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.