Question

Please write a brief response to the following post:

I do agree with the assessment that U.S. companies only bringing in $40 - $50 of the value associated with the Amazon kindle is a decline of American competitiveness. I actually believe that Amazon even using any U.S based company as a source for their product shows that the American competitiveness is actually stable, but these U.S based companies are using foreign countries to actually make the products that Amazon is using. With companies like Apple who make and manufacture their products in foreign countries for way cheaper prices than they would have to pay in the United States, it is a tribute to America that Amazon did not do the exact same thing. In order to maintain in a specific market you have to be able to compete within that market, Amazon made all of the necessary decisions that needed to be made in order to have a competitive product that will be able to last on the market for the future. I understand that these companies are U.S. based, but they basically are using other countries to make their products for cheaper prices and selling them to Amazon. If Amazon decided to design and manufacture the Kindle and all its components in the U.S the consequences would have been the Kindle costing $500 to make instead of $185. They would have to mark up the price tremendously if they did everything for the Kindle in the U.S., just for the labor they would have to pay 10 - 12 dollars more per employee which is already marking up the cost. It would not be smart to solely make a product in the U.S when the competitors are making products in your same market for 1/5 of the price.

Answer 1

It is very much true that the prices will go up substantially because not only the labour charges will be hire, the cost of acquiring technology, cost of raw materials and cost of advertising will also go up. To avoid these costs, companies move out of America, while keeping their Headquarters in the US.