Baron Pierre de Coubertin which is the founder of the modern Olympic Games, said that the most important of Olympic Games is to take part in but not to win, as the most important things in life is struggle but not victory. The first modern Olympic Games were held in Athens in 1896 which has been chosen as recognition of Greek Festival. Its purpose is to create games in order to ensure that people around the world would compete and meet in friendly atmosphere. The meaning of the modern Olympic is the athlete from each country takes an oath “In the name of all competitors, I promise that we shall take part in these Olympic Games, respecting and abiding by the rules which govern them, in the true spirit of sportsmanship, for the glory of sport and the honor of our teams” at the opening of the ceremony. The aim of Olympic movement is “the goal of the Olympic Movement is to contribute to building a peaceful and better world by educating youth through sport practiced without discrimination of any kind and in the Olympic spirit, which requires mutual understanding with a spirit of friendship, solidarity and fair play.” The head office of the International Olympic Committee (IOC) is located in Lausanne and Switzerland in order to manage and control the Olympic Movement and the members are from all around the world. The motto of Olympic is called “Citius, Altius and Fortius in Latin which means faster, higher and stronger or braver. (Technology Student, 2004)
The Objective of Olympic: The objective of Olympic is strived to promote Olympic Games which meets the standards of sustainable development and also respect the environment. The Olympic Games are to promote sustainable development in sports and needs. Besides that, the Olympic Games also promotes positive legacy to the host cities to the Host countries. (Wiki Answers, 2013)
Positive Impact of Olympic: Besides being a sport, Olympics also affect business and hosting countries which are businesses can gain from Olympic such as increasing sales, advertisements and reputation through sponsorships. All the companies, sponsorships and investors of the world are focused on Olympics Games in order to help all the business to increase sales. Hosting the Olympic Games can bring many benefits for the host country which can be divided into either short term or long term. The short term of economic benefits including of the fresh cash flow from the visitors who visit the host country, athletes, officials, training activities, cultural events and media activities linked to the Olympics and the formation of Olympic committee. There have three major categories of long term economic benefits for hosting Olympic Games which are including the creation of infrastructure is reaching the global standards, the concern of the international community through media and related to the community. (Globalrp Economy Issue, 2013)
Short term economic benefits are likely as the total changes that occur in terms of revenue, employment and total national output through foreign investments. The first national economic impact will lead to the fact that the host country will be required to produce more services and goods. Therefore, the goods will be consumed to the athletes and the official themselves. The international visitors will need to consume the industrial products. Besides that, that Olympic also include of media personalities of nationally and internationally and these groups will also need to consume goods and services by the host country. There will be also many sponsors participate in Olympic Games and they will also required to consume the commodities. Therefore, the total amount of additional revenue will come from the sales of production of goods by the host country and the above mentioned groups will form a huge of direct economic benefits from the hosting Olympic country. (Globalrp Economy Issue, 2013)
Another short term of positive impact of Olympic is some tourists may be interested when seeing the host county’s website during the Olympic Games and after. Therefore, there will be large amounts of revenues from those visitors. Research indicated that hosting Olympic country can earn 823 dollars from visitors who visit or access the host country within the first twenty days prior of Olympics and twenty days after the Olympic. (Globalrp Economy Issue, 2013)
In addition, the positive impact of Olympic is providing job opportunities or employment. We should not be underestimates the level of creating the employment opportunities from the host country. In fact, an economic estimate in Atlanta, Georgia which is a state that organized the Olympic), the result shows that about seventy seven thousands of employment opportunities were been created. The hotel industry and lodging take up the largest part of creating the job opportunities. Besides that, the food industry such as bars also provides job opportunities. Additionally, the construction sector also will be provided jobs since there will be additional infrastructure such as new buildings. (Globalrp Economy Issue, 2013)
The long term economic benefits from hosting the Olympic Games can be as legacy of host country. The first legacy will be considered of facilities built specifically for Olympics. After the Olympic Games, the facilities can be continuing operation for many years. The host country needs to build a top level of Stadium in order to meet the international standards. In fact, Georgia was hosting the Olympic Games in year 1996 and the stadium was costing them approximately 189 million US dollars which is consider as quite good investment since the rate of return greater than investments. (Globalrp Economy Issue, 2013)
