Chapter Six was a bit of a tough read. It was a chapter that had to be reread and highlighted. The knowing of the vocabulary was necessary. There was one sentence that easy confused the reader: “Over all, firms becomes mnes because of the fdis provide oli advantages that could otherwise not be obtained”. So yes, it was a bit of a confusing chapter with all the acronyms to say the least.
Chapter Five touched based on the types of advantages a firm can have. First, let’s talk about Absolute Advantage. We’ve been discussing this topic in my Macro-economics course and I find it to be very intriguing. It’s such a basic concept that creates a win-win situation. Why should the U.S. produce something like coffee (which it really can’t) when it can focus it’s resources on air crafts and chemicals? We can have an advantage on the chemical market if we put more time and research in this.
What I am driving with this idea is the U.S. can focus more on medical research then lesser needed items and purchase imports of items that we can barley grow anyways. I was surprised to see that U.S is actually the leading Country to produce cotton. I knew the south was the “cotton king” at one point long ago but I had no idea that this continues to today.
Absolute Advantage is crucial for the market economy. It creates diversity in the products we see in the market. It’s elementary school thinking: my mom makes the best cookies, your mom makes the best brownies-let’s trade! Diversity in our products are important to the luxury and consumer lifestyle.
Absolute Advantage also helps keep prices low. Which we can complain and moan about all the bad things Wal-mart is, but at the end of the day majority of consumers want to save money. Wal-mart loves having this competitive advantage over all the small businesses. Ironically, small businesses make up the U.S. economy.
The product life style also caught my eye in this chapter. A product should have a life style like anything else. I like to compare it to a human. When the products a baby, everyone wants it! It’s cute, new and exciting. When it gets to its teen years it has potential but people kind of get annoyed with the redundancy of the product. So it has to reinvent, recreate and better itself to make it more marketable to the people. The final stage it’s like here I am, I am a classic. Take me as I am.
So for chapter six, I would like to focus on the discussion of licensing vs. FDI’s. As complicated as this chapter was, this I understood. Some of the samples they had in explaining it is crazy. For instance, if there is a good product being sold why not emulate it and make profits of your own off of it. Not everyone can be trusted with certain merchandise. That’s why many inventors are reluctant to share their idea before they pattern it. As an individual working in another country, you know the product must be selling. Why else would the company send it overseas? Thus, take the product change the name and make it your own. Licensing can be very risky in that sense.
Another great point is the knowledge section. The old adadge you can lead a horse to water but can’t make him drink it can be seen relevant in this business section. You can give them all the information they need but they can create a carbon copy of the job you want done. It’s like if someone gave you a receipe for a great Italian Sauce…no matter how closely you follow that receipe, it won’t taste the same like the original.
So from all that, I would suggest if you are looking to invest your company overseas FDI’s are the way to go. Undoubtly they are risky, but more likely than not you as a CEO had to have taken many risks to get you this far in the business world.
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