Vernon's Product Cycle Theory: Quiz and Flashcards

Questions and Answers

A concentration of suppliers and supporting firms from the same industry located within the same geographic area

Pusan, South Korea

A plan employed by the government to support promising industry sectors with potential for regional or global dominance

Vietnam Signup and view all the answers

Tax incentives, investment in national infrastructure, strong legal and regulatory systems Signup and view all the answers

Milan, Italy Signup and view all the answers

Probusiness, proinvestment, export-oriented policies Signup and view all the answers

Technology industry Signup and view all the answers

Can serve as an export platform for the nation Signup and view all the answers

Investment in national infrastructure Signup and view all the answers

Study Notes

Higher living standards for consumers due to lower costs, and greater prosperity in poor countries.
Comparative advantage refers to a country's superior features that provide unique benefits in global competition, derived from natural endowments or deliberate national policies.

France has a climate and soil superior for producing wine.
Saudi Arabia has a natural abundance of oil for producing petroleum products.
Japan has acquired a superior base of knowledge and experience for producing cars.
India has acquired a superior base of IT workers for producing computer software.

Refers to the distinctive assets, competencies, and capabilities developed or acquired by a firm, leading to superior performance.

Each product goes through three stages of evolution: introduction, maturity, and standardization.
Introduction stage: inventor country has a monopoly in manufacturing and exports.
Maturity stage: production becomes standardized, other countries start producing and exporting the product.
Standardization stage: manufacturing ceases in the original innovator country, which becomes a net importer of the product.

Economies of scale are important in some industries for superior international performance, even in the absence of comparative advantages.
Example: The commercial aircraft industry has high fixed costs, requiring high-volume sales to achieve profitability.

Innovation is a key source of competitive advantage, through developing new products, manufacturing methods, marketing strategies, and company operations.
Many innovative firms in a nation lead to national competitive advantage.

Productivity is a key source of competitive advantage for firms, referring to the value of output produced by a unit of labor or capital.
Aggregate productivity is a key determinant of a nation's standard of living.