Global/International Trade Home Work # 3

Corruption Ranking by Country

Corruption can be defined as the paying and receiving of bribes for preferential treatment. Corruption indexes are introduced by Transparency International. They have a special criteria to measure the corruption through 13 independent surveys in any country or nation or governments.

http://www.einfopedia.com/most-corrupt-countries-or-nations-rankings-2010-of-the-world-highest-corrupt-governments.php

Factors To Measure Corruption In Public Sector In Any Country

            

Rank Cause of corruption Index Lack of sanctions or impunity 0.93 Inertia and inaction 0.86 Desire for personal enrichment 0.84 Lack of transparency 0.81 Lack of motivation due to the drop in purchasing power 0.81 Arbitrary career promotion 0.79 Abuse of power by public officials 0.78 Poor functioning of the administration 0.7 Lack of clear rules and standards of conduct 0.66 Pressure from superiors/high-ranking persons 0.57 Excessive patronage and tutelage 0.53 Everyone else does it 0.44

http://portal.bsa.org/idcglobalstudy2007/studies/summaryfindings_globalstudy07.pdf

http://portal.bsa.org/idcglobalstudy2007/studies/summaryfindings_globalstudy07.pdf

http://portal.bsa.org/idcglobalstudy2007/studies/summaryfindings_globalstudy07.pdf

http://portal.bsa.org/idcglobalstudy2007/studies/summaryfindings_globalstudy07.pdf

http://portal.bsa.org/idcglobalstudy2007/studies/summaryfindings_globalstudy07.pdf

http://portal.bsa.org/idcglobalstudy2007/studies/summaryfindings_globalstudy07.pdf

Cases of Violation of Intellectual Property Rights

Feist Publications vs Rural Tele Services Co (1996)
Feist Publications came out with a telephone directory that contained peoples' phone numbers arranged in a certain format. The same format was adapted by Rural Tele Services without any changes in their directory. Feist Publications brought in a lawsuit against Rural Tele Services, calling it a copyright infringement. The case was struck down, as Feist did not include any kind of original data. If Feist had used any special format that took much effort, such as including maps, etc. alongside the phone numbers, it would have been a case of copyright violation. However, as it was just a simple arrangement of phone numbers, the verdict was in favor of Rural Tele Services Co.

http://www.brighthub.com/office/entrepreneurs/articles/74022.aspx

Cases of Violation of Intellectual Property Rights

Princeton University Services (1996) Press v. Michigan Document
Michigan Document Services was involved in creating packages of study material for the students of the University. A professor supplied the course material and Michigan Document services, a photocopying organization, took photocopies of the material and converted it into a booklet for sale to students at the University. There was a clause of "Fair use" in this case. The photocopying company could have paid a nominal fee to the University and then used the material. This was available to anyone who wished to use the material. However, the photocopying company paid for only the original and then started making photocopies of the study material. The court considered that it was not "fair use" and penalized the photocopying company.
http://www.brighthub.com/office/entrepreneurs/articles/74022.aspx

Cases of Violation of Intellectual Property Rights

A & M Records vs. Napster (2001)
This is one of the most famous cases of copyright infringement related to the music industry. As peer to peer file sharing increased, Napster started a website. This website offered downloads of songs of all genre new and old. You may know someone who used it. A & M Records brought in a joint copyright infringement case which accused Napster of stealing music and making it available to people worldwide. Before closing the site in 2002, Napster had to settle USD26 million to different recording companies and songwriters. It could have even more if Napster had not apologized and folded the site. Several websites still thrive on offering free music to people who can download it at no cost. As mentioned in our article on "Internet Ethics and Copyright Laws", the music industry faces most copyright infringement cases. The Napster case, though an example of the consequences, still does not act as a deterrent for other music websites that offer free music downloads. We hope these famous copyright infringement cases have clarified what is considered copyright violation to some extent. If you still have any questions, please free to contact us using the comments facility.

http://www.brighthub.com/office/entrepreneurs/articles/74022.aspx

Trade Theories
1. Mercantilism (Thomas Mun 1630)
Countries should Encourage Exports & Discourage Imports.

2. Absolute Advantage (Adam Smith 1776)

Explains why unrestricted free trade is beneficial to a Country.

3. Comparative Advantage (David Ricardo 1817)

Efficiency of production.

4. HeckscherOhlin Theory (Eli Heckscher 1919 & Bertil Ohlin 1933)

The Leontief Paradox
(Wassily Leontief 1953)

Mercantilism
Initial trade theory that formed the foundation of economic thought from 1500 1800 Based on concept that a nations wealth is measured by its holding of treasure (gold) Nations often imposed restrictions on imports since they did not want their treasure moving to another country to pay for the imports It was also advantageous to run a trade surplus with colonies

Absolute Advantage
Absolute advantage holds that different countries produce some goods more efficiently than other countries Thus, global efficiency can be increased through international free trade

Country Specialization
Under the concept of absolute advantage countries could increase efficiency because:
 Labor could become more skilled by repeating the same tasks  Labor would not lose time in switching from the production of one kind of product to another  Long production runs would provide incentives for the development of more effective working methods

Natural Advantage
Countries have inherent advantages
  

Climate Natural resources Labor forces

Two countries that have opposite natural advantages should favor trade with one another

Acquired Advantage
Most contemporary trade is manufactured goods and services rather than agricultural goods or natural resources. Countries with an acquired advantage produce manufactured goods and services competitively.
 

