Theories of International Trade Investment Erik Kramer, Sam Dickey, and Devin Drayton

Comparative Advantage Theory  Definition: to gain a trade advantage, countries should specialize in products that it can provide more efficiently.  This says that if a country can make or grow a product easily and at a low cost, they should specialize in it and trade with other countries.

Comparative Advantage Theory cont…  Examples: If the United States has better soil for growing corn, and China has better soil for grain. They can specialize the products and then trade with each other.

Product Life Cycle Theory  Definition: The four stages that products or services go through.  The four stages: Introduction, Growth, Maturity, and Decline.

Product Life Cycle Theory cont…  Example: The first computer it was first introduced and then everyone wanted one (growth). Then everyone had one. Then they came out with laptops and more advanced computers.

Balance of Trade   Balance of payments: All international transactions are recorded in this accounting statement.   Current Account: It has the records of the value of imports and exports from foreign nations and also income and payments.   Capital Account: It has the records of the investment funds coming in and out of the country.

Balance of Trade cont…   Example for Balance of payments, Current Account, and Capital Account.   We buying 200,000 iPods from Japan, this gets recorded in the Balance of payments and Current Account. Then we ask for a loan to pay for this import, which is Capital Account.

Balance of Trade cont…   When we buy goods from other countries our dollars are worth more over there which means they make more money than we do off of the same products.   Other countries believe that we have a stable economy. We are buying more than we are selling so the dollar is losing its worth and we are losing money.   The dollar is worth a lot to other countries so they are buying less and we are buying more.

Career Opportunities in International Business  International competition is growing.  More business are going global to increase sales and income.

Career Opportunities in International Business cont..  So they have to transfer their best managers overseas which increases costs. They have to pay for airfare, housing, and pre-culture training for managers being moved.  They also have to get paid more because they have to change their lifestyle and location.

Employment of International Managers   In order to be an international manager, you need these traits:   Socially Flexible   Acceptant of new ideas   Be able to adapt to other Cultures quickly   It is good for managers to know the foreign languages because they can better communicate with local workers and consumers.