Adopt Krugman ; the Nobel Laureate's Trade Theory Can Change India's Business Paradigm.

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My aim was that i would produce a certain volume of cars and create a very low-cost, very low-break-even point plant that a young entrepreneur could buy. A bunch of entrepreneurs across the country could establish such assembly operations and Tata Motors would train their people, oversee their quality assurance and they would become satellite assembly operations for us. It would be satisfying if the small car created 10-15 satellite groups of young engineers who could get together and do a business. They would never otherwise be able to get into the assembly of cars,Ratan Tata had told a newspaper on January 10, 2008, describing his business plan for the Rs 1-lakh Nano.

By design or default, Tata's business plan for the Rs 1-lakh car has made the Nano a perfect candidate for a Paul Krugman success story. The American economist and popular columnist won the Nobel Prize for Economics in 2008 for his trade theory, which explains trade between countries endowed with similar resources. It also explains trade in similar products. Trade between Italy and Germany, for instance, in Porsches and Ferraris, or between the US and Canada in Bombardier planes and Boeings had remained unexplained until Krugman, 55,came out with his trade theory in 1979-80. The Nobel- winning work showed that producers make and export more and more of those products that have large home markets. That's because spread over higher volumes, costs come down, raising cost competitiveness (economies of scale).

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Adopt Krugman ; the Nobel Laureate's Trade Theory Can Change India's Business Paradigm.

Why is the Nano a potential Krugman success story? Because there are few markets in the world bigger than India for the Nano. Indians buy a million small ...

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