Week3 Case analysis
Although my company is not very involved in the international market it is very interesting how absolute and comparative advantage give great insight to the process acquiring and distributing goods in an exchange market. Industrial Sheet Metal is backed by management that has been at the same location for over 30 years but has always dealt with local customers. Based on the surrounding competition Industrial Sheet Metal proves to have both absolute and competitive advantages in its market. The company is a sheet metal fabrication company based out of Hialeah, FL. It caters to businesses and the general public with a majority of the customer base comprised of roofing companies. Many of the main competitors are retail stores that deal with the commonly used products and don’t have much fabrication taking place. This is where I see the absolute ...view middle of the document...
The machinery that is used to produce the products allow or our process to be very efficient and some machines have capabilities that cannot be found within the state of Florida. An example is a 20ft brake; slitter and de-coiler which are three separate machines when used together allow for the rapid production of seamless products in 20 ft lengths. This is a significant benefit to many customers involved in this market because it promotes a more efficient process for those who must install our products. All of these factors play into the absolute advantage that Industrial Sheet Metal poses. I believe that most of the comparative advantage is seen when Industrial Sheet Metal purchases from companies that are able to produce certain products below our marginal cost. An example is a very common type of rain gutter. This product is so commonly used that it has called for the development of a machine that is specifically and limited to only make that type of rain gutter. A company on our same block that is heavily involved in the patio market owns this machine. They are able to sell this finished product for less than our marginal cost. When customers are in need of this product we purchase it from them and resell with our markup. I see these types of transactions as our comparative advantage because the time and cost of Industrial Sheet Metal producing products such as these exceeds what we would pay from getting them from a company that has the resources to produce them more efficiently. This is directed under the idea of opportunity costs in which it is more beneficial for Industrial Sheet Metal to spend its time working on products that it has the resources to produce more efficiently than other companies that do not have those capabilities. It seems this can be generalized as the country or company should spend its efforts on utilizing its available resources. When resources are properly utilized it allows for the entity to gain value and have stability in an exchange market. The idea is to produce a product that has a high demand from the most relevant resources the creation of an absolute and/or comparative advantage is introduced into that market.