B301: Trade War Impact on Factor & Demand Conditions & Strategies

This report examines the impact of the US-China trade war on the factor and demand conditions of both countries, utilizing Porter's Diamond model of national competitive advantages. It discusses both the positive and negative consequences of the trade war on the United States and China, focusing on resource utilization, domestic business impacts, and market dynamics. Furthermore, the report recommends four key strategies for Kuwaiti companies to succeed in the global market: developing a diverse workforce, engaging in joint ventures, adopting a market-adaptable approach, and building a diverse product portfolio. The analysis concludes that while the trade war presents challenges, strategic adaptation and diversification are crucial for international success. Desklib provides students access to similar solved assignments and resources.

Running head: BUSINESS STRATEGY
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Introduction
In the current global scenario, one of the major topics being widely discussed and known
is the trade war between the United States and China. This got further amplified due to the
reason that the government of the United States under the leadership of Donald Trump imposed
heavy duty and taxes on the imports of the Chinese goods. This caused repercussions from the
side of China and lead to the escalation of the issue (Huggins and Izushi 2015). However, in this
case, it should be reviewed about how the emergence of this trade war is affecting the market and
industry conditions of both the country. There will be both negative and positive impacts of the
trade war for the two countries. On the basis of these factors, the domestic firms of any countries
should strategize their importance and preferences and succeed in the global markets.
This paper will discuss about the impact of the trade war on the factor and demand
conditions of both the United States and China on the basis of the Porter diamond model of
national competitive advantages. In addition, the four major strategies will be discussed for the
companied based in Kuwait in succeeding in the global markets.
Porter’s diamond model of national competitive advantages
According to the diamond model of national advantages, there are few factors that should
be followed in gaining the national competitive advantages over the other countries. The two
major factors are the factor and demand conditions in which, factor conditions refer to the
availability of the resources in the country for business and demand conditions refer to the
market potentiality of the particular country. The following section will discuss about each of the
impacts of the trade war on these factors of both the United States and China.
Impact on factor conditions of the United States

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Due to the emergence of the trade war, the factor conditions of the United States faced
both negative and positive impacts. The major positive impact of the trade war is the proper and
optimal utilization of the available resources. This is due to the reason that with the increase in
the import of the readymade goods from China at cheaper rate, the domestic resources available
with the United States got underutilized (Solvell 2015). These resources also include human
resources. Thus, the more is the import for China, the more is the unemployment rate. With the
emergence of trade war, imports from China got restricted and factor conditions of the United
States got improved. However, on the other hand, it should also be noted that due to the
emergence of the trade war, the domestic business also got down. This is due to the reason that
similar to the imports of the Chinese goods, exports were evident from the United States. Thus,
the resources of the United States being used for exported goods for China started to
underutilized (Li, He and Lin 2018). Factor conditions of the United States witnessed both
negative and positive impacts.
Impact on factor conditions of the China
In the case of factor conditions of China, the major positive impact of the trade war is the
underutilization of the resources and this impact is more for China than for the United States.
This is due to the reason that China is more resource depended economy especially on the basis
of the human resources (Liu and Woo 2018). Hence, trade war caused reduction in the business,
which further reduced the requirement of human and other resources. On the other hand, due to
the emergence of the trade war, the domestic business got increased due to the reason that there
are areas where the goods from the United State dominated. In the absence of these goods,
Chinese made goods are getting more domestic potentiality to thrive (Tai and Soong 2014). This

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should also be noted that majorly the knowledge resources and infrastructural factors of Chin are
affected due to the emergence of the trade war with the United States.
Impact on the demand conditions of the United States
Due to the trade war with China, demand conditions in the United States got increased
due to the reason that domestic firms have more market area to operate and cater to larger
customer bases. However, it is having negative consequences from the side of the customers
because they are now having fewer options to choose from. In addition, the customers of the
United States will have to pay increased average price due to the lack of competition in the
market and absence of cheaper Chinese variants (Handley and Limao 2017). Hence, in one side,
the United States are having favorable market conditions for the domestic players and in other
way, the customers are facing the increase in the price of the products. This also increased the
market opportunity and viability of the United States to the companies from other countries due
to the reason that without the presence of the Chinese competition, the market potentiality will be
more for them.
Impact on the demand conditions of the China
In the case of China, the major impact of the trade war in their demand conditions is the
lack of innovation. This is due to the reason that with the inflow of the American products,
Chinese manufacturers are forced to innovate in order to manage their competitiveness in the
market. However, with the absence of the American goods in the market, the requirement for
innovation got reduced for the Chinese companies with the reduction in the competition in the
market (Tankersley and Bradsher 2018). On the other hand, it is also identified that emergence of
the trade war between the two countries also led to increase in the economies of scale. This is

