International-Business-Dr-R-Chandran-E-book

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International Business- Dr. R. Chandran
14. INTERNATIONAL TRADE THEORIES
To build a large mansion and an action plan, a strong
foundation is a prerequisite. To establish a large
international business, conceptual base is important. Trade
theories and their impact in every aspect of operation are
widely viewed as major inputs by organizations around the
world.
Learning Value:
On going through this chapter the reader will learn:
1. Importance of trade theories in the economy
2. Classical theories and their implications
3. Competitive advantages of nations
Their limitations in globalised era
International Trade Theories
Many renowned economists have carried out considerable research on scale
of economies, productivity of the work force and advantages of resources,
which certain countries are endowed with. The theories formulated by them
were accepted by the contemporary economies. European industrialization,
the emergence of the United State as a major power and rapid colonisation
were the three major international developments during the era of classical
economic theories. Today, these factors have lost their relevance. The
revolution taking place in communications, transportation and banking
makes every country resourceful if they formulate proactive policies. The
diminishing importance of borders between countries has enabled many
entrepreneurs to shift their manufacturing base anywhere in the world, invest
their money in safe destinations and explore the resources at any point of
time. Therefore, the theories of absolute advantage, comparative advantage
are not really applicable in current international business operations.
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