IB China Ppt Group-9

8/3/2019 IB China Ppt Group-9

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International Business

Presentation By:- Dhiraj Doley

Piyush Upmanyu Prince Kumar Ravi Rathi Shishir Borkar Sunny Jaiswal


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Factors effecting the F DI sResource seekingEfficiency seekingMarket Seeking

Strategic AssetCoherent Economic Policy


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Factors effecting the country

Creation of JobThe promotion of the domestic export-industry plusthe ensuing positive effects on the trade balance and

the availability of foreign exchange.The introduction of modern management andorganizational know-howThe provision of production and process technology

formerly not known to the host countryExpansion of domestic capital formation beyond thedegree that could be finance with domestic saving


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W orld F DI flow in China


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Absolute Advantage & ChinaSome facts:

China exported $ 1.2 billion in commodity pricesaround the world last year.Travel and equipment machinery, includingcomputers and cell phones consisted 47%Manufactured goods have replaced raw materials

as the top export item, accounting for more than80 percent of total exportsUS markets floored by Chinese Goods being

Cheaper


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N atural Advantage

Population Largest Population account forabundance Man PowerHome to rare earthraw materials used inhigh technologyYoung China -

Cheap Labor Far Lower rate thanJapan($27.80) and Philippines($8.68)


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Acquired AdvantageEmbarked on a major program of economicreform in 1978Focus on Manufacturing

sector by GovernmentThe China PriceRestricted exports of raw materials used in the

manufacturing of high technology productsHuge F DI - The foreign money has built factories,created jobs and has led to transfers of technology.


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Acquired Advantage

Chinese Domestic Market:U.S. businesses seek expansion in China to cashin on the expanding domestic marketHigher Human development Index due to govt.focus on health and infrastructure

High Demand of luxuryand Consumer goods


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Comparative Advantage Theory

The theory of comparative advantage saysthat the global efficiency gains may stillresult from trade, if a country specialises inthose products that it can produce moreefficiently than other products, regardlessof whether other countries can producethose same products even more efficiently


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The "comparative advantage" strategy iscredited with driving China's economy over the past 20 years after the reform andopening-up policy was initiated. Accordingto the "comparative advantage" theory,products short of comparative advantagesmust be imported, while industries withcomparative advantages can attract morecapital and other resources and thus can

develop quickly.


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China s Journey from 1980 to 2011


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Theory of Country Size :-The theory of country size holds that large countries usually

depend less on trade than small countries.

Countries with large land areas are apt to have varied climatesand an assortment of natural resources, making them more self-sufficient than smaller countries


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Theory of Country Size (The Economy Angle) :-.

W orlds top 10 exporters and importers are all developed countries,

except for China. These 10 countries account for over half the worldsexports and imports

The top 10 exporters and importers of the world produce so much thatthey have more to sell, both domestically and internationally

At the same time, there is little trade of developing countries with other developing countries


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Factors Proportions Theory

This theory helps us explain what types of products result from natural andacquired advantagesEli Heckscher and Bertil Ohlindeveloped factors proportionstheory, which is basedon countries production factors, namely land, labour and capital (i.e. funds forinvestment in plant and equipment)The theory says that the differences in countries; endowments of labour,compared to their endowments of land or capital explain differences in the cost of production factorsA company may locate its R&D activities and management functions primarily incountries with a highly educated population and may locate its production work in

countries where less skilled and less expensive workers may be employedManufacturing depends on acquired advantage, largely technology, which in turndepends on large number of highly educated people (like scientists, engineers,etc.) and a large amount of capital to invest in research and developmentDeveloped countries have abundance of above features, hence they originatemost new products and account for most manufacturing output and trade


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S pecialized Product

M ost trade takes place among developed countries

Once a company has developed a new product in response to observedmarket conditions in its home market, it turns to markets it sees as mostsimilar to those at home

Trade occurs because countries specialise to gain acquired advantage, e.g. by apportioning their research efforts more strongly to some sectors than toothers

Developing countries also have gained advantages through specialisation,whereby they concentrate successfully on a very narrow product segments

Country Similarity Theory

Product Diffrentiation

The effect of cultural similarity

Colonial History

Political & Economic Relations

IB China Ppt Group-9

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