Services some cannot be traded others can be traded

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Services: Some cannot be traded; Others can be traded freely via the Internet or global telephony. For many firms, scale economies and superior business strategies provide efficiencies and other advantages. Early trade theories failed to account for this. (E.g., Japan lacks comparative advantages, but its firms succeeded anyway, via superior strategies.) International Business: The New Realities 6-17
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International Product Life Cycle Theory Each product and its associated manufacturing technologies go through three stages of evolution: introduction, maturity, and standardization. In the introduction stage, the inventor country enjoys a monopoly both in manufacturing and exports. Example: The television set.
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International Product life Cycle Theory (cont’d) Each product and its associated manufacturing technologies go through three stages of evolution: introduction, maturity, and standardization. In the maturity stage, the product’s manufacturing becomes relatively standardized, other countries start producing and exporting the product.
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Each product and its associated manufacturing technologies go through three stages of evolution: introduction, maturity, and standardization. In the standardization stage, manufacturing ceases in the original innovator country, and it becomes a net importer of the product. Today under globali- zation, for many products, the cycle occurs quickly. International Product life Cycle Theory (cont’d)
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New Trade Theory Argues that economies of scale are an important factor in some industries for superior international performance, even in the absence superior comparative advantages. Some industries succeed best as their volume of production increases. International Business: The New Realities 6-21 Example The commercial aircraft industry has very high fixed costs that necessitate high-volume sales to achieve profitability.
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Comparative vs. Competitive Advantage
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Critical Role of Innovation in National Economic Success Innovation is a key source of competitive advantage. The firm innovates in four major ways. It can develop: (1) A new product or improve an existing product (2) New ways of manufacturing (3) New ways of marketing (4) New ways of organizing company operations. Many innovative firms in a nation leads to national competitive advantage International Business: The New Realities 6-23
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Critical Role of Productivity in National Economic Success Productivity is the value of the output produced by a unit of labor or capital. It is a key source of competitive advantage for firms. The greater the productivity of the firm, the more efficiently it uses its resources. The greater the aggregate productivity of the firms in a nation, the more efficiently the nation uses its resources.
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