Block 2 - Reading 2:
Competing in a global trade environment
Global trade environment
Manuel castells definition of global economy, 'an economy with the capacity to work as a unit in real time on planetary scale' (castells, 1996, p. 92)
originated in worldwide flows of labor, goods, moneys services and information
modern day global trade, increase development of ICT and social networks
World Trade Organization (WTO)
deals with global rules and trade between nations
main function to trade smoothly and freely as possible
means of removing obstacles
Criticism for doing arguments with countries that do not respect human civil rights
Competition and trade among countries
Theory of absolute advantage, Adam Smith
country can supply a good at a cheaper price than other country, then it is better to buy the good from the country who is able to supply it at a cheaper price
David Ricardo theory
assumption that a country will tend to specialize in the production of the good in which it has a comparative advantage
Michael Porter - diamond model
all countries characterized by differences in national values, culture, economic structure, institutions and histories
Demand conditions in country
strategies structure and rivalry in country
quality of related and supporting industries and infrastructures
existence of global trade should lead each country to specialize in the production in which it is relatively more efficient, trade without absolute advantage
Competition among business organisations
Porter five forces model
direct industry competitors:
firms that offer same type of product
Suppliers:
Where business' purchases materials from
Buyers, customers
potential entrants:
concurrent organisations that may want to enter the market in which the business operates
substitute goods or survives
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