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Product Transparency

October 13, 2010 Leave a comment

Nowadays, several articles consider the importance of tracking products’ origin as an ethical issue. Consumers, suppliers, governments, and companies are demanding information concerning the final product delivered all over the world. Perceptive organizations are treating the supply chain management by asking the question about the origin of where the product comes from.

The purpose of this paper is to discuss cases of Apple and Wal-Mart, which are a great example of companies that did an enormous progress on managing its supply chain by providing consumers the correct information about their product. I will be discussing the difference between Apple and Wal-Mart strategies’ of providing product transparency and managing claims ethically.

It is true that most of the IPhone owners don’t think about the origin of their devices. Furthermore, Apple plans to move a big part of its Chinese worker to other part of China where wages are still lower. Other electronic companies try to figure out how to reduce cost as well. Apple generates more profit than the most important competitors like Dell and LG. because   it has 60% profit margins in addition to the high price of its products. These facts may cause another ethical issue of moving Chinese worker from an area where working conditions are great to a zone where wages are lower in order to keep a comparative advantage and make more profit which is an unethical behavior violating the human right laws (New York Times Journal, 2010).

In my opinion, the change in supply chain of the iPhone 4 in China has a direct relation to the Apple global market strategy. Apple was designed in the United States and supported by high-tech components manufactured and shipped from others countries, assembled in China and shipped back to the United States. In my point of view, this strategy was disturbed by several unethical practices made by Apple’s manager. As I cited before, many adjustment have been made in order to keep costs lower. One of these adjustments was to use child labor, Chinese assembly line as well as hiding information about the origin of their products components.

However, the biggest part of value and profit is generated at the beginning and the end of supply chain process. According to the article and other public sources, Apple orders two of its major iPhone components from Singapore which are: the video processing and base-band communication. The most important source of Apple components comes from Taiwan where they manufacture six major part of the new iPhone 4. Some of these parts itemized as: Digital Camera, Connectors, Bluetooth Chipest, and Printed Circuit Boards. Only two components are made in the United States which are: Touch Screen Controllers and the Wi-Fi Technology. The previous information provided in this paper could help us to understand why Apple makes a $600 iPhone as a final price to sell (New York Times Journal, 2010).

In contrast, retailers such as Tesco and Wal-Mart have used an advanced service in order to let their customers know where their offered products come from. Using innovative ways to let stakeholders (consumers, suppliers, providers, retailers…) appreciate company’s transparency, as well as to let retailers making ethical claims about their product. The major reason of Wal-Mart’s success is its ability to manage every single “store” differently from others using high information technology. It creates databases in which consumers can track and know more about product origin purchased from Wal-Mart. Respect-code.org is an example of multiple Website where we can track the origin of our purchased product (Steve, 2010).

I am in the position of supporting the idea behind what Wal-Mart is doing, providing online-verification codes to consumers as an ethical behavior which should be taking into application by every single multinational company operating abroad.

In addition, the article discussed the importance of strengthening the supply chain for B to B (Business to Business) perception, as far as it is necessary for B to C (business to Consumer). In fact, companies are dealing with different partners which are also manufacturing or distributing one or different product for the same company. In this perspective, it is required enough to let everyone knows about the origin of the product provided in order to reinforce relationship between stakeholders (Steve, 2010).

Under a business ethic approach, it is preferable to do not ask the question about if a specific practice is an ethical behavior or not. I think that ethical behaviors are thought by imposing a company into different experience levels to improve its ethical credibility and perception among stakeholders.

Companies like Apple and Wal-Mart have built reputation from ethical practices. For this particular reason, they should develop the marketing and corporate governance sides which are necessary to ensure a better movement of “correct” information between stakeholders on one hand, and in the other hand to make sure that the company let everyone know where products come from before they discover it which is considered as an ethical dilemma (Steve, 2010).

