The organization’s strategic plan you wrote about in Week 2 calls for an aggressive growth plan, requiring investment in facilities and equipment, growth in productivity, and labor over the next five years. It is your responsibility to determine how the U.S economy during this five year period will impact such an aggressive growth plan. To do so, you should:Develop a 2,100-word economic outlook forecast that includes the following:Analyze the history of changes in GDP, savings, investment, real interest rates, and unemployment and compare to forecast for the next five years.Discuss how government policies can influence economic growth.Analyze how monetary policy could influence the long-run behavior of price levels, inflation rates, costs, and other real or nominal variables.Describe how trade deficits or surpluses can influence the growth of productivity and GDP.Discuss the importance of the market for loanable funds and the market for foreign-currency exchange to the achievement of the strategic plan.Recommend, based on your above findings, whether the strategic plan can be achieved and provide support. Use a minimum of 3 peer-reviewed sources from the University Library.Format your paper consistent with APA guidelines.Running head: THE REAL ECONOMY IN THE LONG RUN
The Real Economy in the Long Run
Andrew Harms
EC0/372
June 28 2016
Professor Hlaing
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THE REAL ECONOMY IN THE LONG RUN
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Since its establishment, Apple has always been the leader in its field. They have always
been ahead of the competition. Apple’s main competition is Microsoft. According to an article
published in industry week, Apple had revenue – in millions – of 196,256 with a growth rate of
6.89%. During the same period, Microsoft had revenue – in millions – of $87,455; and a growth
rate of 12.81% which is double the growth of its competitor Apple. Apple is viewed as a
different, special, and advancing company that has a special view on ways to shape the company.
In order to remain competitive, I would like to recommend to Apple to make an investment and
open production facilities in China.
Apple has many policies, procedures, and regulations that it must enforce. According to
Trading Economics, China has become more competitive for production due to the rise in
production rate – which rose 6 percent in the month of April 2016. China has had a recent
manufacturing output growth of 6.9 percent and fully expects to see a rise of 10.9 percent. Many
privately owned companies and firms are making investments in the country, and these
investments will help the industrial production rates to continue to rise thus making China a
favorable place to invest in production facilities. China is one of the largest manufacturing
powers in the world. Everyone buys items daily that are manufactured in China. Due to the local
economy China is able to have a substantial output with relatively low labor costs. Even though
labor costs are on the rise, China is able to provide workers for the production of any necessary
electronic parts that Apple may need.
Through the decades Chinas economy has had a large growth explosion that has lead to
them being known as the worlds second largest economy. In 1978 china developed a program of
economic reforms. The country ranked ninth in GDP with 214 billion in USD. 35 years later, it
has climbed to second place with a GDP of 9.3 trillion. China has become known as the hotspot
THE REAL ECONOMY IN THE LONG RUN
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for the worlds manufacturing, and the second major sector in the gdp is construction and
comprising industry. Recently, in 2013, China has surpassed the united states as the worlds
largest trading nation. Machinery and electronics comprise of around 55 percent of total exports.
Sales to asia are over 40 percent of total shipments; while north America and Europe have an
export share of 25 percent. In December of 2001, when china joined the world trade
organization, there was an annual growth of 26 percent in goods and services. The
unemployment rate in china is currently steady at around 4.02 percent. Consumer prices rose 2.4
percent in the second quarter of 2016. The inflation rate has averaged around 5.92 percent from
1985 – 2015.
Apple will face the risk of competing with similar already established countries in China.
To reduce some of this risk Apple will do research to select a location where employees are
abundant and the facility can be built and operated for many years to come. There must also be a
quick path to the shipping method. Having sufficient manpower will ensure production levels are
attained. The current rate of pay hourly is less than a dollar USD, while having a plant in the US
would cause a decrease in a return on production. This is due to the higher wage regulations in
the US. Before a decision is made Apple must compare the cost of the move with similar
companies that have moved to china. Research also needs to be done on china’s export
regulations and taxation regulations. Apple will need to factor in the costs for transportation and
ocean shipping. Sub-contractors will need to be contacted and arrangements will need to be
finalized to ensure finished product can reach its final destination. Trade regulations need to be
factored in as well. Will changes in the government, currency, or political unrest impact the
production? China is still a developing nation in terms of per-capita income. Apple must
THE REAL ECONOMY IN THE LONG RUN
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prioritize its strategic priorities and goals. Apple must decide whether the relocation is best for
the low cost of labor, but an increase in risk with overseas productions.
The unemployment rate in china is expected to rise from 4.1 percent to 4.5 or 5 percent in
the long run. The labor costs in this country run low, even as the rate continues to rise. Apple
would need to determine the fixed costs that would be associated with the re-location of
production. The fixed costs are those that do not change. A few examples of fixed costs would be
employee wages, government fees such as any license renewals and debt services that would
include any needed bank loans.
The variable cost that may occur would be any overtime pay an employee needs, based
on the demand for the product. With any introduction of a new product a demand is increased,
thus the production would need to be increased to meet those needs. Inventory costs are another
variable cost that may vary depending on the amount of time needed to create stock, which will
increase the labor costs.
Conclusion
Apple must take in all factors into consideration when deciding how to advance the
company. Moving to china will increase costs, risks, and unknown problems. On the other hand,
production will be steady and the cost to produce the item will drop dramatically. China would
be considered as an off shore investment and would increase the company’s ability to quickly fill
the demand in Europe and asia, without having to ship the item overseas thousands of miles.
Opening a production facility will allow for aggressive growth, with maximum productivity, in
order to take advantage of the extremely low cost of labor.
THE REAL ECONOMY IN THE LONG RUN
Reference
The 2015 Industry Week 50 Best US Manufacturers, (2016). IndustyWeek.com
Retrieved from http://www.industryweek.com/resources/iw50best/2015
China Industrial Production, 1990-2016. Trading Economics, 2016. Retrieved from
http://www.tradingeconomics.com/china/industrial-production
China GDP. (nd). Retrieved from: www.focus-economics.com/countries/china.
China Inflation Rate. (nd). Retrieved from: www.tradingeconomics.com/china/inflation-cpi
China Unemployment. (nd).
Retrieved from: www.tradingeconomics.com/china/unemployment-rate.
Bruton, Garry. Ahlstrom, D. Yuan, L. (2009) Before Heading to China…Make sure you know
what you’re trying to do there. The Wall Street Journal. Retrieved from:
http://www.wsj.com/articles/SB10001424052970203946904574302052610981892
Apple Inc. (2016) Retrieved from http://www.apple.com/Inclusion
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