question 1 Flashcards
perfect competition
Many sellers of identical products
Monopoly market definition
one major seller of single products
Monopolistic
many sellers with products that have minimum differences
Oligopoly
Few sellers with differentiated products
Fair competition aspects
producing quality goods
cost efficient
investment in research and development
unfair competition
fixing price with rivals
pricing lower than costs to eliminate competition
focused on market dominance
Forms of Anti competitive behaviour
Anti competitive agreements between firms (Collusion) i.e fixed pricing
Abuse of dominant market positions i.e predatory pricing
Anti competitive mergers and acquisitions i.e unification of companies
Why is competition important ? - policy perspective
intense competition means lower costs for consumers and higher consumer surplus.
meaning of competitive advantage of a firm
Ability to generate greater than the average profitability in the industry. it can be classed as sustained when it can be maintained over a couple of years
The four Rs
Resources Roots Recombination Reach (Datta et al 2021)
Two Sources of competitive advantage
Cost advantage- similar product at lower cost
Differentiation advantage - price premium for unique product
Porters 1985 generic strategies
cost leadership
cost focus
differentiation
differentiation focus
four sectors of Bartlett and Ghoshal matrix
Global
international
transnational
multi-domestic
Four sections of Porters 1998 Dimond model
Factor conditions.
Firm strategy, structure and rivalry.
related and supported industries
demand condition
Key players in international business
National states
Multinational corporations
Multilateral institutions (WTO, IMF)
Define a MNC
A Multinational corporations is a firm that has the power to coordinate and control operations in more than one country (Dicken, 2007)
Characteristics of MNC
Ability to co-ordinate various processes within transnational production networks
Ability to take advantage of geographical differences i.e resources, labour and Capital.
two Key Ability of MNC
Mobile resources
Immobile resources
Competitive advantages of MNCs
Firm Specific advantages
Home Country advantages
Host Country conditions
(Datta et al, 2021)
Meaning of Externality
A benefit incurred by the party who did not agree to the action causing the cost or benefit.
Positive Externality of MNCs
Economic development
Higher wages
Knowledge spill overs
Adoption of best practices
Negative externalities of MNCs
Loss of local knowledge
Dependence on external knowledge
Undermining of national sovereignty
Alien culture
Degradation of ecology
Example of Positive externalities of MNCs
investment in Vietnam has meant increase in wages and a deduction of poverty from 58.2% in 1993 to 37.4% in 1998
(Glewwe, 2000)
Negative example of MNCs externality
Union Carbide corporation had a gas leak Bhopal where their leak killed 3800 people
Roles that States play in international business
Container
Regulator
Competitor
Collaborator
State as Regulator
Trade Policies
Foreign direct investment Policies
Industry Policies
Tariffs
How can the State promote economic growth
Protecting infant industries
Developing an industrial base
Preserving national identity
Maintaining essential industries
State as Competitor
Use competitive advantage from Porters Diamond
State as collaborators
States collaborate with other states to achieve economic and welfare goals
types of reginal economic integration
Free trade area
Customs Union
Common Market
Economic Union
Trade theories
Mercantilism Absolute advantage Comparative advantage Heckscher-Ohlin theory New trade theory national competitive advantage
Mercantilism theory
Nations should accumulate national financial wealth by encouraging exports and discouraging imports
Absolute advantage
A Country should produce goods where it is efficient, and should trade those goods for where the goods are not efficient. (Adam Smith, 1776)
Comparative Advantage (David Ricardo, 1817)
Countries should import even if more efficient in that production area that country buying from
Heckscher Ohlin theory
Explains that countries who trade with each other will achieve greater economic welfare if:
- factors like labour and capital are proportional in both countries
- labour and capital do not move between the countries
- no costs when transporting goods between countries.
World trade organisations (WTO)
Deals with the rules of trade between countries
Multilateral WTO agreements
trade in goods
General agreement on trade in services (GATS)
Agreement on trade related aspects on intellectual property (TRIPS)
Role of WTO
Trade negotiations
Implementation and monitoring
Dispute settlement
Building trade capacity
Multilateral
agreed upon or participated in by three or more parties, especially the governments of different countries. (WPO)
What is competitive business strategy about
creating value for the firm
Define Competitors
a person if your competitor if the customers values your product less when they have the other persons product
Define Complementor
A person is this when a customer values your product more when they have the other persons product
What is game theory
the study of mathematical models of conflict and corporation between intelligent rational decision makers
Benefits of globalisation
helped countries grow faster by opening up to international trade and capital .
Reduced the sense of isolation
negatives of rise of MNCs
destruction of environment
loss of national sovereignty
loss of local knowledge
income inequality
