Why Do Industries Face Problems

1
Why Do Industries Face Problems?

• Chapter 11, key issue 4

2
Overview

• Major issues exist for worldwide industrial
  growth
• Global problems
• MDC problems
• LDC problems

3
Global Industrial Problems

• Most problems are related to supply and demand
• Demand has remained stagnant
• Capacity (supply) has increased

4
Stagnant Demand

• Slow population growth in MDCs has reduced
  demand in mature markets
• Market saturation
• Higher quality products last longer and require
  infrequent replacement
• Technology has reduced demand for some inputs

5
Increased Capacity

• Capacity amount factories can produce of a a
  product
• More nations have turned to industry to develop
  their economies
• While demand has stagnated, supply has increased
• Prices have been forced downward due to
  oversupply and excess capacity

6
MDC issues trading blocs

• Trading blocs nations within a region who agree
  to trade under certain rules
• Blocs include Western Hemisphere, East Asia,
  Western Europe
• NAFTA, the EU trade within the bloc but then
  compete with other blocs
• Blocs then have large craft fairs called bloc
  parties

7
Trading bloc issues

• Protectionism within the bloc some blocs will
  work to prevent competitors from entering markets
• Even within a bloc, there can be issues between
  nations, regions on labor costs
• Some areas have lower labor and land costs, an
  excess supply of labor, etc.
• Examples include the American South, Northern
  Ireland, East Germany

8
Older LDC issues

• Distance from Markets profitability suffers due
  to distance from MDC markets
• Inadequate infrastructure roads and rail may not
  allow for access to inputs and ways to ship
• Lack of LDC education reduces the number of
  engineers, managers, and finance people

9
Newer LDC issues

• Worldwide competition for raw materials drives up
  price
• Continual migration of industry to cheapest labor
  has hurt nations
• New International Division of Labor MDC gets
  skilled manufacturing, LDCs get unskilled, lower
  wage labor
• Raw materials moved out of LDCs for refinement
  in MDCs