Introduction

Firstly, we have given a little background of France, in terms of its geographic, Demographic, political and economic characteristics and a brief History of France from its old age till the Modern times. Secondly, In order to find the absolute and comparative advantages of France, in terms of its international trade and economic prosperity, we have categorized the imports and exports of France into the following categories: Mineral products, Wood products, Metal products, Stones and glass products, Paper goods, Agriculture products, Animal products, Food stuffs, Weapons, Footwear and headwear, Animal hides, Textiles, Transportations, Machineries, Arts and antiques, Precious metals, Chemical products, instruments, plastics and rubbers. We have kept the imports/exports data of the year 2013 and 2014 under observations and had a relative comparison of France’s imports and exports commodities of these three years. The relative comparison of which are listed in the appendix, in terms of monetary value, percentage value of each categories and the overall imports and exports. Since, the imports and exports were in large numbers, thus we have taken the top 5 imports and exports of each category, as mentioned in the above paragraph, to find out the absolute and comparative advantages of France. Furthermore, we have: revealed the best comparative advantage by applying porter’s diamond model; determined the destination countries, where commodities are exported, by selecting a single company with in the industry that has the best comparative advantage. And finally, we determined the mode expansion using Foreign Direct Investment model.

Background

Geographically: France, with an Area of 643,801 Sq. Km and locality of Western Europe, has boundaries of 2,751 km connected with the boarder countries as Andorra, Belgium, Germany, Italy, Luxembourg, Monaco, Spain and Switzerland; it also connects with the Bay of Biscay and the English Channel and Mediterranean Sea. The land covers 52.7% of Agriculture crops (arable land 33.4%, permanent crops 1.8% and permanent pasture of 17.5%), 29.2% of forest and 18.1% of others. The metropolitan France bears the reserves of Coal, Iron ore, bauxite, Zinc, uranium, antimony, arsenic, potash, feldspar, fluorspar, gypsum, timber, arable land and fish. Apart from the above mentioned metropolitan France, as mentioned above, it has several overseas boundaries and territories. Because of which France is the second largest exclusive economic zone in the world. Demographically: France, comprises a population of 67 Million with a variant age structure and growth rate of 0.43% (July 2015 est.); have an ethnic concentration of Celtic and Latin with Teutonic, Slavic, North African, Indochinese, Basque minorities and overseas (black, white, mulatto, East Indian, Chinese and Amerindian); while the official language of France is French with the intensity of 100%, with a quick declination of Provencal, Breton, Alsatian. Corsican, Catalan Basque and Flemish (regional dialects and languages). The population is religionized as 63-66% Christian (overwhelmingly Roman Catholic), 7-9 % of Muslims, 5-0.75 % of Jewish, 5- 0.75% of Buddhist, 5-1.0% of minorities and 23-28% of the population has either no religion or is unknown. In addition to the demographic characteristics, France has 79.5% of urban population and changes by 0.84% rate chance annually. The life expectancy ratio ranges from 75 to 85-year. People of France enjoys high standard of living. Politically, France: with the capital “Paris”, is a sovereign state (derived from people) and the statutory laws of French’s constitution state the country to be a secular and democratic country. Economically, France has an owner of being a part of G-8 group: making him one of the leading industrialized country. In terms of purchasing parity, France is 7th in world, and 2nd largest economic giant in European Union. France had 39 companies: enlisted in the fortune 500, as per 2010 estimate. France is considered to have a mixed economy because it has both of private, state owned enterprises and obvious government interventions. Apart from this, the French government has a considerable influence on major key sectors of France’s infrastructure and most of the infrastructures as Railway, Electricity, aircraft, nuclear power and telecommunication etc. are owned by French government itself. Furthermore, France is a large producer of agriculture product, by the use of latest technologies. It is the center of attraction for tourist, as 84 million foreign tourist visit the country in one year (with exclusion of tourists that visit for not more than 24 hours); the country bears the capability of producing large electricity, has the a considerable infrastructure of transport i.e. 2nd most extensive network of transport after Germany, and has also honor of being: major contributor of science’s achievements (67 French people have been honored noble prizes, and 12 people have been awarded Fields medal).

