EXIM CASE Essay

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EXIM COMPANY Case Analysis EXIM Company: Comparative Advantage in International Trade Case Analysis INTRODUCTION One of the most important factors that determine trade between countries and companies is the relationship between production costs in different countries. Companies can decide to produce in countries where they can minimize cost in order to export to countries were production costs are higher. The case is based on EXIM Company, a Connecticut-based corporation that assembles computer circuit boards for use in personal computers manufactured by IBM, Apple, Compaq, NEC, and other original-equipment manufacturers. The product portfolio includes a wide variety of multiple-function boards and other peripheral hardware used in the growing personal computer market. Due to foreign competition, especially Asian manufacturers, the companies rate of growth has been reduced. Mr Klauser is concerned about the competitor low price and is looking forward to analyze if it is convenient for the company to establish a foreign production plant in Asia. Due to the nature of the companies products (commodities) the possibility of buying from low cost countries is also available. ANALYSIS In order to conclude what should be EXIM´s trade mix we focused in analyzing the cost competitive advantage of producing the computers commodities in USA, Japan and Korea. We focused on getting a relationship between production cost in each of the 3 countries to conclude where it is cheaper to produce and where should the company focus its procurement and production activities. STEP 1 – Discovering Production Costs Advantage The first step in our analysis is to obtain the production costs comparison of the 3 countries. Due to the localization of EXIM we included the 5% tariff that foreign products have to pay in order to enter the USA market. PRODUCTION COSTS

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