Global Markets Globalization

Question: Discuss about theGlobal Markets for Globalization. Answer: Introduction Globalization is an ongoing process of international interaction and interchange of opinions, ideas, resources, goods and service (Michie, 2011). The global trades are not a modern time notion but were done in every era of known human history, though the term globalization came into use since 1970s (Marsden, 2015). The globalization has given rise to cross border trades, businesses, enabled migration of people, supported exchange of knowledge and wealth. In its report in 2000, the International Monetary Fund recognized the issues and opportunities presented by extensive globalization in the modern business world (International Monetary Fund, 2000). Some of the needs and the opportunities of globalization for the domestic business are explored in this essay. Also this essay would discuss the trade theories formed for the global markets. The comparison, advantages and limitations of the Absolute advantage and Comparative advantage trade theories are explained in details. Globalization is not only Imperative for Survival, but also an Opportunity for Future Growth of Domestic Businesses. The globalization gives opportunities for the domestic business to explore the potential of the new markets. It enables the local business take benefit of the economies of scale by endorsing its goods and services in new budding markets (Bayraktar, 2014). Globalisation is not a mere choice today but almost a compulsion on the business who wishes to grow and sustain in the future. Even if the domestic companies do not enter the foreign market, they are affected by globalisation as the international players enter their local markets. this breaks the monopoly of the local businesses and forces them to upgrade their product quality and prices to become comparable to their foreign competitors. This advancement caused by the globalisation eventually helps the economic growth of the business and the country at large (Hartungi, 2006). Therefore, the growth of the domestic company in foreign market is not merely necessity or the survival of the business but also a plethora of opportunities. After the saturation of the local markets or by the stiffer competition from the foreign market penetrators, the best possible way ahead for a local business is to make use of the opportunities presented by globalisation (Bhagwati, 2007). A company can take advantage of the cheaper raw materials, labour or other resources in a different country and hence ensure control in the operational cost (Mochrie et al., 2001). This would also help the company to make better profits and revenues, further enhancing the company sustainability. Globalisation also ensures that the market risks of the company are distributed by being present in various nations at their different level of economic growth stages. the recession in one nation could be managed by the boom on the economy of other nation (Kohtamaki, 2016). International Trade Theories. In the case where the trading is taking place between two countries the situation involves various complex concepts and theories. These take into account various aspects like the international legislations, treaties, agreements between trading countries etc. the two classification of the global trade theories are the country-based or classical theory and firm-based or modern theories (Helpman, 2011) Absolute Advantage Trade Theory The Absolute Advantage theory is a country-based or classical trade theories. This theory suggested that the capability of a nation to manufacture or produce a certain product with more competency than the other nation, gives it an absolute advantage (Roxenhall, 2013). The nation should therefore identify such products, which it is able to make in a better way, at lower cost, quickly or in higher quality than other countries. Comparative Advantage Trade Theory Comparative advantage is also a classical or country-based trade theory. As per this theory the countries which are more competent in making both the goods that could be traded in exchange of each other, enjoys a higher comparative advantage than the country which is incapable of making any tradable goods or services (Hunt Morgan, 1995). Differences Between the Two Trade Theories The difference between the absolute and comparative advantage trade theories is a subtle one. On one hand the theory of comparative advantage put focus on the differences between the relative productivity of two countries, on the other hand the absolute advantage theory talks about the absolute competence of a nation (Reidenbach, 2013). To understand it better lets take a scenario where the only countries in the world are A and B, which makes only two goods with efficiency, say cheese and leather shoes. If in one-labor hour A makes 20 cheese blocks and 10 leather shoes while B makes 2 cheese blocks and 4 shoes. Here A has higher absolute advantage for making both the goods more in number. Though for A opportunity cost of making 1 shoe is 2 block of cheese, while for B it is merely 0.5 blocks of cheese. Thus B has grater comparative advantage in the manufacturing of shoes as compared to A (Weder, 1995). Limitations One of the important limitations seen in both these theories is lack of consideration for the transportation costs and government restrictions (Castronovo, 2012). The increase in specialisation by one country for a particular products or services may also result in the diseconomies of scale. Also these theories do not take into account the dynamic nature of the business and that switching of labor with expertise in one product might not be very easy task (Porter, 2011). Conclusion Thus it could be concluded that the globalization not only a necessity of the modern business scenario but also a fortunate opportunity for the business which wishes to expand and remain growing in the long run. Also the concepts of global trade theories enable to countries to identify their strengths and use them for better negotiations in the global markets. The limitations of the presently discussed trade theories are compensated by various modern trade theories such as Country Similarity Theory, Product Life Cycle Theory, Global Strategic Rivalry Theory, etc. Thus taking a domestic business in a well-researched global market is the wise decision for the growth and sustainability of the business. References Bayraktar, A., Oly Ndubisi, N. (2014). The role of organizational mindfulness in firms globalization and global market performance.Journal of Research in Marketing and Entrepreneurship,16(1), 26-46. Bhagwati, J.N. (2007) In Defense of globalization: With a new Afterword. Oxford: Oxford University Press, USA. Castronovo, C., Huang, L. (2012). Social media in an alternative marketing communication model.Journal of Marketing Development and Competitiveness,6(1), 117-134. Hartungi, R. (2006) Could developing countries take the benefit of globalisation? International Journal of Social Economics, 33(11), pp. 728743. Helpman, E. 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