Question

Select 1 of the economic concentrations (clusters) below:

• Seattle-Tacoma-Olympia, WA aerospace / defense industry
• Central California winemaking industry
• Hollywood movie industry
• Silicon Valley Technology hub
• Texas / Louisiana Gulf Coast crude oil and natural gas production and refining
• Pre-1994 vs Post-1994 US auto and light truck production and the reasons for the change in economic concentration

Write a 700- to 1,050-word paper evaluating economists’ assessments of the role the 4 factors of production played in determining how the economic concentration you selected has evolved. Complete the following in your paper:

• Analyze how the economic concentration in the area you chose was influenced by competition and pricing.
• Analyze how the economic concentration in the area you chose influenced the supply chain.
• Analyze which of the 4 factors of production were the most and least important in determining the economic concentration of the area you chose.
• Predict changes you anticipate for the area of economic concentration you chose. Support your predictions.

Answer 1

For the last three decades we can see a declining trend in the US auto industry. It had to face multiple existential crisis. Inorder to understand the strategic dynamics the industry is facing at present it is better to have a comparison of industries response during the two recessions - the early 1980s recession and the Great Recession.

The US auto mobile industries has been revitalized in recent years. The following are its remarkable features.  

i. commitment to quality

ii. innovative production and management technicques

iii. smooth relationship between management and labour

iv. improved relationship with suppliers

Economic concentration refers to the economic activity under which a small unit of production contributes to the large market share like total sale, profit, etc. In short market conentration i s the indicator of market power. Industry size, growth / age, size variability and advertising are the factors behind market concentration.

Competition and pricing

The US is considered as the second largest atomobile industry in the world on the basis of volume of production. In the beginning it was very difficult for them because of the high oil prices and increased competion from foreign automobile manfacturers. It was in the early 1990s US witnessed the rise of Big Three - General Motors (GM), Ford and Chrysler. The actual centre of the industry was Detroit - a geographical location gifted for availability of abundant supply of water and famous for skilled automobile engineers.

As per General Motors perception automobiles has to be  considered not only as an utilitarian product but also as a status symbol - an object which indicates a persons total wealth.  

Globalization, changes in idividual demand, changes in income level, changes in manfactring process etc. makes an impact in supply chain of automobile industry and each of its individual unit. Automobile supply chain has to have a close observation of inernal and external factors to minimise cost. Along with manufacturing and distribution providing sub parts available to the organizations at the right time is also to be considered.

Factors of production

Factors of production are the inputs required for the production of goods and services. The 4 factors of production are land, labour, capital and organization.

In addition to the 4 factors of production, technology also plays an important role in production and there by making profit.

A lack of oversight and auditing in the supply chain can lead certain issues in connection with the quality of the vehicles in its performance like speed, milege, fuel consumption, etc.

The performance not up to the expected level will affect the reptation of the organization and it will affect the revenue very badly.

Research and Development wing can do its best by doing internal tests time to time at each level of production process without considering how expensive it is.  

In the beginning of 2008 Tyota, a Japanese automobile manufacturing unit of the world came into the forefront. It created difficulties to the Detroit and its Big Three - GM, Ford and Christler.  

Out of the 4 factors of production labour was the most expensive. Skilled labourers were available in detriot. But production cost was very high because of high labour cost, raw material cost for aluminium, fibre and other automobil body parts which are required to assemble for making finished goods. Fuel price was also had an impact. Even then the dominance and market share of Detriot Three - GM, Ford and Christler was 94.5 % in the later half of 1950s.