Another important positive impact is the fact of hosting the Olympics will be exposure for the host country through excessive media and the hosting country will be able to seen by the World. Therefore, their strengths will be reflected in their marketing efforts and this will greatly increase their tourism industry the next few years. Additionally, there will be also exposure in business aspects in order to attract investors come and invest in host country. (Globalrp Economy Issue, 2013)
As a host country, London Olympic Games was the world’s hottest spot in 2012. Olympic is an important and massive event that a collection of athletes, media, visitors and politicians from all around the world which is definitely a prestigious role city. According to London, the Olympic Games provided positive impact to the larger businesses in London although there is not reach the extent that had anticipated. But according to the survey of 100 large companies by Deloitte which is the official professional services provider to London 2012. Since the beginning of the Olympic Games, 42% of companies reported that an increase in demand and 77% of retailers increase in demand from the new customers. This result preparation and planning was paid off. Naturally, the greatest advantage is the increasing in Tourism industry. According to London, it was been attracted approximately 300,000 of foreigners and also about 5.5 million day trippers during Olympic Games. (The Consultant Eu, 2013)
Another fact was according to Beijing China in 2008, the number of visitors or tourists were rising rapidly. This result shows that Olympic brings the host country to increase the visibility. According to Chen Jian who is the president of Beijing Olympic Economic Research Association was estimated that Beijing was received about 600000 foreign visitors and 2.5 million from China’s domestic tourists during the Olympic Games along with the number of foreign visitors in Beijing will grow 8% to 9% annually. Besides that, a foreign country student who studying in Beijing was experienced the craze of Olympic Summer by the improvements in infrastructures and commercial services during the Olympic Opening Ceremony. In addition, the number of hotels in Beijing has also increasing in the recent years. That is because since China was entered the WTO and won the Olympic bid, therefore the country was reduced the hotel ownership restrictions. Furthermore, the recruitment in Beijing Olympic sponsors, partners, suppliers and others companies also wants to take the benefits of the Olympic “buzz” in Beijing in order to contribute in increasing of advertisement. (Business Today, 2013)
The third fact was according to Sydney Olympic Games in 2000 were praised as the best Olympic Games because Sydney not only did achievements on improving the environment, improve urban construction, promote the development of transportation, real estate and tourism, but it also promote the host city’s international reputation. Sydney brought a considerable sum of profits and motivated promote the follow-up industrial development of tourism, transportation and real estate. Especially, it brought the huge number of direct revenues about 2,605 million US dollars which is the most profitable in Olympic Games. Additionally, it stimulated about 500 thousands tourists. (Bitstream, 2013)
Negative Impact of Olympic: The Olympics’ prestige not only goes along with economic benefits, it also does in downfalls and significant risks which should not be ignored. Therefore, hosting the Olympic Games is very important to the hosting country. To host the Olympic Games is a huge responsible for the country or city due to having a huge risk because the hosting country invested a large amount of money in the games but they do not know about how many visitors coming for the Games. Therefore, they are risking funds without having a backup plan if there is less visitors in the Games. The Olympic Games also will influence the population of the city about one or two months. The city will be crowded of traffic and interrupt the daily of the citizens due to many visitors. Besides that, when the country hosting the Olympic Games, everything must be near perfect such as the street must be clean and in good condition, the stadium must be neat, the hotels must have sufficient reservations for the visitors. This is all about money. However, the money from the visitors or tourists is not enough to support the wastage. Therefore, the country invests a large sum of money in order to keep the city or country clean and well present during the Olympic Games. If any problem occurs during the Olympic Games, the country has to waste money to fix it.
Hosting Olympic Games brings disadvantages to the hosting country especially for poor countries because waste of resources with could for used for the welfare of citizens, corruptions, benefits to go to people in power and business but the poor suffer. Therefore, hosting Olympic Games are waste of resource and money. The money should used for more important things such as improving infrastructure, curing malaria and providing proper education for children and adults from poorer countries. A lots of money are spend on Olympic Games just to watch athletes participate in the Games, but the money can actually donate to the charities in order to helping people in the world. (Debate, 2013)
Besides that, another negative impact is social impacts which are cumulative and a wide range of over space and time. Olympic Games may change the significant and the impact assessment become complicating due to the long lead times, dimension and natural of the event. The changes will affect the increasing in congestion, evictions, increasing in prices such as increasing in land rental value.