History

During the Iron Age, what is now Metropolitan France was inhabited by the Gauls: Celtic people; The Gauls were conquered in 51 BC by the Roman Empire, which held Gaul until 486. The Gallo-Romans faced raids and migration from the Germanic Franks, who dominated the region for hundreds of years, eventually creating the medieval Kingdom of France. France emerged as a major European power in the Late Middle Ages, with its victory in the Hundred Years' War (1337 to 1453) strengthening French state-building and paving the way for a future centralized absolute monarchy. During the Renaissance, France experienced a vast cultural development and established the beginning of a global colonial empire. The 16th century was dominated by religious civil wars between Catholics and Protestants (Huguenots).France became Europe's dominant cultural, political, and military power under Louis XIV. French philosophers played a key role in the Age of Enlightenment during the 18th century. In 1778, France became the first and the main ally of the new United States in the American Revolutionary War. In the late 18th century, the absolute monarchy was overthrown in the French Revolution. Among its legacies was the Declaration of the Rights of Man and of the Citizen, one of the earliest documents on human rights, which expresses the nation's ideals to this day. France became one of modern history's earliest republics until Napoleon took power and launched the First French Empire in 1804. Fighting against a complex set of coalitions during the Napoleonic Wars, he dominated European affairs for over a decade and had a long-lasting impact on Western culture. Following the collapse of the Empire, France endured a tumultuous succession of governments: the monarchy was restored, it was replaced in 1830 by a constitutional monarchy, then briefly by a Second Republic, and then by a Second Empire, until a more lasting French Third Republic was established in 1870. By the 1905 law, France adopted a strict form of secularism. Which has become an important federative principle in the modern French society. France reached its territorial height during the 19th and early 20th centuries, when it ultimately possessed the second-largest colonial empire in the world. In World War I, France was one of the main winners as part of the Triple Entente alliance fighting against the Central Powers. France was also one of the Allied Powers in World War II, but came under occupation by the Axis Powers in 1940. Following liberation in 1944, a Fourth Republic was established and later dissolved in the course of the Algerian War. The Fifth Republic, led by Charles de Gaulle, was formed in 1958 and remains to this day. Following World War II, most of the empire became decolonized. In the context of the Cold War, de Gaulle pursued a policy of "national independence" towards the Western and Eastern blocs. To this end, he withdrew from NATO's military integrated command, he launched a nuclear development program and made France the fourth nuclear power. He restored cordial Franco-German relations in order to create a European counterweight between the American and Soviet spheres of influence. However, he opposed any development of a supranational Europe, favoring a Europe of sovereign Nations. In the wake of the series of worldwide protests of 1968, the revolt of May 1968 had an enormous social impact. In France, it is considered to be the watershed moment when a conservative moral ideal (religion, patriotism, respect for authority) shifted towards a more liberal moral ideal (secularism, individualism, sexual revolution). Although the revolt was a political failure (as the Gaullist party emerged even stronger than before) it announced a split between the French people and de Gaulle who resigned shortly after. In the post-Gaullist era, France remained one of the most developed economies in the World, but faced several economic crises that resulted in high unemployment rates and increasing public debt. In the late 20th and early 21st centuries France has been at the forefront of the development of a supranational European Union, notably by signing the Maastricht Treaty (which created the European Union) in 1992, establishing the Eurozone in 1999, and signing the Lisbon Treaty in 2007. France has also gradually but fully reintegrated into NATO and has since participated in most NATO sponsored wars. Since the 19th century France has received many immigrants. These have been mostly male foreign workers from European Catholic countries who generally returned home when not employed. During the 1970s France faced economic crisis and allowed new immigrants (mostly from the Maghreb) to permanently settle in France with their families and to acquire French citizenship. It resulted in hundreds of thousands of Muslims (especially in the larger cities) living in subsidized public housing and suffering from very high unemployment rates. Simultaneously France renounced the assimilation of immigrants, where they were expected to adhere to French traditional values and cultural norms. They were encouraged to retain their distinctive cultures and traditions and required merely to integrate.

Country’s Absolute Advantage

To find out the about advantage of the country, we have gone through a thorough study of country’s natural resources. Since, we have found, the country has natural reserves of coal, iron ore, bauxite, zinc, uranium, antimony, arsenic, potash, feldspar, fluorspar, gypsum, timber; and it has 52.7% of agriculture land and 17.5 % of Pasteur Areas. Secondly, after the analysis of relative comparison between the country’s imports and exports data of the year: 2013 and 2014, we have come to the following data. As of 2013, we have found that the country had higher value, than imports, in the export of Coal tar (Total:722 million), rough wood (Total: 418 million), wheat (Total: 6.4 Billion), corn (Total: 2.67 billion), barley (Total: 1.8 billion), rapeseed (Total: 890 million), potatoes (Total:858 million), cheese (Total: 4.06 billion), bovine (Total: 1.62 billion), poultry meat (Total: 1.45 billion), trunk and cases (Total: 5.28 billion), Gold (Total: 1.15 billion) and blood fractions (Total: 7.33 billion). As of 2014, country had had higher value, than imports, in the export of wheat (Total: 5.4 Billion), blood fractions (Total: 7.1 billion), and some advantage in the export of cereals (Exports- Imports: 7.8 billion), dairy egg and honey (Exports- Imports: 4.2 billion) and live animal (Exports- Imports: 2.1 billion). Bases on the above data and comparative analysis of imports/exports data, we have come to the conclusion that the country has an absolute advantage in the production of Cereals (type of grass, that produce grains, and can be eaten and be used to produce flour or bread), which is calculated to be worth 7.8 billion of exports. Furthermore, the country has some advantage in the export of wine which calculates to be around 10 billion, but is a finished good: that has gone through certain process of alteration. In the production of iron and steel, the country has no absolute advantage, because the imports of iron and steel are relatively higher in value than the export value of country and the exports of iron and steel are not in raw form but are in processed forms i.e. transformed products.

