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Competing in the global trade environment (The five forces of competition…
Competing in the global trade environment
The global village
To outline that the media was fast intergating the planet and making it possible to experience things on one part of the worlds to other parts of the world in real time
Both business that deal and not deal on globally are affected by global trends.
Different forms
buying as a consumer
working for a multinational company
Rapid development of information and communication technology (ICT)
Global economy has some features
International trade
Colombia selling coffee and Russia selling gas worldwide
Country brand does not mean products are made there
Honda Japanese car maker has production facilities in UK
World Trade Organization (WTO)
goals to make sure trade flows smoothly, predictable and freely as possible
Only international organization dealing with global rules of trade between nations
Trade agreements around the world
General Agreement on Tariffs and Trade (GATT)
Document with legal ground rules
Signed by governments
Comparative advantage theory
How countries can gain from global trade by specialization
Absolute comparative advantage
If businesses can get products at cheaper price somewhere else, do it.
Relative comparative advantage
Choosing countries based on price difference when quality is the same :moneybag:
The Diamond model
National level
competitiveness depends also on:
The demand conditions
The strategies, structure and rivalry
The quality of related and supporting industries
Factor conditions
Availability of natural resources leads a country to specialise
Government
Can influence four factors with their actions
Favorable tax conditions
Distributing subsidies
The five forces of competition
market/industry level
Analyzing nature of competition position
Direct industry competition
Market shares
Monopoly - One firm has market share
Perfect competition - All firms same market share
Diversity among competition
Focus on income customers
Suppliers
Brand reputation
Quality product
Management of bidding processes
Geographical coverage
Buyers
Bargaining power
Potential entrants
Sunk costs create barriers to enter
If market is profitable more business enter
The higher the need for initial investment lover nr of entrants
Internet reduces barriers
Substitute goods/services
low-cost airlines impact traditional airlines & rail industry
Skype impacted traditional telephony industry