ECON600

250 words agree or disagree to each question
Q1
The organization needs to understand the current economic market in that specific region when producing and selling in various countries with any business. More importantly, the organization needs to be familiar with trade costs to import and export materials as necessary to produce a given rate of products at any moment. For GM to maximize their profits, they need to assess the following all these key factors. The best method to accomplish this would be by utilizing the six-step model for decision making.
GM will need to evaluate the potential of any problems that may arise; this would include purchasing and transporting materials; what laws are currently in place in each country the business operates presently? What would be the company’s fixed cost? Supply and demand, is there a fixed cost that is higher to work in one country compared to another? How strong is the economy in that specific country? Determining these factors earlier will be vital in maximizing their profits and identifying potential issues or concerns. The next focus will be on how they can operate successfully in every country without risking a depletion or halt in services. Avoiding this will require the company to be familiar with transports, the cost of goods, and readily available resources in each country.
From there, GM will need to build an assessment of consumer spending habits. Understanding the consumers’ needs and wants also needs to be considered when operating in different locations. For example, Nissan is a Japanese operating business. They too produce and sell vehicles all over the world. Yet, they have specific models and lines that are unique to certain regions. GM will need to consider this as well, depending on location. Emphasis focused on meeting a said location’s needs without increasing its production cost.
GM could utilize one method to develop a baseline model of their vehicle for sedans, SUVs, and trucks. And then offer various customization packages that cater to the needs of consumers in that region. Offering options to consumers could lower the cost of production and decrease the risk of having excess stock on hand. This would be a great alternative method for the company to explore and seek growth in sales.
Samuelson W.F. & Marks S.G. (2015). Managerial Economics. Hoboken, NJ: Wiley & Sons Inc.
Q2
GM is an organization known around the world but that did not happen overnight. It is not only important to have a quality product but also the ability to ensure that product is readily available on a global scale and priced according to the local economy. What that means for decision making is to figure out what factors come into play when producing, shipping and selling a product on a global scale. In order to maximize profit, GM would have to understand the cost associated with making each product and how to price the product appropriately. This can be done by utilizing the six-step model which includes defining the problem, determining the objective, exploring alternatives, predicting consequences, making a choice, and performing sensitivity analysis (Samuelson & Marks, 2015).
First, defining the problem. Production cost include but are not limited to cost of material and labor, cost of facilities for production and holding, cost of shipping to include tariffs. The problem at hand is how to assimilate all of that information to set appropriate pricing and to increase production capabilities. Second, determining the objective. The objective is to maximize profit. Third, exploring alternatives. Alternatives include, outsourcing production to manufacturers in local economies. Fourth, predicting consequences. Manufacturing and shipping products around the world can be a logistical nightmare. Consequences that can be predicted is cost increases due to tariffs, shipping, labor cost dependent on location of production facilities, and cost associated with local laws and regulations. Fifth, making a choice. GM would have to make a decision on what path makes the most sense keeping the objective in mind. Lastly, performing sensitivity analysis. In this final step, GM would need to analyses what would happen if certain factors changed that would affect the final choice. These could include availability of resources, stability of local economy, and embargoes imposed by different countries.
Samuelson W.F. & Marks S.G. (2015). Managerial Economics. Hoboken, NJ: Wiley & Sons Inc
Managerial Economicseconomics