Free Essay on the Theories of International Trade and Investment

In international trade and investment, businesses such as Apple Inc. consciously explore business opportunities with the aim of identifying the options that require low operating costs as long as such choices uphold the desired quality standards. Apple Inc. products design takes place in California, but manufacturing is done in China since the Asian country has firms that specialize in the cheaper industrial production of required materials for assembling the products and has a low cost technical and casual labor force (Hart-Landsberg, 2013). These two factors confer on firm a comparative advantage since it appreciably reduces the costs of production compared to if similar processes are to be done in the United States where the means of production are expensive and not readily accessible (Porter, 2011). The net effect of locating Apple production centers in China is that the company can to produce high-quality products at relatively lower costs resulting in saving of expenses and increased competitiveness of the said commodities in the international market (Hart-Landsberg, 2013). Apple makes model products such as iPhone, Ipad, and MacBook which continue to outcompete rival products such as Samsung with their unique hardware features and software. Nonetheless, manufacturing a complex product such as an iPhone in a country such as the United States would attract a heftier cost than when their industrial production is relocated to China where required means of manufacturing them are cheaper, confer minimum operating costs and profitability.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Order now

The concept of comparative advantage is at the center of the location of Apple Inc. manufacturing industries in China. The terminology which traces its origins to the writings of a political economist called David Ricardo inclines profit-making businesses towards the choices that guarantee lower opportunity cost of producing goods and services (Kressel & Lento, 2012). When the cost of production is minimum, but the final commodity is of high quality and relatively high demand such as Apple products, then a firm can attain higher profit margins. China as a destination for manufacturing Apple products has various sets of comparative advantages than any other location in the world, including the United States of America where the head office is located (Porter, 2011). Some of the aspects that make China have a higher comparative advantage than any other place is that it provides a suitable environment with cheaper raw materials, technically perverse human resource, a high number of qualified personnel to sustain industrial manufacturing, and minimal bureaucracies on human resources management.

The Chinese are well trained in different industrial fields of operation including industry line assembly, multiple disciplines, and innovation. The population there is also relatively higher than the United States of America which means that Apple Inc can conveniently meet its human resource required in manufacturing various product lines at a lower cost than anywhere else (Kressel & Lento, 2012). Since labor is at the nerve center of any innovative company, Apple has the assurance of always becoming a leader in making landmark products from a low-cost labor force hence the certainty of attaining brand competitiveness and success. The readily available technical skills in China enables the firm to employ cost-effective approaches in production that afford it a comparative advantage. In economic terms, firms tend to research and apply innovation that provides them the opportunity of producing commodities more cost-effectively. Also, labor regulations regarding strict employee-employer relations as in the United States of America are not the case in China (Hart-Landsberg, 2013). In China, employees are not protected by elaborate rules like in the United States where workers have set minimum wages and working hours which any employer should not relegate unless with reasonable cause and interventions in the form of overtime. Therefore, Apple taps into the human resource regulations loophole in China to facilitate mass production of products from a team of competent workers at lower marginal labor cost. In essence, the outsourcing of Apple industrial production to China helps it cut its wage bill, obtain expertise labor pool and attain higher profits in both the short term and long run.

The highly developed industries in China, available electronic accessories, and surplus availability of labor makes the company attain economies of scale which meets the high demand for Apple products. The fact that Apple products have attracted a broad-based market share due to their excellent designs and unique operating systems imply a need for an environment which makes it possible to produce such commodities in masses without compromising quality (Hart-Landsberg, 2013). For instance, there was not only a high demand for iPhone which is a model Apple product, but customers also had high expectations about its features. Therefore, if the company could not be able to meet the demand and meet high standards of the product, then the reputation of the company would have been badly tainted and given its rivals firms such as Samsung an opportunity to entrench themselves in the technology segment (Kressel & Lento, 2012). Through mass production and economies of scale which would only be possible in China, Apple was able to meet the mad scramble for iPhone. Conceivably, it would have taken several months to reach the massive demand for iPhone if the production was done in the United States, but it took only a short few weeks to do it in China. The firm was able to source a virtually scratchproof glass from and Chinese factories had the required capacity to rapidly integrate it into the existing iPhone design for large-scale production.

Despite the fact that China provides a suitable environment for the manufacture of Apple products, the company has had labor relations challenges in its Foxconn production center. Foxconn which is the primary producer of Apple products in China is a Taiwanese company which is one of the world's biggest employer with more than 1.2 million workers (Chen, 2012). It has been a source of controversy about Apple's exploitation of labor which casts aspersion on its regard for human welfare in its overseas production center. The employees who worked for the Apple product lines in Foxconn groups complain of lack of motivation, reduced employee morale, subsistence wages, overcrowding, and more extended working hours on the production lines. The weak labor relations put Apple Company in the limelight of using the less strict labor regulations in China to exploit the expertise of the locals. In response to the outcry from workers, Apple hired the Fair Labor Association (FLA) to undertake an investigative assessment of the working conditions within Foxconn. From the fact-finding, exclusive footage from inside the premises was aired on ABC's Nightline as a way of debunking the notion that the firm blatantly exploits its workers in the production lines (Chen, 2012). Furthermore, it undertook to improve its employee relations through reducing working hours and revising their salaries based on the changes the job market.

References

Hart-Landsberg, M. (2013). Capitalist Globalization: Consequences, resistance, and alternatives. New York: Monthly Review Press.

Kressel, H., & Lento, T. V. (2012). Entrepreneurship in the global economy: Engine for economic growth. Cambridge, UK: Cambridge University Press.

Porter, M. E. (2011). Competitive advantage of nations: creating and sustaining superior performance (Vol. 2). Simon and Schuster.

Chen H. (Mar 2, 2012). Who's Really to Blame for Apple's Chinese Labour Problems? The Atlantic. Retrieved from https://www.theatlantic.com/international/archive/2012/03/whos-really-to-blame-for-apples-chinese-labor-problems/253892/