Standing near a busy intersection in Calcutta, you would hear a horn honk every 3 seconds. Or, as one Audi India executive explained, “With the amount of honking in Mumbai, we do on a daily basis what an average German does on an annual basis.”
As a result, Audi equips the cars it sells in India with louder and more resilient horns than those destined for Europe. And, to be sure that their horns measure up, they even test them with 2 weeks of steady honking. (A European horn would not survive the ordeal.)
In addition, because Audi India’s high-end clientele tend to have drivers, they need to make their back seats more appealing. As a result, the rear of the car provides more comfort, more entertainment, and more control.
Where does this take us?
To multinational assimilation in a foreign market and our conclusion to a post on Chinese Oreos:
“Being a trading nation is about more than shipping products abroad. At first it was the 18th century New England merchants who facilitated trade from home. During the 19th century, businesses like I. M. Singer & Co. (sewing machines) secured foreign patents, sold exclusive selling rights to representatives abroad and established foreign manufacturing facilities. Then, the next step was the foreign subsidiary through which the multinational firm increasingly took on the identity of its home away from home.”
Sources and Resources: Thanks to marginalrevolution.com for introducing me to Audi-India’s horns and to the Detroit News and the Globe and Mail for more detail. And finally, you might want to compare our recent post on Nissan eyeing the low-end of emerging markets like India’s with Audi’s high-end strategy.
Posted by: adminEcon
Tags: Audi, Calcutta traffic, car horns, Chinese Oreos, competition, emerging markets, global trade, high end autos, India, Mumbai traffic, product assimilation
To better understand unemployment, a Washington Post article tells us to imagine 2 buckets.
One bucket contains firms participating in a global market. Some export goods and services. Others face competition from imports. Examples include:
- most manufacturing
- agricultural goods
- a “healthy chunk” of business and financial services
The other is filled with purely domestic jobs such as:
- health care
This takes us to income and jobs. Between 1990 and 2008, the global bucket generated more income for Americans at home because of worldwide competition and outsourcing. However, the second bucket had no income growth–only job growth.
Now, with cutbacks in construction, government, and consumer spending, the problem of stagnant wage growth and benefits in the second bucket is compounded by lay-offs.
The Washington Post article is based on a paper by Nobel Laureate Michael Spence. You also might look here for an analysis of the July jobs report.
An Economic Lesson
During May 2007, the unemployment rate was 4.4%. 2 1/2 years later (10/09), it peaked at 10.1%. Economists continue debating whether the cause is structural or cyclical. Perhaps our buckets provide another perspective.
An Economic Question: Cyclical unemployment refers to jobs lost because of less demand when the GDP grows more slowly or declines. Structural unemployment is typically caused by technological change. Which examples might you note that relate to current unemployment?