Globalization Questionnaire Ã¯Â¿Â½ PAGE Ã¯Â¿Â½1Ã¯Â¿Â½
a. What is globalization, and what are some of the traditional international trade theories that support the concept of globalization?
Globalization is the shift to a more integrated and independent world economy (Hill, 2004). Globalization is the process of worldwide trade by which is intended to increase capital and economic gain for all participating countries while increasing global citizenship. Much controversy exists pertaining to globalization; some people find globalization has a negative impact on the local economy because the belief is with globalization many jobs will be eliminated. Others feel the opportunities equate to more jobs and the possibilities of economical gain.
Some of the traditional international trade theories that support the concept of globalization are;
The absolute advantage theory as Adam Smith describes occurs when a country is much more efficient at producing a product then any other country and should specialize in the production for trade with other countries.
Comparative advantage when defined as productivity differences tells us that two countries producing the same products, but in different capacities, could benefit if the agreement is that the two countries focus on the product that has the highest yield from the respective country. This focus would increase production thus lowering the cost of goods sold. When one country can produce more of a product at a cheaper rate then the other country and visa-versa then the opportunity to trade is the worldwide market increases where both countries would benefit.
Product life cycle theory describes the international trade patterns that are influenced by where the product is introduced. When I think of the product life-cycle theory, I think about when Hewlett Packard (HP) began developing specific electronics out of a garage in Palo Alto California and how the products evolved into a worldwide commerce. A...