International Trade and Comparitive Advantage Research Proposal

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In this instance then, the label 'Made in America' is a sign of national trust and high quality. Acme Motors is able to benefit from this as well.

But since producing automobile internally is so beneficial for Acme, the question remains why they, in the first place, moved engine manufacturing from Detroit to Mexico. The answer is the most simplistic one: cost reduction. The Detroit area is highly specialized and as a result, highly costly. Even with the transportation costs incurred, the expenditures are still reduced in comparison to those that would be incurred from producing all engines internally. Moving the manufacturing plant to Mexico did not imply loses in engine quality, moreover when the Mexican labor force is used to outsourcing operations and is becoming increasingly specialized in various fields.

The effects of such international operations are felt by all company stakeholders, including its customers. They are sometimes content with the lower price possible through outsourcing operations. They can also be content with a wider product offering. As more and more companies decide to engage in international activities, the results materialize in more products and cheaper products, which are often satisfactory for the clients. In terms of quality however, the customers could accuse the manufacturers of inferior quality.

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An example in this instance are the complaints forwarded by Wal-Mart consumers, who often blame the low price organization for selling low quality items.

Corporations across the world seek to expand territorially and through this, they also expect not only an increase in profits, but also a reduction in costs. Savings on expenditure can be achieved by investing in emerging countries in the meaning of outsourcing part of the company's operations. Another example in this sense is given by Nike, the shoes and apparel multinational which has outsourced all of its manufacturing operations to developing and less developed countries. The U.S. quarters only deal with administration, management and marketing. This was generically possible throughout globalization and market liberalization, which allowed organizations to benefit from the comparative advantage of other countries. The theory of the comparative advantage was first promoted by economist David Ricardo in the nineteenth century. It saw that countries with an advantage on producing a certain product should focus on it, and then exchange it on the international market for other items, which were more difficult to manufacture internally (Ricardo, 1963)......

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