INTERNATIONAL ECONOMICS

Transcription

1 INTERNATIONAL ECONOMICS Contemporary theories of intenrational trade VERNON'S THEORY OF PRODUCT LIFE CYCLE The theory of product life cycle was formulated by R. Vernon, but Schumpeter created the basis for it According to this theory, the location of production moves from one country to another These changes depend on the level of development of the country and the life cycle of the product. 1

2 ASSUMPTIONS Differentiation of products by country The production process is subject to economies of scale Information flow is limited Technical and marketing characteristics of product change in time and the pattern of these changes are predictable THREE TYPES OF INTERNATIONAL CONGLOMERATES Innovation-driven - new industries, R&D, barriers, aggressive strategies Mature - traditional industries, standard products, conservative strategies or cost leadership, high entry barriers Aging - entry barriers are subject to erosion, declining industries, conservative strategies 2

3 PRODUCT LIFE CYCLE THEORY - STAGES intorduction growth maturity decline INTRODUCTION Introduction stage is characterized by: Innovative in response to the observed needs, Export from the innovating country, Development of product characteristics 3

4 GROWTH Growth is characterized by: Growing exports from innovating country Increased competition (new manufacturers) Increased capital requirements Start of relocation of production sites for benefit realization (to other developed countries) MATURITY Maturity is characterized by: Decline in exports from the innovating country Increased standardization of the product High demand for capital Increasing price competitiveness Production moves to emerging markets 4

5 DECLINE Decline is characterized by: Concentration of production in emerging countries, Country - the innovator becomes a net importer VERNON'S THEORY OF PRODUCT LIFE CYCLE 5

6 VERNON'S THEORY OF PRODUCT LIFE CYCLE THEORY OF PRODUCT LIFE CYCLE LOCALIZATION OF PRODUCTION Stage Production Introduction Growth Maturity Decline Innovating country Innovating country and other developed markets Mix Mainly in emerging markets 6

7 THEORY OF PRODUCT LIFE CYCLE - TARGET MARKET Stage Introduction Growth Maturity Decline Markets Mainly on the market of the innovator country - Small export mainly in industrialized countries local production replaces exports on these markets growing output in emerging markets decline in production in industrialized countries mainly in emerging markets export from emerging markets to industrialized countries THEORY OF PRODUCT LIFE CYCLE - COMPETITIVE FACTORS Stage Introduction Growth Maturity Decline Competitive factors practically monopoly position sales based on uniqueness rather than price product in development phase - change of product characteristics rapidly growing demand growing number of competitors some competitors are beginning to use price reductions the product becomes more standardized practically stabilized demand the number of competitors decreases price is becoming a key element of the sales strategy, especially in the developing countries slow but increasing drop in demand price is a key element of the sales strategy growing numer of manufacturers limit production 7

8 THEORY OF PRODUCT LIFE CYCLE - PRODUCTION TECHNOLOGY Stage Introduction Growth Maturity Technological factors fast start-up time short series, technology development comes along with product development more qualified and experienced staff than even the availability of capital increase of capital expenditures technologies become standard long series with growing capital expenditures strict standardization lower quality requirements Decline low-skilled staff or automated production CONSTRAINTS In this model it is not possible to consider trade in natural resources This model is focused on direct investment, not on export or trade licenses, The analysis is not subject to the competitiveness of international companies or the lack of competitiveness of local entities 8

9 TECHNOLOGICAL GAP THEORY TECHNOLOGICAL GAP THEORY Developed by Posner in 1961; explains the advantages of introducing countries to the market for new products. Key determinant: uneven distribution of technological potential across countries, branches and companies 9

10 TECHNOLOGICAL GAP THEORY Theory assumes that the export advantage is determined by the technological advantage that the innovator has in the country, so it has the advantage and exports goods that have yet to be imitated by other countries (delayed imitation). TECHNOLOGICAL GAP THEORY The advantage of the innovator s country depends on two factors: - the lateness of the latecomers, ie the conditions and time needed to close the technological gap; - the initial innovation potential of the country, i.e. the advantage or technological gap. 10

11 DETERMINANTS OF CATCHING-UP PROCESS Delay of reaction in the leading country, understood as insufficient speed of domestic imitators to imitate leading companies (technology monopolists); Foreign imitation delay, ie the time when national companies in a delayed state (importing country) learn and begin to imitate the production of new state-owned goods; Delay in demand in the country of the imitator, the period necessary for the emergence of sufficiently high domestic demand for profitable production and sales of new products. CLOSING THE GAP IN PRACTICE PESA COMPANY CASE History of PESA Bydgoszcz SA is connected with the first railway line which reached Bydgoszcz in Together with the station, the Eastern Pomeranian Repair Workshops were established, which today constitute PESA Bydgoszcz SA 11

12 CLOSING THE GAP IN PRACTICE PESA COMAPNY CASE Transformation from repair workshops into a Polish largest train manufacturer In 2000 it was bought for 0,5 mln EUR Now it has almost 500mln EUR in revenue and almost 40mln EUR in profit WHY WAS IT POSSIBLE? - Skilled labor force - Experience in train renovation and - winning the largest tender in Europe for the delivery of trams to Warsaw, in (186 trams) 12

13 THE COMPETITIVE ADVANTAGE OF NATIONS THE COMPETITIVE ADVANTAGE OF NATIONS The model describes a combination of factors affecting the welfare of nations The crucial factor for achieving this welfare is ability for sustainable improvement of the competitiveness of the economy, understood as: - cost of labor - interest rates - exchange rates - scale effects - expenditure on R&D 13

14 PORTER S DIAMOND Porter, M.E. (1990). The Competitive Advantage of Nations. Harvard Business Review, March April 1990 ISSUE THE GLOBAL COMPETITIVENESS REPORT EDITION 14

15 THE GLOBAL COMPETITIVENESS REPORT EDITION 15