example of global strategic rivalry theory

The firm-based theories evolved with the growth of the multinational company (MNC). Thus, the overall threat of new entry is moderate. Summit Shows Chinas Africa Clout, BBC News, November 6, 2006, accessed December 20, 2010. In contrast to classical, country-based trade theories, the category of modern, firm-based theories emerged after World War II and was developed in large part by business school professors, not economists. Describe how a business may use the trade theories to develop its business strategies. Global Strategic Rivalry Theory Global strategic rivalry theory emerged in the 1980s and was based on the work of economists Paul Krugman and Kelvin Lancaster. Smith offered a new trade theory called absolute advantage, which focused on the ability of a country to produce a good more efficiently than another nation. The threat of new entrants is low. 12. The theories of Smith and Ricardo didnt help countries determine which products would give a country an advantage. In addition, the beginning of exceptional and helpful methods for industrialized as well as scheming the entrance to a raw substance will also come helpful in the way. Porter's Five Forces is one of the most traditional, well-known, and most widely used strategic macro analysis models.Used in conjunction with a PESTLE analysis, it helps you understand the competitive forces at work in an industry and how they affect the profitability of your business. In the early 1900s, two Swedish economists, Eli Heckscher and Bertil Ohlin, focused their attention on how a country could gain comparative advantage by producing products that utilized factors that were in abundance in the country. The barriers to entry that corporations may seek to optimize include: In the continuing evolution of international trade theories, Michael Porter of Harvard Business School developed a new model to explain national competitive advantage in 1990. What is the historical significance of mercantilism for international trade patterns? Global rivalry is a key element in international business (IB). Linders country similarity theory then states that most trade in manufactured goods will be between countries with similar per capita incomes, and intraindustry trade will be common. 3. Global Strategic Rivalry Theory This lecture is about global strategic rivalry theory.This theory explains how MNCs wins their competititors by using various strategies. 3. While export-oriented companies usually support protectionist policies that favor their industries or firms, other companies and consumers are hurt by protectionism. No. Why Africa Is Poor: Ghana Beats Up on Its Biggest Foreign Investors, Wall Street Journal, February 18, 2010, accessed February 16, 2011. For example, Japan exports Toyota vehicles to Germany and imports Mercedes-Benz automobiles from Germany. Global Strategic Rivalry Theory Economists Paul Krugman and Kelvin Lancaster came up with this theory in the 1980s. China in Africa: Developing Ties, BBC News, November 26, 2007, accessed December 20, 2010, http://news.bbc.co.uk/2/hi/africa/7086777.stm. . . Factors that were in great supply relative to demand would be cheaper; factors in great demand relative to supply would be more expensive. China Daily, February 11, 2009, accessed April 23, 2011, http://www.chinadaily.com.cn/china/2009-02/11/content_7467460.htm. Chinas success in Africa is due in large part to the local political environment in each country, where either one or a small handful of leaders often control the power and decision making. The challenge to the absolute advantage theory was that some countries may be better at producing both goods and, therefore, have an advantage in many areas. But, however "normal" it may be, great-power conflict is nonetheless disconcerting and dangerous. The barriers to entry refer to the obstacles a new firm may face when trying to enter into an industry or new market. Even though research and development is typically associated with the first or new product stage and therefore completed in the home country, these developing or emerging-market countries, such as India and China, offer both highly skilled labor and new research facilities at a substantial cost advantage for global firms. Barriers to trade may exist, and goods must be transported, stored, and distributed. The ability to forge a government-level partnership has enabled Chinese businesses to have long-term investment perspectives in the region. The barriers to entry that corporations may seek to optimize include: Porters National Competitive Advantage Theory. In 1776, Adam Smith questioned the leading mercantile theory of the time in The Wealth of Nations.Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (London: W. Strahan and T. Cadell, 1776). 13. Barriers to trade may exist, and goods must be transported, stored, and distributed. Once again, the major aim here is for turnover maximization for those companies and the social and environmental aspects are not addressed. To better understand how modern global trade has evolved, its important to understand how countries traded with one another historically. China in Africa: Developing Ties, BBC News, November 26, 2007, accessed December 20, 2010, Chapter 1: Introduction to International Marketing, 1.3 The Motivation for International Marketing, Chapter 2: International Business and Trade, 2.2 International Economic Cooperation among Nations, 2.5 The United Nations and the Impact on Trade, Chapter 3: Social and Cultural Environment, 3.1 Factors Shaping the Global Marketing Environment, Chapter 4: The Economic and Political Environment, Chapter 5: Economic Development in the World, 6.2 Global Market Opportunity Assessment - PESTEL Analysis, 6.3 Global Market Opportunity Assessment - CAGE Analysis, 6.4 Global Market Opportunity Assessment - Scenario Planning and Analysis, 6.7 Using Demographics to Guide Global Marketing Strategy, 9.4 Determinants of Global Brand Structure, Chapter 10: Global Channels and Supply Chains, 12.4 Currency Fluctuations and Global Pricing, Chapter 13: The International Marketing Plan, 13.2 Writing the International Marketing Plan, Core Principles of International Marketing, http://online.wsj.com/article/SB10001424052748704804204575069511746613890.html, http://www.thenation.com/article/why-africa-still-poor?page=0,1, http://www.foreignaffairs.com/articles/65916/deborah-brautigam/africa%E2%80%99s-eastern-promise, http://articles.cnn.com/2010-10-15/world/china.africa.trade_1_china-and-africa-link-trade-largest-trade-partner?