Expert answer:Conclusion on company moving back to USA from over
Answer & Explanation:Deliverable Length: 10–15 slides + 150–200 words per slide in the notesRespond to the following scenario with your thoughts, ideas, and comments. Be substantive and clear, and use research to reinforce your ideas. You’re meeting with Lester in his office to discuss the details of your presentation to the board next week.”Given all of the research that you have completed over the past several weeks,” he says, “you should have most of the information you need to make a presentation to the board. The board doesn’t want you to do any more research on all of the topics; rather, we want you to summarize the research that you have already done. “”Yes,” you say. “I think I have what I need.””Of course we want your final conclusion and recommendation on what the company should do regarding the location issue, as well,” he says. “What type of presentation do you have in mind, Lester?””A PowerPoint presentation would be appropriate for this group,” he says. “I want you to include slide notes, too, in case we have to go back and look at something at a later date. Your PowerPoint presentation should contain between 10–15 slides, not including the title slide and reference slide(s). For each slide, you should have between 150–200 words in the Notes sections. Let’s take a few minutes now to go over how the slides should be organized. I’ve done similar presentations, so I can save you some time with a few pointers.”When you get back to your office, you type out your notes about each element you discussed and the overall organization of the presentation. For this presentation, you are addressing the following elements:Legal, social, and financial factor considerationsEconomic factors: gross domestic product (GDP), inflation, interest rates, unemploymentElasticity of demandEconomies of scale and efficiencyStrengths, weaknesses, opportunities, and threats (SWOT)Market structureRiskCosts (marginal, fixed, variable, etc.)International expansion (Five factors that should be considered before making the decision to expand internationally)***I’ve attached the scenario and a couple of assignments I wrote…Thank you***econ___scenerio.docxunit_1_ip.docxunit_2_discussion_board.docxunit_1_ip.docxunit_2_discussion_board.docx
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Problem-Based Learning (PBL) Scenario: AutoEdge
AutoEdge is a leading national automotive supply company located in Detroit,
Michigan. Founded by Jonathan McAlister in 1976, the company specializes in
engines and transmission parts and has been supplying products to the three
largest U.S.-based automakers for over 30 years. AutoEdge’s name is known
by customers and leaders in the automotive industry for quality,
dependability, and reliable products. In fact, despite the extra cost that is
added to the automobiles, consumers appreciate the AutoEdge brand name
and often make purchases because of it.
In 2005, AutoEdge’s board of directors decided that the company needed to
make some drastic changes because of the high cost of labor, rigid American
regulations, and increased competition from other engine and transmission
part suppliers. Their solution was to gradually close all manufacturing
operations in Detroit and begin outsourcing to a well-known factory in South
Korea. The board reasoned that this change would allow the company to
compete with the growing industry, meet the automotive manufacturing
demands, and increase company profits. Some board members were skeptical
about the move, however, because AutoEdge had built a reputation for highquality, detailed craftsmanship, and they feared that transitioning the
manufacturing operations overseas would cause quality to diminish.
For the next 5 years, this strategy proved successful. The company showed
signs of financial growth and company profit.
However, in 2010, the company was found guilty of supplying products that
failed quality tests. As a result, millions of automobiles had to be recalled. The
recall was highly publicized, and the issue of poor quality products impacted
negatively on American automotive companies. AutoEdge’s $51 per-share
stock has fallen to $4 per share, and brand acceptance has come under
scrutiny among even its most loyal customers. Although some economists
blame these negative effects on the products, others believe that it had to do
with the termination of AutoEdge’s Chief Executive Officer, Fred McFadden.
Lester Scholl, Chairman of the Board of Directors, has called an emergency
meeting to discuss AutoEdge’s short-term and long-term strategies. Among
other things, they need to discuss the possibility of continuing production
overseas or returning it to the United States. Lester and others on the board
are well-known for being financially conservative and risk-averse. Because
the American economy is experiencing high unemployment, low interest
rates, low GDP, and low inflation, it might be sensible to make the change. To
some extent, they believe that these macroeconomic factors can be used to
their advantage. They realize the immediate challenges such as the brand
damage, the growing competition, and the financial challenges the company is
facing require immediate action. A new strategy must be formulated quickly
to save the company from bankruptcy.
You have been hired by AutoEdge’s board of directors as a research analyst.
