Globalization and Its Effects on Businesses †MyAssignmenthelp.com

Question: Discuss about the Globalization and Its Effects. Answer: Globalization and its effects on Domestic Businesses Globalization is the vast concept that is involved with business industry since last few decades. According to Bruno and Shin (2014), the phenomenon considerably affects the business life, economy, environment, and society in different ways. The changes occurred due to globalization are affecting the business world in many recognizable ways. It is notified that the globalization is generally increasing the competition in the business environment (Noland, Robinson Moran, 2016). The competition sometimes depends on the product or services or in the technological development. In fact, globalization signifies the growth in economies of scale. In usual cases, the organisations consider various aspects to strengthen the competitive position in the business environment (Shi, Yang Hu, 2016). In spite of several positive consequences, the globalization even signifies some of the negative consequences as well. Especially, the domestic businesses face the significant challenges to compete the larger brands. The following aspects of globalization affect the domestic businesses in a significant manner. Increasing Competition Lee et al., (2014) implied that globalization generally leads to increased competition. In majority of the cases, the internationalized companies use the huge amount of resources to improve the business functionalities in a globalised scenario. The improvement in the business world is providing the customers the significant opportunities to select their products or services as per their expectations. In such cases, the small businesses face the difficulties to sustain their position in this advanced and competitive market. Technology Exchange Technological advancement is one of the most effective and striking manifestation of globalization (Noland, Robinson Moran, 2016). The entrepreneurs and the internationalized businesses utilize the advanced technological tools to exploit the innovative business opportunities. Utilizing these technologies requires investing the sufficient capital resources (De Brentani Kleinschmidt, 2015). The domestic businesses often fail to invest the adequate capital for installing these technologies. Especially, in comparison to the internationalized organisation, the domestic companies use the limited resources. In such cases, it becomes much challenging for these businesses to gain the customers attention. Price Fluctuation Apart from these obligations, it has been observed that many of the domestic businesses face the difficulties in operating business due to the continuous fluctuation in currency. Globalization affects the currency fluctuation which changes the charges of the raw materials and in other necessary resources (Laursen, 2015). Therefore, it becomes troublesome for the domestic businesses to generate capital for the business investment purposes. Accordingly, it affects the business in a significant way. The recognition of both the positive and negative consequences, it can be implied that the globalization has been the significant factor in this competitive business market (Shi, Yang Hu, 2016). The domestic businesses need to utilize the advanced technologies and the business techniques wisely to survive in this competitive and globalised business market. Comparison between Absolute Advantage Theory and Comparative Advantage Theory Absolute Advantage and Comparative Advantage are much exploring concepts in international trade. Levchenko and Zhang (2016) implied that the international trade is the major reason behind the devotion of limited resources for producing the particular good or service. On the other hand, the absolute advantage signifies varying abilities of producing goods much efficiently by the nations. The absolute advantage theory was first developed by Adam Smith who considered the importance of product specialization. He argued that each of the nations needs to focus on any specific product development (Moak, 2017). Otherwise, it becomes quite difficult to keep focus on different products all at once to become rich. On the contrary, comparative advantage theory develops the concern regarding the exchange of the possible beneficial goods with other nations. The absolute theory is concerned about the principle of labour divisions (De Brentani Kleinschmidt, 2015). Only two nations are involved to e xchange the specialized products or services. It has been observed that absolute advantage theory is more practical than the comparative advantage. The absolute advantage depends on the labour divisions that suggest the capabilities of building the specific or suitable product or service by a nation. During the trade, the countries can make the practical approach for any specific good or product to a specific country (Noland, Robinson Moran, 2016). For example, it can be assumed that both Italy and France have adequate resources for producing cheese or wine but these countries cannot produce both together. France has the ability to produce 10 units of cheese or 20 units of wine. Therefore, the opportunity cost= 10/20 or the 0.5 unit of cheese. On the other hand, Italy can produce 22 units of cheese and 30 units of wine. The country has the absolute advantage of producing both cheese and wine. However, it has been observed that the opportunity cost of cheese is 30/22 or 1.36 unit. Similarly, the opportunity cost of wine is 22/30 , or 0.73 unit (Carter, 2017). The above calculation specifies that the Italy has the superior potentiality to produce wine more than France. It has the recognizable comparative advantage even though Italy is more efficient in producing goods. Hence, it depends on the absolute advantage to consider a nation specialized for a particular product or service. Logical Reason behind Donald Trumps announcements of Tariff imposition on China Due to the emergence of globalization and diversification, it was observed that the US retail giants like Wal-Mart and others could sell an ample amount of merchandise goods that are made in China. The production cost in Asia is comparatively lower than America. It was reported that China exported almost $482 billion retail goods to the US consumers. Apparently, this trade is diminishing the American retail industries (Noland, Robinson Moran, 2016). The native industry is falling down due to excessive merchandising of cheaper products made in China. Donald Trump, the President of United States of America, thus announced the imposition of tariff on Chinese imports. Donald Trump announced 45% of the tariffs on Chinese goods. The above discussion on absolute advantage of a nation determines the specialization of a country on a specific good. Similarly, US, being the specialized in retail goods, can ensure the profitable trades with other countries (Moak, 2017). However, the cheaper products of China is hampering the US industries and causing the unemployment rate of the US citizens. Therefore, Donald Trump imposed the tariff rates for the trading purposes with United States. Implication It has been observed that the cheaper Chinese products are hampering the goods and services manufacturing in US. It even increases the unemployment rates that affect the industry development. The competition sometimes depends on the product or services or in the technological development. In fact, globalization signifies the growth in economies of scale. In usual cases, the organisations consider various aspects to strengthen the competitive position in the business environment. Hence, it can be recommended that if China produces the goods in United States by bearing the cost of production. It will be beneficial for the US economy to add up the industrial charges on product manufacturing. In fact, the price of the retail products will be justified for the US citizens. If the domestic consumers can buy the products from US manufacturers, it would be helpful for the economic development of the country. In fact, it will be beneficial for US to provide the retail goods that are manufactu red within the country. In addition, the tariff rates would be added to contribute to the economic growth in foreign trades. Accordingly, US can develop the nation by considering their absolute advantage on selling retail goods. References Bruno, V., Shin, H. S. (2014). Globalization of corporate risk taking.Journal of International Business Studies,45(7), 800-820. Carter, B. (2017). In vino veritas? The Development of Producer Trust and its Market Effects in Regulated French and Italian Quality Wine Markets. InTrust in Regulatory Regimes(pp. 115-144). Edward Elgar Publishing. De Brentani, U., Kleinschmidt, E. J. (2015). The impact of company resources and capabilities on global new product program performance.Project Management Journal,46(1), 12-29. Laursen, K. (2015). Revealed comparative advantage and the alternatives as measures of international specialization.Eurasian Business Review,5(1), 99-115. Lee, J. Y., Park, Y. R., Ghauri, P. N., Park, B. I. (2014). 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