Product technology Process technology

Comparative Advantage
There are still global gains to be made if a country specializes in products it produces more efficiently than other products. Regardless of whether other countries can produce those same products even more efficiently.

Trade Theories (Continued) The Product LifeCycle Theory

Limitations of Product Life Cycle Theory

Products with extremely short PLCs Luxury products where cost may be of little concern Businesses with products that follow a differentiation strategy Products that require specialized technical labor for subsequent generations

Trade Theories (Continued) New Trade Theory

Economies of Scale
Per unit cost reductions associated with large scale of output.

Learning Effects
Cost savings that come from learning by doing.

First-mover advantage
Economic and Strategic advantages entering early in an Industry. gained by

Looking to the Future

Protectionist sentiment is growing. Economies are growing, therefore efficiencies of multiple production locations grow. Flexible, small-scale production methods are on the rise (robotics/automation processes). Services are growing faster than production in industrial countries.

5-18

Categories of World Trade

Implications of New Trade Theories

 Nations may benefit from trade even when they do not differ in resource endowments or technology.  The Aerospace Example

Factors of Comparative Advantage

1. 2. 3. 4. 5. Land Location Natural Resources (Minerals, Energy) Labor, and Local Population Size

Michael Porter

Porter says, sustained industrial growth has hardly ever been built on above mentioned basic inherited factors. Abundance of such factors may actually undermine competitive advantage! He introduced a concept of clusters or groups of interconnected firms, suppliers, related industries, and institutions that arise in particular locations

Porters Diamond Theory

1.Factor Endowments. 2.Demand Conditions. 3.Related Supporting Industries. 4.Firm Strategy, Structure and Rivalry.

Porters Diamond Theory

Factor Endowments/Conditions
Contrary to conventional wisdom, Porter argues that the "key" factors of production (or specialized factors) are created, not inherited. Specialized factors of production are skilled labor, capital and infrastructure. "Non-key" factors or general use factors, such as unskilled labor and raw materials, can be obtained by any company and, hence, do not generate sustained competitive advantage. However, specialized factors involve heavy, sustained investment. They are more difficult to duplicate. This leads to a competitive advantage, because if other firms cannot easily duplicate these factors, they are valuable.

Demand Conditions
The more demanding the customers in an economy, the greater the pressure facing firms to constantly improve their competitiveness via innovative products, through high quality, etc.  Case Study: The Rise of Finlands Nokia

Related Supporting Industries

Spatial proximity of upstream or downstream industries facilitates the exchange of information and promotes a continuous exchange of ideas and innovations.

Firm Strategy, Structure and Rivalry

The world is dominated by dynamic conditions, and it is direct competition that impels firms to work for increases in productivity and innovation)

The Role of Government in Porter's Diamond Model

It is acting as a catalyst and challenger; it is to encourage - or even push - companies to raise their aspirations and move to higher levels of competitive performance. They must encourage companies to raise their performance, stimulate early demand for advanced products, focus on specialized factor creation and to stimulate local rivalry by limiting direct cooperation and enforcing anti-trust regulations.

Focus on Management Implications

Location First-Mover Advantage Government Policies

Identify the Product and its Liabilities

Product liability comprises a number of laws and court rulings that apply to any business that makes or sells a product. Businesses that make or sell products are responsible for ensuring that those products are safe and do not pose a hazard to the public. Such businesses can be held liable for any damage or harm their products might cause.

Identify the Product and its Liabilities

According to Section 102(2) of the Uniform Product Liability Act, product liability includes "all claims or action brought for personal injury, death, or property damage caused by the manufacture, design, formula, preparation, assembly, installation, testing, warnings, instructions, marketing, packaging, or labeling of any product." Product liability issues have become increasingly important to manufacturers and marketing managers, due to the spread of the doctrine of strict liability and the adoption of new theories that permit recovery in so-called "delayed manifestation" cases.

Identify the Product and its Liabilities

Because of their limited resources, small businesses must be particularly aware of their responsibilities under product liability laws. In addition to making safe products, this responsibility extends to prominently displaying warnings of any potential hazards on products and packaging. Experts recommend that small business owners consult with legal counsel experienced in the product liability field. An attorney can help the small business owner sift through the numerous federal and state laws that apply to different types of products. Small businesses are also encouraged to purchase product liability insurance. Unfortunately, the increasing number of lawsuits and large damage awards in this area have made such insurance very expensive and reduced the amount of coverage available. In fact, the expense of insuring against product liability has prevented small manufacturers from competing in certain product areas.

References:
 http://www.einfopedia.com/most-corrupt-countries-or-nations-rankings2010-of-the-world-highest-corrupt-governments.php  http://portal.bsa.org/idcglobalstudy2007/studies/summaryfindings_globa lstudy07.pdf  http://www.brighthub.com/office/entrepreneurs/articles/74022.aspx  http://www.scribd.com/doc/31827104/Lecture-3-International-TradeTheory  http://www.referenceforbusiness.com/small/Op-Qu/Product-Liability.html