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due to the reason that with the trade war, Chinese companies got less threat of the American
products in the market and are being able to cater to larger customer sections. Thus, their sales
volume will be get increased that will further increase the economies of scale.
Recommended strategies
In order to get succeed in the global market, Kuwaiti companies should follow specific
strategies. The following sections will discuss about these strategies.
Diverse workforce
Diverse workforce is important for the companies in Kuwait in getting succeeded in the
global market due to the reason that the more diverse will be the employees, the more will be the
organizational effectiveness in tapping the different needs of the global customers. It should be
noted that different customers from different regions are having different expectations and
requirements. Hence, it is important for the companies to have the employees from different
social and cultural backgrounds to meet the needs of the customers from the respective
backgrounds. Diverse workforce will be able to have the understanding about the diverse
preferences of the global market. In order to have the diverse sets of employees in place, the
Kuwaiti companies should initiate geocentric approach of staffing. With the help of the
geocentric style of staffing, companies will have the employees across different nationalities,
which will ensure the diverse workforce.
Joint venture
It is also recommended that the Kuwaiti companies should initiate joint venture strategy
in order to gain in the global market. With the help of the joint venture strategy, Kuwaiti entities

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will be able to acquire the competitiveness of the partnered firm in the foreign locations.
Moreover, joint venture strategy will also be beneficial in getting the support in terms of
resources in operating in the foreign regions. More brand awareness can be ensured with the help
of the joint venture with renowned firms.
Market adaptable approach
It is also recommended that market adaptable approach should be followed by the
Kuwaiti companies. This will enable them to design their products as per the local taste and
preferences. Global markets are having different sets of customers and products should be
customized according to the preferences in different regions in order to cater to the maximum
number customers. In addition, the more will be the market adaptable approach, the more will be
the probability of market penetration in the foreign markets.
Diverse and broad product portfolio
Diverse and broad portfolio of products is important for the Kuwaiti companies in
succeeding in the global market. This is due to the reason that in order to meet the diverse sets of
requirements in the global market, the product varieties should also be more. Companies should
not only offer products according to the Kuwaiti preferences in order get success in the global
market. The broader will be the product portfolio, the more will be the target customer bases for
the companies.
Conclusion
Thus, it can be concluded that there are number of positive as well as negative impacts to
be faced by both the United States and China due to their ongoing trade war. On the basis of the

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Diamond model of national advantage, number of positive and negative factors is identified from
the perspective of both the countries. In addition, the potential and effective strategies that can
help the Kuwaiti companies in gaining foothold in the global market are also being discussed in
this report.

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Reference
Handley, K. and Limão, N., 2017. Policy uncertainty, trade, and welfare: Theory and evidence
for china and the united states. American Economic Review, 107(9), pp.2731-83.
Huggins, R. and Izushi, H., 2015. The Competitive Advantage of Nations: origins and
journey. Competitiveness Review, 25(5), pp.458-470.
Li, C., He, C. and Lin, C., 2018. Economic Impacts of the Possible China–US Trade
War. Emerging Markets Finance and Trade, 54(7), pp.1557-1577.
Liu, T. and Woo, W.T., 2018. Understanding the US-China trade war. China Economic
Journal, 11(3), pp.319-340.
Sölvell, Ö., 2015. The Competitive Advantage of Nations 25 years–opening up new perspectives
on competitiveness. Competitiveness Review, 25(5), pp.471-481.
Tai, W.P. and Soong, J.J., 2014. Trade relations between China and southeast: Asia strategy and
challenge. Chinese Economy, 47(3), pp.23-39.
Tankersley, J. and Bradsher, K., 2018. Trump hits China with tariffs on $200 billion in goods,
escalating trade war. New York Times.