Main Theories of International Trade and Corporate Strategy Essay

Main Theories of International Trade and Corporate Strategy - try out ExampleThe theory of absolute advantage states that a nation contains an unconditional advantage in the action of a product when it can produce more of that product with the same amount of resources than some other country. (Aghazadeh, 2003) unconditional advantage can also result in higher incomes for a country as genius hour of labor output should increase and the country should become more efficient as a result of trade between countries (Herriot and Pemberton, 2006, 34). Realistically, one country should have an absolute advantage over another country in the production of some goods. As an example, Saudi Arabia would have an absolute advantage in the production of oil comp ard to a country such(prenominal) as Japan. (Beardwell, Holden & Claydon, 2004, 14)The theory of comparative advantage states that a country has a comparative advantage in producing a product when its opportunity costs are lower than an other country producing the same product. Opportunity costs are sacrificed in order to realize or produce another good. With comparative advantage, countries can benefit by specializing in trading accepted products. Production or total output should boost when countries concentrate on producing and exporting goods and sequentially jumper cable to a further proficient application of resources (Herriot and Pemberton, 2006, 34).The Heckscher-Ohlin factor endowment theory is mainly about the form in the comparative profusion of factors of manufacture in a variety of states as the most noteworthy indication of the dissimilarity between relative costs of services and proportional benefit (Herriot and Pemberton, 2006, 34). Every country has various amounts and types of resources that will determine what they are able to produce or not produce. The combination of resources such as land, labor, and capital is referred to as a countrys factor endowment.