3-b) Why BMW and Mercedes have established manufacturing operations in the U.S.

Question

3-b) Why BMW and Mercedes have established manufacturing operations in the U.S. market, while American companies are shifting their production to places like Mexico. Similarly, reflect on the new agreement between Toyota and Mazda whereby Mazda will produce cars at its plant in Mexico for Toyota to sell in the United States.

3-c) Use the applicable theories presented in the chapter to explain the current changes in the car industry, and in the future. Volkswagen, for example, has just committed to opening a new factory in Tennessee where wage rates are relatively low. Discuss!

Explanation / Answer

3. b. the availability of technology and the cost of technology, the government support, business regulations all these are much favorable to the producer in US. These firms can export their units from US to any part of the world. US have such kind of business and trade policies internationally. Of course many other nations were providing benefits and facilities to the firms at low cost. In US along with the cost, the international business policies also supports the luxury car producers.

when it comes to Toyota- Mazda case, it is considered as SYNERGY, where both the firms benefited by this. Toyota can produce cars at lesser cost by using the fixed machinery and manpower of Mazda, same time, Mazda will get some revenues with this.

3.c. The future of car industry is going to be chaged completely. Many revolutions are going to be enter into the industry. The driverless technologies, electric vehicles, etc are going to be change the face of car industry. One of the controllable cost to the car producers is the labor cost, that is the reason why many car producers establishes their production units at the places where the labor cost is much cheaper.

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