University of Phoenix
MGT 448- Global Business Strategies
Professor Dana Gray
October 25, 2010
What is globalization, and what are some of the traditional international trade theories that support the concept of globalization?
Globalization exists in the most basic areas of everyday routines. For example, whether eating breakfast before school or work, the conversations with bosses, friends, and family on a cell phone. Each of the products people use everyday comes from other countries. This is considered an interconnecting web that allows everyone to taste and appreciate products from around the globe which each arrived from.
Globalization according to Hill (2009) is moving toward economies integrating and merging into interdependence of the world’s economy system. This includes the globalization of markets, which are becoming one huge global marketplace. The falling barriers and cross- border trade have made it easier to sell on an international level. The tastes and preferences from consumers are also helping to create a global market. This is also true with the globalization of products. Firms have the tendency to source the goods and services. With locations around the world firms take advantage of the national differences in the cost and quality factors of producing, for example labor, energy, land and money, This has allowed companies to lower the overall costs, improve the quality or functions of products offered which allows them to compete more effectively (WK1, PPT).
Some of the traditional international trade theories that support the concept of globalization include: The Absolute Advantage Theory and the Comparative Advantage Theory. Adam Smith authored the Absolute Advantage Theory in 1776. His position was that a country could produce a product more efficiently than any other country. Countries should specialize in production of goods, in which they have advantage, then trade...