Country’s comparative advantage

After comparative analysis of the imports/exports data of France, for the period 2013 and 2014, we have come to the following that: As of the year 2013, we have found that the country has higher export value , than its imports value, in cements (Total: 286 million), practical boards (Total: 431 million), wood barrels (Total: 415 million), hot rolled iron (Total: 3.17 billion), scrap iron(Total: 2.53 billion), coated flat rolled iron( 2.51 billion), iron pipes (Total: 1.75billion), aluminum plantings (Total: 1.64 billion), interior decorative glass wear (Total:821 million), seed oil (Total: 622 million), rapeseed oil (Total:374 million), bovine sheep and goat fat (Total: 104 million), glycerol (Total: 990 million), kaolin coated paper (Total: 1.68 billion), wine (Total: 10.9 billion), hard liquor ( 5.18 billion), malt extracts (Total: 1.83 billion), explosive ammunition (Total:187 million), military weapons (Total: 9.13 million), planes , helicopter, spacecraft (Total: 49.9 billion), vehicle parts (Total: 16.5 billion), gas turbines (Total: 12.75 billion), integrated circuits (Total: 5.94 billion), low voltage protection equipment (Total: 4.8 billion), combustion engine (Total: 3.55 billion), arts and antiques (Total: 3.9 billion), jewelry (Total: 5.8 billion), precious metal scraps (Total: 841 million), packaged medicaments (Total: 27.8 billion), beauty products (Total: 7.46 billion), perfumes (Total: 5.72 billion), pesticides (Total: 3.88 billion), thermostat (Total: 1.61 billion), x-ray equipment (Total: 1.36 billion), ethylene polymer (Total: 2.61 billion), propylene polymers (Total: 1.89 billion). While, as of year 2014, the country has supply advantage in the following industries: Aircraft, space craft (exports-imports: 28.1 billion, and is 30.7% of the total export), beverages, spirits and vinegars (exports-imports: 13.9 billion, and is 15.2 % of the total exports), perfumes and cosmetics(exports-imports: 11.6 billion, and is 12.7% of the total exports), pharmaceuticals (exports-imports: 7.3 billion, and is 8% of the total exports), iron and steel (exports-imports: 3.1 billion, and is 3.3% of the total exports), and leather and animal gut articles (exports-imports: 2.2 billion, and is 2.3% of the total exports). In the these findings, we have come to the conclusion that country has comparative advantages in Aircraft, space craft, beverages spirits and vinegars, perfumes and cosmetics, pharmaceuticals, iron and steel, leather and animal gut articles, in the respective manner. While the best comparative advantage: as far as the exports data, and the application of porter’s Diamond Model is concerned, we have come to the conclusion that country has the best comparative advantage in the Aircraft, spacecraft industry i.e. which covers 30% of the total country export. Furthermore, the best comparative advantage of France’s is determined by applying porter’s diamond model, which is discussed below: Porter’s Diamond Model After the critical analysis of country’s diamond, we have come across different information and fact, which reveal certain factor conditions, demand conditions, related and supporting industries, firm strategy structures and rivalries, and role of government and European unions in the context of France industries in general and emphasized context of aerospace industry’s diamond in particular. We came to the conclusion that France’s different initiatives has resulted in some negative impacts in certain industries and some plus point in others, especially in aerospace industry. Precisely, the diamond model reveals that France conditions are favorable for aerospace industry, making it the comparative cluster internationally and the shining star, in terms of exports, growth and share. Below is a detailed determination of France’s different conditions, considering the porter’s diamond model. Each interlinked aspect of diamond models are explained below: Factor’s Condition We have reviewed the industry in terms of its factor conditions i.e. Land, labor, capital, organizations, and infrastructure. Land: Firstly, the geographic location of France is strategic i.e. it access the northern Europe through English bay, and the Middle East, south Asia, Suez canal, Atlantic ocean through Mediterranean Sea, which enable France to connect with different countries through Sea routes, in addition to its boarder countries i.e. Andorra, Belgium, Germany, Italy, Luxembourg, Monaco, Spain, and Switzerland. Secondly, location of aerospace industry, it is between midi pyrenes and Aquitaine, so called city of Toulouse or aerospace valley. The aerospace valley has useful characteristics in terms of its lands i.e. the valley has rivers in the flat lands (coastal), flat terrain and mountains, which enable the transportation of large aerospace parts, through rivers (via barge from ports) and establishment or construction of industry building, with a very low cost, and the flat mountains (of pyrenes and alps) are useful for training pilots. And the location is also, far away from the German fronts, and the atmospheric condition of this area is favorable. Positive point is that: the aerospace valley is a place, where numbers of aerospace: core, related and supporting industries, no of OEMs and SMEs are located, either dependent or independent; different research labs, management and aerospace related schools, institutes and universities are established. And most importantly: the head-quarter of the aerospace is also developed by the Government in the same regions. And due to number of industries and enterprises, the supply chains and transportation routes are widely available. Labor Generally, France is a capital intensive country and the intensity of labor is poor in it, the country has higher labor cost in market and the labor intensive workflow is less than 42% of France’s total population. Apart from the fact that country has a comparative advantage in the capital intensive products, there still exist: a little utilization of labor. The workflows labor of Toulouse region, because of government’s contribution: in the establishment of top class educational and research institutes, regarding aerospace and engineering fields, the workforce of aerospace industry is filled with skilled, trained and productive scientist and engineers. Furthermore, different universities, research institutes, research labs, management schools are still producing skilled labors. The only limitation is that: the country focuses in aerospace, engineering and management schools, which although contributes in aerospace industry but lack production in others. Capital France has static policies for monetary, fiscal and social aspects. But in terms of capital generation, the country has a negative point, because there exist very limited credit excess and most of the companies lack self-finance capabilities, so they end up in establishing venture capitals. But since, aerospace industry has a comparative advantage in it, thus government and European unions has provided incentives and subsidies to the aerospace giant i.e. Airbus (the giant in the aerospace valley, which contributes 80% of the total exports of aerospace products), which although limits the capital generation of other horizontal enterprises, but keeping in view the greatest contribution of Airbus, we can consider that capital generation for aerospace industry is not a problem. Furthermore, the shares of Airbus are owned by French government (15 % shares), and additional shares are owned by Germany, United States and Spain. Which gives the Airbus a robust force in the generation and operation of its capital. The aerospace industry was strengthened after the foundation of Airbus, by association of several European countries. The aerospace industry has access to the use of advance technology. Organizations In term of entrepreneurship, the country has both public and private organizations, and the governments hold ownership in private organizations too i.e. 14 % of shares of top 10 biggest companies of France; while, in case of Aerospace giant i.e. Airbus, government enjoys 15% shares with some additional shares owned by Germany, United states and Spain. Furthermore, the aerospace valley has 100 large companies, 400 small and medium enterprises, 80 research industries. The main original equipment manufacturers are:  Airbus, Dassault-Aviation  Sogerma, Thales Alenia Space  EADS-Astrium,  SAFRAN,  Turbomeca etc Other active industries are:

 Alstom  Freescale  Continental Automotive  Thales Avionics  Goodrich  Rockwell-Collis etc. The suppliers of aerospace industries are:

 Alema,  EADS Composites Aquitaine  Creuzet,  EADS Sogerma  Exameca  Labinal  Latécoère  Liebherr Aerospace  Messier-Bugatti-Dowty  Potez Aeronautique  Ratier Figeac  SAFT etc. Some of research centers are:

 ONERA  INRIA  CNES  CEA  CERFACS etc.

