Professional Documents
Culture Documents
Business
Fourth Edition
International Trade Theory
4-3
Chapter Focus
Chapter Focus
Immobile resources:
Resources do not always move easily from one
economic activity to another.
Diminishing returns:
More a country produces, at some point, will require
more resources (diminishing returns to specialization).
Different goods use resources in different
proportions.
However:
Free trade might increase a countrys stock of
resources (as labor and capital arrives from abroad),
and
Increase the efficiency of resource utilization.
First-Mover Advantage
Economies of scale may preclude new entrants.
Role of the government.
Porters Diamond
(Harvard Business School, 1990)
Determinants of National
Competitive Advantage
Factor endowments:nations position in factors of
production such as skilled labor or infrastructure necessary
to compete in a given industry.
Demand conditions:the nature of home demand for the
industrys product or service.
Related and supporting industries:the presence or absence
in a nation of supplier industries or related industries that
are nationally competitive.
Firm strategy, structure and rivalry:the conditions in
the nation governing how companies are created,
organized, and managed and the nature of domestic
rivalry.
Porters Diamond
Determinants of National Competitive Advantage
Firm Strategy,
Structure and
Rivalry
Related and
Supporting
Figure 4.6
Industries
The Diamond
Chance
Company Strategy,
Structure,
and Rivalry
Two external
factors that Factor Demand
influence the Conditions Conditions
four
determinants.
Related
and Supporting
Industries
Government
Factor Endowments
Taken from Heckscher-Olin
Basic factors:
natural resources
climate
location
demographics
Advanced factors:
communications
skilled labor
research
technology