Globalisation Impact on Business: A Comprehensive Report for MNG 92210

This report addresses three key questions related to globalisation and international trade. Firstly, it defines globalisation and analyzes its effects on domestic businesses, including both positive and negative impacts such as market access, competition, and outsourcing. Secondly, it compares absolute and comparative advantage theories, arguing for the practicality of comparative advantage and demonstrating how trade benefits arise using a numerical example. Finally, the report examines the rationale behind Donald Trump's imposition of tariffs on Chinese imports, linking it to protectionism and trade deficits, and discusses the implications of such interventions on domestic consumers, including increased costs and reduced economic output. The report utilizes at least five academic sources to support its arguments and analysis.

RUNNING HEAD: GLOBALISATION
Title: Globalisation
Name of the Student:
Name of University:

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Response to Question 1:
Globalization as a term s defined as the "process of interaction among the people, companies
and, government of different nations, a process driven by international trade and investment and
aided by information technology (Hopper, Lassou and Soobaroyen 2017)." Globalization has a
vast influence on the culture, environment, and political system and most importantly on the
economic condition in so cities around the world. The concept of globalization as understood in
the present term, though is a comparatively new one, the original concept has been there for
thousands of years before. In the ancient history, there are evidences of people and in later ages,
the companies have been identified to be selling as well as buying to each other in the lands of
great distance such as through the famed Silk Route that facilitated the connection between
China and Europe (Solarin, Al-Mulali and Sahu 2017.).
In the present business situation, the organizations get a high competitive advantage on the
business as it helps in fostering the interaction among the market across the globe. From the
cultural sense of perspective, globalization represents the exchange in ideas, cultures, sense of
values and political beliefs. Due to the spread of the ideas, attitude, economic and social ideas
beyond the national boundaries, globalization in the political, as well as economic level, shifted
the attention to intergovernmental organizations like World Trade Organisation (WTO) or
United Nations (UN). (Solarin, Al-Mulali and Sahu 2017.)
Globalization has in recent times changed largely has affected the business scenario over the
world. While the macrocosm is the international business scenario, the microcosm is the
domestic business that is confined in one particular geographical area but plays a vital role in the

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global economy. While globalization has increased various prospects of expansion in business,
for the domestic small business, it has been affecting the business owners as to how they can
continue to grow as well as thrive in a competitive market edge.
One of the most important impacts on the domestic business of globalization is the access to the
global market and gaining knowledge about the global trend and market demand (Coker 2014).
Thus, a local business can achieve a global orientation through its connections. This has the
possibility of increasing at a massive rate the revenue of the domestic business. However, one ill
effect of globalization is the mass importing of cheap rated products from other countries. The
average of the customers does not judge the quality of the product but leans towards the cheap
products. This causes a loss in the indigenous market that requires high production cost and thus,
accelerated revenue for their product. Globalization has also been affecting the domestic
business even in the developed countries that a vast section of the task is being outsourced to the
developing countries that has created a vacuum in the employment of these regions. However,
the globalization in the developing nations affects positively the domestic tour and travel
companies as the knowledge of various lands are now accessible to any country at any time (Du
Plessis, Varottil and Veldman 2018).
https://www.bizjournals.com/boston/news/2020/02/04/with-new-150m-globalization-partners-
could-be.html
New York Business Journal-04-Feb-2020

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Response to Question 2:
Absolute Advantage in the terms of economics is referred to the quintessential ability of a
country for allowing the region to produce a particular product or good in the most effective as
well as efficient manner at a "relatively lower marginal cost (Yoshii, Fujimoto and Yoshinon
2015.)." The country that has the capability of producing the good at the lower marginal cost at a
lesser manpower, requiring the most minimum of time at a lesser cost, without compromising to
the quality of the product at a marginal cost derives an absolute advantage over the product. This
helps the country to gain a monopoly in the product, thus, it can identify its power and capability
of handling the international trade and resource allocation.
Comparative advantage, on the other hand, is the capability of a country to produce a specific
product at a comparatively lower marginal as well as the opportunity cost in comparison to any
other countries (.Levchenko and Zhang 2016) This approach takes into account the viewpoint
that a country or an organization is capable of producing more than one product with the
available resources. the opportunity cost of a particular option is the same as the fortified profit
that the country or the organization can achieve by choosing on the available alternative in
comparison. The calculation of profit gained from the alternatives that are available in the market
are identified, the cost of choosing one particular option over the other can be analyzed.
In comparing the comparative advantage and the absolute advantage, though from the
perspective of a particular nation, the absolute advantage seems to be beneficial but, the
comparative advantage is more practical to achieve and sustain as it keeps its focus mostly on
both the marginal cost as well as the opportunity cost (Alvarez-Cuadrado, Amodio and Poschke
2020). In the present era of globalization and knowledge diffusion and most importantly the

