Mobil Factory

The given the change in hourly compensation cost index as presented in the table , the exchange rates and even wages are shown to have been inconsistent over for most of the countries. The compensation cost in Belgium is shown to have steadily increased from 1990 to 2012 and the wage rates reaching a high of 52 dollars in comparison to US dollar. This means that the currency in these countries are strengthening in comparison to the US dollar and hence, an increase in value of currency for this country. The lower US dollar means that as a US manufacturer using its currency, the firm will be able to gain more from exporting its product to this country. The company’s export into the Belgium market will be more affordable in the country due to increased US competitiveness in the global market.

When compared to the other countries listed, the U.S compensation cost per hour in 2012 is higher at $35.67. Moreover, countries like Canada and Australia had a higher compensation cost and others like Taiwan. In the 1997-2012 periods, the compensation costs for the manufacturing shown in form of percent of overall US costs remained constant or increased in all the other countries in comparison a part from Taiwan. This shows that the cost competitiveness for U.S improved in that period which means that its exports would do well in the global market compared to competitors from other countries. Pressure brought by wage increase is normally inflationary and may increase consumer price (Baumol & Blinder, 2009). This means that the strategy adopted in 2011 would be the same as previous since US would still be competitive as before.

Reference

Baumol, W. J., & Blinder, A. S. (2009). Economics: Principles and policy. Mason, OH: South-Western/Cengage Learning.