International trade involves the exchange of goods and services between countries. When nations trade, they usually benefit through increased availability of goods, greater economic efficiency, and higher standards of living. Modern theories of international trade focus on factors like similarities between trading partners, the life cycles and strategies of multinational corporations, and national competitive advantages in certain industries. Key theories discussed include Linder's country similarity theory, Vernon's product life cycle theory, theories of global strategic rivalry, and Porter's theory of national competitive advantage based on local market conditions and resources.
International trade involves the exchange of goods and services between countries. When nations trade, they usually benefit through increased availability of goods, greater economic efficiency, and higher standards of living. Modern theories of international trade focus on factors like similarities between trading partners, the life cycles and strategies of multinational corporations, and national competitive advantages in certain industries. Key theories discussed include Linder's country similarity theory, Vernon's product life cycle theory, theories of global strategic rivalry, and Porter's theory of national competitive advantage based on local market conditions and resources.
International trade involves the exchange of goods and services between countries. When nations trade, they usually benefit through increased availability of goods, greater economic efficiency, and higher standards of living. Modern theories of international trade focus on factors like similarities between trading partners, the life cycles and strategies of multinational corporations, and national competitive advantages in certain industries. Key theories discussed include Linder's country similarity theory, Vernon's product life cycle theory, theories of global strategic rivalry, and Porter's theory of national competitive advantage based on local market conditions and resources.
International trade involves the exchange of goods and services between countries. When nations trade, they usually benefit through increased availability of goods, greater economic efficiency, and higher standards of living. Modern theories of international trade focus on factors like similarities between trading partners, the life cycles and strategies of multinational corporations, and national competitive advantages in certain industries. Key theories discussed include Linder's country similarity theory, Vernon's product life cycle theory, theories of global strategic rivalry, and Porter's theory of national competitive advantage based on local market conditions and resources.
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Tambasacan, Reign Ashly T.
ACT214
(A) What is international trade?
- The idea of trading products and services between two parties is known as trade. When nations trade with one another, they practically always benefit. The idea of this interaction between individuals or companies in two separate countries is known as international trade. If there is one thing that most economists agree on, it is that international trade improves the state of the world. However, both within countries and between governments, the topic of international commerce can be one of the most divisive ones in politics. The level of living rises in both nations when a company or an individual purchases a good or a service made more inexpensively overseas. Consumers and businesses can benefit from purchasing goods from other countries for other reasons as well. For example, the product might satisfy their demands more effectively than comparable domestic options or it might not be offered locally. In any case, the foreign producer also reaps rewards by selling more than it might in its own market and by earning foreign exchange (currency) that it or others in the nation can use to buy goods created elsewhere. Trading which produces more items—not just more of the same products, but also more products with different types—has a definite positive impact on efficiency. (B) What are Modern Firm Based International Trade Theories? - With the expansion of the global corporation, the firm-based theories evolved the Multinational Company (MNC). Firm-based theories, in contrast to country-based theories, take into account other aspects of products and services, such as brand, customer loyalty, technology, and quality, in order to analyze trade flows. Under the Modern Firm Based Theory here is the variety of theory to start with the Country Similarity Theory, according to Linder's theory, customers would have comparable preferences in nations that are at the same or a similar stage of development. According to Linder's firm-based theory, businesses should create their products primarily for domestic consumption. When businesses consider exporting, they frequently discover that markets with similar client preferences to their native market have the greatest chance of success. According to Linder's country similarity theory, intra - industry trade will be prevalent and the majority of trade in manufactured goods will occur between nations with comparable per capita incomes. Next is the Product Life Cycle Theory, In the 1960s, Raymond Vernon, a professor at Harvard Business School, created the product life cycle hypothesis. A product life cycle includes three distinct stages, according to the theory, which emerged in the field of marketing: (1) new product, (2) maturing product, and (3) standardized product. The hypothesis made the sweeping assumption that all aspects of the new product's manufacture would take place in the nation where it was invented. Third is the Global Strategic Rivalry Theory, based on the research of economists Paul Krugman and Kelvin Lancaster, first appeared in the 1980s. Their idea centered on MNCs and their initiatives to achieve a competitive edge over other international businesses in their sector. In order to succeed, businesses must create competitive advantages in order to compete in a global market. The barriers to entry for that industry are the crucial methods that businesses might gain a long-term competitive edge. The difficulties a new company could have while attempting to join a new market or industry are referred to as entry barriers. Lastly, the Porter’s National Competitive Advantage Theory, In 1990, Harvard Business School professor Michael Porter created a new paradigm to describe national competitive advantage. According to Porter's argument, a country's ability to compete in a given industry depends on that sector's ability to innovate and modernize. He developed a theory to explain why some countries are more competitive in particular industries. Porter compiled a list of four determinants and connected them to form his theory. The four factors include local company characteristics: (1) local market resources and capabilities, (2) local market demand conditions, (3) local suppliers and complementary industries, and (4) local firm characteristics.