Some of the aerospace universities and schools are:

 ISAE (merge of Supaéro and ENSICA)  ENAC  EMAC  Universities of Toulouse  Bordeaux and Pau  INPT  ENSAM  ENSEIRB  Ecole des Mines Albi-Carmaux  Engineering school Tarbes etc. The aerospace valley has 8500 researchers and scientist working, and there is evidence of being 45% research and development potentials, concerning aerospace industry; 480 R&D projects are initiated concerning the aerospace, which show that there exist large scope of improvement and innovativeness in this industry and thus: sequel in the higher competitive advantage of aerospace products. Infrastructure France enjoys highly developed communication, transport, energy, educational infrastructures. By communication, the country has highly developed telephone system: fixed telephone lines (with total subscription of 38.81 million subscription), cellular mobile phones (with total subscription of 64.9 million); mix of both privately and public owned broadcast media: includes number of radio and television stations (advanced with multi-channel satellites); high penetration of Internet (with total subscription of 58.8 million). By transportation, the country shares the honor of 2nd largest transport network in terms of Airports: having 464 ports with paved runways (2013), 294 ports with unpaved runways; heliports, having one port (2013); railway networks, of 29,640 km, with greater percent of standard gauge than narrow; roadways, with 1,028,446 km paved roads; waterways, of 8,501 km ( of which, 1,621 km can bear the navigation of crafts, with weight of 3000 metric tons; marine merchants, by types of bulk carrier, cargo, chemical tankers, container, liquefied gas, passenger cargos, petroleum tankers, refrigerated cargos, 50 foreign owned marine merchants, and 151 marine merchants are registered in different countries; port ways and terminals, with major seaports, river ports, container ports, cruise/ferry ports and LNG terminal (for import purposes). By energy, country has 59 nuclear plant, from which 75% of total country’s electricity is generated, bears EDF (largest producer of electricity, in terms of generation and distribution), and has 15,322 km of gas pipelines, 2,939 km of oil pipelines and 5.084 km of refined products (2013). By educational infrastructure, country’s interest in investing in the aerospace related universities, research institutes and different organizations like IFC (collaborative institution that boost R&D and ties in aerospace industry). Keeping in view the country’s infrastructure, we can draw a conclusion that country’s infrastructure has a positive impact to the aerospace industry: as the technological advances in communication infrastructure, the greater development of transportation structures (including roadways, airports, marine merchants, sea ports), sufficient power sources and highly developed institutions provide sufficient opportunities to aerospace, in terms of its resource utilization, transportation, innovations, testing of materials and logistics. Etc. Demand Conditions The demand conditions is categorized into two: domestic demand and international demands. In terms of France’s domestic demand of aerospace industry, there is some demands by sophisticated customers, government procurements of developed technologies, a bit military demand but overall: there seems to be a little decline in the domestic demand, since few years. While, by international demands, there is high demand of aerospace products by European countries (European space agency is a large buyer of satellites, high demand of aerospace products: there is a demands by Germany, Belgium, united kingdom, Italy, Spain, united states, Netherlands, Russia , Switzerland etc. by variant percentages. There also exist some sophisticated demands for technological advancements. Furthermore, there is an anticipant annual growth rate of 4.8%: for the demand of aerospace and aeronautic products, which shows that there is scope for the aerospace industry to increase its supply. To make sure its competitiveness in global market. There exist strong worldwide demand anticipation. Firm strategy, structure and rivalry In terms of firm’s strategy, structure and rivalry, the country has positive, limited and negative impact on the aerospace industry but overall, we can consider that the firm/industry shall enjoy the comparative advantage in term of strategy, structure and rivalry. After reviewing the strategic review/application of aerospace industry, we come to the finding that aerospace industry seek for growth, expansion, innovativeness, global leadership, visualization of activities, platform and operation. We have also gone through the deep study of industry’s top competitors i.e. Boeing and Airbus and we found that Airbus follows the long term strategy: production of best and safest airlines and management of the need of airlines and its operation while Boeing follow the long term strategy of gaining aerospace leadership. Furthermore, the Airbus and Boeing don’t have strategic alliance up to some extent i.e. they share their jobs to partners and both focus on low cost and high/skilled labors to increase productivity and reduce cost incursion. Overall strategy of aerospace can be drawn as: they seek leverage in competition and visibility within the aerospace industry. Secondly, in terms of structure, the aerospace industry has both private and public owned companies. And the industry follows the horizontal structure i.e. the industry had different smaller units and division with a headquarters located in Toulouse city. Thirdly, in terms of rivalry or competition, the industry had some drawbacks i.e. due to the government subsides, large entry barriers, strong contract enforcement and large sized companies the constructive competition is limited. The top 2 companies enjoys development in terms of production of aerospace products and due to large sized, the other small companies cannot compete so it is a limitation. Furthermore, the development between Airbus and Boeing has been constructive and lead to innovative alliance but due to the government subsides and consideration to the airbus. In terms of low interest rates, the competition is becoming more of a monopoly. Because of the monopolistic approach, economy does not lead to innovativeness and competitiveness but the government had some initiation by investing in R&D, Research Institutions which lead the industry to innovativeness and technological advancement. Related and Supporting industries After a comprehensive review of relating and supporting industries of aerospace valley, we come to know that it has a positive impact of RSI on concerned industry, and there is a positive contribution to the industry. The aerospace valley is a home to 1500 companies, and the aerospace valley has 570 members (which includes 70 primes, 260 SMEs, 80 research institutes and number of engineering, aerospace, training institutions too). Furthermore, there is a government’s initiation: in the establishment of IFC (for the collaboration of players and other European clusters, development in the R&D). There exist some facilities for the integration, testing of aerospace products and enhancement of research capabilities. In terms of relating industries: the aerospace industry enjoys the pool of contractor and suppliers (which are highly specialized), and the aerospace industry is dependent, overly, on few OMEs, which present a negative feedback and threat to loss of competiveness in its suppliers. In terms of supporting industries: the industry enjoys the support of educational institutions (home to several prominent universities regarding aerospace and aeronautics and engineering, which train engineers and do conduct research, extensively advance, concerned with aerospace); Banks (the bank provide average credit systems with high interest, but government has provided subsidies to the leading industry i.e. Airbus, which makes it a favorable point) ; Financial markets ( reports conducted on French financial markets, under which conclusions are drawn that other industries are losing their market shares but the aerospace industries’ shares are observed: growing) ; Research Institutions (80 research institutions are established, that are conducting development researches regarding aerospace technological advancements); logistics (the transportation system is well developed, different ports and terminals are established, existence of well-established supply chains and distribution channel because of already established mature industries, makes the transportation of logistics from origin to the destination possible and easier, and contributes positively to the aerospace industry); ICT ( highly developed Internet and communication technology do contributes to the aerospace industry, especially in spacecraft and astronautics) and IFC ( the institution for collaboration has indirect positive effect on aerospace industry, because of its robustness in the R&D i.e. 480 R&D projects are under process; and the collaboration of ties between aerospace industry players and clusters).