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growth of technologies in every sphere, it is a Utopian idea to think that a particular country will
have the probability of producing a particular good that others cannot (however, the generation
of certain minerals are excluded from the consideration). Comparative advantage, on the other
hand, is more practical in the sense as it admits the fact that even if it is costlier for a country to
produce a particular good, it will have an advantage over others concerning the production of a
particular product about the production of other products (Hanson, Lind and Muendler 2015). If
each country gains comparative advantage for the production of any particular goods, trading
with one another will be more prospectus.
For the sake of example if we take into account two countries, say China and India where China
produces either 20 Computers or 10 cars whereas India produces 30 computers and 22 cars with
the resources that are available then:
Product China India
Computers 20 30
Cars 10 22
Thus, according to the above numeric, the opportunity cost of the production, thus becomes,
Product China India
I unit of computer 0.5 unit 0.73 unit
1 unit of car 2 unit 1.36 unit
Thus, it can be derived that for the production of 1 unit of computer, the opportunity cost
is higher for India than China and China have the high opportunity cost for producing one 1 unit

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of the car. Hence, China should produce a computer and India should produce cars for the
optimization of their cost.
https://www.globaltrademag.com/comparative-advantage-revealed-what-the-u-s-could-gain-
from-an-fta-with-brazil/
Global Trade Magazine (blog)-05-Nov-2019
Response to question 3:
The president of the US, Donald Trump, after receiving the post has been keen on
bringing on changes in the face of global trade by imposing strict tariffs on the goods imported
from EU, Mexico and most importantly, to the greatest extent from China. This has led to a trade
war between China and the US. A trade war is generally known as the attempt of one country's
attack on the trade of another country employing taxes and quotas. This essentially leads to an
economic debacle and thus accelerates the political tension between two nations (Liu and Woo
2018.).
Donald Trump has imposed this tariff of 200 billion dollar worth of the Chinese products and has
planned to impose a tariff of 25% on $325 billion of the goods imported from China. In the terms
of economics, putting a tax on an item coming from a particular country means that the people of
the country to where the products are being imported and thus, in turn, will be keen on buying
local products and in turn boost the economy of the country. The president in recent times has
shown his concern about the poor condition of US manufacturing as a result of the trade deficit.

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In economic terms, the trade deficit refers to the fact that the difference between how a country is
buying products from another country and the rate of selling to that country is quite high. Mr.
Trump is keen on reducing the deficit, which has become quite widespread in recent years. Since
service contributes to the main component of the net income in the US, while China is more
dependent on the exporting of the manufacturing goods (Lukin 2019.). Hence, the president has
been using the Tariff as a means of protectionism approach to boost the industry of the country
and shield it from the foreign competition.
Though on the surface level, the boosting up of the domestic economy is highly stressed upon in
the total affair of the imposition of tariff, it has been pointed out by the economics that the free
flowing of trade is beneficial for both the countries- the one who is exporting as well as the one
who is importing. Free trade is considered to be optimizing the economic output and income
(Fuchs, Alexander, Brown, Cossar, Henry and Rounsevell 2019). The imposition of the tariff
could reduce the output of the country through a few ways. Earlier, the US was able to get the
raw materials or the base part for the manufacturing of the products at a low rate that made their
cost of production comparatively a low one that in turn produced a quality product at a cheap
rate. However, in the present scenario, the economy has been reduced down due to the increased
cost of production.
https://www.forbes.com/sites/rickhelfenbein/2020/03/02/trumps-trade-war-is-awful-for-
american-retailwho-hears-the-music/#29793113b7a5
Forbes-02-Mar-2020

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Reference List:
Alvarez-Cuadrado, F., Amodio, F. and Poschke, M., 2020. Selection and absolute advantage in
farming and entrepreneurship, pp 127-132.
Coker, C., 2014. Globalisation and Insecurity in the Twenty-first Century: NATO and the
Management of Risk. Routledge.
Du Plessis, J.J., Varottil, U. and Veldman, J. eds., 2018. Globalisation of corporate social
responsibility and its impact on corporate governance. Springer, pp. 45-48
Fuchs, R., Alexander, P., Brown, C., Cossar, F., Henry, R.C. and Rounsevell, M., 2019. Why the
US–China trade war spells disaster for the Amazon, pp. 451-454.
Hanson, G.H., Lind, N. and Muendler, M.A., 2015. The dynamics of comparative
advantage (No. w21753). National bureau of economic research.
Hopper, T., Lassou, P. and Soobaroyen, T., 2017. Globalisation, accounting and developing
countries. Critical Perspectives on Accounting, 43, pp.125-148.
Levchenko, A.A. and Zhang, J., 2016. The evolution of comparative advantage: Measurement
and welfare implications. Journal of Monetary Economics, 78, pp.96-111.
Liu, T. and Woo, W.T., 2018. Understanding the US-China trade war. China Economic
Journal, 11(3), pp.319-340.
Lukin, A., 2019. The US–China Trade War and China's Strategic Future. Survival, 61(1), pp.23-
55.

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Solarin, S.A., Al-Mulali, U. and Sahu, P.K., 2017. Globalisation and its effect on pollution in
Malaysia: the role of Trans-Pacific Partnership (TPP) agreement. Environmental Science and
Pollution Research, 24(29), pp.23096-23113.
Yoshii, S., Fujimoto, T. and Yoshinon, S., 2015. Was Adam Smith a Proponent of Absolute
Advantage Theory? A formative history of an urban legend and lessons learned, pp 78-125.