Dev's COMM 101 Blog

Trump’s distaste towards Mexico has been made fairly clear throughout his presidential campaign. He holds outsourcing of production processes to Mexico responsible for the loss of jobs in America and believes that current treaties governing trade relations with Mexico “have destroyed the country”. 

Mexico’s cheap labor costs, tax rebates, and its proximity to the United States and Canada have made it one of the most attractive spots for companies to outsource their production lines. In particular, the city of San Louis Potosi has attracted numerous automobile giants such as GM, Toyota, Ford, and BMW. Trump is now forcing these companies to relocate their factories to the United States, by threatening to impose a 35% tax on their products imported from Mexico.

During his campaign in September 2016, he specifically picked on Ford Motors’ plan to move production of all small vehicles to Mexico from its factory in Michigan. He criticised them for being ‘disloyal’ and ‘un-American’ and said they were ‘using NAFTA to move jobs away from America, as seen in a CNN news clip. However, Ford responded by saying that no American jobs will be lost. The factory in Michigan will continue to operate and produce other car models instead (Isidore, 2016). Despite this, Trump stuck to his threat of charging a 35% tax on every car that is imported from Mexico. This tax would have detrimental impacts on Ford as they would have to pay a total of $2.8 billion per year in taxes which exceeds its total profit in its most recent quarter (Gillespie, 2016). Moreover, it would make cars much more expensive for American consumers (Gillespie, 2016).

In January 2017, Ford announced that they are scrapping the factory in Mexico and are instead investing $700 to build another factory in Michigan where they will be producing electric and self-driving cars, bringing 700 new jobs to America (Long, 2017).  The CEO of Ford Motors, Mark Fields repeatedly said that this decision was taken purely for their business and not because of any special deal made with Trump (Long, 2017). However, I personally think otherwise.

One of Trump’s tweets which hints the fact that Ford’s decision to scrap the Mexican factory was forced

On the other hand, as mentioned in a fellow COMM 101 classmate, Jorge Zubeirta’s blog, BMW motors also received similar threats from Trump and would also suffer crippling losses if this tax legislation is passed. However, unlike Ford, BMW has not been bullied by this threat. They are strongly determined to build their facility in San Louis which is expected to be opened in 2019.

To me, the idea of penalizing these companies is ridiculous. New jobs will be created in Mexico, however, that does not mean that jobs are being lost in America because both companies will continue operating their American factories. Outsourcing production guarantees lower prices for all consumers worldwide, which I think is more valuable than a few thousand jobs that could’ve been brought in.  Moreover, in the case of BMW, the factory in Mexico will mainly be exported to countries other than the United States and so it surely makes sense for them to save costs by producing in Mexico.

The BMW 3-Series Sedan that will be built in the new Mexican factory

Works Cited:

Gillespie, P. (2016, September 15). Trumps 35% Mexico tax would cost Ford billions and hurt Americans. Retrieved November 12, 2017, from http://money.cnn.com/2016/09/15/news/economy/trump-tariff-ford-mexico/?iid=EL

Isidore, C. (2016, September 15). Ford fact checks Trump: We will be here forever. Retrieved November 12, 2017, from http://money.cnn.com/2016/09/15/news/companies/ford-trump-jobs/index.html?iid=hp-toplead-dom

Long, H., & Harlow, P. (2017, January 4). Ford cancels Mexico plant. Will create 700 U.S. jobs in ‘vote of confidence’ in Trump. Retrieved November 12, 2017, from http://money.cnn.com/2017/01/03/news/economy/ford-700-jobs-trump/index.html?iid=EL

Let’s start with the basics. Developed in 2009 by an anonymous group known as Satoshi Nakamoto, a blockchain is a highly encrypted and shared database which facilitates transactions in the form of digital cryptocurrencies such as Bitcoin. This technology aims to provide a secure and faster way to digitally and anonymously send payments between two parties without needing a third party to verify the transaction.  It also provides a tamper-proof alternative to tedious banking processes that are “typically bureaucratic, time-consuming, paper-heavy, and expensive.” (Meola, A., 2017).

