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Political Geography and International Economics

In: Business and Management

Submitted By salshk
Words 680
Pages 3
Assignment 4

Political Geography and International Economics

Oct 18,2012

Question 1 answer:
According the theory of external scale economic, it means when abundant companies in the same industry cluster within a small-scale location or specific geographic area, the average cost of their production will decrease, at the same time, the productivity will increase. External scale economic not only reduce the cost, but also force these companies to become more specialization under a competitive environment. Furthermore industry clustering also will attract numerous skilled and unskilled labours, and the transfer of labour in different firms also will promote the whole industry’s technology and knowledge. In addition, clustering helps to promote the development of peripheral industries.
When 1898, the first U.S vehicle company Olds has been establish in Detroit. After that, with the development of modern automotive industry, amount of auto companies have been set up there. At the present time, Detroit gradually formed an external scale economic focus mainly on GM, Ford, Chrysler as center, supplemented with peripheral industries, such as auto accessory, auto Research and development. And because of the location of Detroit, which includes the Great Lakes, railways and three international airport terminals, efficient logistic system accelerates the development of external scale economic. In spite of the involve of 2008 economic crisis, the big three losed more than 10% of market, but with the recovery of economic and the strength of external economic, the operation rate of big three all reached 100% in 2012.
Base on the external scale economic, it decrease of the cost also made customer could purchase vehicle more cheaper, means it created more demand and trade opportunity. Detroit...

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