Monday, September 29, 2008

International Business (3)

classical theory on country-based trade
--mercantilism: wealth is measured by its holding of gold
--absolute advantage (productive)
--comparative advantage (relatively)

Factor of endowment theory
-- 3C: conditions, connections, concepts
--county has unique advantages

Country similarity theory (trade between 2 countries of good produced by same industry)
--similar per capita income
--consumers are at the same stage of economic development

product life cycle
--new product
--maturing product
--standardized product

Porter's nation competitive advantage theory
--firm strategy, structure, and rivalry
--demand condition
--factor condition
--related supporting industries

Portfolio investment
FDI(foreign direct investment)

Internalization theory: better to own or not (transaction cost)

3 condition for FDI
--ownership advantage
--location advantage
--internalization advantage

Factors influence FDI

International monetary system

gold standard: too expensive
exchange rate: fixed, float, par value

Bretton Wood:
World bank: loans from developed countries to developing countries. help reconstruction and development.

IMF: floated vs. pegged, flexible vs. managed, buying / borrow money. To promote international monetary cooperation. Protect currency. To promote exchange stability.

What is Balance of Payment? (short term / long term)
--current account (goods, service, investment income, gift)
--capital account (portfolio, FDI)
--reserved account
--errors and omissions

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