A Strategic Management Paper on Walmart

International Economy trade

* Mercantilism : export as much as possible and import as little as possible, this enable one to accumulate more gold ( flop principle) - if everyone practice this there will no one be exporting . so you can buy. There will be dispute and tensions across borders

* New Mercantilism : US accuse China. Export a lot import little. Accumulate foreign exchange. China has the largest foreign exchange in the world. China excuse: Produce quality goods at a very competitive ( low) cost. That's why everyone buying from them. They have the comparative advantage. WHO IS RIGHT ?

TWO key words here:

* Specialization VS trade ( they should go tgt )

* Specialization: they produce certain items more than the rest

o Example Saudi Arabia that focus on selling oil and fuel

* Efficiency : More efficient is output over input is more than 1 when compared to others ( the higher the number the more efficient you are )

* Input/output : average cost: the lower the number the more efficient you are

Principle of Absolute Advantage

Autarky : Closed economy

1) When trading occurs within the country, the prices are Autarky prices( domestic prices)

2) Specialisation bring about greater efficiency

3) Apply the 2 man hours to the case of US vs UK = output : 30, 40

4) Pricing of exports n imports determined by opportunity cost

5) If the cost is higher than 4, US will not want to buy no matter how much UK wants to send

6) If the cost is lower than 2/3 US will not sell

7) The outcome is more efficient since the total production output increases

8) Is it fair ? depends on the satisfaction of the trading countries ( very hard to ans)

9) Normal vs inferior goods: normal goods , more is better

10) Fair argument : Its better its fair because situation is better than Autarky situation. 2ndly, you agree to enter the trade yourself and no body forces you to enter the trade so you must be acceptable to the terms and thus fair. 3rd argument : Uk says not fair because US trade more than UK. ANS: Marginal utility in US and Uk is different. Us might require more cloth to achieve the same utility as UK. " Marginal Utility "

11) - absolute advantage principle doesn't work especially when one country has efficiency in all aspect compared to another country

Principle of Comparative Advantage

- A country might be efficient in everything but he might not need to produce everything

- Need to draw a line which to specialize in and had more advantage over another, which industry is more profitable

- Specialize