Global Business Management

Running head: GLOBAL BUSINESS MANAGEMENT
Global business management
Name of the student
Name of the university
Author note

1GLOBAL BUSINESS MANAGEMENT
Task: 1
There are different drivers of globalization relevant in the current business scenario and
the major one is the development in technologies. The current decade is witnessing the rapid
development and advancements in technology especially in the case of communication. In the
current time, the geographical distance is getting lowered with the involvement and introduction
of the latest communication technologies and it is further helping in the trade advantages. For
example, with the improvement in the latest communication technologies, importers can convey
their requirements in the most effective and clear manner to the exporters (Dwyer 2015). In
addition, the importers will also be able to track down the movement of the consignment. On the
other hand, the exporters are also being able to have the payment prior to the movement of the
consignment due to the improvement of the technologies in the financial sector. Thus, it can be
concluded that technological development is one of the major driving factors for globalization.
Another driving force for globalization is the improvement in transportation. In the recent time,
the drastic development and improvement in the water, land and air transportation along with the
infrastructure is helping in the business entities in operating in the global basis. For example, the
cost involved in the air transportation is low compared to what it was a few years ago and thus
the entities are gaining cost effectiveness and competencies in operating across the globe
(Najam, Runnalls and Halle 2016).
The trend of business liberalization in terms of regulations and policies across different
countries is also driving the force of globalization. This is due to the reason that in the current
time, majority of the countries are indulged in the business process with one another. Thus, each
country is liberalizing their legislations and policies for the international business and further
driving the trend of globalization. Thus, the more will be the liberalization of the market, the

2GLOBAL BUSINESS MANAGEMENT
more will be the advantages of the business entities. They will face lower sets of barriers in
entering in a foreign market and importing from them.
Task: 2
With the emergence of different drivers of globalization, the distance and barriers in
business between the two countries are reducing and it is the comparative advantages that will
determine the business viability. According to Heckscher Ohlin model of international trade,
countries with having abundant supply of materials will export to the foreign markets and the
scarce materials will be imported. For example, with the cost effective transportation and
communication technologies in place, it is up to the business entities in deciding about the
exporting or not (Markusen 2013). It is also being stated that competitive advantages for both the
countries and the business entities is being gained from the comparative advantages between
them. This is due to the reason that if the home country is producing wheat and cereals in
abundant and the businesses from there are willing to export them, then they have to look out for
the foreign countries where the average cost of producing wheat and cereals is high (Helpman
2014). However, if the average cost of production is low in the foreign country, then the export
process will be a failure due to the comparative advantages with the host country.
The Heckscher Ohlin model of international trade also states that cost of labor can also be
a source of comparative advantage. This is due to the reason that cost of labor determine the
average cost of production in a country and it is the key source of gaining competitive
advantages for the developing countries. This is due to the reason that developing countries such
as India and China are having huge population and thus the supply of labor is high and cost is
low (Iwasa and Nishimura 2014). This is attracting the foreign businesses in entering these

3GLOBAL BUSINESS MANAGEMENT
countries and having their production facilities that refers as off shoring. With this, the business
entities are gaining competitive advantages in terms of lower cost of resources and developing
countries are gaining competitive advantages due to their comparative advantage in production.
Thus, it can be concluded that sustainable competitive advantages can be gained either by
exporting the goods that the home country is having comparative advantages over others or by
importing from the foreign countries on which they are having comparative advantages. In this
case, export process also plays in important role in gaining the competitive advantages. Exports
should be done to the countries with having low comparative advantages. For example, China
exports electronic goods to the countries such as India (Baldwin and Robert-Nicoud 2014). This
is due to the reason that China is having comparative advantage in manufacturing consumer
goods over India and thus they are being able to export the products in low cost compared what it
will cost in getting manufactured in India.
Trading bloc agreement can also be effective for the multinationals in leveraging on the
comparative advantages of the countries. Thus, counties within a particular trading bloc are
majorly not having any trade barriers between them. Thus, the multinationals gain the advantage
of open and liberal market in the trading bloc. For example, United States, Canada and Mexico
are the members of NAFTA between whom, no trading barriers in the forms of customer duties
are there. Hence, majority of the service and manufacturing companies from the United States
are either outsourcing or off shoring their facilities to Mexico (Caliendo and Parro 2015). This is
due to the reason that cost of operation and manufacturing in the United States is high compared
to that in Mexico. Ford is one such American corporation that has shifted their manufacturing
facilities to Mexico from the United States for reducing their input cost. This is the key