Written By: Redouane Boufous

Categories: International Trade

International Trade Workshops – RI Small Business Development Center – JWU

September 14, 2010 Leave a comment

Posted by: Redouane Boufous

Categories: International Trade

Check this out !

August 16, 2010 Leave a comment
Categories: International Trade

Non tariff barriers

August 2, 2010 Leave a comment

Besides tariffs that restrict international trade. There are non tariff barriers which have gained a significant importance as a measure of protection for USA and other industrialized countries. Non tariff trade barriers include practices as quotas, domestic content requirements, subsidies, antidumping duties and many other practices.

An example of a non tariff barrier is the levying of an additional 35% tariff on tires imported from China to USA that took effect last September. The United Steelworkers Union, that represents US tire workers, pushed the president Obama to impose taxes on Chinese tires by arguing that many American tire factories have closed between 2006 and 2007, and many more are going to close this year.

China, in retaliation, has threatened USA to cut off imports on American chicken if they impose taxes on their tires. While some American poultry experts doubt what China has said by considering in it an empty threat.

Imposing taxes on Chinese tires seems a wrong step taken by U.S government. American executives and law makers ignore the fact that protecting a specific industry can harm another one.

I think USA should reconsider its decision about levying taxes on Chinese tires and should be concerned about China`s threat in which USA can lose the largest market of their chicken in order to protect its local tire manufacturers. In addition, USA should try to improve its relationships with China since this latter is considered the largest buyer of its treasury bonds.

You may argue that USA should levy this additional tax, because they are hurting local manufacturers. However, imposing taxes on Chinese tires would raise import prices, which would lead local manufacturers to raise their prices resulting in an increase of profit for them, but higher prices for the consumer.

Written by: Redouane Boufous

Categories: International Trade

U.S. Changes Tariff Status of Some imported Goods from Developing Countries

July 19, 2010 Leave a comment

According to the article published June 30, 2010 in the New York Time Journal, it shows us how the United States tries to help those developing countries by allowing them exporting some product duty free.  President Obama has implemented a program to change tariff status of some goods in order to help developing countries such as Colombia Thailand and some African countries.

The program was created in 1974 and represent an opportunities for those developing countries to increase their exports and so does the trade balance. In 2009, the value of exports under the program reached $ 20.3 billion. For about 5000 types of products from 131 countries benefited from protection. Otherwise, if a country’s exports surpass a fixed value of $140 million, United States may waive this privilege.

I am not in the position of supporting Obama’s idea as president of United States which is members of G20. Because first of all increasing exports from developing countries to developed countries doesn’t necessarily mean that it will help them in some circumstance for an economic development if we look at the global economy. Second, most of developing countries don’t have a technology compared to developed countries. In my opinion, new technologies conduct a country to new industries and free trade lead to new markets.

In order to collect benefits of new technologies and a helpful market policy, those developing countries should set up a structural adjustment in their economy. The question that we can ask is how G20’ members can make trade works for developing country? My answer for this question in addition to my previous opinion is to let those developing countries to be open to the global market. Furthermore they have to cope from resistance in their own industries and workers which could not be as competitive as they should be.

After looking at those products that United States allow developing country to exports duty free, for example: frozen fruits and vegetables from Egypt and jewelry from some central African countries… in my point of view, those countries could do better if they improve their manufacturing industries in other words they have to set up a strategy  attracting Foreign Direct Investment. Instead of exporting raw material they could export many products using only one source. In this case there is an additional value to those developing countries which will help their own economy first in order to create more job opportunities and to improve their technology in order to see an economic growth.

However, such trade policy can create a losers as well as winners and from this paper I can argue that G20 help for developing countries is not enough for their economic growth.

