please share your opinion on this topic. 

© 2012 by Daryl D. Green



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