Since its birth in 2009, the number bitcoin transactions have skyrocketed, as seen in Figure 1. In addition, the value of each bitcoin has risen from US$1 to roughly $1,100 today (E., 2014).

Figure 1. Source: Business Insider

The credit for this rapid success goes to the numerous benefits provided by bitcoin. Firstly, it eliminates the need for a third party, which reduces transaction costs to a bare minimum of 1% or even free through some bitcoin gateways, compared to an average of 3-4% on credit card purchases. In addition, businesses receive money in hand the day after the transaction instead of usually having to wait 3-5 business days, hence greatly improving their cash flow (E., 2014).

Bitcoins are now being used to buy food, ebooks, music etc.  Secondly, the blockchain server on which bitcoins operate provides complete transparency to users who can log in and browse through every single bitcoin transaction ever made (E., 2014).

In his famous blog titled “Both sides”, the American entrepreneur Mark Suster provides valuable insights into the world of blockchains, stretching even further than cryptocurrency. He mentioned that the strongly encrypted algorithms used in a blockchain can, in fact, be used to transfer confidential paperwork between large businesses as well as governments, ensuring that data isn’t tampered in any form.

He has also shown concerns about the reliability of bitcoins stating that, it’s increased valuation is all because of high speculation and a drive for quick profit which is highly unstable and may not be sustainable in the long run.

Additional concerns with bitcoin include it’s safety. In 2014, 800,000 bitcoins valued at $450 million were lost at a Japanese bitcoin exchange called ‘Mt.Gox’. Furthermore, the federal government is concerned that it might soon be used for terrorism purposes (E., 2014).

In conclusion, I personally think that bitcoins are not a reliable option to replace currency because of the aforementioned reasons as well as the fact that its origin is anonymous even today and there is no central body to govern it and responsible for anything that might go wrong with it.

However, I do believe that the blockchain technology could be applied in other fields like secure document sharing which could be greatly beneficial to governments and businesses across the globe. 

Works Cited:

E. (2014, May 29). Retrieved October 15, 2017, from https://www.youtube.com/watch?v=SmExLsqQYEw&t=325s. 

Meola, A. (2017, August 25). Understanding blockchain technology, bitcoins and the rise of cryptocurrency. Retrieved October 15, 2017, from http://www.businessinsider.com/blockchain-technology-cryptocurrency-explained-2017-8

Suster, M. (2017, September 18). Want to Really Understand What all the Hype of Cryptocurrency is About? Retrieved October 15, 2017, from https://bothsidesofthetable.com/the-case-for-against-cryptocurrencies-101-c8d71c444fe0

Inflation is defined as a steady increase in price levels of all goods and services in an economy, over a given time period. In an effort to combat inflation, packaged fast food producing giants have given birth to a new phenomenon called “Shrinkflation” that involves“manufacturers reducing the package size of household goods while keeping the price the same” (Digital, O. 2017)

Fig. 1

Companies claim that prices of raw materials have risen. In November 2016, Toblerone reduced the size of their products by 10%, with the price remaining same. In their defence they said that “We are experiencing higher costs for numerous ingredients” and so “to ensure Toblerone remains on-shelf, is affordable and retains the triangular shape, we have had to reduce the weight of just two of our bars in the UK, from the wider range of available Toblerone products” (Digital, O. 2017). Similar responses were seen by other companies such as Mars Inc.

