Global Business: Globalization, Trade Theories, and Tariffs - Report

This report provides a comprehensive analysis of global business, addressing three key questions related to globalization, international trade theories, and government intervention. The report begins by defining globalization and exploring its effects on domestic businesses, including both positive aspects like increased market access and negative impacts such as heightened competition. It then delves into two prominent international trade theories: the Factor Proportions Theory and the International Product Cycle Theory, outlining their core concepts and illustrating their limitations with relevant examples. Finally, the report examines the rationale behind the imposition of tariffs on Chinese imports by the United States, considering the implications of such intervention on domestic consumers and production. The analysis is supported by a range of academic sources, providing a well-rounded perspective on the complex dynamics of global business and international trade.

Running head: GLOBAL BUSINESS
Global Business
Name of the Student
Name of the University
Author’s Note

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Table of Contents
Answer to question 1:-...............................................................................................................2
Answer to question 2:-...............................................................................................................4
Factor Proportions Theory......................................................................................................4
International Product Cycle Theory.......................................................................................5
Answer to question 3:-...............................................................................................................6
Reason behind such decision..................................................................................................6
Implication of intervention on domestic production..............................................................6
References..................................................................................................................................8

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Answer to question 1:-
The Global Business Arena
Globalization is the ideal process of interaction in which people, corporate and
government are directly involved with the integration. The complex phenomenon of
globalization is directly associated with the integration of local as well as national economics
in the economy that is unregulated in nature (Ghosh 2017). In recent years, globalization has
increased to its extent and grown in the targeted market for development and advancement in
the technology of communication and transportation. With the increased in global interaction
includes the growth in the international trade, globalization mainly involves the goods and
services along with resources of capital and data. Liberation in the marketing data involves
the activities of exchange of goods that helps in removing the cross border trade barriers
(Cavusgil et al. 2014, p.41). Countries that have already built the economic partnership for
facilitating the movement in the market. The effects of globalization are generally complex
along with politically charged. Increase in mutual benefits provides beneficial relationship
between two different countries for increasing the trade services and other modes of
relationship.
Domestic business involves the process of globalization that helps the company to
enhance their business along with development in the ongoing technology. The positive
impact of globalization on domestic business is described in the below part.
Globalization helps in widening the horizon – The positive impact on the domestic
business mainly paves the stones of efficient connectivity that are associated with the
communication and other shipping routes. It also helps the domestic small business to expand
their growth and development with foreign ideas (Savrul, Incekara and Sener 2014). Increase

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in global awareness is associated with environmental impact along with fair value agreements
that highlights the looking of quality and other reusable products.
Manages certain challenges – Globalization helps the small business in managing
the challenges that are faced by the company in their business activities. The prominent
competition in the targeted market provides assistance in expanding the business that has
already resourced with other organizations. Small business that helps in pointing the learning
curve that creates the online presence of being the automated solutions would aid of certain
challenges (Paramati, Apergis and Ummalla 2017). The issues that are associated with the
companies are solved with globalization, which seems to be daunting and expensive.
Business equalizer – Globalization helps in equalizing the level of marketing that is
associated with the foreign market conditions. In earlier days, foreign business are more
advanced that domestic business but with introduction of globalization, the domestic business
has equally balanced with the foreign businesses.
The negative impact of globalization on domestic business is described in the below part.
Increases competition – Globalization increases the competition with all industries
around the world as it opens up the gate for the businesses. Small business that are domestic
in nature have the access of foreign deals with increased in globalization as it includes the
mass cooperation for monopolizing the targeted market.
Remote staffing – Availability of staff members includes from all around the world
that is associated with other employees that are working in other companies. Items that are
shipped between the countries are in search of extra products that includes the effective
communication between the countries.
Changes in technology – Small business might face some difficulty in implementing
the recent technologies that the world is currently using (Helpman 2014). This mainly

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incudes the changes that has effected from the technological advancement, which benefits the
society by understanding the relative costs and sustainable development.
Answer to question 2:-
Theories of International trade and government intervention
Factor Proportions Theory
The Swedish Economist known as Eli Heckscher has developed the particular theory
that includes major international trade along with labour value theory. The modern concept of
production has raises its capital as per the importance of labour in the companies (Federico
2014). Factor intensity in the production mainly provides a two dimensional concepts that
helps in highlighting the overall concept of labour and capital. These factors helps in pointing
out the factors that differs from other group of products. For instance, a manufacturing
company mainly focuses on the labour intensive technology rather than capital intensive
technology even if the other process of sophisticated in nature (Cavusgil et al. 2014, p.195).
The comparative advantages that is associated with the production of export mainly
determines the cost of differences. As per this theory, it depends on the state of technology
that is being used in the current stage of manufacturing of the given product (Mercure 2015).
It also assumes the classical theory that points out the factors of the productivity of labour
that would require more amount of productivity differences.
The comparative advantages that is derived from the productivity from the relative
abundance of the factors of production. It includes the countries that relates to the production
of relativity that are labour intensive for exchange in the capital intensive goods. The overall
concept of factor proportion is used for comparing the total production process of goods and
services. The limitation of factors of proportions theory points out the no possibility of
international trade that is between the two countries that are identical in the overall business

