Emerging Economies and Globalization
October 29, 2013
Emerging Economies and Globalization
Multinational corporations (MNC’s) are consistently looking for new unsaturated markets to tap into in optimisms of expanding their business and capitalizing on future industry trends. General Electric Healthcare (GEH) is one of these MNC’s trying to capitalize on the incessantly rising healthcare industry. In 1878, Thomas Edison founded General Electric (GE), which is the corporation that established GEH in 2004. GE was the first company to invent the household light bulb and has successfully ventured forwarded in the electric industry through its innovations and manufacturing of household appliances, lighting fixtures, light sockets, to founding one of the nation’s largest computer companies. The company recently established GEH in 2004 to tap into the expanding healthcare industry and in 2005; GEH innovated and manufactured the world’s first high definition magnetic resonance (HDMR) system (“About Us”, 2013). GEH has recently expanded its operations into India and China; their India operation is developing new drugs for the healthcare industry and their China location is busy manufacturing X-ray equipment for the healthcare industry. This paper will discuss GEH business operations and the following: Two trade theories that explain why GEH has expanded operations into India and China An explanation of the trade theories and an evaluation of GEH’s reasoning of utilizing the theories Potential pitfalls in GEH’s strategy
An evaluation of GEH’s human resource strategy in China and India A proposal for training and preparing expatriates for their assignment overseas in India and China
The two trade theories for discussion are Comparative Advantage and National Competitive Advantage. Comparative Advantage
Comparative Advantage was introduced in 1817, by David Ricardo in his book ‘The Theory of Political Economy and Taxation’. According to Ricardo, the Comparative Advantage is when “two nations and two commodities, even if one nation is less efficient than the other nation in the production of both commodities, there is still a basis for mutually beneficial trade” (Gunawardan and Khorchurklang, 2007, p. 1). If one country specializes in the production and manufacturing of a particular product and then exports it whiling having the comparative advantage and then imports the goods due to the comparative disadvantage (Gunawardan and Khorchurklang, 2007). According to Landsburg (n.d.) having a comparative advantage is not the same thing as being the best at something, it is the ability to produce a good at a lower cost.
Different countries have different comparative advantages. For example, China has a comparative advantage in its labor-intensive manufacturing industry (“What are the U.S. and China’s Current Comparative Advantages?, n.d.). GEH has moved its X-ray business quarters overseas to China. According to Burkitt (2011), the reason GEH moved its headquarters was to “accelerate sales in the country’s fast-growing health-care market” (para. 1). There is also an abundance of cheaper and skilled labor in China. GEH can utilize China’s labor-intensive manufacturing industry and tap into an emerging market. GEH understands that China governments are beefing up their spending on healthcare (Burkitt, 2011). This alone provides China a comparative advantage because it has the demand for healthcare that the U.S. has already saturated. Therefore, the U.S. picked China for several reasons: 1). Emerging market for healthcare
2). Cheaper and more efficient labor resources
3). More skilled labor; employs approximately 700 engineers (Burkitt, 2011). These reasons enable GEH to not only innovate but also produce at a cheaper price and a quicker rate, and in addition, tap into an emerging market.
Although GEH’s international strategy seems a...
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