Suppose button industry is characterized by monopolistic competition with external economy. China is currently the dominant producer of buttons. Explain why Vietnam may find it difficult to compete with China in a button industry even if Vietnam has lower average cost as a function of the size of the industry
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Suppose button industry is characterized by
monopolistic competition with external economy. China is currently the dominant producer of buttons. Explain why Vietnam may find it difficult to compete with China in a button industry even if Vietnam has lower average cost as a function of the size of the industry
For any country to be competitive in low – cost manufacturing, there are few other factors which needs to be considered: size of the industry, young population, skills and proficiency of workforce, infrastructure, consumer market, customer credibility etc.
Vietnam has many positives for its manufacturing sector that will likely to grow but there are few insights to be looked upon while looking for competitiveness with China in button industry :
- Although Vietnam’s cost curve lies below to that of China as it can manufacture buttons more cheaply than China. But one of the major issues that Vietnam faces is its small share of global manufacturing as compared to that of China.
- The Chinese manufacturing sector and economy is of sheer size as compared to that of Vietnam which gives China a take to operate more efficiently and limits Vietnam’s ability to compete.
- Other major issue with Vietnam is lack of skilled human capital referring to economic value of workforce which China has a positive stake on.
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