The negative effect of Olympic Games comes from expenditures on transports infrastructure, facilities, housing, safety measures and maintenance in order to meet the requirements or demands of the International Olympic Committee and also to impress to the public. According in London, the total budget comes up to £9.325 billion. This result estimates that the costs of Olympic Games are difficult tasks. This was result in the final budget was exceeded by £5.906 billion of the projected budget from the bid in November 2004. Besides that, the expenditure of security had to double. At the same time, there has been twelve fold rises in the management fees by UK Parliament. Therefore, it has been claimed that spending is higher than expected which has been exceeded the positive impacts on economy of United Kingdom. (Merar, 2010-2013)
Evidence was in Athens Olympic Games in 2004 was failed to motivate the economic growths due to lack of publicity or promotion and a large number of expenditures. According to Wang and Chen who said about the large amount of expenditure was about 12 million US dollars which is a big debt will be paid for about 10 years. The amount of expenditure was more than double of the budget. Besides that, the Olympic gymnasiums and facilities were not invested until 2000. Therefore the postponed construction led to large amount of costs and inefficiency. This result shows that Olympic Games indeed have a significant impact on the economic development of the host cities. (Bitstream, 2013)
Besides that, evidence was showed that the United State government was investigated the BHP Billiton Ltd which is the world top mining company possible of corrupt practices and it was being one of the sponsorship of Beijing Olympics Games 2008. According to Fairfax reported that between 2000 until 2008, BHP Billiton Ltd spent millions of dollars on sponsorship deal of Olympic Games.
Conclusion: As a conclusion, I would like to conclude that Olympic Games bring positive impacts and negative impacts to the hosting country that result show the Olympic Games are more than a sport because there are included in cultural, political and economic phenomena. Particularly interest to see Olympic as a tourism attraction, marketing opportunity, media event, the catalyst for urban renewal and development and also was the inspiration for youth and generating a force for peace and understanding of international as well. In fact, it can be said that there value-added, non mainly on sporting, roles which makes Olympic Games becomes unique at the international level and in order to continued survive probably depends on their continuing to play these roles. For example, according to Sir Roger Bannister (1988) who is the Olympic athlete first man to run a mile within four minutes and later became British Sport Minister was discussing about Olympic Games will moves towards the changes but still remain the greatest hopes of the world. Besides that, Olympic is in the deepest interests of the world of the future for them to be continuing. (Google Books)
Furthermore, Olympic Games are much more than a show, the games are open to the world and the entire country has the opportunity to take part in numerous activities such as the marching of the flame throughout the country, cultural activities, educational projects and local volunteer services.
International Competitiveness Of Chinese And Indian Tea Economics Essay
Tea as an important drink is very popular throughout the world. More and more people have formed the habit of drinking tea because of its healthy benefits. China and India are the two largest tea countries in the world so far. Tea was first cultivated and brewed in China. It was then spread to other countries and regions worldwide. Tea industry carries great meaning to China in both economic terms and cultural terms. Chinese tea is an important symbol of Chinese culture. Chinese tea industry has dominated in the world for thousands of years. Speaking of tea, westerners naturally relate it to Chinese culture.
The cultivation of tea in India also has a long history. Tea was cultivated and consumed in eastern and northern India for thousands of years, but it is the arrival of the British East India Company that make production of tea in India commercialized. Tea is indigenous to India and is the industry which the country is very much proud of. India has emerged to be the world leader in tea production, consumption and export in the past two centuries. India is one of the largest tea consuming countries with 70% of its tea production consumed by itself.
As the two oldest ancient eastern countries, both China and India have distinguished tea culture and drinking habits. The two peoples have shared the similar habit of drinking green tea which is seen as medicine and has the functions to cure diseases and refresh people. Chinese tea industry and Indian tea industry emerged in a very important historical period, the 1830s. After 1830s, India, which was then British colony and the tea producing base of Great Britain, had learned how to make tea and began to compete with China in world tea market. For historical reasons and other reasons, China began to lose its dominant position in the tea market in mid nineteenth century. From then, China’s tea industry was almost destroyed and lost its dominant position to India.
