International Business Chapter 6 Homework Porter’s 1990 study tried to explain why a nation achieves international success in a particular industry

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Class Discussion

Discuss new trade theory and the role of government in helping an industry, like the aircraft

industry, be successful. How has government policy shaped other industries?

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CONNECT

Click and Drag

Applying Porter’s Model

Summary

This activity focuses on Michael Porter’s Diamond of Competitive Advantage. Using his

Diamond, Porter tries to explain why some countries succeed in trade and others do not.

Activity

Students are asked to match various descriptions with the correct component of Porter’s model.

Class Discussion

Understanding Porter’s model can provide insight into why countries succeed in trade and can

influence trade policy decisions. Discuss the different parts of the model and what they mean.

Then using the model, identify industries that have been successful and why. How could this

shape future trade policy?

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firm to disperse its various productive activities to those countries where, according to the theory

of international trade, they can be performed most efficiently.

First-Mover Advantages

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1. Mercantilism is a bankrupt theory that has no place in the modern world. Discuss.

2. Is free trade fair? Discuss.

3. Unions in developed nations often oppose imports from low-wage countries and advocate

trade barriers to protect jobs from what they often characterize as “unfair” import competition. Is

such competition “unfair?” Do you think that this argument is in the best interests of (a) the

unions, (b) the people they represent, and/or (c) the country as a whole?

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4. What are the potential costs of adopting a free trade regime? Do you think governments

should do anything to reduce these costs? What?

5. Reread the Country Focus “Is China Manipulating Its Currency in Pursuit of a Neo-

Mercantilist Policy?”

a. Do you think China is pursuing an economic policy that can be characterized as neo-

mercantilist?

b. What should the United States, and other countries, do about this?

6. Reread the Country Focus “Moving U.S. White-Collar Jobs Offshore.”

a. Who benefits from the outsourcing of skilled white-collar jobs to developing nations?

Who are the losers?

b. Will developed nations like the United States suffer from the loss of high-skilled and

high-paying jobs?

c. Is there a difference between the transference of high paying white-collar jobs such as

computer programming and accounting, to developing nations, and low paying blue

collar jobs? If so, what is the difference, and should government do anything to stop the

flow of white-collar jobs out of the country to countries like India?

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7. Drawing upon the new trade theory and Porter’s theory of national competitive advantage,

outline the case for government policies that would build national competitive advantage in

biotechnology. What kind of policies would you recommend that the government adopt? Are

these policies at variance with the basic free trade philosophy?

8. The world’s poorest countries are at a competitive disadvantage in every sector of their

economies. They have little to export. They have no capital; their land is of poor quality; they

often have too many people given available work opportunities; and they are poorly educated.

Free trade cannot possibly be in the interests of such nations. Discuss.

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Exercise 1

Search phrase: World Trade Organization International Trade Statistics

Resource Name: World Trade Organization (WTO): International Trade Statistics

Exercise 2

Search phrase: Australian suppliers

Resource Name: Australian Suppliers Directory

Website: https://www.austrade.gov.au/suppliersearch.aspx

globalEDGE™ Category: Company Directories

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1. What were the proposed benefits of the TPP?

2. What were the potential drawbacks of the U.S. entering the TPP? What would be the

drawbacks to other nations?

3. Why do you think that Donald Trump was so adamantly opposed to the TPP?

4. Why do you think the 11 remaining signatories went ahead with a revised deal after the United

States withdrew?

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5. Is the CPTTP a threat to American economic interests?

6. What is the opportunity cost to the United States of withdrawing from the TPP?

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Activity

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Continuous Case Concept

In the last few decades, the auto industry has shifted from one in which a few, large companies

primarily manufactured in their domestic markets and sold in their domestic markets, to one in

which a few large companies serve the world market, manufacturing around the globe to capture

competitive advantages wherever they can.

• Ask students to reflect on the changes in the industry. Why do companies like Toyota and

Nissan have large operations in the U.S. market? Why don’t American companies have a

large presence in Japan?

• Next, consider why BMW and Mercedes have established manufacturing operations in

the U.S. market, while American companies are shifting their production to places like

Mexico. Similarly, reflect on the new agreement between Toyota and Mazda whereby

Mazda will produce cars at its plant in Mexico for Toyota to sell in the United States.

• Finally, ask students to use the theories presented in the chapter to explain the changes in

the industry, and to predict what may occur in the next decade. How will the Chennai

region of India, referred to as the Detroit of India because so many automakers and

suppliers have established operations there, change the industry? What will be the impact

of the new trade agreement between Mexico, Canada, and the United States have on

production? What are the implications of the move toward more electric vehicles by

companies like Volkswagen?

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Additional Readings and Sources of Information

How A Trans-Pacific Trade Deal Got Made Without Trump

https://www.forbes.com/sites/stratfor/2018/03/08/how-a-trans-pacific-trade-deal-got-made-

without-trump/#1d84f01a75d7

TPP: What is it and why does it matter?

https://www.bbc.com/news/business-32498715

Everything you need to know about the Trans Pacific Partnership

https://www.washingtonpost.com/news/wonk/wp/2013/12/11/everything-you-need-to-know-

about-the-trans-pacific-partnership/?utm_term=.6b09c6eb1d76

Why Economists Are Worried About International Trade

https://www.nytimes.com/2018/02/16/business/trump-economists-trade-tariffs.html

Trade wars, Trump tariffs and protectionism explained

https://www.bbc.com/news/world-43512098

What Game Theory Says About Trump’s Trade Strategy

https://www.bloomberg.com/view/articles/2018-07-16/what-game-theory-says-about-trump-s-

trade-strategy

The last American “trade war” didn’t work out so great

https://www.cnn.com/2018/03/02/politics/donald-trump-steel-tariffs-q-and-a/index.html

Is free trade always the answer?