Question 1

Preempting the available demand,gaining cost advantages related to volume,building an enduring brand ahead of later competitors,and,consequently,establishing a long-term sustainable competitive advantage,are all examples of:

Accepted Answer

For the individual firm,the clear message is that it pays to invest substantial financial resources in trying to build a first-mover or early-mover advantage even if that means several years of losses before a new venture becomes profitable.The idea is to preempt the available demand,gain cost advantages related to volume,build an enduring brand ahead of later competitors,and,consequently,establish a long-term sustainable competitive advantage.

Question 2

Does Porter's model of competitive advantage predict the pattern of international trade that we observe in the real world?

Accepted Answer

It is not yet known if Porter's model of competitive advantage is true.Porter's theory has not been subjected to detailed empirical testing.Much about the theory rings true,but the same can be said for the new trade theory,the theory of comparative advantage,and the Heckscher-Ohlin theory.

Question 3

_____ occurs when employees move between firms within a region and when national industry associations bring employees from different companies together for regular conferences or workshops.

Accepted Answer

Clusters of related industries are important because valuable knowledge can flow between the firms within a geographic cluster when employees move between firms within a region and when national industry associations bring employees from different companies together for regular conferences or workshops,benefiting all within that cluster.

Question 4

Mercantilism viewed trade as a zero-sum game.Discuss Adam Smith's and David Ricardo's stand on the issue.Also discuss the phenomenon of neo-mercantilism.

Accepted Answer

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Question 5

Japan is a country that is at a disadvantage in terms of natural resources but it has achieved economic success by investing in education,thereby building a vital pool of skilled labor and technological know-how.This reflects Porter's argument that:

Accepted Answer

Porter argues that advanced factors are the most significant for competitive advantage.Unlike the naturally endowed basic factors,advanced factors are a product of investment by individuals,companies,and governments.Thus,government investments in basic and higher education,by improving the general skill and knowledge level of the population and by stimulating advanced research at higher education institutions,can upgrade a nation's advanced factors.

Question 6

Porter noted the predominance of engineers in top management at German and Japanese firms and a predominance of people with finance backgrounds leading many U.S.firms.He argued that the dominance of finance in U.S.firms led to a relative loss of U.S.competitiveness in some engineering-based industries.Thus,Porter illustrates how different nations _____,which are instrumental in their building national competitive advantage.

Accepted Answer

The fourth broad attribute of national competitive advantage in Porter's model is the strategy,structure,and rivalry of firms within a nation.Porter makes two important points here,of which one is that different nations are characterized by different management ideologies,which either help them or do not help them to build national competitive advantage.

Question 7

Porter argued that in terms of factor endowments,_____ factors are the most significant for competitive advantage.

Accepted Answer

Porter argues that advanced factors are the most significant for competitive advantage.Unlike naturally endowed basic factors,advanced factors are products of investment by individuals,companies,and governments.Thus,government investments in basic and higher education,by improving the general skill and knowledge level of the population and by stimulating advanced research at higher education institutions,can upgrade a nation's advanced factors.

Question 8

Porter argues that the presence of _____ component(s)is usually required for "Porter's diamond" to boost national competitive advantage.

Accepted Answer

Porter contends that the degree to which a nation is likely to achieve international success in a certain industry is a function of the combined impact of factor endowments,domestic demand conditions,related and supporting industries,and domestic rivalry.He argues that the presence of all four components is usually required for this diamond to boost competitive performance (although there are exceptions).

Question 9

Sophisticated and demanding local customers in Scandinavia helped push Nokia of Finland and Ericsson of Sweden to invest in cellular phone technology long before demand for cellular phones took off in other developed nations.This underscores Porter's point about how:

Accepted Answer

Porter emphasizes the role home demand plays in upgrading competitive advantage.The characteristics of home demand are particularly important in shaping the attributes of domestically made products and in creating pressures for innovation and quality.Porter argues that a nation's firms gain competitive advantage if their domestic consumers are sophisticated and demanding.Such consumers pressure local firms to meet high standards of product quality and to produce innovative products.

Question 10

What is meant by the term "free trade"? Is free trade compatible with the concept of mercantilism?

Accepted Answer

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Question 11

Technological leadership in the U.S.semiconductor industry provided the basis for U.S.success in personal computers and several other technically advanced electronic products.Similarly,Switzerland's success in pharmaceuticals is closely related to its previous international success in the technologically related dye industry.These instances illustrate the attribute of national competitive advantage identified by Porter as:

Accepted Answer

The third broad attribute of national advantage in an industry is the presence of suppliers or related industries that are internationally competitive.The benefits of investments in advanced factors of production by related and supporting industries can spill over into an industry,thereby helping it achieve a strong competitive position internationally.

Question 12

Porter,in his model of competitive advantage,suggested that there is a strong association between _____ and the creation and persistence of competitive advantage in an industry.

Accepted Answer

Porter asserts that there is a strong association between vigorous domestic rivalry and the creation and persistence of competitive advantage in an industry.Vigorous domestic rivalry induces firms to look for ways to improve efficiency,which makes them better international competitors.

Question 13

Which of the following factor endowments would be classified as a basic factor by Michael Porter?

Accepted Answer

Porter recognizes hierarchies among factors,distinguishing between basic factors (e.g. ,natural resources,climate,location,and demographics)and advanced factors (e.g. ,communication infrastructure,sophisticated and skilled labor,research facilities,and technological know-how).

Question 14

Which of the following factor endowments would be classified as an advanced factor by Michael Porter?

Accepted Answer

Porter recognizes hierarchies among factors,distinguishing between basic factors (e.g. ,natural resources,climate,location,and demographics)and advanced factors (e.g. ,communication infrastructure,sophisticated and skilled labor,research facilities,and technological know-how).

Question 15

Porter argues that a nation's firms gain competitive advantage if their domestic consumers are:

Accepted Answer

Porter argues that a nation's firms gain competitive advantage if their domestic consumers are sophisticated and demanding.Such consumers pressure local firms to meet high standards of product quality and to produce innovative products.

Question 16

If a company were to draw from the ideas proposed in the various theories of international trade,from a profit perspective,how would it go about selecting locations for its businesses?

Accepted Answer

Underlying most of the theories is the notion that different countries have particular advantages in different productive activities.Thus,from a profit perspective,it makes sense for a firm to disperse its productive activities to those countries where,according to the theory of international trade,they can be performed most efficiently.

Question 17

Describe Adam Smith's concept of absolute advantage.

Accepted Answer

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Question 18

How does the theory of comparative advantage suggest that trade is a positive-sum game to an even greater degree than does the theory of absolute advantage does?

Accepted Answer

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Question 19

Who argued that successful industries within a country tend to be grouped into "clusters" of related industries?

Accepted Answer

One of the most pervasive findings of Porter's study was that successful industries within a country tend to be grouped into clusters of related industries.

Question 20

According to Porter,the characteristics of _____ are particularly important in shaping the attributes of domestically made products and in creating pressures for innovation and quality.

Accepted Answer

The characteristics of home demand are particularly important in shaping the attributes of domestically made products and in creating pressures for innovation and quality.Porter argues that a nation's firms gain competitive advantage if their domestic consumers are sophisticated and demanding and pressure local firms to meet high standards of product quality and to produce innovative products.

Quiz 5: International Trade Theory