Taylor M.

Ferguson
INEN 505
Homework #1

1. In 2013, President Obama proposed a one-time, $1 billion investment to

launch a network of 15 manufacturing innovation institutes across the
country. At least 7 of such centers have been established. Describe the focus
of these centers.
One of the primary focus of these centers is job creation in the US. Each
institute is also focused on the
development of world-leading manufacturing
capabilities and technologies. Each of the
15 is meant to serve as regional
innovation to manufacturing hubs with individual unique areas of focus in
research. Each IMI has a goal of commercializing, developing and
displaying
new products for domestic production. A key focus also is also to reduce market
failures such as allowing the innovators to receive full economic benefits of
their innovations, and also avoiding the problems of not having a draw of investors
due to profits being too far in
the future to peak interest.

2. Problem 7, page 13
What are the four determinants of national advantage suggested by Porter?
Give examples of companies that have thrived as a results of these factors.
1.
2.
3.
4.

Demand conditions
Factory conditions
Firm strategy, structure and rivalry
Related and supported industries.

Examples of companies who have thrived as a result of these factors include

but are not limited to:
Ford, Apple, Samsung, and Nike.

3. Problem 12, page 14

The North American Free Trade Agreement (NAFTA) was established in 1994
under the Clinton administration.
a) What is the purpose of NAFTA?
It was envisioned as a way of North America to be more competitive in the
global marketplace by easing the movement of goods and services
between the United States, Mexico, and Canada. The purpose was to
remove tariffs on trade, and especially focused on agriculture,
automobiles and textiles.

b) At the time, political opponents characterized the big sucking sound as

jobs would be lost as a results. Is there any evidence that this was, in fact,
the case?
Ross Perots famous slogan the big sucking sound has had some
validation. There is evidence that this has been the case. Jobs exported
have increased dramatically since the agreement was signed.

4. Problem 17, page 22

What general features would you look for in a business process that would
make that process a candidate for reengineering? Discuss a situation from
your own experience in which it was a clear that the business process could
have improved.
There are key features that are to be assessed when choosing a candidate for
reengineering. Some of which include businesses that demonstrate low
performance measures such as cost, customer service, quality, and speed.
Through my observance of a nursing home in which my grandmother is
currently a patient of I have noticed many business processes that can be
improved. They pay their workers so little and require them to care for more
patients than they are supposed to. This causes the customer, the patient to
suffer. Retention rates are so low among workers, so each day someone new
quits or doesnt show up for work. This put the company in a jam where they
have to pay outside agency twice the pay to come in to fill-in for the workers.
5. Problem 22, page 27
Define servicization and provide an example from your own experience of a
case where services were the deciding factor in a purchase.
Servicization is a strategy in business where the company focuses on selling
the utility or functionality of the products rather than the products
themselves.
One experience is the value added Product service system of adding Netflix,
Hulu and other services to video game systems. This combination of services
was a deciding factor when choosing to purchase that new game system.
6. Problem 26, page 31
Give an example of a product that has undergone the four phases of the
product life cycle and has achieved stability.
A desktop computer is a product that has undergone the four phases of the
product life cycle and has now achieved stability.

7. Problem 33, page 37

A start-up firm has kept careful records of the time required to manufacture
its product, a shutoff valve used in gasoline pipelines.
Cumulativ
e number
of Units

50
100
400
600
1000
10000

# of
hours
required
for next
unit
3.3
2.2
1.0
0.8
0.5
0.2

a. Compute the logarithms of the numbers in each column.

Cumulativ
e number
of Units

ln(50)=3.9
1
ln(100)=4.
61
ln(400)=5.
99
ln(600)=6.
40
ln(1000)=6
.91
ln(10000)=
9.21

# of
hours
required
for next
unit
ln(3.3)=1.
19
ln(2.2)=0.
788
ln(1.0)=0
ln(0.8)=0.223
ln(0.5)=0.693
ln(0.2)=1.61

b. Graph in ln(hours) against the ln(cumulative units) and eyeball a straightline fit of the data. Using your approximate fit, estimate a and b.

ln(# of hours required for next unit) vs. ln(cumulative number of unit)s
4
3
2

ln (hrs) 1
0

10

-1
-2

ln(cum # of units)

Intercept=a=~3.25

x 2 x
y2 y1 =

Slope=b=

0.2230
6.405.99 =-.544

c. Using the results from part (b), estimate the time required to produce the
first unit and the appropriate percentage learning curve that fits this data.
Exp(3.25)=25.79=Time required to produce the first unit
Ln(L)=-b*ln(2)
=(-0.544)*(ln(2)=-0.377
L=exp(-0.377)=0.686
L=68.6%=Appropriate percentage learning curve

d. Repeat parts (b) and (c), but use an exact least squares fit of the
logarithms computed in part (a).

Yavg=(1/6)(1.19+0.788+0-0.223-0.693-1.61)=-0.0913
Xavg=(1/6)(3.91+4.61+5.99+6.40+6.91+9.21)=6.17
n=6

Sxy=nxiyi-(xi)(yi)=6(-12.75835)-(37.03)(-0.548)=-56.25766
Sxx=nxi2-(xi)2=6(245.9525)-1371.2209=104.4941

Sxy

56. 258

b=slope= Sxx = 104. 494

=-0.538

a=intercept=yavg-b(xavg)=-0.0913-(-0.538)(6.17)=3.22816
exp(a)=exp(3.22816)=25.2 hours=Time required to produce the first
unit
-appropriate percentage learning curve:
Ln(L)=-b*ln(2)=(-0.538)ln(2)=(-0.538)(0.6931)=-0.373
L=exp(-0.373)=0.689=
L=Appropriate percentage learning curve=68.9%

8. Problem 37, page 38

An analyst predicts that an 80 percent experience curve should be an
accurate predictor of the cost of producing a new product. Suppose that the
cost of the first unit is $1000. What would the analyst predict is the cost of
producing the
a. 100th unit?
b. 10000th unit?

Production cost vs Cumulative number of units produced

1000

100

Production cost ($)

10

100

10000

1000000

Cumulative # of Units Produced

a. Cost of producing the 100th unit: about $215.00

b. Cost of producing the 10000th: about $50.00