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Globalization and Trade Economics

1. Professor Charles W.L. Hill says, "As used in this book, globalization refers to the shift toward a more integrated and interdependent world economy. Globalization has two main components: the globalization of markets and the globalization of production."

Without rewording Hill's statement, give your definition of the term Globalization.

2. In his book The Competitive Advantage of Nations, Michael Porter of the Harvard Business School tries to explain why certain nations have international success in selected industries. He does so by looking at four major attributes in a paradigm we now call Porter's Diamond.

In your own words, tell what the four attributes are and then evaluate Porter's Diamond theory.

3. Shortly after World War I, the nations of the world returned to tracking the value of their currencies to the price of gold. This system lasted until the Great Depression era when nations suspended gold convertibility.
Why? And what role did the United States play in all of this?

4. Professor Hill speaks to several international trade theories. We have also addressed this in class. One of these is the Product Life Cycle theory, sometimes called the International Product Life Cycle Theory, or IPLC.
Define the IPLC in your own words and giving two examples of products that fit within this theory

5. Toward the end of World War II, with the world's economic system of trade in ruin, over 40 nations met in the United States at a resort in New Hampshire to create rules and organizations to govern the post-war international monetary system.

What was the name of the "system" that came out of this series of meetings, what were the two multinational institutions that were established, and explain the mission of one of these two organizations.

6. There are both advantages and disadvantages to entering into international business via a certain mode.
Name two different modes of entry and thoroughly discuss the advantages and disadvantages of each, identifying at least one product or service that would go with each of your two modes.

Solution Preview

The response addresses the queries posted in 1917 words.

//Before analyzing the Globalization and Economics, it is essential to have knowledge about the exact meaning and basic concept of 'Globalization'. One should know about the key factors of Globalization, which further will assist in analyzing this process for business//

Ans. 1 Globalization is a set of processes leading to the integration of economic, cultural, political, and social systems across geographical boundaries. It means the generalized expansion of international economic activity which includes increased international trade, growth of international investment (foreign investment) and international migration, and increased creation of technology among countries. Globalization is the increasing world-wide integration of markets for goods, services, labor, and capital. Basically it describes the idea that the world is becoming a single global market. It describes the idea that time and space have been shrunk as a result of modern telecommunications technologies which allow almost instantaneous communication between people almost anywhere on the planet.

//Above is the discussion of basic concept of Globalization. As per the instructions, I will discuss about the four attributes and the evaluation of the Porter's 'Diamond Theory'.//

Ans.2 Porter is a famous Harvard business professor. In his book The Competitive Advantage of Nations, he mentions "Porter's Diamond Theory". Porter believes standard classical theories on comparative advantage are inadequate. According to him, a nation attains a competitive advantage if its firms are competitive. Firms become competitive through innovation. Innovation can include technical improvements to the product or to the production process. So in Porter Diamond Theory he mentions four determinants of national competitive advantage. They are as follows:-a) factor conditions, b) demand conditions, c) related and supporting industries, and d) firm strategy, structure and rivalry.

Now explanation of these four attributes is like this: - here factor condition means the inputs which is used in production such as labour, land, natural resources, capital and infrastructure. But Porter also argues that the "key" factors of production (or specialized factors) are created, not inherited. In his view specialized factors of production are skilled labour, capital and infrastructure. While the general factors such as unskilled labour and raw materials can be obtained by any company and hence, they do not generate constant competitive advantage. However, specialized factors involve heavy, sustained investment. They are more difficult to duplicate. This leads to a competitive advantage, because if other firms cannot easily duplicate these factors, they are valuable. Porter also argues that sometimes lack of resources often actually helps the countries to become competitive because such countries are forced to innovate to overcome their problem of scarce resources.

Demand conditions are the second attribute of Porter's Diamond Theory. Here he says that a sophisticated domestic market (customers) is an ...

Solution Summary

This solution discusses the questions about globalization, competitive advantage, the gold standard, international trade theories, the international monetary system, multinational institutions and modes of entry in international business. This solution is 1917 words.

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