Name: Instructor: Course: Date: Paper Analysis Analysis # 1 According to an article in the New York Times, Ford Group intends to implement a strategy that prices their Lincoln MKZ Hybrid in a similar way to its gas counterpart. While they do expect the gas engine to continue being their flagship car, it is also expected that the gas-electric hybrid will carve out a niche for itself…
Economies of scale are the cost advantage that comes from a product’s increased output. They arise due to an inverse relation between fixed costs per-unit and quantity produced. The more cars produced in this case, the lower the fixed cost per unit, as the cost is shared among a larger quantity of cars. They may also reduce unit variable costs due to synergies and operational efficiencies. Economies of scale are in two major types; external that arises from industry size and other extraneous factors and internal that arises from inside the firm (Motavalli 1). While benefits of this concept are obvious, I think they also impact on such areas as finance. For instance, a company like Ford Group would have a lower capital cost compared to smaller firms due to their ability to borrow at lower rates of interest. However, I believe that, even with this advantage, I think there is a finite upper limit to how Ford Group can grow in achieving economies of scale. When the hybrid car production reaches a specific number, it will be more expensive to manage due to bureaucracy, complexity, and operational inefficiency. The results from Ford Group are also hard to ignore. For instance, the model T line of production and task specialization were integrated with standardization, as can be seen in their hybrid plant. The specialization that will go with the hybrid car production will lead to productivity increase. The coupling of specialization and standardization will ensure that the model parts will be of universal size at all times, which greatly reduces costs of restoration. However, it can also be argued that the reduction of costs by specialization and increase in productivity is offset by huge human costs. While there is little evidence of how economies of scale impact organizations like Ford in the long run, the idea has become a hallmark of Ford Group and other similar companies because it can be used all manufacturing functions; for example, marketing, research and development, distribution, and sales force utilization (Motavalli 1). Analysis # 2 The Texas drought of 2011 is bound to have ripple effects across the globe, especially with regards to agricultural products. Texas produces approximately 55% of cotton crop in the US, supplying the same to mills around the world. Because of the drought’s effect on cotton, the prices are on the up. The drought has also affected beef prices with ranchers being forced to sell off their cattle due to dramatic reductions in water and animal feed. The selling of, off valuable breeding stock is expected to see a long-term increase in the price of beef. It is also expected that there will be a 50% jump in the prices of wheat in winter because of the drought, especially since Texas accounts for 20% of wheat production (Hylton 1). The FAO price index for food raised to 6% in mid-2012, which was attributed to the unfavorable conditions of weather, particularly the drought currently ravaging parts of the United States, which have driven the cost of agricultural products up. However, what is happening now is more a climatic transition than a random weather event. The consequences have been predicted to be especially dire for the poor population in the world (Hylton 2). However, in my opinion, the prices of beef, wheat, and cotton will be affected by other factors, rather than by drought alone. The use of biofuels ...
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