You are doing research on where to produce a new component for your product to be sold in the United States. You developed the following table capture the information provided by your company’s point of contact in each location:
Country: Daily Wage Laborers Production
Vietnam 112,500 Dong 8 50 units
China 45.5 Yuan 10 60 units
Mexico 740 Pesos 3 120 units
(explanation: 8 laborers in Vietnam working 1 week make 50 units)
Assumptions: Workers in each country work 5 days a week.
The exchange rates are as follows (note, these numbers are close to the real exchange rates):
$1 = 22,500 Dong
$1 = 6.5 Yuan
$1 = 18.5 Mexican Peso
a. Based solely on wages, which is the best location to produce the component?
Analysis of Vietnam _______
Analysis of China _______
Analysis of Mexico _______
Best Location _______________
b. The transportation costs are as follows. How does that change your analysis?
Vietnam 27,000,000 Dong for 300 units
China: 3,900 Yuan for 1,000 units
Mexico 18.5 pesos per unit
Analysis of Vietnam _______
Analysis of China _______
Analysis of Mexico _______
Best Location _______________
c. The United States decides to put a $1 per unit tariff, which will affect Vietnam and China, but will not affect Mexico as they are part of NAFTA. How does that affect your analysis?
Analysis of Vietnam _______
Analysis of China _______
Analysis of Mexico _______
Best Location _______________