Concept of Competitiveness Competitiveness Analysis and Factors Affecting Trade Flow of Natural Rubber in International Market
15 agree that in order to measure the competitiveness of a commodity, it is best to
look at an absolute advantage, as well as a competitive and comparative advantage. The absolute advantage is the advantage gained by either country due to the
benefits or advantages of nature natural resources, technology and human resources, so that the production becomes more efficient than in other countries
Putong, 2010.
According to Hady 2004, the theory of absolute advantage is based on several key assumptions, for instance, the factors of production used are labor, the
quality of goods produced from two countries, and exchange or barter without financial compensation, with transportation costs being ignored. International
trade will occur and benefit both countries if each country has a different absolute advantage. Thus, if only one country has an absolute advantage for both products,
the trade will not be lucrative. This is a weakness of Adam Smiths theory of absolute advantage. However, the weakness of Smiths theory is improved or
enhanced by David Ricardos theory of comparative advantage. In this theory, Ricardo stated that international trade occurs when there are differences in the
comparative advantage between countries. Comparative advantage will be achieved if a country is able to produce more goods and services with lower cost
than the other country. The law of comparative advantage states that trade can be carried out by countries that do not have an absolute advantage in both
commodities traded by product specialization to the product that has a smaller absolute loss. In other words, the theory of comparative advantage states that a
nation can improve its economic situation if the country specializes in the production of goods and services that has the highest productivity and efficiency.
Another concept of relevance is competitive advantage. While the concept of comparative advantage states that a country does not need to produce a product,
if the other country can more efficiently produce the good, the concept of competitive advantage is a concept that is not a natural condition must be taken
into inhibitors because the advantages of the country can basically fought and competed with the struggle or effort. The advantages of a country depend
primarily on the ability of firms within the country to compete in providing goods that can compete in the international market Porter, 1992.
The Revealed Comparative Advantage RCA method is often used to analyze competitiveness, more specifically; the RCA is used to analyze the
comparative advantage of a commodity in a specific country. RCA can also be used to measure an export commodity’s performance through evaluating the
commodity’s role in the country’s total exports, compared to the share of the commodity in the world market. In 1965, Ballasa first introduced the concept of
RCA, which assumes that a countrys comparative advantage is reflected from its exports. The concept of RCA has since been widely used in research reports and
empirical studies, as an indicator of the comparative advantage of a product, and further, as a reference for international trade specialization. The competitiveness
of the goods can be reflected from the value of the RCA.