Comparative Advantage

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Comparative Advantage Christopher L Kearney University of Phoenix ECO/GM 561 International Economics Watson T. Ragin June 27, 2011 Comparative Advantage This writing will begin by defining the concept of comparative advantage while comparing the automobile industry in the United States and the industry in Japan and expound of the similarities and differences of both of the countries. According to InvestorWords.com comparative advantage is defined as the ability of a business entity to engage in production at a lower cost than another entity. Comparative Advantage, rather than absolute advantage is useful in determining what should be produced and what should be acquired through trade. Japan is the country being compared to…show more content…
The performance of the automobile industry is closely related to economic performance. The increases in oil prices have caused the demand for Sports Utility Vehicles and light trucks to decline as consumers are now vying for more fuel efficient vehicles in an attempt to save costs on transportation. The flux in consumer preferences has proved to be positive for German, Japanese, and Korean manufacturers as they have seen an increase in the market shares in the industry. The American industry is still developing strategies to adapt his product line to meet the needs of consumers with the change in preferences. Toyota advances the United States in motor vehicle production because the country has devised the proper strategies in importing valuable technologies for manufacturing; they have excelled in building the appropriate labor pool; along with skilled management professionals, as they have marketed their products successfully in the home market for Japanese transportation needs. The Japanese could modify their manufacturing process with low-cost skilled labor along with raw materials obtained at a cheap rate. The Japanese focuses on quality products for their customers and as the gas prices increased demand shifted to smaller vehicles where the Japanese were already designing and rolling out to customers. The aggregate effect of these changes improved Japanese company’s ability to market their
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