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Why we left our factories in China
Pages 4 (1004 words)
Economic Theories from the Article “Why we left our factories in China?”
1. Cost minimisation
The economic concept that compelled business that includes Sleek Audio to outsource its production be it in China, India or elsewhere is the imperative of cost minimisation. …
Businesses are compelled by competition to sell products at the lowest price possible at the highest quality doable. Such, businesses are always on the lookout for ways on how to cut cost and improve quality on the inputs of production. This effort to cut cost often points producers and businesses to outsource to China because of the cheap labour and material cost. In the article by Sheridan Prasso entitled “Why we left our factories in China”, Prasso pointed the numbers why manufacturers go to China. In 2005, Sleek Audio was quoted a price of $20 of $19 or $20 for one particular component that the Chinese were offering to make for $2 (2011). That is a whooping $17 to $18 price difference with each component. If Audio Sleek will purchase by the thousands, the price difference will just be very hard to ignore. 2. Economy of scale In the article of Prasso, businesses are now beginning to leave factories in China with the emerging movement called reshoring where business are beginning to bring their operations close to home. One of the major reasons cited for reshoring is that it is very difficult to deal with China; other is the presence of language barrier and delay in response time if there are any issues. Mark even lamented that when they are in China, great care are being extended to satisfy them where parts are made perfectly when they are around. ...
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