International Business
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INTERNATIONAL BUSINESS
1. Which of the theories of international trade can help Indian services providers gain competitive edge over their competitors?
Trade between and among countries has occurred for many thousands of years. But it was not until the 15th century that people tried to explain why trade occurs and how trade benefits both parties to an exchange.
Below figure shows a time line of when the main theories of international trade were proposed. Efforts are being made to modify existing theories and develop new ones.
[pic]
Let’s try to analyze and see which of the theories among all of these are helpful for Indian service provider to gain competitive edge over their competitors.
By looking at advantages what Indian service provider got, following theories can help Indian Service provider to gain competitive edge.
1) Theory of Comparative Advantage
The idea here is simple and intuitive. If our country can produce some set of goods at a lower cost than a foreign country and if the foreign country can produce some other set of goods at a lower cost than we can produce them, then clearly it would be best for us to trade our relatively cheaper goods for their relatively cheaper goods. In this way, both countries may gain from trade.
Indian service providers can provide service to other country at lower cost than they can produce and By following this theory we can do trade of other items that can be produced at lower cost in other countries.
2) Factor Endowments Theory
The Heckscher-Ohlin theory states that international and interregional differences in production costs occur because of differences in the supply of production factors.
A country is labor-abundant if it has a higher ration of labor to other factors than does the rest of the world. A product is
INTERNATIONAL BUSINESS
1. Which of the theories of international trade can help Indian services providers gain competitive edge over their competitors?
Trade between and among countries has occurred for many thousands of years. But it was not until the 15th century that people tried to explain why trade occurs and how trade benefits both parties to an exchange.
Below figure shows a time line of when the main theories of international trade were proposed. Efforts are being made to modify existing theories and develop new ones.
[pic]
Let’s try to analyze and see which of the theories among all of these are helpful for Indian service provider to gain competitive edge over their competitors.
By looking at advantages what Indian service provider got, following theories can help Indian Service provider to gain competitive edge.
1) Theory of Comparative Advantage
The idea here is simple and intuitive. If our country can produce some set of goods at a lower cost than a foreign country and if the foreign country can produce some other set of goods at a lower cost than we can produce them, then clearly it would be best for us to trade our relatively cheaper goods for their relatively cheaper goods. In this way, both countries may gain from trade.
Indian service providers can provide service to other country at lower cost than they can produce and By following this theory we can do trade of other items that can be produced at lower cost in other countries.
2) Factor Endowments Theory
The Heckscher-Ohlin theory states that international and interregional differences in production costs occur because of differences in the supply of production factors.
A country is labor-abundant if it has a higher ration of labor to other factors than does the rest of the world. A product is