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According to Raymond Vernon Theory

According to Raymond Vernon theory (Product life theory) and the examples of the developing countries performance in the international market that where shown. These nations permit the increase of foreign firms in their market who take a huge portion of the national firms market, as a result, of their poor competitive skills to preserve their customers. Moreover, national firms tend to participate in international markets at a moment where they are all ready saturated, for that reason it is difficult to profit from it.

Under these circumstances, it is relevant to developing countries to be able to innovate (product and service) and to recognize new potential markets where they can profit.

In that order, developing nations should consider what they have, in order to determine what they should produce. The theory of comparative advantage states that “a country should produce and export those goods and service for which is relatively more productive than are other countries, and import those goods and service for which other countries are relatively more productive than it is”.

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(Mahoney, Trigg, Griffin & Putstay, 2001, p. 102)

Under this theory, a country should produce those goods and services that it is able to produce relatively well, and buy other goods and services from those countries that can produce them relatively well. According to these facts, the country may specialize in specific goods and services taking into account international standards of productivity and quality. However, this is not the only issue that developing countries governments should take into account if they want to solve the economic (devaluation, current account deficit, foreign debt), social (unemployment, income equality), political and environmental problems that the economic growth process may cause.

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In addition, they have to add value to the resources they have, creating a competitive advantage (Doryan, 1993, p.451), that help them in sustainable growth. As previously stated, the export expansion would help economic growth, and if a country is able to create a competitive advantage that would help them to get an important position in the global market. Under these conditions, they can avoid problems such as devaluation, foreign debt, unemployment, income and equality, political instability and environmental problems.

According to Porter’s theory, governments must ensure the development of four elements in order to get the nations continued competitiveness, they are:

Productivity

Governments should veal for the industry efficiency creating a macroeconomic and financial dynamism, adequate infrastructure and a competitive domestic market with the participation of international firms.

Socio-political Stability

It is necessary to build an environment that allow freedom of expression, human rights and were exist a confidence toward the judiciary system and the government, and good living standards. (Doryan, 1993, p.453) Human resources: “The human factor may ultimately come to represent the new competitive edge for the global corporation, more than physical and other resources” (Kedia & Mukherji, 1999, p.235). Government should be conscious of the important of human resources, for that reason it is important to create accessible educational and training opportunities.

Environmental Conditions

In order to obtain Environmental sustainability governments should control the adequate management of natural resources, establish rules and procedures to control waste and pollution, and create a social consciousness of the importance of environmental conservation at firms and citizens levels. Furthermore, Porter states that in order to obtain economic growth through great international trade, the government should be able to promote the creation of international clusters. For example, this is what Mexico is doing by linking with the United States. This is a situation, where Mexico can obtain many benefits in the growth of import and export. In addition, this country can gain access to their technology and human resources and incorporate them into their own country in order to maintain its economic growth and development and internationally competitive strength. (mirar bibliografia mexico)

Reference List

  1. Aybar & Milman, (1999), ” Globalization, emerging market economies and the currency crisis in Asia: Implications on Economic Reform and Development. Multinational Business Review. Vol.7, No. 2. pp. 37-44.
  2. Balassa, B. (1998), “The Lesson of East Asian Development: An Overview”, The University of Chicago, pp.273-289
  3. Doryan, Eduardo. (1993), ” An Institutional Perspective of Competitiveness and Industrial Restructuring Policies in Developing Countries”, Journal of Economics Issues, Vol.28, No. 2. pp. 451-457.
  4. El Pais (2001), Dossier Documental,

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According to Raymond Vernon Theory. (2017, Aug 22). Retrieved from https://studymoose.com/according-to-raymond-vernon-theory-essay

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