LOOKING TO THE FUTURE
LOOKING TO THEFUTURE
As global competition increases and trade barriers continue to fall,
it will be increasingly important for firms to drive down costs as much as possible. This means that global firms will need to continue to develop the cheapest sources of supply that they can. Outsourcing as a means
of finding components at the cheapest price will continue, and firms that rely on cheap labor as an important part of the production process will continue to look for low-cost production locations, such as Mexico for U.S. firms. In addition, firms will continue to implement the concept of total quality control in order to make their production operations more efficient and effective. The use of concepts such as JIT will enhance the quality and productivity of manufacturing operations.
In spite of the move to invest offshore in order to be closer to the market, firms will continue to export. During the late 1980s when the dollar was weak, exports were an important source of strength for the U.S. economy. Both federal and state governments realized the benefits in employment of having a strong export economy. However, federal and state budget deficits will make it difficult to provide more financial assistance for exports. This will place even greater emphasis on exchange rate management. A weaker currency will benefit exports, so monetary authorities will constantly keep an eye on their policies to balance the domestic and foreign imports of their decisions. The desire to keep interest rates high in order to control inflation also maintains strong exchange rates and therefore hurts exports.
As firms realize the importance of exports as a source of relatively easy profits in comparison with foreign investment, they will attempt to be more competitive in global markets. However, it is doubtful that new institutional forms will arise to service those exports. Existing forms, such as freight forwarders and EMCs, will continue to thrive, because they offer flexibility to the exporter by not having to incur large in-house overhead to service exports. Their services will be very much in demand.
As global competition increases and trade barriers continue to fall,
it will be increasingly important for firms to drive down costs as much as possible. This means that global firms will need to continue to develop the cheapest sources of supply that they can. Outsourcing as a means
of finding components at the cheapest price will continue, and firms that rely on cheap labor as an important part of the production process will continue to look for low-cost production locations, such as Mexico for U.S. firms. In addition, firms will continue to implement the concept of total quality control in order to make their production operations more efficient and effective. The use of concepts such as JIT will enhance the quality and productivity of manufacturing operations.
In spite of the move to invest offshore in order to be closer to the market, firms will continue to export. During the late 1980s when the dollar was weak, exports were an important source of strength for the U.S. economy. Both federal and state governments realized the benefits in employment of having a strong export economy. However, federal and state budget deficits will make it difficult to provide more financial assistance for exports. This will place even greater emphasis on exchange rate management. A weaker currency will benefit exports, so monetary authorities will constantly keep an eye on their policies to balance the domestic and foreign imports of their decisions. The desire to keep interest rates high in order to control inflation also maintains strong exchange rates and therefore hurts exports.
As firms realize the importance of exports as a source of relatively easy profits in comparison with foreign investment, they will attempt to be more competitive in global markets. However, it is doubtful that new institutional forms will arise to service those exports. Existing forms, such as freight forwarders and EMCs, will continue to thrive, because they offer flexibility to the exporter by not having to incur large in-house overhead to service exports. Their services will be very much in demand.
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