_s=PM:WORLD, http://www.chinadaily.com.cn/china/2009-02/11/content_7467460.htm, http://www.ccs.org.za/wp-content/uploads/2010/03/ENGLISH-Evaluating-Chinas-FOCAC-commitments-to-Africa-2010.pdf, http://www.unctad.org/Templates/Webflyer.asp?docID=8172&intItemID=3971&lang=1, http://news.bbc.co.uk/2/hi/africa/7086777.stm, http://news.bbc.co.uk/2/hi/business/6120500.stm, Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, Around 5,200 years ago, Uruk, in southern Mesopotamia, was probably the first city the world had ever seen, housing more than 50,000 people within its six miles of wall. Recent versions have been edited by scholars and economists. Divide your class into four or eight groups, depending on the size of the class. The bargaining power of the buyers, all airlines, is fairly high. Global Strategic Rivalry Theory Global strategic rivalry theory emerged in the 1980s and was based on the work of economists Paul Krugman and Kelvin Lancaster. Nearly every country, at one point or another, has implemented some form of protectionist policy to guard key industries in its economy. Nations expanded their wealth by using their colonies around the world in an effort to control more trade and amass more riches. The threat of substitute products is low. Here are some real-world examples of the three key types of global strategies: Standardization strategy example Imagine that you want to create a standardization strategy for your luxury purse company. In subsequent years, economists have noted historically at that point in time, labor in the United States was both available in steady supply and more productive than in many other countries; hence it made sense to export labor-intensive goods. Over the decades, many economists have used theories and data to explain and minimize the impact of the paradox. Place your order by filling in the form on our site, or contact our customer support agent requesting someone write my essay, and you'll get a quote. So Germanautomakers such as Daimler-Benz, Porsche, and BMW have chosen to compete on thebasis of quality and high performance that can withstand the stresses of high speeddriving. By working together with these firms the car industry can enhance its national competitive advantage. In reality, the world economy is more complex and consists of more than two countries and products. the ownership of intellectual property rights, unique business processes or methods as well as extensive experience in the industry, and. Firms will encounter global competition in their industries and in order to prosper, they must develop competitive advantages. A closer look at world history from the 1500s to the late 1800s helps explain why mercantilism flourished. What are the modern, firm-based international trade theories? This condition makes it possible for many smaller retailers to compete against Walmart. We also acknowledge previous National Science Foundation support under grant numbers 1246120, 1525057, and 1413739. As an. As professor and author Deborah Brautigam notes, Chinas current experiment in Africa mixes a hard-nosed but clear-eyed self-interest with the lessons of Chinas own successful development and of decades of its failed aid projects in Africa. 4, According toCNN, China has increasingly turned to resource-rich Africa as Chinas booming economy has demanded more and more oil and raw materials.5 Trade between the African continent and China reached $106.8 billion in 2008, and over the past decade, Chinese investments and the countrys development aid to Africa have been increasing steadily.China-Africa Trade up 45 percent in 2008 to $107 Billion, 6 Chinese activities in Africa are highly diverse, ranging from government to government relations and large state owned companies (SOE) investing in Africa financed by Chinas policy banks, to private entrepreneurs entering African countries at their own initiative to pursue commercial activities.7, Since 2004, eager for access to resources, oil, diamonds, minerals, and commodities, China has entered into arrangements with resource-rich countries in Africa for a total of nearly $14 billion in resource deals alone. When they explore exporting, the companies often find that markets that look similar to their domestic one, in terms of customer preferences, offer the most potential for success. The theory also assumes that labour is homogeneous (Salvatore 2002). Let us look at some examples to better understand global commerce. He studied firms that were successful in competing in international markets and concluded that; Firms struggle to dominate world markets by - Owning intellectual property rights - Investing in research & development - Achieving economies of scale & scope Exploiting the experience curve A good example of . Countries such as Japan, China, Singapore, Taiwan, and even Germany still favor exports and discourage imports through a form of neo-mercantilism in which the countries promote a combination of protectionist policies and restrictions and domestic-industry subsidies. Achieving economies of scale or scope ? For example, the below Venn diagram shows the tension for Apple, Inc. Although mercantilism is one of the oldest trade theories, it remains part of modern thinking. International trade theories are simply different theories to explain international trade. Similarly, if Country B was better at producing another good, it could focus on specialization as well. China: Trade with Africa on Track to New Record, CNN, October 15, 2010, accessed April 23, 2011. Consequently, these firms dominate the world market for high-performanceautomobiles. 