End of Part Case Notes
Part Three
Legal Outsourcing
1. What are the benefits to a law firm of outsourcing of legal services to a foreign country? What
are the potential costs and risks?
2. What kind of legal services are most amenable to outsourcing?
3. Which groups gain from the outsourcing of legal services? Which groups lose?
4. On balance, do you think that this kind of outsourcing is a good thing or a bad thing? What are
the risks here?
5. Why were the services in this case outsourced to India, as opposed to another country such as
China? What does this case tell you about the kinds of factors that are important when a firm is
considering whether to outsource a value creation activity, and where to outsource it to?
Answer: India is favored because local universities produce a steady stream of lawyers trained in
common law, which is the legal tradition India inherited from the British. The same tradition
underlies American law. Also, educated Indians speak English well, and the 10- to 12-hour time
difference between India and the United States means that work can be done overnight in India,
increasing responsiveness to clients.
The Global Financial Crisis and Protectionism
1. Why do you think calls for protectionism are greater during share economic contractions than
during boom periods?
2. Despite the sharp economic contraction during 2008–2009, the increase in protectionist
measures was fairly modest. Why do you think this was the case?
3. During 2008–2009, many developed nations gave subsidies to their automobile producers.
How might this have distorted international trade? Was this a reasonable thing to do given the
circumstances?
Answer: The 2008-2009 financial crisis prompted many countries including the United States to
provide subsidies to automakers. While the assistance helped companies remain in business and
protected jobs, it also created an artificial environment for them and may have prompted some
4. What might occur if renewed economic slowdown triggered a wave of protectionist measures
around the world? Would protectionism protect jobs, or would it make things worse?
Answer: In mid-2011, the global economy was still unstable, and the threat of a double-dip
recession was very real. Many students will probably suggest that if the economy fails to fully
5. The volume of world trade rebounded sharply in 2010 on the back of a fairly modest growth
rate in the world economy. What does this tell you about the nature of international production
in today’s global economy? What does this tell you about the vulnerability of the world
economy to any future trade wars?
NAFTA and Mexican Trucking
1. What are the potential economic benefits of the trucking provisions in the NAFTA treaty?
Who benefits? Who might lose?
Answer: Under the NAFTA agreement trucks from Mexico are no longer required to unload
their goods and reload them onto U.S. trucks. Instead, Mexican trucks can simply cross the
2. What do you think motivated the Teamsters to object to the trucking provisions in NAFTA?
Are these objections fair? Why did Congress initially align itself with the Teamsters?
Answer: The Teamsters have rigorously objected to the provisions of NAFTA allowing Mexican
truckers to cross U.S. borders and deliver their goods to their destination. Prior to NAFTA,
3. Does it make economic sense for the United States to bear the costs of punitive tariffs as
allowed for under NAFTA, as opposed to letting Mexican trucks enter the United States?
Answer: When the United States initially failed to abide by provisions set forth in NAFTA
regarding trucks, Mexico gave the country a second chance to honor its commitment. The
4. Why do you think the Obama administration brokered a deal with Mexico to allow Mexican
truck drivers to access the United States? Do you think this is a reasonable deal?
Answer: Under NAFTA, Mexico has the right to place tariffs on goods shipped from the United
The Rise of the Indian Automobile Industry
1. What are the attractions of India as a base for producing automobiles for domestic sale, and
for export to other nations?
2. Both Hyundai and Nissan made their investments in the southern Indian city if Chennai. Is
there an advantage to be had by investing in the same region as rivals? What is it?
3. What are the drawbacks of basing manufacturing in a country like India? What other
locations might be attractive?
4. If Hyundai, Nissan, their suppliers, and other automobile companies continue to make
investments in the Chennai region of India, how might this region evolve over time? What does
this suggest about manufacturing location strategy?
Logitech
1. In a world without trade, what would happen to the costs that American consumers would
have to pay for Logitech’s products?
2. Explain how trade lowers the costs of making computer peripherals such as mice and
keyboards?
3. Use the theory of comparative advantage to explain the way in which Logitech has configured
its global operations. Why does the company manufacture in China and Taiwan, undertake basic
R&D in California and Switzerland, design products in Ireland, and coordinate marketing and
operations from California?
4. Who creates more value for Logitech, the 650 people it employs in Fremont and Switzerland,
or the 4,000 employees at its Chinese factory? What are the implications of this observation for
the argument that free trade is beneficial?
5. Why do you think the company decided to shift its corporate headquarters from Switzerland to
Fremont?
6. To what extent can Porter’s diamond help explain the choice of Taiwan as a major
manufacturing site for Logitech?
7. Why do you think China is now a favored location for so much high-technology
manufacturing activity? How will China’s increasing involvement in global trade help that
country? How will it help the world’s developed economies? What potential problems are
associated with moving work to China?