Quality is important for Costs?? WHY U.S.A buys a lot of its\' stuff from China.
ID: 362609 • Letter: Q
Question
Quality is important for Costs?? WHY U.S.A buys a lot of its' stuff from China. As we know, most of the products from China do not have high quality but the U.S.A keeps buying it and people keep buying it. The U.S.A also makes products as well, with possibly the same or better quality and not too many people buy the products. With the cheaper quality from China, it makes things affordable for people but buying products made in U.S.A people will complain about high costs. Also, most people are satisfied with products from China because its cheap and if it goes bad or breaks, it can be bought again at the same cheap price.
Explanation / Answer
Yes quality is important for costs. It directly affects costs. The quality of the resources used in production directly impacts costs.
For example: If inexpensive low quality resources are used in manufacture of an item, it will help reduce costs in the short run, but in the long run it will adversely affect the costs of a company.
Take the merchant shipping business for example. In their efforts to reduce costs and increase margins, the shipping companies opt for buying chinese built vessels over the japanese and korean builts. The chinese vessels are far cheaper than their japanese and korean counterparts. But once the vessel is put to use, the repairs and maintenance costs pile up and directly affect the working capital of the company, which affects its routine functioning. Also the life of the chinese vessel is lesser so the capital expenditure of purchasing a new vessel also adds to the costing woes of the company.
The question of why a particular country keeps on buying from China when the products are made in the home country is valid all over the world and not only the USA.
There are a few things that need to be pondered upon, which will help understand this dichotomy over buying own products and prefering chinese products.
These ar some of the reasons which have helped china to become the manufacturing hub of the world.
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