1. Why is it undesirable for the United States to evolve into a service economy?
It is undesirable for the United States to evolve into a service economy because several problems arise if jobs shift from manufacturing to service. One is that service job pay less. Many service jobs are in minimum wage, while hourly wages from manufacturing jobs have historically exceeded the minimum wage by a substantial margin. As a result the standard living will necessarily decline. Furthermore, manufacturing allows the firm to capture payoff for the development of new technology. If this payoff is lost, so is the incentive to invest in research. The decline of manufacturing domestically has led to a ...view middle of the document...
It is our continual focus on short-term performance and the incentive system we have built up around this objective that led to these crises.
4.What are the advantages and disadvantages of producing new products in existing facilities?
Here are some advantages of producing existing facilities:
* Financial benefits – Clean up your balance sheet by eliminating assets, and have a more stable cash flow
* Strategic optimization – Think about your company's core mission and whether it is relevant to continue certain operations
* Better management of the outsourced activity – In theory, you can choose a supplier that is a leader in the field
* Market discipline – You can align your costs with those of suppliers in the field
* Technology – In theory, you gain access to state-of-the-art technologies
* Flexibility – The resources no longer used in one area can be redirected to the company's core operations
Here are some disadvantages of producing new products in existing facilities:
* Loss of expertise – You lose know-how and skills that may prove critical to your long-term competitiveness. Information from suppliers helps in new product development.
* Dependence on the supplier – If you resume carrying out the outsourced activity yourself, it can take years to reach the level of performance you used to enjoy. But if the supplier’s service deteriorates, or if their price rises, you may want to take back...