Trends in auto makers

This entry is on the USA Today article “Buyers Find Fewer Cars Made to order.”  It discusses some of the newer trends in the automobile manufacturing industry.  The main point of this article is to point out the effects of some automakers decreasing the amount of customized packages of trim levels and options available.  It has both benefits and cons for the producers and consumers.

For producers, cutting the amount of customizability of the options for their cars can simplify production and inventory planning, but it can also discourage consumers from buying packages.  Because cars are made in assembly lines, less customization means less variance from making one car to the other.  This decreases costs of production.  But, because there is less customization available, this could discourage consumers from buying packages because they may want one thing, but not the others in the package.  This could decrease the demand for trim levels and options.

For consumers, less customization could mean lower prices, but it could also force them to purchase unwanted options with the wanted ones.  Because less customization lowers costs of production, it could lower prices which would increase the demand.  But, because it is more difficult to get a package with only the perks you want, it would decrease the demand for packages.

I think these changes will build a stronger auto making economy, and overall the demand for trim level and option packages will increase.

A look into Germany's economy

This post is about the recent article from the New York Times, "In Germany, Exports Mask Economic Weaknesses."  This article highlights some of the strong and weak points of the German economy.  The two main points that I will be focusing on are the how Germany relies on exports and what effects it has, and how government regulations and interference in their service sectors are creating a less than optimal business environment.

Exporting is a crucial factor in today's business world.  It allows for increased domestic producer surplus to those who export and increased consumer surplus to those who import.  According to this article, Germany's main strength is that their exports of such things such as automobiles and other machines.  Being an "export juggernaut" could keep any economy afloat, because it significantly increases the producer surplus of those who export than if they weren’t.  But, relying mainly on exports can leave a countries economy vulnerable to ups and downs in other major markets.

For this reason, Germany should try to improve the state of their current services economy.  The regulations they currently have in place, although better than in the past, still hurt their country.  An excellent example of this in the article is a man trying to keep his flower shop open on mother’s day from 9 a.m. to 4 p.m.  Because it was a Sunday, he could not do this and had to keep his shop open for fewer hours.  This would result in lost sales, which would leave the amount that he wanted to sell, and the amount consumers wanted to purchase unequal.  This keeps that market from reaching equilibrium and creates deadweight loss.

According to the article, if Germany removed these barriers to competition and other inefficiencies, they could add about ten percent to growth.  This would help their overall economy and better protect them from the flaws of primarily relying on exports.

Coffee Around the World

This post is about the New York Times article, "After a Year of Delays, the First Starbucks is to Open in Tea-Loving India this Fall."  This article discusses some of the pros and cons of Stabucks' desicion to bring their franchise to India.  Although I am not an expert in international coffe franchises, this article posed some interesting insight in the topic of microeconomic advantages and disadvantages involving the supply and demand curves related to the products these cafe franchises sell.  The topics this article can be related to for demand are taste, market size, and price of related goods.

Regarding taste, in the Unites States, it seems that Starbucks primarily focuses on coffee and coffee like products.  But, as stated in the article, India is primarily a country of tea drinkers whose current population prefers "cold sweet milkshakes, teas and other beverages to traditional coffee."  This would make one think that in order for starbuck to increase the demand for their products they would primarily focus on these types of drinks.

The second thing affecting demand in India is the market size.  According to this article, India has "experienced an explosion in cafes and restaurants over the last decade because of its growing middle class and a large youth population."  This increase in market size would push the demand curve for cafe products to the right, and would make this a good time for Starbucks to open stores in India.

A third and final aspect of demand touched upon by this article is the price of related goods.  It appears that Starbucks will be attempting to reach a different market than most of its soon to be competitors in India.  But, will this approach work?  Although India's market is growing it still may not be growing enough to purchase products from Starbucks.  A cafe chain in India called Cafe Coffee Day typically sells a cappuccino for roughly one dollar.  The real question is that will the quantity demanded for "premium" coffee, tea, and food be enough for this franchise to thrive in a new market.

Overall, Starbuck's decision to move stores to India seems justified as long as they shift to a more India friendly menu, get in the market soon before the supply grows to meet the increasing demand, and possibly sell a less expensive product.