Comparative Advantages and International Trade Dynamics
Comparative Advantages and International Trade
Gains from Trade: Trade is based on comparative advantages, rather than absolute advantages.
World Development and Globalization
The world has been evolving towards a more liberalized global market, reducing protectionism and creating free trade areas. Tariffs and restrictions have been reduced, leading to the “vertical disintegration” of production. Nowadays, a product may be “produced” in several countries. For example, some parts may be made
Read MoreGlobalization and International Business Strategy
Globalization: An In-Depth Look
Globalization can be viewed from several perspectives:
World Scale
- Shift from national economies with borders (autarchies).
- Convergence of economic dimensions and variables across many countries (consumer preferences, standardized products, new markets, economic policies, etc.).
Country Level
The intensity of an economy’s interactions with the rest of the world:
- Exports + Imports as a percentage of GNP.
- Inflows and outflows of Foreign Direct Investment (FDI).
Industry Level
- Industries
Understanding Free Trade Agreements, Customs Unions, and Trade Dynamics
Understanding Free Trade Agreements and Trade Dynamics
Free Trade Agreement (FTA) or Area: An agreement among several countries to eliminate internal barriers to trade but to maintain existing barriers against nonmember countries. Tariffs (taxes on imported goods) between members are eliminated. Each member country maintains its own tariffs with respect to nonmembers. Such agreements usually do not free all trade immediately; rather, there are typically a number of products for which tariffs are
Read MoreMarket Entry Strategies: Licensing, Franchising & Joint Ventures
Market Entry Strategies: Licensing, Franchising, and Joint Ventures
31) For Starbucks and other companies whose business models are based on franchising, which of the following is the best way to enter a new market? D) Exporting
32) One of the advantages of licensing is: B) Licensees have considerable autonomy.
33) Licensing as a market entry mode has several disadvantages, except: E) Adaptations by the licensee.
34) ________ represents a market entry strategy whereby one company permits a foreign company
Read MoreInterest Rates and Monetary Systems: A Historical Perspective
Interest Rates and Their Determinants
Interest rates are the “price of debt or credit” and are determined by supply and demand.
An increased supply of commodity money leads to more lenders. The supply of credit increases, and people have more money saved. Consequently, an increase in the amount of money results in a reduction of interest rates.
This leads to:
- Investment
- Consumption
- Economic growth
The relationship can be summarized as:
+ Commodity Money + Saved Money + Supply Credit → Low Interest Rates
Read MoreInternationalization: Motives and Foreign Operation Modes
Motives for Internationalization
Understanding why firms internationalize is crucial, as it influences their strategies for market entry, country selection, and operations. The main motives are:
- Market-Seeking Motives:
- Goal: Access foreign markets with strong sales potential.
- Key Factors:
- Market size and growth.
- Attractive customer segments.
- Bridgehead strategies to enter adjacent markets (e.g., Hong Kong for China, Austria for Eastern Europe).
- Follow-the-Customer Strategy:
- Manufacturers or service providers