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One Question = Please analyze this case, using International Trade methodology (not a short answer please) The Schwinn Bicycle Company illustrates the notion of globalization
One Question = Please analyze this case, using International Trade methodology (not a short answer please) The Schwinn Bicycle Company illustrates the notion of globalization and how producers react to foreign competitive pressure. Founded in Chicago in 1895, Schwinn grew to produce bicycles that became the standard of the industry. Although the Great Depression drove most bicycle companies out of business, Schwinn survived by producing durable and stylish bikes sold by dealerships that were run by people who understood bicycles and were anxious to promote the brand. Schwinn emphasized continuous innovation that resulted in features such as built-in kickstands, balloon tires, chrome fenders, head and tail lights, and more. By the 1960s, the Schwinn Sting Ray became the bicycle that virtually every child wanted. Celebrities such as Captain Kangaroo and Ronald Reagan pitched ads claiming that Schwinn bikes are the best. Although Schwinn dominated the U.S. bicycle industry; the nature of the bicycle market was changing. Cyclists wanted features other than heavy, durable bicycles that had been the mainstay of Schwinn for decades. Competitors emerged, such as Trek, which built mountain bikes, and Mongoose, which produced bikes for BMX racing. Falling tariffs on imported bicycles encouraged Americans to import from companies in Japan, South Korea, Taiwan, and eventually China. These companies supplied Americans with everything ranging from parts to entire bicycles under U.S. brand names, or their own brands. Using production techniques initially developed by Schwinn, foreign companies hired low-wage workers to manufacture competitive bicycles at a fraction of Schwinns cost. As foreign competition intensified, Schwinn moved production to a plant in Greenville, Mississippi in 1981. The location was strategic. Like other U.S. manufacturers, Schwinn relocated production to the South in order to hire nonunion workers at lower wages. Schwinn also obtained parts produced by low-wage workers in foreign countries. The Greenville plant suffered from uneven quality and low efficiency, and it produced bicycles no better than the ones imported from Asia. As losses mounted for Schwinn, the firm declared bankruptcy in 1993. Eventually Schwinn was purchased by the Pacific Cycle Company that farmed the production of Schwinn bicycles out to low-wage workers in China. Most Schwinn bicycles today are built in Chinese factories and are sold by Walmart and other discount merchants. Cyclists do pay less for a new Schwinn under Pacifics ownership. It may not be the industry standard that was the old Schwinn, but it sells at Walmart for approximately $180, about a third of the original price in todays dollars. Although cyclists may lament that a Schwinn is no longer the bike it used to be, Pacific Cycle officials note that it is not as expensive as in the past either. One Question = Please analyze this case, using International Trade methodology (not a short answer please)
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