Cost Minimization in the Real World

My dad works in the cell phone section of his company, which has been outsourcing more and more over the years. The outsourcing is how his company implements cost minimization. The location of each step in the process of creating a cell phone is chosen in order to minimize the costs based on labor. The locations are solely based on cost of labor, because the costs of transportation of materials and finished products are relatively minimal. Cell phone materials are relatively easy to ship, as are the finished phones themselves. It is more cost effective to ship these materials farther in order to manufacture the phones with cheaper workers. Because of this, my dad is frequently in contact with people from other countries; he manages a team of engineers from places like Taiwan and Singapore. All these people from different countries are working on the same product. The American engineers make decisions about how the phone should work, what it should do, and what it looks like. Then the engineers in places such as Singapore determine how to actually create the phone. Once this step has been completed, the phones are mass produced in places like China. There is a reason for having these steps located where they are. The phones are thought up and designed by American engineers because this is an American company. These ideas are actually created and made to work in Singapore because the engineers in Singapore do not cost as much as engineers in America. The engineers from Singapore do not have to be paid as much, so having them work on the phones after the ideas have been established is more cost effective. Once a specific phone is complete, it is mass produced in China because, as many other companies know, it is much less expensive to hire laborers in China rather than in America. However, something that I found interesting was the fact that there must be cell phone factories in Mexico. The Mexican government does not allow phones to be sold in the country if they were not manufactured in Mexico, because they are trying to preserve their economy. I’m not sure what the cost differences are between manufacturing in Mexico and manufacturing in China, but even if Mexican manufacturing costs more, it would still be more profitable to have cell phones sold in Mexico rather than not. The potentially higher cost of labor would just be another minimal cost that the company would have to pay in the pursuit of profit.