Comparative Advantages and Disadvantages

With China being a market of more than 1. 3 billion people, emulation for this newly emerging market Is rich. The following brands are omitting In the Chinese market. 1. 3 National comparative advantage The theory of comparative advantage propagated by the classical economist David Richard proposes that a country attractiveness to foreign expendment is determined by its inherent natural factors such as land, natural resources, labor, and the size of it of the local population.Michael Porters Diamond of National Advantage extends the theory to propose that a nation posterior create new advanced factor endowments such as skilled labor, a strong technology and k in a flashledge base, government support, and ultra. Kicker uses Porters model here to determine the national comparative advantage. 1. 3. 1 Factor conditions China can offer quality products because of its comparatively cheap labor. China has become the location of choice for global manufacturing. This is usually attributed to its low wages.Chinese factory workers today earn 50 cents to $2 an hour and often work long shifts, getting minimal time off for weekends and holidays. Prosperity, 2005 Competitive Labor Chinas workers are non Just tinny but literate, hard irking, already reasonably skilled and desperate to be trained. There is also a sizable and growing cadre of university-educated technologists and professionals. For example, China is now graduating 330,000 engineers and scientists annually, as compared with 398,622 for the United States Prosperity, 2005.Abundant resources Apart from competent and cheap human resources, China also boasts of huge natural resources. All the raw materials required for producing Kicker are tardily available in China at very competitive prices. 1. 3. 2 Demand Conditions The demand for car audio is increasing rapidly in China, as already noned in a previous chapter. The demand has increased steadily, however, not from Kickers current target market, which is the higher income earning group.The demand for Kicker products will stagnate if it does not lower its price to suit the needs of the upcoming middle class group. Growing market populations China offers a huge market population of 1. 3 billion people. As seen earlier, the middle class car purchasing group, which is Kickers new target group, is increasing phenomenally wing to national growth. 1. 3. 3 Related and load-bearing(a) Industries Kicker sources most of its raw materials from China, who are suppliers of global standard raw materials.Kicker can benefit from the existence of its support industries in China. 1. 3. 4 Firm Strategy, Structure, and Rivalry Kicker is not a single player in the market. This is good because the existence of competition ensures that there is sufficient motivation for product innovation. It also indicates that the demand for foreign car audio exists in the market and has the potential to expand. All the factors together indicate that the time is ripe for K icker to begin its operations in China. . 3. 5 Government military position towards FED / foreign firms The biggest advantage for China is its open policies on foreign direct investment fundss. China is attracting multinational companies by improving relevant policies to attract multinationals to invest in China Chinas Absorption of Foreign Investment, n. D. . The efforts are paying off well, as indicated earlier, the phenomenal increase of over 142% in foreign direct investment from 1999 to 2003.