Primarily, your job is to list and describe some of the legal, cultural, financial,
and economic factors that AutoEdge needs to consider when deciding to
either stay in South Korea or return to the United States. Because Fred
McFadden was recently terminated, you will work directly with the board
until a new CEO is named.
Running Head: AUTOEDGE AUTOMOTIVE SUPPLY COMPANY
Victoria McMath
Applied Managerial Economics
ECONC616 -1601A-03
Unit 1 Individual Project
January 11, 2016
Running Head: AUTOEDGE AUTOMOTIVE SUPPLY COMPANY
AutoEdge Automotive Supply Company
Introduction
AutoEdge automotive supply company has operated in both countries for a significant
period of time during which it was successful before the epidemic that recently struck the
company in South Korea. The decision whether or not to continue operating in South Korea or to
ship its operations back home is very vital and will dictate the future of the business as the wrong
decision can destroy the remaining probability of the company ever getting back to its feet again.
Thus, the company managers need to effectively understand the financial, economic, cultural,
and legal factors that will affect the company (Clinton, 2011). These are the fundamental factors
that directly affect the company and its operations and will determine its success in either
company depending on whether they favor the growth of the company back to its roots or not.
Below is a deeply scrutinized report on these macroeconomic factors and the various factors
within them that will be for or against the business entity.
Economic Factors
The country has 71.5 score of economic freedom and this results rank it in the 29th
position among the freest countries. These results have improved by 0.3 from the results
recorded last year and these have resulted in advancements in property rights, monetary freedom,
as well as labor freedom. The United States registered an economic freedom of 76.2 and these
ranked it in 12th rank among the freest economies in the world. This economic freedom is
Running Head: AUTOEDGE AUTOMOTIVE SUPPLY COMPANY
significantly higher compared to South Korea and this makes America an attractive site for the
entity. However, the economic freedom of South Korea is limited by corruption spread in the
government throughout the entire country as well as limited labor freedom. Equity and freedom
are significantly deteriorated in the country by this high levels of corruption registered in the
country. The government takes numerous reform initiatives but these activities remain
unproductive due to the rigid labor market present in the country that lowers the level of
competitiveness.
Consequently, South Korea registers a high level of underemployment. The recovery
from the recession has been characterized by high levels of uncertainty and increased
unemployment with a minimum number of Americans currently seeking employments (Clinton,
2011). The rate of growth in America is also significantly low and this can be attributed to the
increased level of favoritism in America for entrenched interests and elevated taxes as well as
regulatory burdens. The rate of unemployment in South Korea is 3.2 while the level of
unemployment in America is 7.5%. The inflation rate in South Korea is 1.3 while in America
inflation rate is 1.5%. FDI inflow in South Korea is registered at $12.2 billion while in the Unites
States it is recorded at $187.5 billion. South Korean GDP is $12.2 billion while that of US is 16.8
trillion.
Social and Cultural Factors
The South Korean culture is significantly different from the American calling for
company employees to alter their ways of life to fit in the new culture. It is crucial to understand
both cultures in order to understand certain behavioral traits and to avoid common
misunderstandings in the workplace. Western employees need to shake the hand of the native
Running Head: AUTOEDGE AUTOMOTIVE SUPPLY COMPANY
Koreans as a sign of politeness. Locals in South Korean are addressed using their titles or family
names as a sign of etiquette and the first name is only used once the involved individuals have a
profound relationship (Kingstone, 2011). South Korea has Confucian values whereby all South
Koreans are expected to operate within these Confucian values. The people should work hard,
respect the authorities, live moderately, and behave virtuously. The concept of face kibun is
dominant in South Korea and the state citizens strive to maintain harmony at all times in their
personal lives as well as businesses. They avoid confrontations and use moderate words to
prevent disputes from taking place. These individuals provide a very effective working
environment once they are enrolled in the organization.
However, this culture significantly differs from the American culture whereby people pay
little attention to the consequences of their words. Hugs are a common way of greeting among
Americans that is perceived to be a sign of being friendly. Unlike the South Korean individuals
who avoid conflicts at all times, Americans are aggressive in nature and often challenge their
leaders in cases they find their actions unacceptable. The Americans understand their rights
within an organization and advocate for them and in case they are not granted these rights, the
Americans go to the extent of suing the company they work for or their superiors.
