Module 1 - Lesson 3 - International Business and Trade - Gonjoran, Rema Jean D. BSBA 3G

Republic of the Philippines
Biliran Province State University

(Formerly NAVAL STATE UNIVERSITY)
ISO 9001:2015 CERTIFIED
Naval, Biliran
BACHELOR OF
SCIENCE IN
BUSINESS
INTERNATIONAL BUSINESS
AND TRADE
BA 317
LESSON 3
Module 1
JONAS A. ENRIQUEZ
Instructor
Absolute Advantage and Comparative Advantage
Intended Learning Outcomes

Second Semester, SY 2020-2021
At the end of this lesson, you are expected to:
Name of Student: _Rema Jean D. Gonjoran_________________________________
1. Select an international business as subject of the case study
Course, Year & Section: __BSBA 3-G________________________________________
Develop the case study by identifying the progress of the business from host country up to
the country where
Contact the business
Number: is operating At the end of this lesson, you are expected
09954715245____________________________________________
to:
1. Select an international business as subject of the case study
Ground Floor Administration Building, Main Campus, P. Inocentes St., P.I. Garcia, Naval, Biliran Province, Phillipines 6560
Tel. (053) 507-0082‫ ן‬Telefax. (053) 507-0082 & Cell # 0995-471-5907
SUC Level III-A (Per DBM-CHED Joint Circular #B dated June 21, 2007
Website: www.bipsu.edu.ph ‫ ן‬Email: op@bipsu.edu.ph ‫ ן‬Facebook: www.facebook.com/WowBiPSU
2. Develop the case study by identifying the progress of the business from host
country up to the country where the business is operating
3. Critically analyze the differences of political/legal system, economic dimensions
and cultural dynamics.
Overview:
International business and trade is an advance subject for BSBA students. In the beginning
of this course, all students will focus on the development of the concepts of international
business. This subject underlined most on the trading system. Notwithstanding, this focuses
first on the theories whom the students may able to direct observe in their surroundings.
Let’s Start
International Trade: Theory and Applications are not only about business interests in a
particular country. Likewise global trade is much more of this, in fact, it quite complicated
and high risk but manageable and can offer very interesting invested return. Understanding
the theories on absolute advantage and comparative advantage gives way to develop
effectively in terns of trading system.
Smith argued that specializing in the

products that they each have an absolute
advantage in and then trading the products,
can make all countries better off, as long as
they each have at least one product for
which they hold an absolute advantage over
other nations.
Countries with an absolute advantage can

decide to specialize in producing and
selling a specific good or service and use
Illustration 1
the generated funds to purchase goods and
services from other countries.
Answer me:
1. Justify how absolute advantage manage to develop the economic stability of

the such particular country.
Answer:
Absolute advantage is something that a country can produced greater
amount of goods and services effeciently with fewer resources needed than
other countries. And a country that has an absolute advantage specializing
in producing that goods and services will manage to develop the country's
economic stability in a a sense that producing more of that goods will drive
our GDP growth , and a constant output growth domestically considered as
economically stable.
2. Within the concept of absolute advantage, identify particular advantage of your

chosen product.
Answer:
Based on the concept of absolute advantage , Starbucks coffee has an absolute

advantage of producing high quality coffee than other coffeehouses. They have
skilled worker and new technology in producing or making coffee drinks quickly and
with high quality.
3. Critically discuss the impact of the absolute advantage in the local area.
Answer:
Absolute advantage has a great impact in the local area in a way that when a
country has absolute advantage of producing a particular goods with fewer
resources means that the local area will also benefit because the resources or
materials are taken locally and the labor workers will be hired locally.
Let’s Analyze
Comparative Advantage
Comparative Advantage
Illustration 2
Activity 12: Comparative Advantage
1. Justify how comparative advantage manage to develop the economic

stability of the such particular country instead of absolute advantage.
Answer:
If we compare it with absolute advantage , a country can have absolute
advantage of producing all goods and it is focus on producing a greater
quantity of goods effeciently while comparative advantage is tge ability of
producing goods and services at a lower cost not on the volume or quantity
of producing goods. A country that has a comparative advantage will be able
to develop economic stability in a way that they'll focus on producing in a
particular goods that has a lower opportunity cost than with the other goods.
So , if a country specialized in producing a goods that has a lower
opportunity goods in terms of other goods , it will allow the country to reduce
its average capital-output ratio and it will give a possibility to a higher rate of
growth in output that will result for our economic growth .
2. Within the concept of comparative advantage, illustrate particular advantage of

your chosen product.
Answer:
Starbucks has a comparative advantage in producing high quality coffee and

