According to Library of Economics and Liberty, comparative advantage is when someone provides a good or service at a lower cost than his competitors. Absolute advantage occurs when a product or service provider is the best at producing a good or service over its competitors.Continue Reading
Shmoop explains this in terms of farming; in this case, it is not conducive for a country to compete against another country for a comparative advantage, when the factors leading to the advantage are environmental. For example, if the soil, temperature, and amount of rain yields an environment necessary to grow a certain fruit, then it is cheaper for that country to grow and export that fruit over any other country. Another country can attempt to compete by importing soil, building shade, etc., but this would make the process more expensive. Shmoop states that if a country produces a good or service as a result of an advantage, this is called Specialization.
If an absolute advantage is being sought, the goal is efficiency. A country may compete against other countries in the production of oil. The country that is the best at producing oil will sustain an absolute advantage. This country has discovered a quick and low-cost solution to supply oil, leading to the advantage.Learn more about Economics
The World Trade Organization ensures that countries that trade goods and services have a say in how trade is conducted on an international level, thereby promoting peaceful relations, stimulating global economic growth, lowering the cost of living for residents of many nations and creating challenges to governments that seek to gain an economic advantage through corrupt trade practices. The WTO generally encourages transparent government among its members.Full Answer >
"Absolute advantage" is an economics term that refers to the ability of a person, firm or household toÂ produce a good or service with less input than any other person, household or firm. It is different than a comparative advantage, which focuses on gains from trade and specialization.Full Answer >
There are three popular strategies that businesses can use to gain an advantage against their competitors: cost leadership, differentiation and focus. Professor Michael Porter of Harvard Business School pioneered these generic strategies and they continue to be popular in both business theory and practice.Full Answer >
A low cost pricing strategy in marketing is an attempt by a company to increase sales by offering a product or service at a low price relative to competitors. This strategy, sometimes also called a price leadership strategy, is typically a difficult strategy for smaller businesses to employ because of the high sales volume needed to make up for smaller profit margins.Full Answer >