Legal and Political Factors
Before offshoring the company back to America, the company needs to familiarize itself
with various legal issues and laws that dominate the business industry in America. The political
system of America is stable and this offers the company a wealth opportunity to invest in the
country. America has numerous natural resources that are conducive for the organization. The
company has a rich and healthy labor forces that can provide the institution with a ready
Running Head: AUTOEDGE AUTOMOTIVE SUPPLY COMPANY
workforce. The demand for goods and services is constantly on the rise in America, especially
with the increasing population (Chun, 2011). South Korea is also politically stable that makes it
suitable for business operations. Although the government might often interfere with the rules
and regulation governing the company, the government is stable politically and favors business
operations.
America constitutes of numerous risks that it poses to the company as it aspires to
reinvest in the country. America constitutes of fifty different states with each state having its own
local regulation that might significantly differ from other states. The states also have varied labor
laws as well as taxes and the company needs to understand the various laws applied in every
state and their suitability to the company before settling back for America. However, this case is
quite different in South Korea that has a central government, hence all laws and regulations are
universal throughout the entire country. The South Korean government restricts company
investment in certain fields such as telecommunications. The advantage of doing business in
South Korea is that all business laws and regulations are universal among all business entities
and no special laws are applicable to foreign companies only (Kingstone, 2011). The legal
systems of America system in America significantly affect all companies both foreign and
domestic. The environmental protection laws significantly impact all companies. America has
strong antipollution laws that make the process of carrying out business in the country fairly
expensive. Companies have to go extra miles to either reuse their wastes or put them into other
use to ensure they do not contaminate the environment. These laws render business operation in
the country expensive.
Running Head: AUTOEDGE AUTOMOTIVE SUPPLY COMPANY
Financial Systems
The South Korean financial market enables all foreigners to be in a position to buy all
securities. The country also has strong jurisdictions that inhibit the companies from carrying out
business with certain countries. The government has put in place a strong restriction that
prevents any company operating in the country from transacting with countries such as North
Korea as well as Iraq. Those companies found guilty of this offense are heavily charged and in
other cases deported back to their mother country (Castells, 2011). The government also
regulates foreign exchange within companies in their jurisdiction and foreigners. The financial
system of South Korea has a worldwide record for being liberal exceeding the American
financial systems by far. As much as this fact is advantageous to the country and businesses
operating in it, a case of financial instability can have very negative and profound impacts on the
country as international speculators can get the opportunity to sell the country’s assets and buy
them later at a profit.
America faces a financial threat with the country’s level of debts having escalated to
dangerous levels. The debts among Americans are on the rise to alarming levels and the debt
balloon is almost busting. These escalating debts are primarily powered by the high levels of
income inequality. These escalating debts that have resulted in debt-led growth threaten to drive
the country to a state of crisis as a result of increased borrowing (Chun, 2011). These
government deficits are reflected by the increasing debts observed in most individual’s ledger.
The American government encourages foreign investment into the country that result in the
growth of American stock market. The government has limited limitations on local countries
conducting business with foreigners as it is the case with South Korea.
Running Head: AUTOEDGE AUTOMOTIVE SUPPLY COMPANY
References
Chun, J. J. (2011). Organizing at the margins: The symbolic politics of labor in South Korea and
the United States. Cornell University Press.
Clinton, H. (2011). America’s Pacific century. Foreign Policy, 189(1), 56-63.
Castells, M. (2011). The power of identity: The information age: Economy, society, and culture
(Vol. 2). John Wiley & Sons.
Kingstone, P. (2011). The political economy of Latin America: reflections on neoliberalism and
development. Routledge.
http://www.heritage.org/index/country/unitedstates
Victoria D McMath
Unit 2 Discussion Board
Applied Managerial Economics
ECON616-1601A-03
January 14, 2016
AutoEdge must make the decision if they should bring their automotive manufacturing
operation back to the United State or continue to operate overseas. The organization must
determine whether the move would be the best decision for them based on the current
state of the market and the elasticity of the products within the market. Determining the
products elasticity will enable the organization to make the best decision on whether to
return to the United States or stay in South Korea. Elasticity is utilized in economics to
measure how the demands of a product will change in regards to its price being changed.