The competitiveness of Chinese tea decreased little by little and fell to its lowest point in history in the year 1949, before the People’s Republic of China was founded. After then, China’s tea production and export started to restore. During 1950s, China was producing around 13.6% of world tea, and in 2007 the percentage was increased to 25 percent. However, the share of India during 1950s was 40 percent and declined to about 24 percent during 2007. China was exporting about 5.4 percent of world export during 1950s, while increased its share to around 17.8 percent in the recent two years. On the other side, India’s share in world export declined from 42 percent during 1950s to about 13 percent in the year 2007 (FAOSTATIS). Hence the question arises about what are the factors responsible for the decline of India’s tea production and the share of its export in world tea export.
China is now still the largest tea producing countries in the world. However, it has no such world famous tea brand as Tata in India and the famous tea planting areas like Indian Darjeeling and Assam. Some Indian tea companies have even acquired famous foreign tea brands which include British brands Tetley and Typhoo. Although Chinese tea production has overtaken India in recent years, the international competitiveness of China’s tea lags behind that of Indian tea in some aspects. China indeed has rich resources to plant tea, but has not yet made full use of them. China still competes in world market with low-priced products. Additionally, China has absolute advantage in producing green tea but lack competitiveness in black tea. However, the world tea market is dominated by black tea.
From the review of earlier literature, it can be seen that earlier studies were mainly about China’s own performance in tea or India’s own experience. Few studies have focused on the comparison between Chinese and Indian tea, the two largest typical tea producers in the world, so it is needless and meaningful of further study focusing on this aspect. This paper is specific to probe into the status quo of Chinese tea industry and Indian tea industry, their production, consumption and trade, their international competitiveness in world market, and figure out the advantages and disadvantages of tea industry in both countries and eventually provide a brighter way which could make the two tea producers more competitive in world market.
Chapter 2 Literature Review
2.1 Studies on Classical International Competitiveness
Theory of international competitiveness started as early as mercantilism, according to mercantilists, national wealth of a country is measured by gold and silver. Through exporting, the country can get gold and silver from other countries and thus accumulate wealth. So the country should export the maximum of its product and import the minimum of the product from other countries. Mercantilism dominated the international trade theory till Adam Smith published his master piece The Wealth of Nations (Smith, 1776, cited in Ezeala-Harrison, 1999). Smith viewed trade as positive-sum game instead of zero-sum game in Mercantilism. According to Smith, a country should produce and export the product in which it had absolute advantage and import the product it had no advantage at all.
After Adam Smith, there were many other economists making important contribution to the theory. The most important one is David Ricardo’s competitive advantage theory. Ricardo (1817) put forward his theory by solving a problem in absolute advantage theory, that is, what if the country has absolute advantage in both goods? Ricardo thought that the better country should produce the product which it has greatest advantage in. The other country should specialize where it has the least absolute disadvantage. Even if a country has no advantage in any good, it still can benefit from international trade. After Ricardo, there emerged many theories of international competitiveness, among which the factor endowments theory in early twentieth century by Heckscher and Ohlin had great implication to the international trade. HO model tells us that each country has its well-endowed factors, and it should produce and export the product whose production is intensive in the well-endowed factor (cited in Dong-Sung Cho, Hwy-Chang Moon, 2000). Those classic theories of international trade have great influence on the later economists.
2.2 Porter’s Competitive Advantage of Nations
In the late 20th century Michael Porter of Harvard Business School published the book The Competitive Advantage of Nations that attempts to determine why some nations succeed and others fail in international competition. Porter’s basic thesis is that four broad attributes of a nation shape the environment in which local firms compete, and these attributes are factor endowments, demand conditions, relating and supporting industries, firm strategy, structure and rivalry. These attributes constitute “the diamond” (Porter, 1998).
Factor endowment refers to the factors of production that determine the industry’s comparative advantage in the international market. Basic factors such as the natural resources, climate and location can provide the basic advantages. Demand conditions mean that such industry that can create home demand has comparative advantages. Industries can do this by improving the product and providing superior-quality product or service. The related and supporting industries are regarded as the complementary products of the industry. The close relation and the coordination of related and supporting industries can increase the competitiveness of the specific industry (Porter, 1998).