The rising cost of raw materials is a fairly valid reason for reducing packaged sizes. However, the argument posed by companies about keeping products affordable for consumers, instead of raising prices, seems more of a marketing stunt than an effort to ensure consumer satisfaction. I say this because it seems as if these corporations conveniently adjusted their costs and didn’t lose a single penny. It is the consumers who lose out by receiving lesser quantity. By marginally reducing package sizes, they created an illusion to trick consumers at first. When an average consumer walks into a store and picks up a pack of chocolates, it’s hard for them to notice the difference in size, and so they end up buying it. On the other hand, if prices were hiked up by 10%, the consumer would immediately realize that they are now paying more for the same packet and possibly make them think twice before buying it. In addition, in the case of chocolate producers, it is hard to believe that “their raw material costs went up” even though cocoa and sugar prices have dropped since 2015, as seen in Fig. 2, and Fig. 3.

Fig. 2

Fig. 3

Strangely enough, Mcvities’ 300g chocolate biscuit packet had its size reduced by 6% but its price was reduced by 10% (“Lawrie, E., 2017″). This technically implies that consumers are now paying lesser for the same quantity. This example got me thinking that perhaps “shrinkflation” isn’t all that bad for consumers. In fact, smaller serving sizes of high-calorie foods like chocolates and biscuits would perhaps help reduce obesity and promote healthier lifestyles among consumers.

(“Toblerone, 2017”)

Works Cited:

           Digital, O. (n.d.). Shrinkflation and the changing cost of chocolate. Retrieved September 26, 2017, from https://visual.ons.gov.uk/shrinkflation-and-the-changing-cost-of-chocolate/

                   Lawrie, E. (2017, July 24). Five products hit by shrinkflation. Retrieved September 26, 2017, from http://www.bbc.com/news/entertainment-arts-40709180

                Toblerone. (2017, September 23). Retrieved September 26, 2017, from https://en.wikipedia.org/wiki/Toblerone

To begin with, Business ethics is defined as  a system of laws and guidelines by which business professionals and corporations operate in a fair, legal and moral fashion (“Business Ethics, 2017”).

Although the sole motive of most businesses is profit, I believe that running a business is about more than just making money.

In my opinion an ideal business institution is one that operates with an efficient, cost effective model in order to make profits but at the same time ensuring that it provides benefits to all stakeholders involved and does not provide significant gains to one at the cost of another.

Even though governments all across the globe have taken several efforts to enforce laws that safeguard the interests of society against unethical business practices, several corporations have crossed the line time and again. A recent incident that took me by surprise was a global emissions scandal by the Volkswagen group.

After the clean air act was passed by the FPA, engineers at Volkswagen were pressured to modify existing vehicle prototypes to comply with the new regulations. This meant high costs in R&D and reduction in the milage of their vehicles which was their main selling point. (Russel Hotten, 2017). In addition they were losing business to their competitors in North America such as Toyota and Honda that use hybrid technology. Hence, they decided to install a device that would automatically reduce the engine power when a vehicle is being tested in a laboratory in order to falsely pass emission tests (Russel Hotten, 2017).

So in a nutshell, the Volkswagen group violated the trust of their customers and national government bodies across Europe and North America, not to mention the adverse effects the harmful emissions from their vehicles have had on the environment. All of this, just to put in a few more millions in their bank account.

And was it even worth it in the end? Within months of this scam, the company was charged with an $18 Bn dollar fine and had to set aside another $6.7 Bn to repair and replace the faulty vehicles. In addition, they have faced several lawsuits from individual vehicle owners. (Russel Hotten, 2017).

I’d classify this as a classic case of “pennywise pound foolish”. In addition to their financial loss, this scandal has slandered Volkswagen’s brand name and legacy which will surely have a long lasting negative impact on future sales. In fact, just a month after being exposed, the company recorded their first quarterly loss in 15 years, worth $2.5 Bn (Russel Hotten, 2017).

Works cited:

Business Ethics. (2016, June 09). Retrieved September 14, 2017, from http://www.investopedia.com/terms/b/business-ethics.asp

Hotten, R. (2015, December 10). Volkswagen: The scandal explained. Retrieved September 12, 2017, from http://www.bbc.com/news/business-34324772