importing arabica beans from Asian Pacific countries. We know that United States
is not rich in coffee beans , instead of having their own farm of coffee beans , the
Starbucks just imports Arabica beans from farms in Asian Pacific countries that is
top notch in high quality.
3. Critically discuss the impact of the comparative advantage in the local area.
Answer:
The impact of comparative advantage in the local area is that they'll benefit from it
because if a country produced a goods and services at a lower opportunity cost , it
means that goods and services will be cheaper or will be sell at a lower price .
Let’s Dig Deeper
Activity 13. Absolute and Comparative Advantages
Advantage
Theories Disadvantage
• Ability to produce • It has drawbacks for
Absolute greater quantity of that foreign exchanges. One
particular goods and limitation is it can disrupt
services than other supply and demand•
countries
• Fewer resources or
materials needed in
production of goods and
services.
• ability to produce goods

and services effeciently
than other nations
• Ability to produce goods • Other goods will be
and services at a lower given up to produce that
opportunity cost than specialized goods and
other nation. services.
• Increased effeciency • Government may restrict

trade
Comparative
Let’s Use it:
SWOT Analysis: Starbucks
STRENGHTS WEAKNESSES
INTERNAL 1. Products of the highest 1. Expensive Products
quality 2. Imitability of Products
2. Location and Aethestic 3. Overdependence in the United
EXTERNAL appeal of its store States Market
3. Strong Market Position and 4. Self- Cannibalization through
Global brand recognition Overcrowding
4. Customer base Loyalty
OPPORTUNITIES
1. Technological Advances S1 & O4 - Innovate new high W3 & O2 - Expansion in other
2. Global expansion quality product mix countries around the
3. Expansion of retail operations and offerings globe not just in United
4. Expanding Product Mix and States
offerings
THREATS
1. Increased Competition S1 & T1- Innovate and maintain
2. Price Volatility in the Global high quality products to W1&T4 - Maintain high quality
Coffee Market outscore competitors products to be an
3. Changing consumer taste and advantage with low cost
lifestyle choices competitors.
4. Low-cost competitors
ASSESSMENT
1. Demonstrate the impact of the two theories

Answer:
Both theories has an impact on our country's economic stability. Absolute advantage
gives an impact on the growth of production of a particular goods and services which
in turn drive the growth of country's GDP. Also a country who has an absolute
advantage of a specialized goods will impact the price of goods , it will become
cheaper than in other countries. While the comparative advantage has a great impact
on the average capital of output ratio because of its lesser production cost than other
goods.
2. Which of the two theories described most to your business? Support your answer.
Answer:
In my perspective , Starbucks mostly has an absolute advantage over other
coffeehouses around the world in terms of producing more high quality coffee drink
very quickly because of their advanced technology and skilled workers . The
starbucks imports arabica beans from Asian Pacific countries and has skilled workers
to make their high quality coffee drinks.
COURSE
POST TEST
Test I. Comprehensively discuss the following:

(You may extend the lines if more space if needed)
1. Define by own words the following and give example each.
A. Absolute Advantage
Answer:
In my own opinion , absolute adavantage is the ability to produce goods and

services very quickly and with fewer materials needed.
B. Comparative Advantage
Answer:
Comparative advantage is the ability to produce good and service at lower

opportunity cost and it is like giving up other goods to produce that particular
goods which is much lesser in terms of other goods.
C. SWOT Analysis
Answer:
In my understanding, SWOT analysis is a tool wherein business used to analyze

and identify the Strengths, Weaknesses , Opportunities and Threats in an
organization or a business. And as a result of analysis , it will help the
organization to come up for a strategic plan to meet their goals.
D. What particular products of the Philippines is suited for:

1. Absolute Advantage
Answer:
The Philippines has an absolute advantage of coconuts because we are the
largest producers of coconuts. The Philipines is the biggest exporters of
coconut oil and copra around the world.
2. Comparative Advantage
Answer:
The Philippines has a comparative advantage in agricultural goods like
sugarcane and coconuts. The Philippines exports coconut oil and copra in
other countries.

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Republic of the Philippines

Biliran Province State University

Absolute Advantage and Comparative Advantage

Intended Learning Outcomes

1. Select an international business as subject of the case study

Smith argued that specializing in the

Countries with an absolute advantage can

1. Justify how absolute advantage manage to develop the economic stability of

2. Within the concept of absolute advantage, identify particular advantage of your

Based on the concept of absolute advantage , Starbucks coffee has an absolute

1. Justify how comparative advantage manage to develop the economic

2. Within the concept of comparative advantage, illustrate particular advantage of

Starbucks has a comparative advantage in producing high quality coffee and

Let’s Dig Deeper

• ability to produce goods

• Increased effeciency • Government may restrict

SWOT Analysis: Starbucks

1. Demonstrate the impact of the two theories

Test I. Comprehensively discuss the following:

1. Define by own words the following and give example each.

In my own opinion , absolute adavantage is the ability to produce goods and

Comparative advantage is the ability to produce good and service at lower

In my understanding, SWOT analysis is a tool wherein business used to analyze

D. What particular products of the Philippines is suited for:

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