An iPod Has Global Value.
This article focuses on the assembly of the iPod. It shows that trade does pay off, or none of us would be walking around with that box attached to some body part. Apple outsources the entire device piece by piece. There are about 451 parts that go into an iPod. Three researchers at the University of California followed the trail of all the parts and realized how complex the global economy is. The most expensive part of an iPod is the hard drive which is made by Toshiba for $75. The finally assembly in China only cost about $4 U.S. Even though Toshiba is a Japanese company, they outsource the creation of the hard drive to the Philippines and China. This happens with all the other parts. It can get very confusing. The parts that are outsourced have smaller parts that are further outsourced. The $73 Toshiba hard drive contains $54 in parts and labor. Toshiba added $19 in value to the hard drive plus its own direct labor costs. This $19 is attributed to Japan since Toshiba is a Japanese company. The largest share of the value added in the iPod goes to the United States because of the units sold. The researchers estimated that $163 of the iPod’s $299 retail value in the United States was captured by American companies and workers, breaking it down to $75 for distribution and retail costs, $80 to Apple, and $8 to various domestic component makers. Apple figured out how to combine 451 mostly generic parts into a valuable product. They may not make the iPod, but they created it. This article shows how just one small product can have a global presence. Since the United States is a service economy, our ideas and creativity are more valuable than our labor or assembly. What do you think?
1 comment:
[This comment is by Chunzi.]
To the long-term benefit for a whole company, the creativity does bring much more values and benefits than in the past. The original cost for producing a product is less cost & more benefits. As the labor is so cheap in China, it’s a top choice of processing the small parts such as the USB line of iPod, arm binds of iPod and many other extra products for iPod. They separate different parts produced into different countries where they can seek a fewest cost but a larger benefit. iPod is a global product. A right creative strategy can bring billions of dollars. So I agree that the ideas and creativity are more valuable than labor or assembly.
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