Globalization and the New American Economy - Essay Example

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Globalization and the New American Economy

Exports and overseas operations are highly beneficial for a company. US firms increase their profitability and net worth by expanding into potential markets globally. This happens either through a fully direct investment or through partnerships and mergers. Through this market expansion, the US firms earn more profits and market share. Increased profitability of the company will boost the investment climate in the market. An increased investment climate will in turn help to boost the economy. This is how the whole cycle works.
This scenario can be better explained with the help of companies from various industrial sectors. To begin with, let us take the case of automobile industry which is one of the major contributors to the nation’s economy. Ford Motors, one of the largest US auto manufacturers has recently entered into a joint venture with OAO Sollers of Russia to manufacture and distribute Ford Cars in Russia. “The partnership with Sollers also will include engine production and stamping and involve establishing research and development activities, Ford said in a statement.” (Higgins & Ebhardt, 2011) This arrangement will help to increase the market presence of Ford which has successfully come out from a crisis recently. This increase of market share will kick start the cycle which has been mentioned earlier in the essay. Now let us see the case in a different angle. Companies also increase the profits through cost reduction. Employee compensation forms one of the major components of the total cost of production. US companies have been making huge cost savings by using cheap labor from outside the country. Most of the companies outsource its back end operations to countries like India and China where the job is done at half the cost incurred in US. Most US IT firms have their full fledged offices in these countries. Outsourcing helps the US firms to increase profits through cost savings. This has helped the companies to increase the ...Show more

Summary

Companies from US are going out to take advantage of the huge market potential across the world. Similarly, the US market is also opened up for the global firms to do business. This essay will…
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