Theories of International Trade and Investment
BUSA Final
Chapter 6
Objectives: 1. Theories of international trade and investment 2. why do nations trade? 3. How can nations enhance competitive advantage? 4. Why and how do firms internationalize? 5. How can internationalizing firms gain and sustain competitive advantage? Theories of International Trade and Investment:
Mercantillism: belief popular in 16th century - National prosperity results from maximizing exports and minimizing imports Nonmercantillism: today some argue - nation should run a trade surplus labot unions - protect domestic jobs farmers - keep crop prices high manufacturers - some rely on exports Free Trade: absense of restrictions to the flow of goods/services among nations ** Best because it leads to: more/beter choices for consumers/firms lower prices of goods for consumers/firms higher profits/better worker wages - imported input goods usually cheaper higher living standards for consumers - costs are lower greater prosperity in poor countries Competitive Advantage: foundation concept of international trade. Answers how nations can achieve and sustain economic success/prosperity Superior features of a country that provide it with unique benefits in global competition comparitive advantages are derived either from natural endowments/deliberate national policies **In a firm: Distinctive Assets/competencies/capabilities that are developed or acuired Ex: Saudi Arabia has a natural abundance of oil - petroleum products Ex: France climate/soil for producing wine Absolute Advantage: country should produce only those products in which it has absolute advantage or can produce using fewer resources that another country Comparative Advantage: Beneficial for two countries to trade even if one has absolute advantage in the production of all products. **Efficiancy in which it can product the product is the most important Ratio of production costs is key This pplies to all goods - shows how countried use scarce resources more efficiently Limitations of
Chapter 6
Objectives: 1. Theories of international trade and investment 2. why do nations trade? 3. How can nations enhance competitive advantage? 4. Why and how do firms internationalize? 5. How can internationalizing firms gain and sustain competitive advantage? Theories of International Trade and Investment:
Mercantillism: belief popular in 16th century - National prosperity results from maximizing exports and minimizing imports Nonmercantillism: today some argue - nation should run a trade surplus labot unions - protect domestic jobs farmers - keep crop prices high manufacturers - some rely on exports Free Trade: absense of restrictions to the flow of goods/services among nations ** Best because it leads to: more/beter choices for consumers/firms lower prices of goods for consumers/firms higher profits/better worker wages - imported input goods usually cheaper higher living standards for consumers - costs are lower greater prosperity in poor countries Competitive Advantage: foundation concept of international trade. Answers how nations can achieve and sustain economic success/prosperity Superior features of a country that provide it with unique benefits in global competition comparitive advantages are derived either from natural endowments/deliberate national policies **In a firm: Distinctive Assets/competencies/capabilities that are developed or acuired Ex: Saudi Arabia has a natural abundance of oil - petroleum products Ex: France climate/soil for producing wine Absolute Advantage: country should produce only those products in which it has absolute advantage or can produce using fewer resources that another country Comparative Advantage: Beneficial for two countries to trade even if one has absolute advantage in the production of all products. **Efficiancy in which it can product the product is the most important Ratio of production costs is key This pplies to all goods - shows how countried use scarce resources more efficiently Limitations of