International Trade and Investment Theories

This article discusses the Heckscher-Ohlin Theory and Product Life Cycle Theory in international trade. It also recommends the suitable market entry strategy for businesses, which is exporting. The article cites relevant sources to support the discussion.

INTERNATIONAL
TRADE

Contents
INTRODUCTION ..........................................................................................................................1
International trade and investment theories.................................................................................1
Suitable market entry strategy.....................................................................................................1
REFERENCES................................................................................................................................3

INTRODUCTION
International trade and investment theories
It is essential for businesses to comprehend all significant kind of international trade
theories. The concept of international trade is broader than just selling and receiving commodities
as well as services. Various international trade theories which helped businesses in its evolution
in different nations are as follow:
Heckscher-Ohlin Theory- It is a comparative advantage international trade theory which
states that nations where capital is relatively abundant and workforce relatively limited will strive
to export capital intensive commodities and import labour associated products. This concept is
used to assess trade and equilibrium of trade between two nations which have varied strengths
and natural resources (Dallmann, 2019) . This theory emphasis on export of products needed
factors of production which a country has in plenty. It also encourages import of commodities
which a country can not generate efficiently. The Heckscher-Ohlin Theory determines how a
nation should runs and trade when resources are not proportionate throughout the world.
Product Life Cycle Theory- This theory is given by Raymond Vernon which presents the
notion of utilising life cycle of products in order to justify transactional trade activities in area of
marketing. This concept of international trade breaks down life cycle of commodity in stages
namely launching, growth, maturity and diminution (Jones and Kierzkowski, 2018). As per this
theory, as demand for new commodity increases, host country begins to export it to other nations.
In this case, local producers facilities are opened to fulfil the request which makes that specific
product standardization. This theory defines how a commodity matures and declines as outcome
of internationalization as well as observed pattern of transactional trade.
Suitable market entry strategy
 Exporting: - this is being considered as one of the most common way which are used by
organisation to go globally. This may be defined as the goods are produces in home
country and sold to the buyer of another country (Nathaniel, Murshed and Bassim, 2021).
The company can export the product directly to the consumer or by using the service of
agent.

From the above discussion it has been recommended to the company that firm can chose
the exporting as the way of expanding their business into the global market. By adopting this way
they can access the more consumer base without investing in the another country and are able to
take the advantage of the diversifying market opportunities. There is availability of large amount
of resources, the investment of company comes from the unlimited shareholders. The
requirement of funds is being resolved with increasing number of share holders. The Winery
company can reduce the cost of production through their higher amount of resources in
production. The liability of shareholders is limited in a company. The company is managed by
the Board of directors, which are being elected democratically. The existence of a company can
not be affected if owner of the company is dead. The shares of a company can be easily marketed
in the stock market. The share of risk in business is high in number so the company can take risk
in market.

REFERENCES
Books and journals
Dallmann, I., 2019. Weather variations and international trade. Environmental and resource
economics. 72(1). pp.155-206.
Jones, R. W. and Kierzkowski, H., 2018. The role of services in production and international
trade: A theoretical framework. World Scientific Book Chapters, pp.233-253.
Nathaniel, S. P., Murshed, M. and Bassim, M., 2021. The nexus between economic growth,
energy use, international trade and ecological footprints: the role of environmental
regulations in N11 countries. Energy, Ecology and Environment. 6(6). pp.496-512.