1) Options:
1a) do in pairs
1b) work on your own (individual)
2) Answer these questions:
a) Discuss the characteristics of the modern trade theories: Product Life Cycle Theory and Strategic Trade Theory. (Hint: Look at the definition of the concepts and the elements involved). Give specific examples on how these are being applied by global companies.
b) Discuss the factors that managers need to consider when assessing the comparative advantages of various locations around the world.
3) Upload your work to Canvas by end of class. Maximum – 1 page, excluding resources page (this could be a separate page)
4) Note: If working with a partner, please submit your paper as a team! Only one person needs to submit the work – but make sure the name of your partner is on the document so they can receive credit.
Helpful resources to complete your assignment:
Chapter 5: International Trade (PPT) (Links to an external site.)
Remember!!
Managers should discover and leverage the comparative advantage of world-class locations.They should monitor and have the ability to nurture current comparative advantage of certain locations and take advantage of new locations. Managers should also be politically active to demonstrate, safeguard, and advance the gains of their organizations from international trade.
Modern trade theories are the major theories of international trade that were advanced in the 20th century, which consist of (1) product life cycle, (2) strategic trade, and (3) national competitive advantage of industries.
Product life cycle theory is a theory that accounts for changes in the patterns of trade over time by focusing on product life cycles. It says that the advantage resides with the lead innovation nation and spreads to advanced nations and then to developing nations. Please see Figure 5.4 below for illustration:
Strategic trade theory is a theory that suggests that strategic intervention by governments in certain industries can enhance their odds for international success. It says that governments can help domestic firms get an advantage in some industries.
First-mover advantage – benefit that accrues to firms that enter the market first and that late entrants do not enjoy
Strategic trade policy – government policy that provides companies a strategic advantage in international trade through subsidies and other supports