Application of Krugman’s Theory

The Airbus (leading Aerospace company, being the Headquarter in France), has both internal (In terms of cost reduction and production) and external economies of scale (when scope of operations expands). The Airbus has attained the internal economies of scale and is already developing its factors that further grows the economies of scale: because of the company’s bulk purchasing of raw materials (has a network of suppliers of about 1500, from more than 30 countries) ; IFC’s initiation of 480 R&D projects; the concerned aerospace related universities, institutions, research labs, which trains engineer and scientist, build and develop their workforce’s potential skills, do innovative researches; company’s large scale of production due to increased demands of aerospace products from potential customers; and in addition to all these, company has been established since 1960, and it is producing, selling, distributing aerospace products since last 4 decades, which makes the company to be quite efficient because of its constant practices of operations. All the above mentioned factors makes the organization to be cost effective and thus gain internal economies of scale. In addition: due to company’s large size, growth volume and establishment of new factories, it has cost comparative advantage and is getting better by the time. It has also attained the external economies of scale because of the aerospace valley: as all the aerospace related industries, OEMs, SMEs, Air bus’s divisions are clustered in the same region. And because of the strategic goal of aerospace valley i.e. leverage in competitiveness of all members of aerospace valley; the sharing of skilled workforce, advance technology among each other makes the airbus gain the external economies of scale: as it has a greater impact on the whole industry, because of its giantess and competitiveness.

Destination countries of Airbus company’s products

Airbus exports aerospace products to the following countries, categorized by continents:

Europe

UNITED KINGDOM RUSSIA SPAIN BELGUIM CZECH REPUBLIC HUNGARY AUSTRIA NORWAY UKRAINE ITALY MOLDOVA ALBANIA SWITZERLAND GREECE SWEDEN FINLAND NETHERLAND IRELAND DENMARK

Asia

CHINA MALAYSIA THAILNAD SOUTH KOREA PHILIPHINES JAPAN HONG KONG INDONESIA UAE TURKEY INDIA SAUDI ARABIA QATAR KUWAIT OMAN MALDIVES KAZAKHSTAN VIETNAM AZERBAIJAN MALDIVES LEBANON PAKISTAN GEORGIA BURMA

North America

UNITED STATES CANADA MEXICO South America

CHILE COLOMBIA ARGENTINA BRAZIL BOLIVIA PERU

Australia

AUSTRALIA FIJI NEWZLAND FRENCH POLYNESIA

Africa

LIBYA SOUTH AFRICA TUNISIA MOROCCO BURKINA FASO MOZAMBIQUE GABON MAURITIUS SOUTH SUDAN MAURITANIA SOUTH SUDAN

Mode of expansion

Airbus, follows different modes of expansion among which FDI is also practiced by the Airbus. The country we have chosen: where Airbus has expanded his business operations, manufacturing plants and facilities, is the United States: where Airbus has exploited the advantage of in the country, in rivalry action against the biggest competitor Boeing. The reason, Airbus has chosen the United States, as their destined mode of expansion, is because the US is a large market for aerospace products, and to be close enough to Airbus’s potential customers and its supplier the Airbus has established its manufacturing plants and facilities. Currently, the Airbus has several Airbus’s engineering offices, training centers and facilities in: Alabama, Kansas, Florida, Mississippi, Texas, Georgia, and Virginia; while headquarters in Herndon and Miami. And the reason Airbus expanded its operations to US is because of its appetite of seeking advantage.

Seekers of Advantage The Airbus seeks for the Markets, Security, knowledge and factors that are most favorable: in conducting its operations i.e. in United States, ant the country’s markets, security, knowledge and factors are discusses below in detailed: Market In terms of market advantage, United States has large availability of markets, potential customers. As it share the honor of having global leadership in aerospace industry; and is the world’s largest single aisle aircraft markets. Exploiting marketing advantage is profitable because: . The airbus company will be closer to its potential customers, 800 suppliers (out of 1500), and it end up in cost reduction. . Airbus visibility will be increased . Market shares of Airbus are increasing by a favorable rates. . There is an anticipation of: increase in demand for 500 new planes by 20-year. Etc. Security Due to the US strong regulations, there is security of both physical and financial. The law and order problem does not exist. Investments are secure. There are some hindrance to investments and operations. But are not a big issue at all. Factors The United States has labor: cheaper than that of Europe, skilled workforce of machinist, engineers and trained workers; lands availability, strong distribution channel; policy and promotional strategies are strong, availability of both related and supporting industries; developed infrastructure. And the Airbus industry wants to exploit the factor conditions. Knowledge In terms of knowledge, United States have top class educational institutions, the level of modernized education, innovativeness, creativeness is unmatched up to some extents. Different research and developments programs, concerned with the advancement in aerospace technology. And as we see, NASA’s utilization and discovery of advance technology also contributes in innovativeness. At last, the Airbus: can also exploits the US aerospace knowledge for its comparative advantage.

