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Chapter 6: International Trade Theory (4 Attributes (1. Factor Endowments,…
Chapter 6: International Trade Theory
4 Attributes
1. Factor Endowments
A nation's position in factors of production to compete in industry, can lead to competitive advantage
Basic
: Natural resources, climate location
Advanced
: Skilled labour, infrastructure, technological know-how
3. Relating and Supporting Industries
The presence or absence of supplier industries and related industries that are internationally competitive
Can spillover to other industrues
Successful industries tend to be grouped in clusters in countries
2. Demand Conditions
The nature of home demand for the industry's product or service
Influences the development of capabilities
Sophisticated and demanding customers
pressure firms to be competitive
4. Firm strategy, structure and rivalry
Conditions governing how companies are created, organised, and managed, and the nature of domestic rivalry
Different management ideologies affect the development of nationl competitive advantage
Vigorous rivalry create pressure to
Innovate, Improve Quality, Reduce Costs, Invest in Upgrading Technological Features
Porter's Theory of Competitive Advantage
Product Life-Cycle Theory
As products mature, the location of sales and optimal production location will change
US to low labour cost (developing) countries
Developing countries acquire production advantage due to high cost pressures
US becomes importer of the product