International Studies in Business Part One According to Stern, comparative advantage refers to the potential of the organization to produce goods and services at a relatively cheaper cost that other organization in the same industry. An organization that has access to cheap resources, favorable government policies, improvement in technology such as communication technology, increase in demand, in the home country and the establishment of related organizations supports the activities of the business thus improving its performance. Dunavant Enterprises is based at the United States and deals with cotton brokerage in many parts of African and Asia (Zachary, 2007).
Most of the organizations in African nations have engaged in oil, gas and mineral exploration in various nations. Therefore, the presence of other organizations in African nations such as Uganda gives Dunavant an upper hand in running of its activities. Their presence results to the improvement in infrastructure development thus reduction, in cost of acquisition and transportation of cotton. The organization offers the farmer cash on delivery of cotton thus giving the cotton farmers in Africa motivation to grow more cotton in exchange for food crops because money is scarcer than food.
The American subsidies to the cotton farmers in Uganda have contributed to low cost of production to the advantage of farmers. Dunavant can get cheap cotton produce as a result of subsidies that make farmers produce cotton at a relatively low cost. Therefore, growing cotton in Africa is cheaper due to availability of cheap land than in other parts of the world where land is scarce. The “independent distributors offered small farmers loans” to cater for the cost of inputs such as fertilizers and pesticides thus resulting to an increase in productivity (Zachary, 2007). Cotton farming is labor intensive and time consuming activity.
Therefore, Dunavant and other Western nations should encourage cotton farming in Africa due to availability of cheap labor than in United States. Since the cotton farming has not been very well utilized in Africa, Dunavant has an opportunity to bring in new expertise to in the growing of cotton thus increasing the output to the advantage of the farmers and the organization. The available resources such as land and labor in the home country can be utilized in producing other commodities while the cotton firms utilize the resource in Africa to produce cotton.
Investing more in cotton farming will create more employment opportunities for the Africans (Zachary, 2007). The privatization of cotton farming increased productivity of cotton “six fold, with the crop peaking at 54,000 tons of seed cotton on 2005” (Zachary, 2007). The government will get tax revenue they charge from the cotton farmers and the Dunavant corporate tax. In addition, cotton farming contributes to economic growth to the advantage of the government.
The African governments are able to benefit from foreign currency since cotton produce is exported to the United States. Part Two Morocco is one of the highly developing countries in Africa both politically, socially and economically. As a growing economy, the demand for luxuries such as vehicle is quite high. Therefore, for a company dealing with automobile tires Morocco would offer an excellent investment opportunity for their products. Commodities such as vehicles are in high demand in nations with high literacy level. In Morocco, the literacy level is about seventy-three percent thus it offers a good opportunity for the company dealing with automobile tires (Njoku, 2006).
In Morocco, most of the people are Muslim and speak in one language. It is easy for a company to promote its products in Morocco due to a unified culture (Njoku, 2006). The company dealing with automobile tires may find it easy to penetrate the market without incurring huge expenses since the literacy level of the people is quite high and the attitude of the people is almost similar due to sharing of similar culture.
The automobile company should consider marketing their tire in Morocco as the best opportunity to offer people the products they need most for stimulating economic growth (Njoku, 2006). They should sell tires to the people of Morocco so that they can bring essential products close to the people who need it most. Morocco is relatively stable both economically and politically. The residents have high purchasing power due to economic stability (Njoku, 2006). Furthermore, being an open market economy, Morocco attracts foreign investors in their country in order to promote economic growth.
Furthermore, Morocco enjoys good international relations with due its inclusion in the European Union that was aimed at promoting closer neighborhood. Finally, the high literacy level offers investors an advantage competent workforce for their industries. Therefore, the automobile company should invest in Morocco since the nation offers a conducive environment for the international investors. References Njoku, R. (2006). Culture and Customs of Morocco. Stamford: Cengage Learning. Stern, R. M. (2011). Comparative Advantage, Growth, and the Gains from Trade and Globalization: A Festschrift in Honor of Alan V Deardorff.
USA: World Scientific. Zachary, G. P. (2007). Out of Africa: Cotton and Cash. The New York Times. Retrieved on 15th May 2014 from. Http: //www. nytimes. com/2007/01/14/business/yourmoney/14duna. html? pagewanted=4&_r=0&adxnnlx=1400103226-f30nm66/VOeFORHz8a0bMQ