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structures (Acemoglu 2015). The assumptions that are made are oversimplified like the
classical doctrines along with other factors of influencing the overall range of products.
International Product Cycle Theory
In the year 1960, Raymond Vernon has authored the International Product Cycle
Theory that mainly explains the overall theory of life cycle of the products in the
international market. The product matures and declines as the result of internationalization
that is associated with different stages with the risk. The Introduction of new products
includes the cycle that helps in innovating the new product in the targeted market. The impact
of low sales would keep the manufacturing of the products that are local in nature (Chen
2014). Any kind of modification with the product is required to be implemented without any
kind of risk and wasting less time. The process of internationalization of the product develops
the need of nature that are quite similar with the relative result. In addition to this, the
maturity stage is required to be established for the developing countries, which would assist
in meeting the demand of the customers.
The products that are manufactured are required to consider the production of the
equipment and plants, which would meet the demand in the production plants that are placed
locally (Cavusgil et al. 2014, p.46). The effects of globalization are generally complex along
with politically charged. Moreover, it includes the standardization of the products and
streamlining of the developed economy that includes the competitive product offers for
saturating the competitive edge of the situation (Tai and Soong 2014). The limitations of the
theory includes the fluctuation in the sales data that might vary the graphs in the sales data. It
also includes the variation of the condition in marketing that are associated with the product
life cycle.

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Answer to question 3:-
Cooperation between nations
Reason behind such decision
Donald Trump has threatened the tariff rates on the Chinese goods that despites the
promise of after the G 20 summit, which includes around $ 325 billion. In addition to this,
China has introduced a new member for negotiating the team of the relationship with United
States (Cavusgil et al. 2014, p.243). The administration has announced for exempting 110
different types of Chinese products that consist of medical equipment and other technological
equipment. The trade between US and China follows the tentative truce that has reached
earlier for relaxation of the resources. US imposed ban of Huawei as they were imposed of
leaking the data of the customers who are using their phones (Wilson 2015). A three month
cease of the company has been imposed after the G 20 summit along with increasing the tariff
rates. The entity list by China might be the reason for imposing the tariff and implement these
types of decision. The interested parties of US has requested the exclusion of certain products
that are Chinese in nature.
Implication of intervention on domestic production
Tariff and trade intervention has forced the monetary transaction between the two
countries, which affected the changes in economic changes. Larger economies have certain
surplus as well as deficit in policy distortion that prevents trade from adjusting (Fan et al.
2014). The intervention of the evidences have mainly depends on the institutions that flows
the capital from the existing trade and employed intervention. The tariffs are implemented in
the policy tools that also reduce the unemployment for the growth of debt. Devaluation in
currency is the only form of trade intervention that points out the distortion of the
introduction of global trade along with flow of capital. The reverse income inequality with
the minimum wages along with improvement in the social safety for relativity of the policies

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of the government. Achieving of the desired result includes the policies that are required to be
deficit on unemployment that protects the strength of manufacturing (Cavusgil et al. 2014,
p.246). The globalized economy helps in protecting the strength of the trade sectors by
lowering the relative wages that are indirectly boosts the services. The basis of assumptions
has the direct relationship with the imported Chinese widgets that are available in the targeted
market.

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References
Acemoglu, D., 2015. Localised and biased technologies: Atkinson and Stiglitz's new view,
induced innovations, and directed technological change. The Economic Journal, 125(583),
pp.443-463.
Cavusgil, S.T., Knight, G., Riesenberger, J.R., Rammal, H.G. and Rose, E.L.,
2014. International business. Pearson Australia.
Chen, E.I.H., 2014. US-China trade relations and economic distrust. Chinese Economy, 47(3),
pp.57-69.
Fan, Y., Ren, S., Cai, H. and Cui, X., 2014. The state's role and position in international
trade: A complex network perspective. Economic Modelling, 39, pp.71-81.
Federico, S., 2014. Industry dynamics and competition from low‐wage countries: Evidence
on Italy. Oxford Bulletin of Economics and Statistics, 76(3), pp.389-410.
Ghosh, A., 2017. How does banking sector globalization affect economic
growth?. International Review of Economics & Finance, 48, pp.83-97.
Helpman, E., 2014. Foreign trade and investment: Firm‐level
perspectives. Economica, 81(321), pp.1-14.
Mercure, J.F., 2015. An age structured demographic theory of technological change. Journal
of Evolutionary Economics, 25(4), pp.787-820.
Paramati, S.R., Apergis, N. and Ummalla, M., 2017. Financing clean energy projects through
domestic and foreign capital: The role of political cooperation among the EU, the G20 and
OECD countries. Energy Economics, 61, pp.62-71.

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Savrul, M., Incekara, A. and Sener, S., 2014. The potential of e-commerce for SMEs in a
globalizing business environment. Procedia-Social and Behavioral Sciences, 150, pp.35-45.
Tai, W.P. and Soong, J.J., 2014. Trade relations between China and southeast: Asia strategy
and challenge. Chinese Economy, 47(3), pp.23-39.
Wilson, J.D., 2015. Mega-regional trade deals in the Asia-Pacific: Choosing between the TPP
and RCEP?. Journal of Contemporary Asia, 45(2), pp.345-353.