Hyundai decided to build a new automobile assembly plant in Alabama
Globalization and international trade have increased competition among different players in the automobile industry; different companies are innovating and inventing technologies to strengthen their competitiveness. The decision by Hyundai Motor Company to build an assembly plant and Alabama is a strategic decision by the company, which was triggered by several factors both internal and external.
Hyundai targets the regional and international market for its products thus when choosing a location for an assembly, it must consider the available transport infrastructure; Alabama has good transport and communication network that links the region to the world through water, sea, and road transport; this is one reason that Hyundai considered.
Alabama population is mixed with both highly learned and semi-educated population, the large population in the area will offer much needed skilled and non-skilled labor to the factory. On its own, the region population will offer the market to Hyundai products. The government of Alabama has enacted legislation that supports new ventures; such incentives include tax holidays on income and capital deductions.
Who benefits and who loses from the new plant in Alabama?
One of the obvious beneficiaries of the new development is the factory itself since it will have an additional facility to produce more commodities. The commodities will also get to international markets fast because of efficient transports and communication networks.
The people of Alabama will benefit, as the plant will offer employment opportunities; the government also stands to benefit from taxes and facilitated trade by the company, which will earn the country foreign exchange.
The environment is the main loser in the venture since when the factory is producing; some wastes will injure the environment; however, Alabama has efficient environmental policies to curb damage from production plants. Competitions in the automobile industry will also lose some of their customers to Hyundai.
Is the firm’s decision to build the new plant consistent with Dunning’s eclectic theory?
The expansion is consistent with Dunning’s eclectic theory since the company is targeting the market and aims at riding at its reputation and strong brand name. The expansion is likely to be successful since the market is aware of Hyundai products thus they are likely to accept the venture fast. This will lead to an advantage for the company.
Why is inter-industry trade not predicted by country-based theories of trade?
Inter-industry trade means that a country does not specialize in importation and exportation of one commodity; however, it uses a mixed approach to have the best out of the market. International trade is the exchange of goods, services, or/and capital between different countries; It has continually strengthened economically, politically, and socially with many countries’ participation. International trade plays a very important role in ensuring the continuity of globalization.
International trade rides on policies made by international bodies like the World Trade Organisation regulating and defining some processes in the trade. Some countries fail to implement the set policies and the result is un-predictability.
Another factor that makes Inter-industry trade unpredictable is the existence of trade barriers among countries; trade barriers take the form of governmental policies, fiscal and physical barriers. Some governments impose trade restrictions, which bars the importation or exportation of goods or services from/to certain countries. The uncertainty of the direction that international trade will take makes Inter-industry trade unpredictable.