Chapter 5 Global Business Today
March 8, 2012
Global Business Management
3. Unions in developed nations often oppose imports from low-wage countries and advocate trade barriers to protect jobs from what they often characterize as “unfair” import competition. Is such competition “unfair?” Do you think that this argument is in the best interests of (a) the unions (b) the people they represent (c) The country as a whole
The Comparative advantage theory says that if a country should specialize in producing those goods that it can produce most efficiently, while buying goods that it can produce relatively less efficiently from other countries. It also says that opening a country to free trade stimulates
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Porter’s theory of nation competitive advantage argues that four broad attributes of a nation shape the environment in which local firms compete, and that these attributes promote or impede the creation of competitive advantages. These four attributes are: factor endowments, demand conditions, related and supporting industries, and firm strategy, structure, and rivalry. It also argues that firms are most likely to succeed in industries in which the four attributes used together is best. The New Trade theory argues that because of too many substantial scale economies world demand will only support a few firms in many industries. The first-mover advantages are the economic and strategic advantages that add up to the early entrants into an industry. When qualities of a nation are conductive to the production of a product, and the manufacturers have had some events that provide them first-mover advantages the government policies should promote the building of national competitive advantages in that area. Some of the ways to do that are through R&D grants, policies towards education, lower tax and policies that favor the industry in capital markets. Through this the government is creating a base for comparative advantage.
8. The world’s poorest countries are at a competitive disadvantage in every sector of their economies. They have little to export. They have no capital; their land is of poor quality; they often have