The reasons why particular locations develop a competitive advantage in the production of particular type of goods are complex.
Competitive advantage grows out of the firm can create value for its buyers that exceeds the value of the firm on its establishment. Value is what buyers are willing to pay, and superior value stems from offering lower prices than competitors for equivalent benefits or providing unique benefits that more than offset the higher price. (Williamson 1991) There are two basic types of competitive advantage: cost leadership and differentiation. This is the reason why competitive advantage is complex in the production of particular type of goods. (Wignaraja 2003) This paper will discuss the reasons why particular locations develop a competitive advantage in the production of particular type of goods are complex.
Location theory considers the most important questions about who is producing the goods or services in any field, and why. Like many government policies to involve attempts to shift production, one must first examine the basis for the initial decision to deploy in order to understand the implications of changes in incentives. Almost 200 years ago, the main problem of early theorists of place, (Van Marrrewijk 2002) above all, Johann Heinrich von Thünen (1783-1850), (Weber 1929)was the optimal location of cities and farms, balancing the cost of land and transportation costs. In the model of von Thünen’s concentric rings of agricultural activities, development throughout the city. Production of perishable goods or goods that need to go to market quickly in the rings closer to the city, and other activities, such as ranch, (Van Marrrewijk 2002) located on the outer rings. Since von Thünen, many other scientists suggest using a more sophisticated model of the ground, including in the manufacture of industrial and agricultural goods and services. Many of the issues addressed at the site of the theory are relevant to the international economy. For example, trade theory explains patterns of international production and trade. Similarly, most research in the field of foreign direct investment (FDI) looks at the multinational company, (Smarzynska 2005) where to find different activities.