International and Pacific Asian Business Essay Example | Topics and Well Written Essays - 3000 words

International and Pacific Asian Business - Essay Example New Trade Theories The new trade theories address the area of competitive strategy in various ways, usually (but not always) relating to globalisation. Sloman (2005 p.307) identifies the following as reasons for organisations to expand beyond their home nation: access to new markets, new customers, new supply sources and new ideas and skills. They also have to deal with competition within their home nation from overseas organisations who can produce goods at a lower cost or with some innovative function or features. One of the main reasons organisations go overseas is to reduce their overall costs. Sloman (2005 pp.310-311) identifies the following as areas within which costs can be reduced by setting up operations overseas: Resource costs, including labour Skills held by workers, including entrepreneurial and management skills Cost reductions as a result of the learning curve Economies of scale Transport costs Government policies. Many of these areas are addressed by new trade theori es. Economies of Scale Economies of scale result from increasing production capacity to reduce the overall costs of production. Lynch (2009 p.801) defines them as â€Å"the extra cost savings that occur when higher-volume production allows unit costs to be reduced†. ... The presence of economies of scale can prevent new competitors entering the market if they involve large-scale production facilities or very specialised facilities requiring significant capital investment to replicate. Demand-Led Growth Setterfield (2003, p.25) identifies a counterpoint to the focus on supply-side driven growth in the form of demand-led growth. He outlines two effects on growth rates stemming from the demand-side of the growth equation: the potential for demand failures in the long run, and the impact of demand conditions on productive resources over time. The theory states that â€Å"there is no supply-determined equilibrium† (ibid) for output levels. Instead output levels are determined by relatively autonomous demand conditions coupled with supply-side conditions. Setterfield (2005, p.26) says that â€Å"the sequence of short-run outcomes associated with the demand-determined utilisation of productive resources traces out the economy’s long-run grow th path† and does not automatically to the output path of the economy. He further points out that â€Å"the potential growth rate of the economy depends on the growth of physical capacity, labour resources and factor productivity† but that â€Å"each of these is affected by the demand-determined actual rate of growth† (ibid). In short, demand-led growth requires attention to be paid to the demand side of the supply = demand equation. The Product Life-Cycle Every product has a life-cycle, starting with growth and ending with decline and obsolescence: Figure 1: The stages in a product’s life cycle (Source: Sloman, 2005, p.313) When considering the global situation, launch would normally take place in the country