Problem:
Discuss the ideas in on: "Made in China". Discuss both In-sourcing and Outsourcing.
Made in China:
Barbie and her companion Ken are as American as apple pie, and considering their origins gives us some insight into the modern U.S. economy and its interconnection with other countries. Barbie and Ken are not produced in the United States; they never were. When Barbie first came out in 1959, she was produced in Japan. Today, it is unclear where Barbie and Ken are produced. If you look at the box they come in, it says “Made in China,” but looking deeper we find that Barbie and Ken are actually made in five different countries, each focusing on an aspect of production that reflects its comparative advantage. Japan produces the nylon hair. China provides much of what is normally considered manufacturing – factory spaces, labor, and energy for assembly – but it imports many of the components. The oil for the plastic comes from Saudi Arabia, which is refined into plastic pellets in Taiwan. The United States even provides some of the raw materials that go into the manufacturing process – it provides the cardboard, packing, paint pigments, and the mold.
The diversification of parts that go into the manufacturing of Barbie and Ken is typical of many goods today. As the world economy has become more integrated, the process of supplying components of manufacturing has become more and more spread out, as firms have divided up the manufacturing process in search of the least-cost location for each component.
But the global diversity in manufacturing and supply of components is only half the story of modern production. The other half is the shrinking of relative importance of manufacturing, and it is this other half that explains how the United States maintains its position in the world when so much of the manufacturing takes place elsewhere. It does so by maintaining its control over the distribution and marketing of goods. In fact, of the $15 retail cost of a Barbie or Ken, $12 can be accounted for by activities not associated with manufacturing – design, transportation, merchandising, and advertising. And, luckily for the United States, many of these activities are still done in the United States, allowing the country to maintain its high living standard even as manufacturing spreads around the globe.