The Economics of the Doll and Car Industry in the USA and in China - Term Paper Example

? The Economics of the Doll and Car Industry in the USA and in China Due Doll Production Doll productiondoes not involve much heavy equipment to carry out its industrial production according to the movie. Considering the fact that doll making could be very convoluted and intricate at some point, it requires more labor force than machines since most machines do not have the capability to perform extremely complicated tasks with high levels of precision. Also, doll production takes in a lot of workers to work on the quality checking, dressing, molding phase, and assembling. Looking at the conditions, doll manufacturers have lower production as compared to other industries such as the car industry in that doll industry implements labor intensity rather than capital intensity. This is the reason why the doll industry employs several hundreds to thousands of workers to meet its production quota. It’s vivid from the movie that doll production goes through several phases. These phases includes, molding body parts, assembling of the body parts, varying doll colors, doll dressing, quality check and packaging. Most of the China dolls are manufactured by low fired ceramic. The doll heads are labeled easily lost stickers inside the heads. Certainly, each phase calls for a lot of workers to perform each type of operation. Consequently, the current doll production process entails not just lower production but also higher production cost as doll manufacturers have to remunerate a considerable number of workers. Car Production In car production employs capital intensity in the manufacture of the cars. Car manufacturers use a large part of its capital to purchase and install extremely heavy and costly machines and robots rather than workers to carry out its production (Economy Watch, “Capital Intensive Industry”). One fine example is the recently constructed Honda assembly plant in Wuhan, Central China. This new Honda facility poses a capability to produce thousands of cars annually. As a matter of fact, as stated on the video, DFAC Honda has produced 164,200 units in 2008 alone; and this is still way short to the facility’s maximum production capacity of 240,000 cars. Honda also underwent a joint venture, which combined Guangzhou Honda and DFAC Honda. This merger has resulted into Honda being one of the top five selling car brands, 470,000 units sold annually, and two independent channels of sales. Also, 95% of this production was sold in China, and 70% of the auto parts were supplied locally. Honda’s high production can be attributed to its implementation of capital intensity. It uses heavy equipment and high-priced machines to work as substitute for the labor force. In general, car manufacturers prefer this strategy in their production because it entails high production but lesser production cost. In the video, Honda installs hundreds of robots and heavy machines to build cars. These robots and machines work simultaneously and coordinately for a faster and more precise assembly of cars. Capital-intensive industries such as Honda do not necessarily discount the importance of labor force. Car manufactures still employ labor force to perform very important functions in the installation of small auto parts and for checking the quality of the car; although, car production requires smaller number of workers. Labor Intensity Labor intensity involves a large number of employees or longer hours of work from its employees in order to meet certain production quota. The production cost can be measured by taking the proportion between the labor cost and the capital cost. In the case of doll production, a lot of human labor is implicated since. This is because it involves a lot of complicated tasks and high levels of precision in the making unlike the car industry whereby human labor is minimal. This makes the doll industry is labor intensive. Capital Intensity Capital intensity entails an investment of the capital to heavy and expensive machines to act as substitute for a considerable percentage of the labor force. Capital intensity does not necessarily mean more machines and less labor force. There are some capital intensive industries such as car and aircraft companies which employ a lot of workers and heavy machines. In this case, the car industry uses much less human labor than machinery unlike the doll industry. This makes the car industry capital intensive. Hypothetical 2x2 Matrixes of Two Industries and Two Inputs COUNTRY / ITEM USA CHINA DOLL 4 6 CAR 7 3 In reference to the above hypothesis of USA and China, China is labor intensive while the USA is capital intensive. This is because China has ready, available, convenient and cheap labor. For instance, in the case of doll production in China, the manufacturing process involves more human labor than machinery and robots. This makes China labor abundant. On the other hand, car production in the USA involves the use of machinery and robots to a large extent than labor. This makes the USA capital abundant. Units of cars in the USA Quantity of dolls in China Production of dolls in china is cheaper as compared to the production of the same products in the USA. This is because china is well situated to produce doll which are labor intensive unlike the USA. The price of dolls in autarky will be cheap due to availability of resources and factor abundance. With trade, China will produce surpluses which will be exported to other countries which do not produce the dolls like the USA. On the other hand, the US will produce multiple units of vehicles. Trade triangle will be formed to show changes in trends of trade between the countries. This is due to the fact that both China and the USA have been endowed with different resources thus they need to trade. Toy- exports by China China is the leading country when it comes to toy exports. In fact, Guangdong is the top region in toy exports in China producing an average of 70% on the total exports of toys. The region has seen toy exports rise on year to year basis to US$7.84 billion Chinas toy exports have been stable at around US$5 billion. The toy business has increased at at 13% per year. However, the rate of growth slowed by 1.6% in 2011 and also 2.1% points lower than the previous year in net exports. Toy- imports by USA Most of the toys in the USA are imported. A great volume of these imports are imported from China. Demand for dolls in the US is affected by seasons and holidays such that during the festive season, dolls sales hike hence more imports. The USA dolls importations tumbled 9% in September 2011 due to some caution over the next big season of Christmas. Moreover, the container volume has been decreasing due to a decline in consumers and investors confidence that opt to manage less inventory rather than engaging in large volumes of discount sales. Car-imports by China In 2011 china car imports hit a record of 1 million units from foreign companies. The vehicles imports rose by 31% by the end of November and also by 53% in the year 2012. Public transport vehicles accounted for 98% of vehicle imported in 2012, nevertheless, SUVs imports rose by extra 50 percent. This trend in car imports in china has worried the administration and has imposed tariffs on imported cars especially from the USA targeting models like Chrysler, BMW and Hummer. This is because china auto industry is thriving and the government is trying to reduce imports by charging higher tariffs. Car exports by the USA US made vehicles are demanded in many places. In Fact, BMW has exported at least 8700 units of their X3 models. Statistics from the department of commerce show that the top importers of US made cars and trucks are Canada, Saudi, Germany and China. There has been a surge in exports of cars from the USA from the year 2010 to date. The exports have been on the upward trend having exported 1.4 Million units in 2010, 1.56 units in 2011 and 1.65 million units in 2012. Works cited Findlay Ronald. Eli Heckscher, International Trade, and Economic History. Boston. MIT press. 2006. Print. Coleman, Dorothy S., Elizabeth A., and Evelyn Jk. "China Head Dolls", The Collector's Encyclopedia of Dolls Volume One, London: Robert Hale.2001. China Tao.China's toy exports .2012. Web. 22nd February 2012. Read More