TOPIC OF THE CASE: TRADE IN INFORMATION TECHNOLOGY AND US ECONOMIC GROWTH INTRODUCTION:
The assignment is about the case where the organizations in the US were responsible for the development and advancement of information technology which also included the invention of Mainframe and Midrange computers in the era of 1960s and 1970s. Companies such as IBM and Dell were one of the first companies which led to advancement of information technology. However, with the high cost of production in US regarding the production of basic components, such were then offshored to foreign companies. PROBLEMS AND SOLUTIONS:
1. During the 1990s and 2000s computer hardware companies in certain developed nations progressively moved the production of hardware components offshore, often outsourcing them to producers in developing nations. What does international trade theory suggest about the implications of this trend for economic growth in those developed nations? SOLUTION:
The theory illustrates that developed nations despite having resources to produce, have pursued in buying the commodities from the foreign manufacturers. This is because of the low cost of importing rather than producing such components. The theory may be described as Comparative Advantage Theory. Such theory states the ability of a nation to produce goods at a lower opportunity cost than other nation. The developed countries were only focusing on producing on high value added components whereas developing nations were improvising on manufacturing basic hardware components. The demand of these different components were being met by each nation and hence the international trade commencement to meet the demands were utilized by such nations. IMPLICATIONS:
The developed nations by practicing the outsource methodology for production of basic hardware commodity benefited it for many different reasons. Such reasons are as follows: * The internal resources which could have been utilized at exorbitant costs can be curtailed and such resources could be used for alternative purposes. This would mean that the factors of production shall be available for other developments and advancement. * The decrease in cost of a final product would result in increase in the sales volume of such product as demand will increase. This increase in demand would result in an increase in the supply of a commodity therefore, more revenue shall be generated for the government. * An increase in the overseas supply of a final product would implicate a favorable balance of trade. This shows that exports shall increase over imports during a period. * Productivity of a major industry in regard to an increase in sales will enlighten the economic development of a nation by enhancing its Gross Domestic Product (GDP). This means if information technology industry of a nation improves then the contribution to the GDP of a developed nation shall also enhances. * Development in an industry promotes the job opportunities of developed nations. This means that with the advancement of information technology sector came with a high demand of related jobs such as computer software engineers and other kinds of computer based services. With this unemployment also reduced and proved a considerable contribution to the economy. CONCLUSION:
With the outsourcing of production of basic commodities to developing nations in the era of 1990s and 2000s, developed nations were greatly benefited by both time and cost to allow them to produce even more technical commodities and exert their skills on advancing in the information technology sector. Currently such companies like Dell, Intel, Apple etc. are generating even more new products into the world market of information technology and simultaneously contributing to the economy of their respective nations. 2. IS THE EXPERIENCE OF THE UNITED STATES, AS DESCRIBED IN THE CASE CONSISTENT WITH THE PREDICTIONS OF INTERNATIONAL TRADE THEORY?...
Please join StudyMode to read the full document