Porter’s diamond framework combines the comparative advantage of different industries with the theory of competitive strategy. Different industries vary from each other in resources and capabilities, which leads to the advantage and disadvantage in the dynamic environment circumstances. According to Porter, it is the firms rather than the nation that matter. The principal role of the nation is the “home base” of the firms which helps in shaping the identity of the firms, the management features, the availabilities of the resources to the firm. Firm strategy, structure and rivalry are the important factors to determine its competitiveness. For example, the domestic rivalry may cause the pressure on the firm to innovate, lower its costs and improve quality. Thus it can increase the competitive advantage of the industry.
The four factors in the diamond framework are correlated with each other and work together to shape the competitive advantage of the industry over time. Besides, Porter maintains that two additional variables can also influence the national diamond in important ways: chance and government. The role of government is acting as a “catalyst”, encouraging firms to raise their performance and produce high-quality products. Government also works in stimulating local rivalry through establishing anti-trust regulations and limiting monopoly.
Figure 1 Determinants of National Competitive Advantage: Porter’s Diamond Source: Drawn from Porter M.E. “The Competitive Advantage of Nations”
2.3 Studies on Chinese Tea Industry
Since tea industry is of so great significance to China, many Chinese scholars have contributed to the field of China’s tea. Fuping Huang (2000) compared export price of China’s tea with that of India and Sri Lanka and believed that economic benefits of China’s tea lagged far behind other major tea nations. Changxing Xu (2001) proposed that China’s tea industry enjoyed advantages on natural resources, geography, varieties of tea and technology. He also emphasized that China was the largest green tea producers and exporters in the world and had great potentials in the field. Zhigang Xu (2001) made a research on China’s green tea, tested the comparative advantage of China’s tea from the year 1990 to 2000 by applying cost index method and concluded that China has no comparative advantage in producing tea and thus resource distribution in tea industry would lead to waste and loss. However, he pointed that Shaanxi, Sichuan and Guizhou provinces of China still had some comparative advantage in tea planting.
Zhucheng Su (2001) proposed that China could learn from Japan who had invested in Australia and made use of its resources to produce green tea. Since China had little competitiveness in producing black tea and also confronted great limits when introducing black tea from abroad, it could invest in such countries that had advantages in producing black tea, cooperated with them and took advantage of their resources to produce and market black tea. Su also believed that competitive advantage of China’s tea had for a long time lied in its factor endowment advantages but it was the industry organizing system that had great impact on competitiveness. Thus, he suggested China should optimize the organizing structure of its tea industry.
Zhongyu Chen (2002) analyzed the statistics of tea export volume and also believed that China had great competitive advantage in green tea and oolong tea, while lacked competitive advantage in black tea. However, the markets of green tea and oolong tea were relatively small. What’s worse, Vietnam, India, Sri Lanka and Indonesia began to increase the production of green tea and competed with China in world market. So, he believed that China’s tea industry still has a long way to prosper.
Some foreign experts have also done a lot of research on China’s tea industry. Forster Keith has once researched Chinese tea during the whole 1990s. Forster (1993) pointed out that China’s tea industry had long been subject to varieties of price and production controls by the Chinese government. Since 1980, the production and marketing system of the tea industry have been changed a lot and the state reduced its role in purchase and sales of tea, and tea planters had more freedom to grow and market their tea, which has led to the great development of China’s tea industry.
2.4 Studies on Indian Tea Industry
As early as in 1991, Neelanjana Mitra figured out the problems that Indian tea industry was facing over the period 1960-90. One of the major problems had been the slow growth in tea production compared to the steady rise in domestic consumption. Over the period 1960-90, the annual growth of tea production had been just 2 percent, while the growth of domestic consumption had been about 5 percent. The slow growth in tea production was naturally accompanied by a decline in world market share of Indian tea export. Thus India failed to take the advantage of the expanding world tea market.
In the recent case study of Indian tea sector, Himanshu Dutt (2007) has done a very through analysis of Indian tea industry. According to Dutt, the production and export of Indian tea has been experiencing great downfall in recent years. Domestic consumption has also witnessed decline. Higher labor cost, climate change and more fierce competition from Kenya, Sri Lanka and China are the main reasons. Application of industrial labour laws for welfare and social security has greatly increased the labour cost. Under the free trade agreement of WTO, cheap tea products from other main tea producers began to compete in world market, which has led to the price downturn of tea in world market.
