Sample Essay

A country is said to possess comparative advantage when it can produce more of a particular product at a lower opportunity cost than another country (Suranovic 9). The law of comparative advantage relates to this company in two ways. The first is in the area of wage rates.

In Mexico for instance, Wal-Mart might have to pay a higher wage rate for a particular work output while the company pays less for the same work output (or higher) in China. Secondly, in the area of government regulation, Mexican government regulations might not be in favor of the company while Chinese government regulations would augur well with the target plans of the company. In these contexts, it can be seen from an input as well as output perspective. The wage rate factor is an internal perspective while the government regulation factor is an external perspective. Taking the input perspective into consideration and relating it to Wal-Mart, it is apparent that the company can benefit from the cheap labor that China provides while the country in return benefits from the employment opportunities that the company provides.

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