Comparative Advantage and Internet Technologies, Essay Example

Comparative advantage principle is ability of an individual, a firm or a country to give services or produce goods at a lower opportunity cost than the other party. It is usually vital in determining what need to be produced and what need to be acquired through trade (Hildegunn, 2000). Internet is global system of computer networks that are interconnected using Internet Protocol Suite (TCP/IP) to serve millions of users all over the world. All these play a great role in the creation of global markets. They serve as a driving force in the global market worldwide.

Although trade deficits do not resolve the trade deficits, it is in great extent used to transfer wealth from one country to another. This comparative advantage usually involves the flow of capital from the countries that are developed to small countries and emerging markets. Factors of production are transferred by multinational enterprises across the borders hence seeking to maximize their value. A good example is the case of Israel where the government of Israel took an action to trigger the process of sector-specific capital importation to Israel and mainly from the United States capital market. After this process begun, it led to economic growth through reducing intangible and tangible trade costs hence creating trust generating the competitive advantage for the innovative technology firms from Israel in global markets (Yusaf, 2003).

Due to accessibility of the internet all over the world, internet technology is becoming a large market for many companies. Many companies are taking the advantage of low cost advertising and commerce through the internet which is referred to as e-commerce.  This interconnection and internet technology has boosted trade between the markets and countries hence increased global markets (Kwan & Henry, 2009). Internet provides opportunities to create the competitive strengths. Internet provides efficient coordination due to much better communication with the importers, distributors, customers and even suppliers through convectional communication media. Internet also provides closer and direct contacts with the customers and relevant partners. One example of global trade that has been improved by the internet is the software distribution through the internet hence saving the cost to a great extent. Microsoft company as a software company usually distributes its products through the internet where the interested buyers whether individuals or organizations buy them from. This increases the global trade through the internet (Sheng & Song, 2008).

References

Hildegunn, K. (2000, February 18). Comparative advantage and economies of scale: When does Ricardo dominate Smith? Review of International Economics. 8(4),    667-680.

Kwan, C., & Henry, T. (2009, February 27). Breaks in the chain of comparative advantage. International review of Economics & Finance. 19 (2), 346-348.

Sheng, Y., & Song, L. (2008, March 14). Comparative Advantage and Australia-China Bilateral Trade. Economic paper. 27(1), 41-48.

Yusaf, H. (2003). Global antitrust: trade and competition linkages. London: Ashgate Publishing, Ltd.