Conclusion On conclusion, we would like to say: that the aerospace industry in France may enjoys, being the comparative advantage; but their do exist some negative points in the country’s competitive strategy i.e. government’s provision of subsidies to Airbus limits competition, encouraging Airbus’s monopoly results to destructive competition, higher taxes, outsourcing may end up in less leverage to aerospace valley, less credit access by banks etc. which can be ameliorated, if the weak points of France’s aerospace industry are turned into its strengths and France may enjoy the greater comparative advantage of this industry.

References: . https://www.cia.gov/library/publications/resources/the-world-factbook/geos/fr.html . https://en.wikipedia.org . http://www.tradingeconomics.com/ . http://atlas.media.mit.edu/ . http://www.export.gov/france/doingbusinessinfrance/index.asp . http://www.economywatch.com/world_economy/france/export-import.html . http://www.worldstopexports.com/ . http://www.nationsencyclopedia.com/economies/Europe/France-INFRASTRUCTURE- POWER-AND-COMMUNICATIONS.html . http://www.diplomatie.gouv.fr/en/french-foreign-policy/economic-diplomacy-foreign- trade/facts-about-france/facts-about-french-economy/article/fact-1-world-class-french . https://en.wikipedia.org/wiki/Aerospace_Valley . http://www.investineu.com/content/aerospace-sector-eu . http://www.eacp-aero.eu/index.php?id=26 . http://www.conferenceboard.ca/hcp/details/innovation/export-market-share- aerospace.aspx . http://www.britannica.com/topic/aerospace-industry . http://www.reuters.com/article/france-aerospace-idUSL6N0KI24020140108 . http://www.ainonline.com/aviation-news/aerospace/2014-07-14/french-aerospace- industry-predicts-another-good-year . http://www.intltradesummit.com/france.html . http://www.youbuyfrance.com/uk/Posts-10258-french-aeronautical-industry-set-for-new- heights-as-global-demand-skyrockets . https://en.wikipedia.org/wiki/France . http://atlas.media.mit.edu/en/profile/country/fra/ . http://www.airbus.com/ . https://en.wikipedia.org/wiki/Airbus . http://www.grin.com/en/e-book/87814/airbus-versus-boeing-strategic-management-report . http://www.bizcoachinfo.com/archives/1326 . http://www.slideshare.net/taposhdr/airline-industry-analysis-boeing-airbus . https://etd.ohiolink.edu/!etd.send_file?accession=muhonors1210008575&disposition=inli ne . www.researchandmarkets.com . http://strategyatheinz.blogspot.com/2012/06/boeing-and-airbus-rivalry-strategy.html . http://www.focus-economics.com/countries/france . https://www.b2match.eu/air-days2014/participants/51 . http://www.eacp-aero.eu/index.php?id=26 . http://www.fdiintelligence.com/Sectors/Aerospace/Aerospace-Airbus-and-Boeing-s-FDI- strategy?ct=true . http://welkerswikinomics.com/blog/2010/11/22/from-short-to-long-economies-of-scale- and-the-long-run-average-total-cost-curve/ . www.airliners.net . http://astro.temple.edu/~pippin/Scl&Scp.htm . http://www.ofii.org/news/airbus-announces-foreign-direct-investment-fdi . http://www.ft.com/cms/s/0/f2bfe83e-3f47-11e4-a5f5- 00144feabdc0.html#axzz3tkQOSuog . http://www.airbus.com/presscentre/pressreleases/press-release-detail/detail/airbus- officially-opens-us-manufacturing-facility/ . http://www.export.gov/industry/aerospace/ . http://www.export.gov/industry/aerospace/ . http://nces.ed.gov/?src=ft . https://www.fas.org/sgp/crs/misc/R40967.pdf

Appendix

Data: 2013

Products Exports Imports

Mineral products $21.4B $105B Wood products $2.75B $4.68B Metals $39.8B $44.9B Stone & Glass $5.53B $7.81B Animal & vegetable bi- $2.12B $3B product Paper Goods $10.6B $13.8B Vegetable products $21.2B $15.7B Animal $17.4B $16.3B Food stuff $39.2B $27.1B Weapons $254M $286M Footwear & headwear $2.26B $7.81B Animal hides $7.25B $4.86B Textiles $12.9B $30.5B Transportation $112B $91.9B Machines $107B $132B Arts & antiques $3.9B $644M Precious metals $8.59B $6B Chemical products $94.9B $76.6B Instruments industry $19.2B $22.6B Plastics & rubbers $30B $32.9B Others $6.52B 15.7B

Mineral Products

Exports Percentage Dollars Refined petroleum 69 14.7B Petroleum gas 17 3.64B Coal tar 3.4 722M Non-Iron & steel slag, ash & 1.3 275M residue Cement 1.3 286M

Imports Percentage Dollars Crude petroleum 38 39.8B Refined petroleum 31 32.2B Petroleum gas 25 25.9B Coal briquettes 1.8 1.92B Iron ore 1.5 1.63B

Wood Products Exports

Percentage Dollars Practical board 16 431M Rough wood 15 418M Wood barrels 15 415M Swan wood 12 321M Wood fiberboard 10 277M

Imports Percentage Dollars Swan wood 22 1.01B Wood carpentry 13 605M Wood fiberwood 11 493M Other wood articles 7.8 363M Plywood 7 327M

Metals

Exports Percentage Dollars Hot-rolled iron 7.9 3.17B Scrap iron 6.3 2.53B Coated flat rolled iron 6.3 2.51B Iron pipes 4.4 1.75B Aluminum plating 4.1 1.64B

Imports Percentage Dollars Other iron products 5.2 2.32B Hot-rolled iron 4.4 1.97B Refined copper 3.9 1.73B Iron structure 3.8 1.71B Large flat rolled stainless 3.7 1.67B steel

Stones & Glass

Exports Percentage Dollars Interior decorative 15 821M glassware Glass bottles 14 763M Glass fibers 8.8 489M Other stone articles 7.5 417M Safety glass 7 389M

