A Research On The Relationship Between Product Quality、Market Competition And The Product Mix Of Exporters

Carrying out reform and opening up over the last three decades has made China’s foreign trade a rapid growth. In2009, China’s total export exceeded Germany, becoming the largest exporter. However, China’s low product quality results in low price, suppressing the optimization of export structure and export sustainability. So the ascension of export quality should become the new subject for the development of Chinese foreign trade.In recent years, the study of multi-product has replaced single-product, becoming a new trend. The adjustment of exporter’s product mix contributes a lot to the volume of trade. Target market’s environment is a main factor leading to the adjustment of exporter’s product mix. Therefore, we study it to reveal a micro mechanism of trade growth.The paper does a systematic study to answer the following three questions:(1) what factors do market competition intensity depend on?(2)How does market competition intensity effect the reallocation of core products and others within an export firm?(3) Which product international competition mode is selected, price competition or quality competition?My theoretical model is based on Mayer、Melitz and Ottaviano(2011)model, studying the mechanism how market competition intensity effect the adjustment of exporter’s product mix. The theoretical model provides the answers to above three questions.(1) Market competition intensity hinges on the number of local product variety, average price and price elasticity of demand. It is positively correlated to the number of local product variety and price elasticity of demand, negatively correlated to average price.(2) Fierce market competition makes exporters add core products and shrink other products.(3) The selection of product international competition mode depends on product attributes. The model makes a distinction between efficiency oriented products and quality oriented products and yields the result that efficiency oriented products are suit for price competition while quality oriented products are suit for quality competition.The key viewpoints in the paper are that quality competition isn’t always better than price competition. It is the right road to improve product quality sustainably to choose the best product competition mode based on country, industry and product’s characteristics.