“The value goes to where the knowledge is”

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Source: http://www.nytimes.com/2010/07/01/business/global/01trade.html?_r=1&scp=1&sq=U.S.%20Changes%20Tariff%20Status&st=cse

 

Written by: Redouane Boufous

Categories: International Trade

Supply Chain for iPhone Highlights Costs in China

July 18, 2010 Leave a comment

It is important to understand how supply chain management can be costly for the best known companies worldwide. I picked an article from New York Time Journal published July 5, 2010 which on one hand, discuss how supply chain for iPhone highlights costs in China. On the other hand, the article shows up the Apple’s strategy to keep costs lower while Chinese wages increase by 20 to 30% in most parts of the country.

Manufacturing in China tend to be more expensive than usual. Worker wages and shortage start rising as well as Chinese currency, which makes exports more expensive and so does making devices like iPhone assembly in China.

Furthermore, Apple plans to move a big part of Chinese worker to other part of China where wages are still lower. Other electronic companies try to figure out how to reduce cost as well. But Apple generate more profit than its most important competitors like Dell and LG. because Apple has a 60% profit margins plus the high price of its products.

In my opinion, the change in supply chain of the iPhone 4 in China has a direct relation to the Apple global market strategy. Apple was designed in the United States and supported by high-tech components manufactured and shipped from others countries, assembled in China and shipped back to the United States.

The biggest part of value and profit is generated at the beginning and the end of supply chain process. According to the article and other public sources, Apple orders two of its major iPhone components from Singapore which are: the video processing and base-band communication. The most important source of Apple components comes from Taiwan where they manufacture six major part of the new iPhone 4. Some of these parts itemized as: Digital Camera, Connectors, Bluetooth Chipest, and Printed Circuit Boards. Only two components are made in the United States which are: Touch Screen Controllers and the Wi-Fi Technology. The previous information provided in this paper could help us to understand why Apple makes a $600 iPhone as a final price to sell.

From this point, I can argue that Apple is trying to reduce costs by sourcing majority of parts from only one country which is Taiwan because it keeps the supply chain to be more efficient and less costs adopted. It also had an important risk if The United States has political trouble with Taiwan it will block the bilateral trade and so does the supply chain which will causes of adding more additional costs. More often, Apple may lose its comparative advantage if a minor change occurs in the global market.

To sum up, I think that China tend to be more protective when it comes to its labor force by raising wages and building a more human economy. Basically, China will not be able to support the whole world economy by been a workshop place for the most knows companies like Apple, because it has a low profit value and as discussed in this article, the big part of the profit is included in the supply chain the beginning and the end of the process. I am also in the position of arguing that as wages rise overseas it become more significant for U.S. companies to keep some of its manufacturing in the U.S.

Written by: Redouane Boufous  – [White paper]


Categories: International Trade

Terrorist Attack Results in added costs and slowdowns for U.S. Freight System: A New Kind of Trade Barrier ?

June 22, 2010 Leave a comment

Terrorist attack of the September 11 conducted that shipments were held up for days at the U.S. borders with Canada and Mexico, and at airports around the world. Otherwise, it creates an economic slowdown and limitation of items received from other countries into the U.S borders.

It has also affected the migration of labor from some countries to the U.S and unfortunately lowers the lower wages job for unskilled workers. I think that the new trade deals might at least initially benefit other counties more than U.S. witch conducted many changes into its investment spending. For example, U.S. focuses its investment on developing new technologies of security and providing them to private companies around U.S. It is true that it was a huge investment but in other hand there were few investments for creating jobs opportunities and covering the impact of those September 11 terrorist attacks.

One of the most important changes happened to the U.S international trade is that U.S. Customs Service created the Container Security Initiative (CSI).  The primary purpose of CSI is to protect the global trading system and the trade lanes between CSI ports and the U.S. basically the keys elements of CSI is to identify high-risk containers; prescreen containers before they are shipped and use new technology to make sure that the process can be done rapidly.

It took more than 7 years after September 11 terrorist attacks to set up this new system witch in my opinion would help to make trade effectively more secure and faster than what it was before even if it costs to the U.S economy a trade deficit of $375 billion.

Written by: Redouane Boufous

Categories: International Trade