CHAPTER six - CHAPTER SIX: INTERNATIONAL TRADE AND...

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CHAPTER SIX: INTERNATIONAL TRADE AND POLITICAL ECONOMIES In a Free Market firms are free to set up their Value Added Chains (VACs) as they wish, for example, rationalizing them if they are competing in a global industry where the emphasis is on cost and quantity. This applies for all parts of the Value Added Chain. Firms can and do look at every single thing they do to bring a product or service to its clients. If their product is a global one where economies of scale and returns to specialization are possible, where learning curve economies can be achieved, and where consumers use the global product in the same way regardless of their location – then firms will seek sources of the best comparative advantage for every link in the VAC. For each of these links they will make a number of decisions, but two are salient: First, where should they locate that activity to capture the most advantage; and second, should they outsource that activity or internalize it in their ownership structure. For this to work, the markets for upstream raw
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CHAPTER six - CHAPTER SIX: INTERNATIONAL TRADE AND...

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