Question

Describe comparative advantage, competitive advantage and strategic trade theory. How are they different? Use a real-world example or come up with a hypothetical example in your description of each. Which do you feel is better for the global good?

Answer 1

Comparative advantage: It achieves when a country produces the same goods at the lower opportunity cost as compared to others.

Competitive advantage: It achieves when a firm achieves a strategic advantage as compared to others.

Strategic trade theory: It is a trading strategy, in which a firm interacts with the global firms and make the plans to bring advantage for the domestic firms or markets.

Explanation:

Comparative advantage: It achieves when a country produces the same goods at the lower opportunity cost as compared to others.

Generally, it is happened in the specialization of the production of the good for the country and applies to international trade.

When a country has a comparative advantage to produce a particular good, then that country exports a particular good in the international market. Example: India has a comparative advantage to produce spices.

Competitive advantage: It achieves when a firm achieves a strategic advantage as compared to others. It achieves through better quality production, cheaper goods, better management, branding, etc. Generally, it is found among the production units in the country.

But it can be found in international trade also. Example: Coke has a competitive advantage in the production of beverages.

Strategic trade theory: It is a trading strategy, in which a firm interacts with the global firms and make the plans to bring advantage for the domestic firms or markets. In this, the export subsidy is the main tool to get benefits for the domestic markets.

R&D investment and import tariffs also play an important role in this. Example: China and the U.S. conflicts on Chinese imported products.

Comparative advantage: It achieves when a country produces the same goods at the lower opportunity cost as compared to others.

Competitive advantage: It achieves when a firm achieves a strategic advantage as compared to others.

Strategic trade theory: It is a trading strategy, in which a firm interacts with the global firms and make the plans to bring advantage for the domestic firms or markets.

Explanation:

Comparative advantage: It achieves when a country produces the same goods at the lower opportunity cost as compared to others.

Generally, it is happened in the specialization of the production of the good for the country and applies to international trade.

When a country has a comparative advantage to produce a particular good, then that country exports a particular good in the international market. Example: India has a comparative advantage to produce spices.

Competitive advantage: It achieves when a firm achieves a strategic advantage as compared to others. It achieves through better quality production, cheaper goods, better management, branding, etc. Generally, it is found among the production units in the country.

But it can be found in international trade also. Example: Coke has a competitive advantage in the production of beverages.

Strategic trade theory: It is a trading strategy, in which a firm interacts with the global firms and make the plans to bring advantage for the domestic firms or markets. In this, the export subsidy is the main tool to get benefits for the domestic markets.

R&D investment and import tariffs also play an important role in this. Example: China and the U.S. conflicts on Chinese imported products.

According to my view, comparative advantage is the best policy for global goods. It gives benefits to the produces and consumers both.

According to my view, comparative advantage is the best policy for global goods. It gives benefits to the produces and consumers both.