International Business Module Harvard Case Solution & Analysis

Solution 4

Innovative Economy

            Innovation economy refers that it is the responsibility of the government to produce higher productivity and define economic policy accordingly in order to produce the goods. The factor that should be considered is that markets should depend upon input resources in order to achieve economic growth. In order to bring innovation in the economy, it should be inspiring and influencing by creating a community and think on a long term basis. At government level, leaders should be able to inspire and influence the people with a clear vision and mission statement. At this level, leaders should be able to motivate the people in order ensure best performance level and they should be provided better work environment in the country. Create a community refers to building an effective ecosystem that must be efficient in order to achieve long term success of the country. Inside and outside community should be provided equal benefits to work and participate in the success of economy in the long run. Think long term means that in order to be successful and bring innovation in the economy, leaders must be concerned regarding the long term goals and objectives for the country. Instead of just focusing on the number game, it is better to maintain standards and procedures that support all the sectors in the economy.

Difference b/w Innovation and Manufacturing Economy

            In any economy manufacturing is a wealth producing area of a country. Production is common in both innovation and manufacturing economy, one of the differences between these two is, in innovation economy production is based on research and development, creativity, innovation, updated technology and it keeps on changing with the passage of time as per the technology updates and trends and subject to global practice. As far as manufacturing economy is concerned, it produces goods on the basis of past trend and practices unlike the innovation economy. Innovation economy can play a very important role for the country development in the long run because it usually produces goods for the international market and it is very necessary for any country to be involved in that process in order to compete successfully at global level.

Solution 5

            Keeping in mind the international trade theory, comparative advantage theory is the most significant factor. In order to produce the goods, various options are available for the country to work upon; sometimes a foreign country can provide cheaper commodity rates than the country itself has produced, in this way advantage can be achieved. The Ricardian model of comparative advantage has concentrated on economic model of international economy in order to gain advantage at global level. The theory explains that in case two countries are producing the goods dependent only on the labor as a factor of production and goods are considered identical across firms and countries. Labor is homogenous factor within a country but not heterogeneous across countries. Goods can be produced at cheaper rates between countries as well as labor also but it should not be transferred between countries. According to the Ricardian theory, labor should be provided with ample opportunities in the long run in order to grow the economy. Production and technology differences exist across countries and industries are reflected in labor production parameters.

            Ricardian theory supports the economy in a positive manner because when labor is increasing in the country so it means that the economy is doing well and there are sufficient job opportunities provided to the lower middle class; which is an important factor in order to keep the economy growing and sustainable. One of the drawbacks of the Ricardian theory is the dependence over labor as a factor of production. According to the Ricardian theory, labor is the only utilization in the factors of production that means land, capital and organization factors are ignored. This may cause a negative impact in the economy because without the combination of all of them, it is very difficult for a country to boost the economy on long term basis. Capital investment is a very important factor for the economy and for the country as without an increase in capital; economies cannot grow further and cannot compete globally as well. Firms cannot be established if there are no opportunities and friendly policies from the government level related with trade, taxation, import/export duties etc. Land is also another key factor of production that also plays a vital role in the economy performance, natural resources including oil, gas, water, soil, mineral, flora, etc. are all important for the economy. These are some of the main concerns that Ricardian theory lacks................................

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