Competing in the Global Environment

Understand the Global Trade Environment

Competition among business Organisations
Five forces model of competition Porter 1980

Rapid development of ICT and social media provides better interconnections

International Trade

An economy with capacity to work as a unit...(Castells, 1996, p.92)

World Trade Organisations

  • Foster openness of greater worldwide trade
  • Deals with Global rules
  • Trade agreements negotiated terms from nations
  • 1986-94 Uruguay Round - provide legal status
  • Help Producers of goods& services, exporters and importers conduct business

CRIICISED - for doing trade with some nations who do not up hold the human civil rights

Competition and trade amongst Countries

Comparative Advantage

Absolute comparative advantage


  • If a country can supply the goods cheaper than others then its better to get it cheaper - (Adam Smith, 1776.pp 424-5).

Relative comparative advantage


  • Determinant factor is the price that exists in producing the goods.
    (For example if it costs £60 for cloth UK and £50 in Spain whilst wine is £55 UK and £40 Spain. Differences are £10 and £15. Bigger comparative advantage was bigger for Spain to produce wine. RCA would show it is better for UK to produce cloth not wine - David Ricardo 1819.

Diamond Model
Michael Porter 1990

Diamond Model

  • Differences in national values, culture, economic structures, institutions and histories (Porter 1990, p 74.)
  • Demand for the country who has the specialism
  • Strategies, structure and rivalry of firms in the industry
  • Quality of related industries and infrastructures

GOVERMENT INFLUENCE

5 forces model :

Direct Industry competitors

Suppliers

Buyers

Potential Entrants

Substitute goods and services