Mgmt 670 Mid-Term Exam Questions
MGMT 670
Mid-Term Exam
1. Explain Vernon’s product cycle in terms of the global development of the market and production of the personal computer.
The product life-cycle theory is an economic theory that was developed by Raymond Vernon in an effort to explain observed patterns of international trade and the makeup of trade between countries in the world market. Vernon theorized that products, much like living organisms, go through stages of birth, development, growth, maturity, decline and demise. The model demonstrates dynamic comparative advantage. The country that has the comparative advantage in the manufacturing of the product changes from the innovating (developed) country to the developing countries. Vernon's hypothesis was an effort to expand the existing trade theory beyond the static structure of comparative advantage (Ricardo) and other classical economists.
The theory suggests that early in a product's life-cycle all the parts and labor associated with that product come from the geographic area in which it was invented. Advanced countries, which have the capability to innovate, as well as high-income levels and mass consumption, will sell the item first to its domestic market, then will become initial exporters of goods to other technically advance countries. After the product becomes adopted and used in the world markets, production gradually moves away from the point of origin. The advanced country loses their exports initially to developing countries (who will import and later manufacture these goods) and subsequently to less developed countries. Eventually, the original advanced country (original innovator) will become importers of these goods because they will have begun producing other new products. The duration of each stage of the cycle varies with the product and the type of management supporting it.
Understanding the product life-cycle stages allows a company to fully take advantage of market opportunities by either
Mid-Term Exam
1. Explain Vernon’s product cycle in terms of the global development of the market and production of the personal computer.
The product life-cycle theory is an economic theory that was developed by Raymond Vernon in an effort to explain observed patterns of international trade and the makeup of trade between countries in the world market. Vernon theorized that products, much like living organisms, go through stages of birth, development, growth, maturity, decline and demise. The model demonstrates dynamic comparative advantage. The country that has the comparative advantage in the manufacturing of the product changes from the innovating (developed) country to the developing countries. Vernon's hypothesis was an effort to expand the existing trade theory beyond the static structure of comparative advantage (Ricardo) and other classical economists.
The theory suggests that early in a product's life-cycle all the parts and labor associated with that product come from the geographic area in which it was invented. Advanced countries, which have the capability to innovate, as well as high-income levels and mass consumption, will sell the item first to its domestic market, then will become initial exporters of goods to other technically advance countries. After the product becomes adopted and used in the world markets, production gradually moves away from the point of origin. The advanced country loses their exports initially to developing countries (who will import and later manufacture these goods) and subsequently to less developed countries. Eventually, the original advanced country (original innovator) will become importers of these goods because they will have begun producing other new products. The duration of each stage of the cycle varies with the product and the type of management supporting it.
Understanding the product life-cycle stages allows a company to fully take advantage of market opportunities by either