Question

A company manufactures auto spare parts. The company employs 1500 workers in its two units. The management of the company wants to move the low technology, labor intensive part of its operation to Bangladesh to take advantage of the low cost of labor there. If the company moves its operations to Bangladesh, from both units, a total of 500 workers will lose their jobs. The expected cost saving is estimated to be $1 million in the first year and $2 million in subsequent years, for nine years.

Answer 1

This scenario discusses a company's decision to move its low technology, labor intensive operation to Bangladesh. It raises questions about globalization, outsourcing, comparative advantage, and the impact on employment and economic development.

Step-by-step explanation:

In this scenario, the subject being discussed is the decision by a company to move its low technology, labor intensive operation to Bangladesh to take advantage of low labor costs. This decision has implications for both the company and the workers affected. The company expects to save $1 million in the first year and $2 million in subsequent years, but it also means that 500 workers will lose their jobs.

This situation raises questions about the impact of globalization and outsourcing on employment and economic development. It also highlights the concept of comparative advantage, where countries specialize in producing goods and services that they are relatively more efficient in, and how shifting production to areas of comparative advantage can lead to overall gains in production and trade.

However, it is important to consider the potential social and ethical implications of such decisions, including the impact on workers who lose their jobs and the working conditions in the countries where production is shifted.