Working Capital Management and Comparative Advantage

When organizations are managing their working capital they have to make decisions concerning the levels and mix of their current assets. The managers have to ascertain the comparative advantage they possess over their competitors to determine how much to invest to enable the organization minimize costs, risks, and obsolescence, as well as the opportunity costs of tying up investments in non-performing assets.

The biblical City of Tyre was one of the richest cities in history due to its comparative advantage fueled by geopolitical and economic factors (Diakonoff, 1992). Comparative advantage is the ability of a nation to produce a particular commodity at a lower opportunity cost than others (Hall & Soskice, 2001). The city had a port and an abundance of natural resources for trade, for instance, vast and dense pine, cedar, and cypress forests as well as purple dye for clothing, which were sold to Israelites in exchange for food (Ez. 27, KJV). Further, Ezekiel asserts that the city’s wares were sold to many people and had a lot of merchandises to emphasize its wealth (27:33, KJV).

Moreover, Tyre made trade pacts with Israel thereby optimizing its comparative advantage. The pacts increased the city’s maritime trade, which in turn led to expanding infrastructure and technology, an advantage it enjoyed over its trade partners (Lipiński, 1987). This enabled the city increase the exports to meet the swelling demand. Innovations, such as pottery and metal works were also exploited to increase the comparative advantage. 

Further, the city had the most profitable slave trade in the region. The city was renowned for trade, manufacturing, and trade, had the best human resource comprising of builders, carpenters, and masons who were exported to Israel (Lipiński, 1987). Further, Tyre amassed gold from foreign lands and its geographical position played an integral role in the defense of its resources.

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