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News and analysis: Foxconn raises wages but keeps long hours, Nike sells $315 shoes, Herr’s makes 5-6 tons of chips/day

So FoxConn workers are making more than they used to. They’re still working 60-hour weeks in violation of government labor laws.

So the wages are going up, changing relative wages against both the U.S. and against other developing nations. What’s going to happen? Well, we should expect that some manufacturing jobs will move back to the U.S. We should also expect higher value items and higher value brands to be established as more important parts of China’s economy.

The downside: prices on consumer goods–which have been depressed for a long time due to the 2000s explosion of labor due to the expansion of western firms into China–are likely to rise.

The upside: China will start buying more stuff, particularly higher-value items, in which the U.S. has a comparative advantage, so U.S. wages–which have been depressed for a long time due to the same explosion–are also likely to rise.

Lebron is selling sneakers for $315. Remember the Pump? How do they get you to pay $300 for shoes?

Two approaches to marketing here–innovation…or maybe gimmicks, and endorsements. Why does Nike market? Isn’t a shoe a shoe?

Well, they wouldn’t be marketing if the return wasn’t greater than the expenditure. The only ways that the return could be larger would be: higher prices or more units sold–in practice, marketing usually seeks to accomplish both, although it might focus on one or another depending on the product and the marketing campaign.

Herr’s makes a lot of chips. 5-6 tons of snacks per hour. That is a lot of snacks.

It certainly didn’t start out this way–it was purchased as Verna’s potato chip company–but at this point, it’s a pretty thoroughly developed operation. It used to be one guy doing it, a guy who loved sales. Eventually, it got easier. Why do things like this get easier? What does this mean for the size of snack manufacturers?

Specialization, mostly. Also, it means that small companies are labors of love. It’s so much cheaper to make snacks when you make a lot of them.


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August 2012
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