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betajet
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CEO
I shall survive
betajet   2/6/2014 3:07:00 PM
I really doubt that the CEOs of a lot of USA companies care if the company survives.  They care about how much money they make personally.  Sure, if the company survives and remains healthy they stand to accumulate more money, but if they have to choose between their own riches and the long-term health of the company and its employees I suspect they'll look out for #1.

JMO/YMMV

DMcCunney
User Rank
CEO
Re: Bye Bye to more US jobs
DMcCunney   2/6/2014 2:51:09 PM
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@dt_hayden:  Actually it was out of the insatiable greed by sociaopathic coporations, which their stockholders demand.

The more I read these forums, the more convinced I become that an elementary course in economics and finance should be a course requirement for any engineering degree. 

The one constant is change.  The one thing we can say for sure about tomorrow is that it will be different than today.  We do not know (and likely cannot know,) how it will differ - only that it will.

A business is like any other creature in an environment.  Before anything else, it wants to survive.  It wants to be around to open its doors tomorrow to do more business with its customers.

Surviving and prospering tomorrow requires that the business change.  It will have to stop doing some things it currently does, start doing some new things, and do some of what it continues to do differently than today.  To make those changes, it must invest in the business.

Your business is unlikely to have the money lying around to make the necessary investments.  It is likely fully invested.  To get the capital needed to invest, you must get it from outside the business, as Other People's Money.  You may get it in the form of equity, by selling stock, or debt, by getting loans.  Either way, that capital will have a cost.  Investors buy stock because they expect a return.  Lenders expect to be repaid with interest. 

How much your capital will cost will be a function of how healthy you are perceived to be.  If you are perceived to be healthy, you will have a high stock price and have to sell less stock to get the capital, or you will get a lower interest rate on the loans you take out. because the lender sees less risk in your ability to repay.  If you are perceived to be unhealthy. capital will cost a lot more because those who might supply it will see greater risk, and want a larger return in consequence.

The usual question asked by companies that ought to know better is "What is the maximum profit we can make?"  It's wrong.  The correct question is "How much profit do we have to make, to survive?"  The answer is simple: "Enough to cover our marginal cost of capital."  For some companies, the most optimistic answer to "What is the maximum profit we can make?" is lower than the answer to "What must we make to survive?", and they're in trouble.

The problems in high-tech industries are exacerbated because they are capital-intensive industries, and by the nature of their business, the amount they need to invest is far greater, with greater attendant costs and higher profits needed to cover those costs.

This isn't sociopathic corporations responding to greedy sharehaolder demand.  It's a rational response to an environment. Different businesses have different capital requirements and costs, and different ways in which success is measured.  There's a reason why a high-tech outfit like Apple might consider a 22% margin lower than they want to see.

If you get an opportunity, sit down with the guy in your shop responsible for coming up with the money when investment is needed, and see how the world looks from his chair.  It should be an eye-opener.

DMcCunney
User Rank
CEO
Re: Bye Bye to more US jobs
DMcCunney   2/6/2014 2:04:08 PM
NO RATINGS
@rob18767: Globalization has changed the world. I suppose we can re-erect the barriers. However the main problem is that goods, services and, most importantly, money flow across borders with ease while people cannot. 

Indeed, protectionist barriers have been tried time and again through history, and are still being tried.  (A good bit of the problems in the Eurozone revolve around countries that tried to do that as politicians attempted to protect consitutent workers and industries from competition from elsewhere.)

Ultimately, all such efforts do is delay the inevitable.

And there is a larger and more direct problem.  When you erect barriers to protect local workers from foreign competition, you raise prices for all locals.  Wages are a component of cost-of-goods-sold, and higher wages result in higher prices for the goods those workers make and the services they perform.

Consider the computers we use as tools of our trades.  Lots of folks decry the outsourcing of consumer electronics to China to get lower labor costs.  What would they cost if there was a legal requirement that all steps in the process be done here by US workers?   (And would you ban import of gear made by foreign manufacturers not subject to those requirements, offering equivalent gear at prices half what a US vendor would have to charge?)

And if you try to do that, forget generating revenue through export - the rest of the world won't pay those prices.

dt_hayden
User Rank
CEO
Re: Bye Bye to more US jobs
dt_hayden   2/6/2014 1:18:14 PM
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"Steve Jobs out-sourced most manufacturing and assembly to China not because he was secretly Chinese or had a soft-spot for Asia, he needed that to be competitive."

 

Actually it was out of the insatiable greed by sociaopathic coporations, which their stockholders demand.

http://ycharts.com/companies/AAPL/profit_margin

dt_hayden
User Rank
CEO
Re: Bye Bye to more US jobs
dt_hayden   2/6/2014 1:08:21 PM
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"Work flows to where it can be done cheapest.  The growth of the Internet has vastly accellerated that process.  With instant high speed communications, many jobs that don't have to be performed in a particular location, like software development or engineering design, can be done from anywhere in the world, and increasingly are.

In the world we are moving into, if it can be done by machine, it will be.  If it can be done somewhere else by someone willing to do it cheaper, that will happen too."

 

You forgot the disclaimer excepting management and boards of directors.   For some reason those "jobs" must be done in the US at top wages. 

rob18767
User Rank
Manager
Re: Bye Bye to more US jobs
rob18767   2/6/2014 8:32:30 AM
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I would suggest it is even tougher than that. If the company can pay someone even less for doing your job, even if that someone is making a profit for the company, then firing the more costly worker will increase profits.

Hence the outsuorcing of software to India. 


Globalization has changed the world. I suppose we can re-erect the barriers. However the main problem is that goods, services and, most importantly, money flow across borders with ease while people cannot.  

zewde yeraswork
User Rank
Blogger
It's official
zewde yeraswork   2/4/2014 9:44:09 AM
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Now that Microsof thas made the news of Nadella's appointment official, how do you think he will fare as the next Microsoft CEO?

Syed Hussain
User Rank
Rookie
Re: Bye Bye to more US jobs
Syed Hussain   2/4/2014 6:18:02 AM
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The logic "Bye Bye to more US jobs" is utterly wrong practically. In my experience Indian CEO or group heads are more cautoius about out sourcing to India than the US managers. I think he is going to prevent out sourcing to India and put more sourcing to China. After all CEO's are absoulutely focussed on making share value higher. So the way company will benefit that road will be followed.

TarraTarra!
User Rank
CEO
Re: Bye Bye to more US jobs
TarraTarra!   2/3/2014 12:45:53 PM
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"you can be sure that the jobs in India will be growing while the jobs located in the US will be shrinking"

 

You are completely off-base here. There is no correlation between the ethnicity of the CEO and out-sourcing. It is all about growing share-holder value. The microsoft board is making a decision on the effectiveness of the incoming CEO with that in mind.

 

Steve Jobs out-sourced most manufacturing and assembly to China not because he was secretly Chinese or had a soft-spot for Asia, he needed that to be competitive.

Fredo3
User Rank
Rookie
Ballmer's Bonkers Presentation
Fredo3   2/3/2014 12:11:20 PM
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Steve Ballmer's 2006 Microsoft presentation will forever haunt me as the most bizzare performance I have ever seen.

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