Dr. B.H. Nagoor (2009), a lecturer from Karnatak University, has studied in details the performance of India’s tea export. He pointed out by referring to the data of Indian tea from 1950 to 2004 that India’s share in world export has declined from 42 percent during 1950s to about 22 percent in 1981-90 and further to 13.3 percent during 2001 -04. The trade liberation under WTO has not benefited Indian tea industry. Nagoor suggested that the main factors causing the poor performance of India’s tea export are the rising domestic demand, slow increase in yield, slow expansion of tea planting area, failure to compete with other major tea countries, increase supply of tea in world market and also the loss of traditional market like UK, Russia (Nagoor, 2009). However, the doctor also saw the positive side of Indian tea export and he believed the prospects of Indian tea export was bright since the import of developing countries was increasing and Indian tea should seek new opportunities and find some new markets like Pakistan, Iraq, Kazakhstan and so on.
Dan Robertson (2010) analyzed the state of Indian tea industry by comparing with China. Robertson proposed India tea was lagging and has lost its dominant position to China in both production and export. Many reasons were responsible for the decline. The major one was that few tea estates in India were aggressive in marketing their products. Although India has famous tea like Assam and Darjeeling, foreigners still know little about what Assam tea is and where it comes from. Moreover, Indian tea estates pay little attention to giving their tea a fancy name or package.
However, Jayanta Roy and Kaushik Das (2009) have held the belief that the outlook of Indian tea industry in the short and medium term was positive. From 2008, the domestic demand has increased steadily. Because of the shortfall in production in many other countries, the Indian tea has witnessed an increase in export. The average domestic price has also seen the increase by about 28 percent, which led to the improvement of profits of tea producers. For the Indian tea industry, the main driver of demand lies in the domestic market, so the increase of domestic demand has improved the performance of Indian tea industry as a whole. The main reason for demand increase is the effective marketing strategy taken by the tea players which include the positioning tea as healthy drink. The affluence of Indian people is another reason. In the medium term, the continuous increase in domestic demand and export will keep the price at high lever in the medium term. However, if the industry is unable to maintain the current export level or if the production of other major tea countries restore to high level, the domestic tea price will increase due to the higher supply in domestic market (Jayanta Roy, Kaushik Das, 2009).
2.5 Measuring Parameters of International Competitiveness
There are some important parameters that can reflect the international competitiveness of a product, including world market share rate (WMS), price and cost, normalized trade balance (NTB) and revealed competitive advantage (RCV). World market share rate (WMS) refers to rate of the export value of one product in a particular country to the world total export value of that product, that is WMSi= Xi/Xw. WMSi is the world market share rate of country i, and Xi is the export value of given product of country i, Xw refers to the export value of given product of the world.
Normalized trade balance refers to the rate of net import value or net export value to the total trade value of a particular product. That is, NTBi= (Xi-Mi)/ (Xi Mi). X is the export value and M is the import value and i refers to product i. If the import value of one product surpasses its export value, the product is import oriented. Otherwise, the product is export oriented. If the rate is very near to 1, it means that that product is highly competitive in the international market. And no matter what the import value and export value are, the rate is between -1 and 1 (P. Lelio Iapadre, 2001).
Revealed competitive advantage is an index used in international economics for calculating the relative advantage or disadvantage of a certain country in a certain class of goods or services as evidenced by trade flows. It is based on the comparative advantage concept of David Richard. It most commonly refers to an index introduced by Balassa. The Balassa index basically measures normalized export shares, with respect to the exports of the same industry in a group of reference countries. The Revealed Comparative Advantage (RCA) index is measured by this formula: RCAi = (Eij / Eit) / (Enj / Ent), where i is country index, j is commodity index, n refers to a set of countries and t is a set of commodities. If RCAi ¼ž1, it means that the country has revealed advantage in commodity j; If RCAi ¼œ1, the country has no revealed advantage in this commodity. The bigger RCA is, the more competitive the country is in the particular commodity (Balassa, 1989). In the working paper Revealed Comparative Advantage, an Analysis for India and China, Amita Batra and Zeba Khan (2005) firstly applies the Balassa index to evaluate the revealed comparative advantage for India and China in the global market, which provides an important resource for researchers to do comparative analysis between China and India.
Chapter 3 Historical Development of Chinese