Posted: May 13th, 2015

When is subsidizing no longer beneficial

When is subsidizing no longer beneficial

Company : Toyota Plant in Alabama address all the elements required in the instructions below (within the information provided below)

For decades the primary goal of state and municipal governments offering economic incentives was to induce job creation. It was felt that economic incentives such as tax credits and exemptions, cash grants, gap financing, and in-kind services could only be justified if companies receiving the incentives provided new jobs and earnings in exchange. For the most part, states and communities would compete in the domestic marketplace to attract new jobs. During the past several decades, global competition facing U.S. companies accelerated as lower-cost foreign labor became more accessible. Domestic companies were faced with two primary options in order to remain competitive: shift operations to lower-labor-cost regions offshore or invest in technologies that reduced the need for more expensive labor in this country. Both alternatives brought widespread reductions in jobs and earnings within states and municipalities, and these jurisdictions found themselves competing for fewer incremental job opportunities. Business outreach programs sprung up among states and communities throughout the nation as a means for public officials to identify companies that were likely to relocate operations overseas or close domestic facilities. Great effort was undertaken to head off relocations and closures in advance of final corporate decisions.

During the past several years, a number of public officials in states and communities most heavily impacted by the loss of facilities and jobs, such as those in the automotive-dominated states, have begun to structure economic incentives for the purpose of retaining automotive operations and their associated jobs and payroll. An automotive component supplier in the Midwest was faced with the necessity of upgrading technologies at its domestic plants. This meant a reduction in jobs at each of its plants in order to remain globally competitive. The average plant job reduction ranged between 20 percent and 30 percent. However, even with the new technologies, the company realized that it would need to identify other avenues for addressing foreign competitive pressure. Included in this was the pursuit of state and local financial incentives to help offset the significant new capital expenditures that the firm was proposing in order to make the facilities more viable over the long term. This would, in turn, aid in ensuring that the remaining jobs would be protected.

The majority of the communities that were approached by the company accepted the legitimacy of the company?s request for community support. These communities recognized the logic in addressing the company?s long-term needs to remain competitive well in advance of a future critical juncture where the company could be faced with no alternative but to relocate or close its operations entirely. Consequently, the company received partial incremental property tax incentives from these municipalities, generated by the new capital expenditures. The tax incentives aided the company in offsetting its technology upgrade costs, while enabling the community to offset its loss of individual municipal income taxes ? caused by the job reduction ? with the portion of the incremental property taxes not returned to the company in the form of tax incentives.

Public officials can only justify the use of incentives if there is a demonstrated benefit to the local or state economy. The direct jobs retained by a challenged facility comprise only part of such benefit. The true extent of the benefits to the economy goes well beyond the four walls of the plant. The economic impacts of automotive manufacturing operations and their suppliers are among the highest in the U.S. economy. Each automotive job typically creates between 2.5 and 6 other jobs within the economy. Likewise, the higher compensation of automotive employees drives additional indirect and induced earnings within the state or community. Automotive operations are also responsible for extensive secondary economic output in terms of real dollars.

Global competition that has reduced jobs and earnings in many U.S. jurisdictions has impacted a far wider range of industries than automotive. State and local economic development officials, legislators, and administrators must continue to look at the use of economic development tools that address the retention needs of the highly valuable automotive industry along with corporations within all competitive industries well in advance of events that necessitate corporate decisions resulting in unfavorable jobs consequences. But how much is too much because there comes a point in an auction where you don’t want to be the one with your hand in the air. I want to see your research on this topic, laying out the positives and negatives, the benefits and the costs, and the point where offering incentives no longer makes sense.

You must provide citations to support your statements. Unsupported opinions and generalizations are not sufficient justification for objectively analyzing and evaluating the organization’s strategic issues. The utilization of distribution management concepts from the textbook, research articles, and classroom discussion is mandatory. The purpose of this requirement is to demonstrate your comprehension of the distribution management process. Your analysis must be both reasonable and objective. Do not submit a one-sided argument that omits any likely evidence that conflicts with your evaluation. Do not be biased by your emotions. Instead, concentrate on offering a balanced analysis and evaluation of the issues. Phrases such as, “I think,” “I feel,” and “I believe,” have no application to analysis at the graduate-level and must be avoided. Instead use properly referenced citations such as “Porter (1980) suggests” or “Mintzberg (1977) concludes” as demonstration of your ability to identify more objective sources.

The final section of your research should be a set of recommendations that address all of the issues you initially identified, evaluated, and researched. Specifically, you must describe how your recommendations will address the distribution management issues identified. Furthermore, the recommendations must be reasonable in terms of being acceptable to the organization’s culture, competencies for executing the recommendations, and industry standards. Each of your recommendations should offer a definite action agenda including an implementation schedule and designate a specific individual/position or operating division that is accountable for the plan.