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Competing in a global trade environment (The Diamond Model (Helps to…
Competing in a global trade environment
WTO
World Trade Organisation
Help trade run smoothly
Help trade run predictably
Help trade run as freely as possible
Comparative advantage
Absolute
If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage
Relative
Based on the assumption that a country will tend to specialise in the production of the good in which it has a relative competitive advantage
This can be summarised as comparative advantage helps us to understand how countries can gain from global trade by specialism
The Diamond Model
Helps to establish where comparative advantage may be for each country
all countries are characterised by 'differences in national values, culture, economic structures, institutions, and histories that all contribute to competitive success
The Factor conditions (natural resouces)
The demand conditions in the country for a specific industry
The strategies, structure and rivalry of firms within the industry
The quality of related and supporting industries and infrastructures
The Five Forces of Competition
Direct industry competitors
Suppliers
Buyers
Potential entrants
Substitute goods and/or services