Multinational Financial Management 11th Edition by Alan C. Shapiro Solution manual

 
Cons: As with any kind of trade, imports of services through outsourcing results in the loss of jobs for Americans previously employed in providing those services. Outsourcing may also put out of business U.S. companies that provide these services.
 
How does outsourcing affect U.S. consumers? U.S. producers?
Answer. As the answer to part a) points out, outsourcing allows companies to buy services less expensively abroad. Competitive pressures force companies to pass these savings along to consumers in the form of lower priced goods and services.
 
U.S. producers are able to boost productivity and cut costs while improving quality, time-to-market, and capacity to innovate. As such, American companies are better able to compete. This competition, however, forces companies to pass most of their savings from outsourcing through to their customers.
 
Longer term, what is the likely impact of outsourcing on American jobs?
Answer. The longer-term effect of outsourcing on U.S. jobs should be insignificant. Trade has little, if anything, to do with the quantity of jobs in an economy but rather the nature and distribution of those jobs in various occupations. Outsourcing should lead to higher average productivity of those jobs that Americans work at and, hence, to higher wages and benefits.
 
Several states are contemplating legislation that would ban the outsourcing of government work to foreign firms. What would be the likely consequences of such legislation?
Answer. Such legislation would result in less efficient and more expensive government. The end result would be higher taxes or, if taxpayers balk, fewer government services.
 
 
SUGGESTED ANSWERS TO “ARCO CHEMICAL DEVELOPS A WORLDWIDE STRATEGY”
 
1.    What was ARCO Chemical’s rationale for globalizing?
 
Answer. ARCO Chemical went global because its customers are now worldwide. For example, the company's engineering resins are sold to the auto industry. In the past, that meant selling exclusively to Detroit's Big Three in the U.S. market. Today, ARCO Chemical sells to Nissan, Toyota, Honda, Peugeot, Renault, and Volkswagen in Japan, the United States, and Europe. It also deals with Ford and General Motors in the United States and Europe. ARCO must be able to deliver a product anywhere in the world or lose the business.
 
2.    What advantages has ARCO Chemical realized from its global operations?
 
Answer. ARCO Chemical has been able to sell to customers worldwide, thereby expanding its sales. Operating overseas also yields competitive intelligence, enabling ARCO to keep track of its competitors’ moves and figuring out how to counteract them.
 
What threats have arisen from ARCO Chemical’s globalizing efforts? What are some ways in which ARCO Chemical has responded to these threats?
 
Answer. Global operations have exposed ARCO Chemical to increasingly stiff competition from abroad in addition to its traditional U.S. competitors such as Dow Chemical. European companies have expanded operations in America, and Japanese competitors also began to attack ARCO Chemical's business lines. In response, ARCO Chemical set up production facilities around the world and entered into joint ventures and strategic alliances, thereby gaining access to competitive and market intelligence.
 
How has globalization affected, and been affected by, industry consolidation?
 
Answer. Globalization has forced companies to take fuller advantage of economies of scale in order to be more competitive, thereby resulting in greater industry consolidation worldwide. At the same time, industry consolidation, by allowing companies to spread overhead, distribution and research and development costs over a larger asset base, has enabled those companies in the consolidation vanguard to be lower-cost producers and to be more competitive in foreign as well as domestic markets. To realize similar low costs, competitors are forced to go overseas to spread their fixed costs over a larger sales volume.
 
 
SUGGESTED ANSWERS TO “DEMOCRATS TURN PROTECTIONIST”
 
What might explain the candidates’ and Democratic Party’s reversal of position on free trade? Which voting constituencies would be most likely to reject free trade? Why?
Answer. The Democratic Party is heavily reliant on union votes and money. And unions, particularly the industrial unions that make up the core of the union movement is against free trade because it subjects their members to competition from foreign labor embodied in foreign goods and services. The candidates themselves are trying to appeal to the unions as they are among the best organized segment of the Democratic Party and have the ability to turn out votes in primaries where few voters go to the polls. Given the low turnout, a primary is often determined by the most committed voters, who are often union members threatened with job losses from free trade.