Primary sales market, Offshore production is a trend of

Primary sales market

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Reference no: EM13898381

Offshore production is a trend of assembly of a good in another country and then shipping it back to the US (or the primary sales market). Offshoring became popular in the late 1970s and was an issue in the recent presidential elections. You are a automobile factory manager considering this option for a new line of cars, which would add 100 workers somewhere (from 100 workers to 200 workers). You know that the daily wage rate of even non-unionized auto workers in the US is at least $75. In China you would expect to pay $50 per day. Assume that given infrastructure, transportation costs are the same between each factory and the retail location. Say you have the following data given from the assistant managers at different plants:

Worker productivity in China

If there are 100 workers then the plant makes 500 cars/ day

If there are 300 workers then the plant makes 750 cars/day

Worker productivity in the US

If there are 100 workers then the plant makes 600 cars/ day

If there are 200 workers then the plant makes 700 cars/day

Should you add the production line in China or in the U.S.? Discuss what changes in wages would make you reverse your decision.

Reference no: EM13898381

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