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1. What is globalization, and what are some of the traditional international trade theories that support the concept of globalization?
“Globalization refers to the shift toward a more integrated and interdependent world economy. Globalization has several different facets including the globalization of markets and the globalization of production,” (Hill, 2004). Although no one theory can explain the apparent pattern of international trade, together, the theories of Free Trade, Life-Cycle, Mercantilism, Heckscher0Ohlin, New Trade and Porter’s Theory do suggest which factors are important and can support the concept of globalization.
2. List the major drivers of globalization and give three examples of each.
The major drivers of globalization would be declining trade and investment barriers, technology and communication and social -demographic changes. Trade barriers have been reduced and are shifting from closed and economy to open end economy. “The lowering of barriers to international trade enables firms to view the world, rather than a single country, as their market,” (Hill, 2004). The lowering of trade barriers has also facilitated the globalization of production. “According to data from the World Trade Organization, the volume of world trade has grown faster than the volume of world output since 1950,” (Hill, 2004).
Some examples of technology and communication would be internet, fax, cell phones, and transportation. Using these technologies create greater data flow and increase the amount of information that can be processed by individuals and firms. Social-demographic is a driver that has been a dramatic change in the demographics of the global economy. Examples of changing demographics would be the dominance in the world economy and world trade picture, dominance in world foreign direct investment, and dominance of large multinational U.S. firms on the international business scene. (Wikipeida, 2006).
3. Explain at least four effects of globalization that impact your community and your organization.
1. Economies of scale – One of the major advantages of globalization for companies is to achieve economies of scale in production and marketing. Companies and communities need to adapt to the emergence of a globalized market to see and realize the benefits from economies of scale.
2. Improved lifestyles of people – Consumers are now made available the best of products and services from around the world. This also causes prices to be more competitive.
3. Improved quality of products and services – manufacturers are facing global competition so they strive to improve their quality of goods and services.
4. Economic dependence and growth – Globalization has led to an increase in international trade, international flow of capital, creation of international agreements and development of global financial systems. (Wikipeida, 2006).
4. What are some major regional trading blocs and specify at least two in your region of interest.
Regional trade blocs are intergovernmental associations that manage and promote trade activities for specific regions of the world. Some of the major trading blocs are: European Union (EU), North America Free TradeAgreement (NAFTA), MERCOSUR (Mercado Comun del Cono Sur, also known as Southern Common Markets (SCCM) and Association of Southeast Asian Nations (ASEAN). (UC Atlas of Global Inequality, 2006). NAFTA and EU are the two trade blocs that I am interested in. I am interest in NAFTA because the United States is included in this region. I am also interested in EU because the European Union is the world’s largest trading block; it has “harbored political ambitions extending far beyond the free trading arrangements sought by other multistage regional economic organizations. (UC Atlas of Global Inequality, 2006)
Hill, C. (2004). International Business: Competing in the Global Marketplace. The McGraw- Hill Companies
UC Atlas of Global Inequality. (2006). The Role and Function of Regional Trade Blocs. Retrieved August 8, 2006 from http://ucatlas.ucsc.edu/trade/subtheme_trade_blocs.php
Wikipeida. (2006). Globalization. Retrieved August 8, 2006 from http://en.wikipedia.org/wiki/Globalization