Imports Percentage Dollars Glass bottles 14 1.12B Glazed ceramic 12 913M Safety glass 8.5 662M Glass fibers 7.6 593M Cement articles 4.6 359M

Animal & Vegetable Bi-product

Exports Percentage Dollars Seed oils 31 622M Rapeseed oil 19 374M Other pure vegetable oils 7.7 155M Bovine, sheep & goat fat 5.1 104M Glycerol 4.9 99M

Imports Percentage Dollars Palm oil 16 480M Pure olive oil 16 474M Margarine 15 442M Rapeseed oil 11 329M Other pure vegetable oil 9.3 278M

Paper Goods

Exports Percentage Dollars Kaolin coated papers 10 1.68B Toilet papers 8.4 887M Brochures 7.7 810M Uncoated papers 7.6 807M Paper container 6.1 646M

Imports Percentage Dollars Paper container 13 1.77B Kaolin coated paper 12 1.67B Toilet paper 11 1.55B Uncoated paper 9.4 1.3B Chemical wood pulp 8.2 1.13B

Vegetable Products

Exports Percentage Dollars Wheat 30 6.4B Corn 13 2.67B Barley 8.5 1.81B Rapeseed 4.5 890M potatoes 4 858M

Imports Percentage Dollars Coffee 11 1.77B Citrus 7 1.11B Other vegetable 5.9 923M Other live plants 4.8 751M Rapeseed 4 629M

Animal Product

Exports Percentage Dollars Cheese 23 4.06B Bovine 9.3 1.62B Poultry meat 8.3 1.45B Pig meat 7 1.22B Bovine meat 7 1.21B

Imports

Percentage Dollars Cheese 10 1.65B Bovine meat 9.4 1.54B Fish fillets 9.2 1.5B Non-fillet fresh fish 8.8 1.43B Pig meat 7.7 1.26B

Food Stuff

Exports

Percentage Dollars Wine 28 10.9B Hard liquor 13 5.18B Animal food 6.4 2.51B Baked goods 5.4 2.12B Malt extract 4.7 1.83B

Imports

Percentage Dollars Baked goods 8.1 2.2B Rolled tobacco 7.4 2B Chocolate 7.2 1.95B Soya bean meal 5.6 1.51B Hard liquor 5.1 1.39B

Weapons

Exports

Percentage Dollars Explosive ammunition 74 187M Weapon parts & accessories 11 26.8M Spring, air & gas guns 7.3 18.6M Military weapons 3.6 9.13M Other fire arms 2.8 7.2M

Imports

Percentage Dollars Explosive ammunition 51 146M Other fire arms 23 65.3M Spring, air & gas gun 13 38.1M Weapon parts & accessories 9.5 27.3M handguns 1.7 4.96M

Footwear & Headwear

Exports

Percentage Dollars Leather footwear 52 1.18B Textile footwear 15 342M Rubber footwear 11 252M Other headwear 5.2 117M Other footwear 4.9 111M

Imports

Percentage Dollars Leather footwear 50 3.91B Textile footwear 18 1.4B Rubber footwear 17 1.31B Other headwear 2.7 214sM Footwear parts 2.6 203M

Animal Hides

Exports

Percentage Dollars Trunk & cases 73 5.28B Leather apparel 6.4 464M Tamed equine & bovine 4 289M hides Other leather articles 3 130M Equine & bovine hides 6.1 445M

Imports

Percentage Dollars Trunk & cases 63 3.05B Leather apparel 13 652M Tamed equine & bovine 7 342M hides Skin apparel 2.6 125M Other hides & skins 2.1 103M

Textiles

Exports

Percentage Dollars Non-knot women suits 9.3 1.21B Knit sweater 6.6 772M Knit t-shirts 4.9 628M Non-women textiles 4.4 564M Non-not active wear 3.9 509M

Imports

Percentage Dollars Non-knit women suits 11 3.27B Knit sweaters 10 3.07B Non-knit men’s suits 7.7 2.36B Knit t-shirts 7.4 2.27B Knit women’s suits 4.3 1.32B

Transportation

Exports

Percentage Dollars Planes, helicopters, 45 49.9B spacecraft Cars 20 22.1B Vehicle parts 15 16.5B Aircraft parts 6.7 7.53B Delivery trucks - 5.32B

Imports

Percentage Dollars Cars 34 31.2B Aircraft parts 17 15.4B Planes, helicopters, 17 15.3B spacecraft Vehicle parts 14 12.6B Delivery trucks 6.3 5.8B

Machines

Exports

Percentage Dollars Gas turbines 12 12.7B Integrated circuits 5.6 5.94B Low-voltage pro-equipment 4.5 4.8B Combustion engine 3.3 3.55B Telephones 3.2 3.45B

Imports

Percentage Dollars Computers 9.4 12.4B Gas turbines 6.9 9.12B Broadcasting equipment 5 6.57B Integrated circuits 4.4 5.78B Telephones 3.8 5.05B

Arts & Antiques

Exports

Percentage Dollars Paintings 74 2.88B Sculptures 12 476M Antiques 10 399M Collector’s item 2.8 108M Prints 1 39.8M

Imports

Percentage Dollars Paintings 53 343M Sculptures 21 132M Collector’s item 15 97.7M Antiques 9.5 61M Prints 1 7.17M

Precious Metals

Exports

Percentage Dollars Jewelry 60 5.11B Gold 13 1.15B Precious metal scraps 11 941M Imitation jewelry 4.9 424M Diamonds 3.3 280M

Imports

Percentage Dollars Jewelry 46 2.75B Diamond 15 872M Gold 13 776M Silver 7.3 438M Imitation jewelry 6.4 386M

Chemical Products

Exports

Percentage Dollars Packaged medicament 29 27.8B Beauty product 7.9 7.46B Human or animal blood 7.7 7.33B Perfumes 6 5.72B Pesticides 4.1 3.88B

