The document discusses classical and modern international trade theories including absolute advantage, comparative advantage, factor proportions, overlapping product ranges, product cycle, imperfect markets, and Porter's four determinants. It also covers foreign direct investment theories including monopoly profit, product and market imperfections, cross investment, and internalization. Costs and benefits of FDI for host and home countries are summarized.
The document discusses classical and modern international trade theories including absolute advantage, comparative advantage, factor proportions, overlapping product ranges, product cycle, imperfect markets, and Porter's four determinants. It also covers foreign direct investment theories including monopoly profit, product and market imperfections, cross investment, and internalization. Costs and benefits of FDI for host and home countries are summarized.
The document discusses classical and modern international trade theories including absolute advantage, comparative advantage, factor proportions, overlapping product ranges, product cycle, imperfect markets, and Porter's four determinants. It also covers foreign direct investment theories including monopoly profit, product and market imperfections, cross investment, and internalization. Costs and benefits of FDI for host and home countries are summarized.
The document discusses classical and modern international trade theories including absolute advantage, comparative advantage, factor proportions, overlapping product ranges, product cycle, imperfect markets, and Porter's four determinants. It also covers foreign direct investment theories including monopoly profit, product and market imperfections, cross investment, and internalization. Costs and benefits of FDI for host and home countries are summarized.
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Nama : Sarah Aulia
Semester/Kelas : 1 / D Prodi : Perdagangan Internasional Wilayah ASEAN dan RRT NIM : 220204207 Mata Kuliah : Bisnis Internasional
Tugas 2
1. Summarize the classical, country-based international trade theories. What are the differences between these theories, and how did the theories evolve? Answer : a. The Theory of Absolute Advantage Adam Smith : Hanya ada 2 negara yang bisa dilakukan untuk perdagangan, yaitu dalam negeri dan luar negeri. Negara di dunia seharusnya melakukan spesialisasi produknya dengan system yang efisien. Ada 2 unsur untuk meningkatkan kesejahteraan, yaitu keahlian dan perbandingan tenaga kerja yang produktif dan tidak produktif.
b. The Theory of Comparative Advantage David Ricardo : Hanya ada 1 negara yang bisa dilakukan untuk perdagangan. Negara yang memproduksi beberapa barang walaupun produknya kurang kompetitif. Negara tersebut seharusnya melakukan spesialisasi yang efisien pada 1 barang dan yang lainnya di impor.
c. The Theory of Factor Proportions Eli Heckscher and Bertil Ohlin : Negara yang seharusnya melakukan produksi spesialisasi pada negara yang memiliki pendapatan tinggi berarti padat modal dan negara yang berkembang atau gaji tenaga kerjanya murah berarti padat tenaga kerja / padat karya.
2. What are the modern, firm-based international trade theories?
Answer: The Leontief Paradox Wassily Leontief Overlapping Product Ranges Theory Staffan Burenstam Linder Product Cycle Theory Raymond Vernon Imperfect Markets and Strategic Trade Paul Krugman The Competitive Advantage of Nations Michael Porter
3. Describe how a business may use the trade theories to develop its business strategies. Use Porter’s four determinants in your explanation. Answer: 1. Factor conditions: The suitability of a country's factors of production to compete successfully in a particular industry. Most importantly, it is the ability of a nation to continuously create, improve, and deploy its factors (such as a skilled workforce) that matter, not start-up capital.
2. Demand conditions: The level of soundness and competition the firm must face in its home market. Companies that can survive and thrive in highly competitive and demanding local markets are much more likely to gain a competitive advantage.
3. Related and supporting industries: The competitiveness of all related industries and suppliers to the company. A company that operates in many companies and related industries gains and maintains excellence through close working relationships, proximity to suppliers, and the timely flow of products and information.
4. Company strategy, structure and competition: Conditions in the home country that hinder or assist the creation and support of the company's international competitiveness.
4. What is Foreign Direct Investment?
Answer: Is an ownership stake in a foreign company or project made by an investor, company, or government from another country.
5. Compare The theory of foreign direct investment
Answer: In the theory of foreign direct investment there are 4 theories, namely Monopoly Profit Theory, Product and market imperfection factors, expansion of the hymer theory, Cross Investment Theory, and internalization theory. Monopoly profit theory, namely companies with monopoly power can limit output and emphasize higher prices than perfect competition so as to generate profits. Product and Factor Market Imperfection Caves (1971) expanded Hymer's theory and hypothesized that the ability of firms to differentiate their products- particularly high income consumer goods and services may be key ownership advantages of firms leading to foreign production. Cross Investment Theory E. M. Graham noted a tendency for cross investment by European and American firms in certain oligopolistic industries; that is, European firms tended to invest in the United States when American companies had gone to Europe. The Internalization Theory It is an extension of the market imperfection theory. By investing in a foreign subsidiary rather than licensing, the company is able to send the knowledge across borders while maintaining it within the firm, where it presumably yields a better retum on the investment made to produce it.
6. Summarize Costs and Benefits Associated with FDI
Answer: 1. Host Country The cost: Possible adverse effects on competition within the host nation Adverse effects on the balance of payments The perceived loss of national sovereignty and autonomy.
The benefit are:
Resource-transfer effects Employment effects Balance-of-payments effect Effect on competition and economic growth. 2. Home Country
The cost: The capital account of the balance of the payments suffers from the initial capital outflow required to finance the FDI. The current account of the balance of payments suffers if the purpose of the foreign investment is to serve the home market from a low-cost production location. The current account of the balance of payments suffers if the FDI is a substitute for direct exports. The benefit are: The capital account of the home country’s balance-of-payments benefits from the inward flow of foreign earnings FDI can also benefit the current account of the home country’s balance of payments Benefits to the home country from outward FDI arise from employment effects Benefits arise when the home-country MNE learns valuable skills from its exposure to foreign markets that can be transferred back to home country.
