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.