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Transcription of this question: 5.Moving back to the USReducing costs has been a significant driving force in pushing multinational companies to offshoremanufacturing. However, as emerging economies develop, labour costs are rising.Between 2005 and 2010, wages Of factory workers in China rose by 69%. An analyst forBoston Consulting Gmup said that “the cost advantages from offshoring are falling to such an extentthat some American multinationals with manufacturing offshore are returning home to supply theirAmerican customers”. By 2015, the cost advantage of offshoring manufacturing for the United States(US) market will disappear. The analyst has forecasted, based on the same time series technique assales forecasting, that wages will continue to grow at around 17% a year in China, but remain stable inthe US.Gary Pisano, Of Harvard Business School, said dlat some American companies that had consideredoffshoring parts of their business are choosing to expand within the US. General Motors, for example,will invest USS2 billion to create 4000 jobs at 17 manufacturing plants in the US.A growing number Of multinational companies, especially from high-income countries, are startingto see the benefits Of keeping their manufacturing “at home”. For many producers, labour costs area small proportion Of the total cost. Also, long and complex supply chains have become unreliabledue to changes in external factors such as the increase Of Oil prices, political instability and naturaldisasters such as earthquakes.However, Gary Pisano also argues that:• in some industries, such as consumer electronics, the US no longer has the necessary supply chainsome multinational companies will continue to build most Of their new factories in emergingeconomies, where the demand is growing fastestsome Of the new factories in the US have been financed by government subsidies, which willsoon stop• in India, despite rising wages, its innovative software development and call-centre offshoringindustries are likely to retain its cost advantages because Of increasing productivity.(Source adapted from “Moving back to America”, The Economist, 14 May 2011](i)(ii)(iii)Identify one possible variable cost of production, other than wages, thata manufacturing company may face.Identify one possible fixed cost Of production that a manufacturingcompany may face.Define the term offshoring.(b)(c)(d)The Boston Consulting Gmup analyst used the same technique as sales forecastingto predict changes in wages. Explain one advantage and one disadvantage Ofusing this technique.Examine the possible impacts on China Of the US multinational companiesoffshoring manufacturing to China.Discuss the suggestion that US multinational companies are likely to increasethe scale Of manufacturing at home.[1 mark][1 mark][2 marks][6 marks][6 marks][9 marks]

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