Explain the term ‘globalisation’ and the role that multinational companies play in the development of globalisation. Globalisation is the process by which the world is becoming increasingly interconnected as a result of massively increased trade and cultural exchange. Globalisation has increased the production of goods and services and has therefore lead to increased trade between countries. This trade encourages countries to work together and removes trade barriers such as quotas and tariffs. This increased openess allows countries to specialise in producing goods which they have a comparitve advantage in (this means they can produce goods at lower unit costs) A multinational Company is a corporation that has its facilities and other assets in at least one country other than its home country.
Trade Most goods we buy have a label on them. This ‘made in’ label tells us where the items have been produced and therefore from where they were imported from. The exchange of goods and services between nations is trade. International trade is based on a country specializing in producing a surplus of gods it can produce most efficiently in order to gain a competitive advantage. Trade allows for: businesses to grow and create more jobs, a wider choice of goods and services often at cheaper prices, economic growth and the strengthening of strategic and political ties between nations.
Innovation impacts the cost of production as well. Even the innovation helps in lowering the cost of production and making economies more efficient – producing more outputs with the same number of inputs. Technology affects market structure. In today’s market world, technology advances more rapidly because individuals gain incentives, in the form of profits, to discover new and cheaper ways of doing things. Even the dynamic efficiency refers to a market’s ability to promote cost-reducing or product-enhancing technological change.
The importing industry can increase its output only by attracting more resources from the export industry. 3. Equalization of Costs Argument "We need to neutralize any advantage the foreign producers may have over the domestic producers, in lower taxes, or cheap labor." "We need to equalize the costs of production between foreign and domestic producers." In this way, we level the playing field.
International Trade Simulation Darlene Traci Kepner XECO/212 June 17, 2012 Jim Vernon International Trade Simulation I am advising International trade recommendations for the President of Rodamia. The advantages of international trade and investments imports will create a wider variety of products which will give them a choice in price and quality. Domestic producers can expand and sell their products to other countries creating jobs, capital, and new investments, increasing the economy. When trading you have to look at the opportunity of cost production this is what defines the comparative advantage in which a country can produce a particular good or service at a lower marginal price, compared to another country; basically a choice
1. Globalization has _____ the opportunities for a firm to expand its revenues by selling around the world and _____ its costs by producing in nations where key inputs are cheap. | | | Student Response | A. | Reduced, reduced | B. | Increased, increased | C. | Increased, reduced | D. | Reduced, increased | | | 2.
Similarly, productivity growth in exports is likely to benefit exporters while causing a real currency appreciation. If we consider a ceterus paribus increase in the real exchange rate, this is typically bad for exporters as their exports are now more expensive to foreigners which may reduce foreign export demand. In general, though, we need to know why the real exchange rate changed to interpret the impact of the change. 3. (a) A tilt of spending towards nontraded products causes the real exchange rate to appreciate as the price of nontraded goods relative to traded goods rises (the real exchange rate can be expressed as the price of tradables to the price of nontradables).
If this situation were to happen it could lead to the company having to use different materials in different countries. By having to use different materials it would raise the cost of both research and development along with raw materials. This could cause headaches further down the line. Economic growth in both the world and the United States could be beneficial to STX. With the value of the dollar raising it will increase real Gross Domestic Product.
This will allow different parts of the world to enjoy merchandise that is specific to one country. Throughout the past it has been proven that by introducing industries’ and the use of globalization has strengthened a country’s economy. I am a pro economic globalization because I feel that we need to change the way of the past if nothing seems raise the economic standards. Hopefully we will be able to realize that economic globalization is working so we can help countries quickly and efficiently. Economic globalization has attracted much debate throughout society today.
Sheltering new industries may pay off later 4. Free trade allows companies the possibility of outsourcing the production of goods for domestic sale. Question No.3: Identify the major fallacies of international trade? Answer: 1. One fallacy is that trade is a zero sum activity, if one trading party gains, the other must lost.