Imports

Percentage Dollars Packaged medicaments 23 17.9B Human or animal blood 7.2 5.49B Nitrogen heterocyclic 5 3.8B compounds Radioactive chemicals 4 3.03B Hormones 3.4 2.63B

Instruments

Exports

Percentage Dollars Medical instruments 16 3.08B Orthopedic instruments 14 2.77B Thermostats 8.4 1.61B x-ray equipment 7.2 1.38B Chemical analysis 6.1 1.17B instruments

Imports

Percentage Dollars Medical instruments 20 4.59B Orthopedic instruments 16 3.54B Base metal watches 6.3 1.42B Chemical analysis 6 1.36B instruments thermostats 5.9 1.33B

Plastics & Rubbers

Exports

Percentage Dollars Rubber tires 12 3.53B Ethylene polymers 8.7 2.61B Other plastic products 7.8 2.35B Plastic lids 7.8 2.33B Propylene polymers 6.3 1.89B

Imports

Percentage Dollars Rubber tires 13 4.18B Other plastic products 9.8 3.23B Plastics lids 8.5 2.81B Raw plastic sheeting 7.7 2.53B Ethylene polymers 7.3 2.39B

Others

Exports

Percentage Dollars Seats 21 1.34B Other furniture 19 1.24B Liquid fixtures 12 784M Sports equipment 8.5 557M Model & stuffed animal 7.1 462M

Imports

Percentage Dollars Other furniture 27 4.29B Seats 21 3.84B Light fixtures 11 1.79B Video & card games 8 1.26B Model & stuffed animals 7.8 1.22B

Data: 2014 Fastest-Growing French Export Products

Percentage Dollars Vegetable products Up 115.3 0.22B Coffee, tea and spices Up 111.5 1.01B Clocks and watches Up 94.1 2.86B Gems, precious metals Up 66.8 7.30B Silk Up 57.0 0.12B Footwear Up 55.2 3.22b Other base metals Up 54.5 0.83B Paper yarn, woven fabric Up 54.4 0.51B Collector items, art, Up 51.1 1.46B antiques Tobacco Up 46.1 1.12B

With fastest pace in terms of Growth

Percentage Dollars Cereal and milk Up 92.2 862.3M preparations Paper yarn, woven fabric Up 75.3 303.5M Modified starches, enzymes Up 59.6 1B Iron and steel Up 41.7 3.1B Soaps, lubricants, candles Up 38.3 339.8M Leather, animal gut articles Up 33.3 2.2B Other chemical goods Up 27.8 3.6B Aircraft, spacecraft Up27.8 28.1B Raw hides, skins not fur Up 27.4 212.9M skins, leather Perfumes and cosmetics Up 21.5 11.6B

France top 10 exports

Percentage Dollars Machines, engines, pumps 11.7 66.3B Aircraft, spacecraft 10.2 57.7B Vehicles 8.4 47.6B Electronic equipment 7.8 44B Pharmaceuticals 6.2 35.2B Plastics 4.1 23B Oil 3.9 22B Beverages 3.2 18.1B Medical, technical 3.2 17.9B equipment Perfumes, cosmetics 3.1 17.3B

France top 10 imports

Percentage Dollars Oil 14.6 96.2B Machines, engines, pumps 11.3 74.6B Vehicles 8.8 58.3B Electronic equipment 8.4 55.5B Aircraft, spacecraft 4.5 29.6B Pharmaceuticals 4.2 27.9B Plastics 3.8 25.2B Medical, technical 2.9 19.2B equipment Organic chemicals 2.7 17.7B Iron and steel 2 13.3B

France top 10 exports in terms of Advantages

Percentage Dollars Aircraft, spacecraft Up 27.8 28.1B Beverages Up 20.2 13.9B Perfumes, cosmetics Up 21.5 11.6B Cereals Up 15.6 7.8B Pharmaceuticals Down -14.3 7.3B Dairy, eggs, honey Up 17.7 4.2B Other chemical goods Up 27.8 3.6B Iron and steel Up 41.7 3.1B Leather, animal gut articles Up 33.3 2.2B Live animals Up 7.3 2.1B

Highest value French exports product

Dollars Aircraft, spacecraft 49.7B Medication mixtures in dosage 25.7B Cars 19.1B Automobile parts/accessories 16.7B Processed petroleum oils 13.6B Turbo-jets 12.4B Wine 10.2B Aircraft parts 7.8B Beauty/makeup/skin care preparations 7.78B Electronic integrated circuits/micro 7.29B assemblies Blood fractions 7.16B Cases, handbags and wallets 5.98B Wheat 5.4B Phone system devices 5.31B Trucks 5.30B Perfumes, toilet waters 5.23B Electrical switches, protectors and 5.09B connectors Electrical switches, protectors and 4.98B connectors Engines (diesel) 4.84B Alcohol (including spirits, liqueurs) 4.62B Jewelry 4.53B

Highest value French imports product

Dollars Crude oil 38.8B Processed petroleum oils 32.4B Cars 30.9B Petroleum gases 20.8B Medication mixtures in dosage 18.2B Aircraft parts 16.5B Automobile parts/accessories 13.1B Aircraft, spacecraft 12.9B Phone system devices 11.6B Computers, optical readers 9.7B Turbo-jets 9.1B Blood fractions 6.9B Trucks 5.7B Electronic integrated circuits/micro 4.8B assemblies Electro-medical equipment 4.5B Miscellaneous furniture 4.1B Rubber tires 4.0B Footwear (leather) 3.97B Jewelry 3.95B Orthopedic appliances 3.8B

Project Title: Application of Trade Theories Country Name: France Subject Name: International Business & WTO

Submitted To:

Mr. Imran Qureshi

Submitted by:

Dilawar khan

3570-BBA/FMS/F12

Arif Hussain

3689-FMS/BBA/F12

Dated: Wednesday, December 9, 2015