Elasticity is measured in terms of perfectly inelastic, perfectly elastic, unitary elastic,
relatively elastic, and relatively inelastic. (Hawks, 2009)
Perfectly Inelastic states there is no change in the demand when there is a change within
the price. The value of the price is not a factor in perfectly inelastic, which means the
demand will remain constant. This type of demand is a theoretical concept that can’t be
utilized in practical situations. With that being said, essential goods, such as with salt,
the change in price does not affect the demand. Accordingly, the demand for essential
goods is perfectly inelastic. On the opposite end of the spectrum, perfectly elastic
demand states when there is a small change in the price of a product it will cause a major
change with its demand. With perfectly elastic demand the smallest raise in price will
cause the demand to decrease to zero, while a small decrease in the price will cause the
demand to rise to infinity.
Unitary elastic change states when there is a change in the products demand that produces
the same change within the price of the product, the demand is considered to be unitary.
Meaning, the price and demand is equal which will not affect the total revenue.
Relatively elastic demand takes into consideration when the proportionate change that
takes place in the demand is greater than the proportion change in the products price.
The range of numerical value of relatively elastic demand can be anywhere from one to
infinity. Meaning, if the price is raised the total revenue will fall and vice versa.
Relatively inelastic demand states when the demands percentage change that is produced
is less than the price of the products percentage change it is relatively inelastic. For
instance, if the products price rise by 30% and the products demand only decrease by
10% it is considered relatively inelastic. The range of numerical value of relatively
inelastic demand can range between zero and one. Meaning, if the price is raised the total
revenue will rise.
The demand for AutoEdge automotive products have been declining due to the poor
quality and in turn the organizations stock price has nearly placed them in bankruptcy.
The consumers’ behavior shows they have loss confidence in the organization and their
capability of manufacturing good quality products. Also, with the force resignation of
the popular Chief Executive Officer (CEO) the company is experiencing a very difficult
time. With that being said, the organization must make an informed decision to return to
the United States whose economy is currently shaky, has a high unemployment rate and a
troubled market. After careful consideration, the organizations product is relatively
elastic. What that means is by bringing the manufacturing operations back to the United
States there is a very high probability the products price will be raised which will result in
a drop in the demand. This is providing the organization with an overall loss of revenue.
(Hawks, 2009)
In conclusion, with having a relative elastic demand I would suggest the organization try
to rectify the problems that are occurring within South Korea rather than move the
manufacturing operations to the United States. The organization would need to gain the
trust of the consumers prior to returning the U.S. and raising prices, which in turn would
lower the demand. With that being said, if we can gain the trust of our consumer base
and make effective strategic moves that enable the organization to be profitable it is
worth considering.
References:
Economic Discussion (2015). The 5 Types of Price Elasticity of Demand. Retrieved
January 10, 2016, from
http://www.economicsdiscussion.net/elasticity-of-demand/5-types-of-price-elasticity-ofdemand-explained/3509
Hawks, Alan (2009). Economics for Business and Management. Financial Times Prentice
Hall. Retrieved January 13, 2016
Running Head: AUTOEDGE AUTOMOTIVE SUPPLY COMPANY
Applied Managerial Economics
ECONC616 -1601A-03
Unit 1 Individual Project
January 11, 2016
Running Head: AUTOEDGE AUTOMOTIVE SUPPLY COMPANY
AutoEdge Automotive Supply Company
Introduction
AutoEdge automotive supply company has operated in both countries for a significant
period of time during which it was successful before the epidemic that recently struck the
company in South Korea. The decision whether or not to continue operating in South Korea or to
ship its operations back home is very vital and will dictate the future of the business as the wrong
decision can destroy the remaining probability of the company ever getting back to its feet again.
Thus, the company managers need to effectively understand the financial, economic, cultural,
and legal factors that will affect the company (Clinton, 2011). These are the fundamental factors
that directly affect the company and its operations and will determine its success in either
company depending on whether they favor the growth of the company back to its roots or not.
Below is a deeply scrutinized report on these macroeconomic factors and the various factors
within them that will be for or against the business entity.
Economic Factors
The country has 71.5 score of economic freedom and this results rank it in the 29th
position among the freest countries. These results have improved by 0.3 from the results
recorded last year and these have resulted in advancements in property rights, monetary freedom,
as well as labor freedom. The United States registered an economic freedom of 76.2 and these
ranked it in 12th rank among the freest economies in the world. This economic freedom is
significantly higher compared to South Korea and this makes America an attractive site for the
entity. However, the economic freedom of South Korea is limited by corruption spread in the
government throughout the entire country as well as limited labor freedom. Equity and freedom
Running Head: AUTOEDGE AUTOMOTIV …
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