Question

Wal-Mart is famous for requesting ever lower prices from its suppliers: if a supplier offers a product for $45, Wal-Mart will ask the supplier to consider introducing a similar product for $39. Which International Trade theories would support this requests, and which consequences do such requests have?

Answer 1

Country advantage in production will increase.

Step-by-step explanation:

This will of-course result in the introducing of similar products in the other mega stores to compete with Wal-Mart. Which means the competitors will try to rough their shoulders with Wal-Mart to keep their market share secured by introducing similar products in the market. Furthermore, According to Heckscher-Ohlin factor theory, the lowering of the cost of production due to stress on gaining efficiencies, lowering raw material usage, labor costs, and other quality related costs will definitely develop the country's advantage in production of the product at lower cost which would increase the export or repel the import of similar products due to tough competition faced by home products.