Why is Comparative Advantage Important in Business?
Comparative advantage is crucial for businesses because it can inform strategic decisions regarding what products to manufacture, what services to offer, and which markets to enter. By understanding their own comparative advantages, businesses can allocate resources more efficiently, reduce costs, and improve profitability. This concept also underpins the rationale for outsourcing and offshoring, enabling firms to focus on core activities while procuring other goods and services more efficiently from specialized partners.