LUKoil - The factor-proportions theory says that if labor...

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Global Dimensions of Business September 29, 2008 LUKoil The Mercantilist Theory, which says that a country should export more than it imports, explains Russia’s position as an exporter because they export 70% of their oil. Absolute Advantage does not explain Russia’s position as an exporter because they are not the most efficient country in regards to oil. They have allowed some Western oil companies to buy part of LUKoil so LUKoil could become better at the competitors strength. The theory of Comparative Advantage describes Russia’s position as an exporter because although they are not the most efficient out of all the countries, they are efficient in some aspects. The theory of country size says that larger countries do not depend as much on trade as smaller countries. Russia greatly depends on international trade.
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Unformatted text preview: The factor-proportions theory says that if labor is scarce then the costs will be high and vice-versa. This explains why the Russian oil companies employ less than 1% of the population. The country-similarity theory says that high-income countries will trade with each other because they produce and consume more, emphasize technical breakthroughs in different industrial sectors, and produce differentiated products and services. Russia is a high-income country that started out investing in the closest countries but has moved to higher income countries. I think LUKoil is buying its own petroleum products distribution companies in the West to diversify its holdings globally and to cut on the costs of distribution in the long run....
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This note was uploaded on 09/08/2010 for the course BUS 187 at San Jose State University .

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