Theories of International Trade and International Investment ( Chapter 3)
International Trade
Def: The exchange of goods and services between people, organizations, and countries.
Mercantilism
Economic state building
Promote Export, discourage import
Adam Smith
Two elements to the problem of increasing wealth
Skill of the labor force which was solved by the division of labor. Say in the manufacturing of a product the various steps were divided and specialized by different workers.
The proportion of productive to unproductive labor which was solved by the accumulation of capital that allowed for plant and machinery to be created but also enabled labor to be employed
Absolute Advantage
The majority efficiency a country has in producing a unit with fewer man hours required than another county.
Comparative Advantage
The ability a country has to produce a good at lower man hours than the other
Porters Diamond
Michael Porters 4 key elements of international entrepreneurial success
Factor Conditions
labor, land, natural resources, capital, and infrastructure. Elements difficult to duplicate therefore generating a competitive advantage
Demand conditions
Sophisticated domestic market that demands high quality.
Related and supported industries
Industries that create competition for products to constantly be improving
Strategy, Structure and Rivalry
Strategy being based on the concept of a short term market or a long term market. Structure on how the management style of industries varies. Rivalry suggesting that competition impulses the industry to thrive.