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Essay / Research Paper Abstract
This 4 page paper uses the concept of comparative advantage and the models of competitive advantage and the Uppsala model to consider the way that a firm may start an export and an import strategy, using example of a firm wishing to export cars to South Africa and import diamonds. The bibliography cites 5 sources.
Page Count:
4 pages (~225 words per page)
File: TS14_TEplantheory.rtf
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Unformatted sample text from the term paper:
to assess the goods that will be exported and imported. The determination of which goods may be seen with consideration of comparative advantage; this may be used to assess the
export of cars to Africa and the import of gold/diamonds from Africa. With Adam Smith we see the foundations of what was
to become the theory of comparative advantage, although this is not the formation of the theory. Smith stipulates that each nation should concentrate on producing goods where they have the
absolute advantage (Thompson, 2007, Smith 1994). This means that they should produces the goods that they can produce in a more effective manner than any other nation. Conversely, in international
trade they should also import any commodity where they have the absolute disadvantage. This helps to explain how and why Africa should be exporting gold and diamonds.
David Ricardo developed an alternative idea and although this sounds similar it is a very different approach. Ricardo take Adams ideas a little further; Ricardo
states that countries and companies within the countries should make their decision of what commodities to produce and export by reference to that which has the smallest absolute disadvantage. They
should also import commodities where the absolute disadvantage is the greatest, for the gold and diamonds this is explained. Africa may be seen as a low labour cost country, but
comparative advantage looks at companies and countries not production goods where they have a disadvantage and although there is some car production there are lacking aspects which include the technology
and the clustering as well as capacity needed for efficient production. This leads us to consider the way that the cars which
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