TRADE TAKING PLACE FROM A

COUNTRY ON BASIS OF NEW

TRADE THEORY

PRESENTED BY,
V.PONMANI
09MBAB33
 NEW TRADE THEORY
• New trade theory explains about
economies of scale.
• Economies of scale can be achieved by
large scale of production to reduce the
cost.
• When the per unit cost of manufacturing
depends on the size of the individual firm’s
output, the larger the firm the greater the
scale of manufacturing benefits.
Advantages and Disadvantages
Advantages: Disadvantages:
• Imperfect competition • Huge investment.
& increasing return to • It will affect the small
scale. scale business.
• Increases profit. • Poor product quality.
• Creates oligopoly. • Low technology and
• Increases gross infrastructure
domestic product. weakness.
LOW COST ENVIRONMENT COUNTRIES:

• China
• Thailand
• Vietnam
• India
• Ukraine
• Romania
• Bulgaria
• Mexico
• Brazil
COST REDUCTION SEGMENT
 Indian software service
industries
• It has strong export orientation.
• No transportation cost.
• Demand realized after production.
• They produce large software packages to
gain profit and also to reduce cost.
• Using skilled persons to produce.
 TATA NANO IN INDIA

• Nano is the world largest

cheapest car worth about
Rs.1,00,000.
• They have produced branded cars
with low cost of production.
• Even a middle income level people afford
to buy the product.
INDIAN CEMENT INDUSTRIES

Company Production
ACC 17,902
Gujarat Ambuja 15,094
Ultratech 13,707
Grasim 14,649
India Cements 8,434
JK Group 6,174
Jaypee Group 6,316
Century 6,636
Madras Cements 4,550
Birla Corp. 5,150
 CONTD……..

• They are the major oligopoly players in

Indian cement industries.
• It need huge investment to start a
business.
• They will produce in bulk in order to
reduce the cost.
• The total cement production in the
financial year 2009 was 231 MT.
 Sinopec in China
• Sinopec is the second largest crude oil
producer in their country.
• The company operates a broad range of
activities covering oil and gas exploration,
refinement of raw materials, transportation
of oil products, export and imports, as well
as research and development into new
technologies.
 Contd….
• They employees large number of
engineers to drill the oil from well.
• It has employed several tankers to ship
crude oil, refine oil & gas to other
countries.
• Its yearly production of crude oil nearly 3.4
billon barrels(540,000,000m3).
• It leads to larger economies of scale to the
company as well as Chinese government.
 ECONOMIES OF SCALE IN RUSSIA

POLYUS GOLD:
• Polyus Gold is the only Russian company
on the world market of largest gold
producers.
• Over 12,500 people work for
Polyus Gold. Its gold production in 2006
amounted to 37.8 tones (1 215 k oz).
• Their high production in gold leads to
economies of scale to country.
 MMK IRON & STEEL WORKS
• The company is producing the
Wide range of iron and steel
Products in Russia.
• In 2006 MMK produced approximately
4,68,200 tons of iron ore materials.Today the
company produces and sells over 600 items
of finished products.
• The main aim of MMK iron and steel works
is to produce large units to achieve the
economies of scale in country.
CEMENT INDUSTRIES IN SAUDI
ARABIA
EXPORT GROWTH IN CEMENT INDUSTRIES
 CONTD…….
• Because of the low cost of production,
cement prices in Saudi Arabia are among
the lowest in the world
• It will become even lower due to surplus
cement available in the next few years.
• Further they can decrease lost cost of
manufacturing.
• In future they can able to support the large
construction projects.
 STEEL PLANT IN SINGAPORE

• They will locate the plant industry

temporary in near to the construction
place.
• So the construction companies can get
steel at a low cost. Because it will neglect
the transportation cost.
• The products are produced according to
the demand it leads the economy of scale
to both the industries.