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Competing in a global trade environment (The diamond model (factor…
Competing in a global trade environment
introduction
can take different forms
working for a multinational
internationalizing your firm
as a consumer- buying something produced in another country
Global economy has given rise to many institutions to govern international trade
WTO
deal with global trade rules within nations
ensure trade moves freely and smoothly
help producers, importers and exporters
competition and trade among countries
comparative advantage
2 versions
absolute comparative advantage
better to buy off a commodity from a country who can produce at a cheaper price
relative comparative advantage
ricardo says- look at disadv and adv, and compare which would make more sense to specialise in what
lead each country to specialise in production which is relatively more efficient
help gain from global trade by specialisation
The diamond model
demand conditions
related and supporting industries
structure of firms and rivalry
factor conditions
natural resources
governments can influence these four factors
distributing subsidies
provide good infrustructure
apply good tax conditions
ensure effective educational policies- improve labour skills
competition among business organisations
the five forces of competition model
focus at market and industry level
tools used to access their competitive position and market attractiveness
the five forces of competition
direct industry competitors
offer same type of products in the market
suppliers
buyers
potential entrants
substitute goods or services
sunk costs
past costs sustained by an org entering a market that cannot be recovered if that org exits the market
existence can create entry barriers
market shares
can be measured in terms of the total percentage of total revenues of a firm against total revenue of all firms in a specific industry
perfect competition
many firms with more or less same market share
monopoly
one firm has almost all market share
Micheal Porter