1. For example, Google has already done so through products like Nexus smartphones. Each group should select a different industry. The country-based theories couldnt adequately address the expansion of either MNCs or intraindustry trade, which refers to trade between two countries of goods produced in the same industry. Aviation is one of the most widely talked about industries in the global economy and yet airlines continue to present an enigma. The United States has ample arable land that can be used for a wide range of agricultural products. Outline :. The four determinants are (1) local market resources and capabilities, (2) local market demand conditions, (3) local suppliers and complementary industries, and (4) local firm characteristics. Countries such as Japan, China, Singapore, Taiwan, and even Germany still favor exports and discourage imports through a form of neo-mercantilism in which the countries promote a combination of protectionist policies and restrictions and domestic-industry subsidies. 3. He stated that trade should flow naturally according to market forces. Porters theory stated that a nations competitiveness in an industry depends on the capacity of the industry to innovate and upgrade. His analysis became known as the Leontief Paradox because it was the reverse of what was expected by the factor proportions theory. The four determinants are (1) local market resources and capabilities, (2) local market demand conditions, (3) local suppliers and complementary industries, and (4) local firm characteristics. Summarize the classical, country-based international trade theories. Some countries have a disproportionate benefit of some factors. This page titled 2.2: What Is International Trade Theory? International trade is the concept of this exchange between people or entities in two different countries. In 1960 they had 300 stores in Germany, they work hard and put all their efforts in making best retailer of grocery in Germany. Unlike the country-based theories, firm-based theories incorporate other product and service factors, including brand and customer loyalty, technology, and quality, into the understanding of trade flows. Great power rivalry is again becoming a principal theme of global politics. Firm Strategy and Rivalry is the competition in the home market that drives innovation and quality. Global strategic rivalry theory is about how multinational companies need to gain a competitive advantage against other multinational companies in their industry through activities such as research and development. Smith reasoned that trade between countries shouldnt be regulated or restricted by government policy or intervention. Ricardo reasoned that even if Country A had the absolute advantage in the production ofbothproducts, specialization and trade could still occur between two countries. The difference between these two theories is subtle. Discuss which strategy seems to be the most successful in your selected industry. Her productivity and income will be highest if she specializes in the higher-paid legal services and hires the most qualified administrative assistant, who can type fast, although a little slower than Miranda. Chapter 1 "Introduction", Section 1.4 "The Globalization Debate" discussed how Thomas Friedmans flat-world approach segments history into three stages: Globalization 1.0 from 1492 to 1800, 2.0 from 1800 to 2000, and 3.0 from 2000 to the present. However, what remains clear is that international trade is complex and is impacted by numerous and often-changing factors. The objective of each country was to have a trade surplus, or a situation where the value of exports are greater than the value of imports, and to avoid a trade deficit, or a situation where the value of imports is greater than the value of exports. This section has sought to highlight the basics of international trade theory to enable you to understand the realities that face global businesses. 8. Production would also become more efficient, because there would be an incentive to create faster and better production methods to increase the specialization. In other words, if people in other countries buy more from you (exports) than they sell to you (imports), then they have to pay you the difference in gold and silver. X is a developing nation. For example, small retailers have low costs of doing business relative to larger firms. Nevertheless, they remain relatively new and minimally tested theories. In the early 1950s, Russian-born American economist Wassily W. Leontief studied the US economy closely and noted that the United States was abundant in capital and, therefore, should export more capital-intensive goods. Trade is the concept of exchanging goods and services between two people or entities. The bargaining power of suppliers is weak. Tracy Hon, Johanna Jansson, Garth Shelton, Liu Haifang, Christopher Burke, and Carine Kiala, Evaluating Chinas FOCAC Commitments to Africa and Mapping the Way Ahead(Stellenbosch, South Africa: Centre for Chinese Studies, University of Stellenbosch, 2010), 1, accessed December 20, 2010, http://www.ccs.org.za/wp-content/uploads/2010/03/ENGLISH-Evaluating-Chinas-FOCAC-commitments-to-Africa-2010.pdf.

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