US Economy Fixes 2

The forces that shape any industry in Porter's framework is the threat of new entrants, suppliers, buyers, and the threat of substitutes. The threat of substitutes is coming mainly from China and other cheap suppliers. Buyer power is expanding due to the cheap prices on the internet. Suppliers are basically distribution houses and manufacteurers, and the threat of new entrants is any new business that affects the industry as a whole. It is possible, that given these forces, the discount stores can be moved to carry items that are pricier and more differentiated. Differentiation can simply be a service contract or some benefit that the product has which other products do not have. If so, the prices of these products will go down and the perceived exclusivity of these products will disappear. So the American discount stores will, in effect, become more premium stores... Target, Walmart, and Costco. They will have to redesign their stores and perhaps manufacteuring will return to the US. But here, one must be careful. Apple, a unique, well differentiated business, still gets its supplies from China, Vietnam, etc. People are no longer sticking to Porter's framework. There are businesses with well-differentiated designs and yet cheap prices (Target). Culture plays a role in business that economists underestimate. But overall, Porter's framework is an eminently practical way of looking at how businesses make their decisions.

So, with the $15 minimum wage, American businesses will move up a tier and maybe bring back some of the manufacteuring. Meanwhile, Asian discount businesses will take over the discount market with their cutthroat practices. Let's look at this picture closely. China, who is so fussy with keeping the currency rate low, and who gives major loans to the US, is going to run businesses which will are on the stock market. Ben Bernake has to worry about price stabilization... I suppose in such a scenario, Chinese investors are going to make a killing on the market. We may as well just sell out souls to the Chinese.