Globalisation, FDI, Product Life Cycle and International Trade Essay

This essay provides an in-depth analysis of globalisation, focusing on its effects on foreign direct investment (FDI) and international trade. It examines the benefits, such as increased economic development and trade, and the limitations, including potential economic disruptions and inequalities. The essay also discusses Vernon's Product Life Cycle theory, outlining its four stages (introduction, growth, maturity, and decline) and how it relates to international trade and investment. Furthermore, the essay briefly touches upon the Eclectic Paradigm Framework. The content covers various aspects of globalization and its implications on international business, offering insights into how businesses can navigate the global market and make strategic decisions.

Individual essay

Table of Contents
INTRODUCTION...........................................................................................................................1
Main Body...................................................................................................................................1
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Globalisation is a worldwide movement towards the trade, economic, communication and
also financial integration. It is like a free movement of products, people and also services across
all over the world in an integrated way (Amin, 2014). In the present essay, benefits and also
limitations of globalisation in context of foreign direct investment and international trade are
explained. Foreign Direct Investment put a direct impact on the host country negativity and
positively that will be briefed here. Also, there are four stages of theory of Vernon's Product Life
cycle which are discussed in the given essay. Further, Eclectic Paradigm Framework with its
advantages is studied.
Main Body
a)
Globalisation refers to a process through which business or some other companies create
an international influence or begin a business at the international level. It is a procedure under
which the services, people, products and also ideas are spread in all over the world. Under this,
there is an integration as well as interaction among the different cultures, economies and also
government of the international countries. In the globalisation includes services, goods, data,
capital resources and also technology. In this, host country sells its products outside the
boundaries. It is helpful in enhancing the development and profit level of business. Globalisation
helps in enabling the investment as well as financial markets in order to operate business
internationally. With the help of this, relationship among the two countries will be good and
healthy. But the globalisation does not consists the unhindered labour movement.
Globalisation is helpful in developing nations as well as helps in making all countries
connected with each other. Foreign Direct Investment affects the economic development and it
can develop a positive impact on wealthy countries. It is helpful in enhancing the FDI, trade in
order to developing the high rates. International trade has some necessary share in the Gross
Development Product (GDP) in various countries. There are many different business firms from
the various countries are looking for the effective and new development opportunities outside the
home countries. From an international trade, an economy of ICT and Transport sectors can be
stimulated (Baylis, Owens and Smith, 2017). It is necessary for the business and helpful in
improving business, minimising dependency of other markets, increasing development, etc.
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Globalisation is an interdependence among those countries which are arising from an integration
of various aspects of a country economy.
There are some advantages and limitations of globalisation in context of foreign direct
investment and international trade. There are many benefits of globalisation like it is helpful on
increasing the long run average development rate of an economy of specific country. Am other
advantage of globalisation is that it enhances the development and also productivity of labour.
Globalisation helps in eliminating an inefficiency in the manufacturing system (Bos,
Economidou and Sanders, 2013). With the help of globalisation, competitive markets minimize
the incentivise and profit level of businesses. It helps in the free movement of the labour or
workers among the countries. It leads to be enhancing the free trade among the different nations
and the products or services are provided from one country to another for the purpose of making
the relationship better. Globalisation helps in providing better employment related opportunities
for people and also offer better quality of goods and services in the competitive areas. In this
present time period, an international trade increasing day by day. It is helpful in developing the
positive impact on the development of Transnational Company.
There are some disadvantages of globalisation are it can be lead to enhance a livelihood
of an economic disruptions of single economy which impacting on all nations. The other
disadvantage of this globalisation is that from this, inequalities in the wealth and also income of
people will be increased. Globalisation gives its contribution towards enhancing gap among the
poor as well as rich people. From this, an environment will be suffered badly and from this the
traffic will be enhanced among the countries. It will exploited the natural resources on earth.
Those countries which are democratic, there is some difficulty in executing a globalisation. In
the industrialized countries, globalisation caused an unemployment because the companies move
towards their factories to that place where the labours are meet in cheap prices.
The motivation behind internationalise business, there are many factors like for doing the
business at an international level, the products and services of company will be increased.
International business is necessary to expand the business at a large scale. It provides the among
term benefit to the business and from this it will be saturated at the same place (Breznitz and
Murphree, 2011). The main motivation behind doing the business at international level is that
with help of this, relationship among two countries will be healthy and also harmonious. For
doing trade at the international level, there are many benefits which are arise from this lime from
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the international trade the GDP (Gross Development Product) rate of a country will be enhanced
and it will also be helpful in economic development of a country. The main advantage of this
international trade process is that if there is any product which is at the decline stage in home
country, then same produce in host nation is introduced by which enterprise can increase its
profit as well as market share. International trade is helpful in improving the business as well as
maximising its market share. If firm will be dealing in international level then the skills and
knowledge of staff members will be enhanced in an organisation and they can deal with the
people or clients of host country in an effective and proper manner (Cetorelli and Goldberg,
2012). With the help of international level profit development and profit level of company will
be enhanced and the existence of the existing products will be enhanced in host country.
Foreign Development Investment (FDI) refers to an investment which is made through a
business firm or a person in one country in the business interest in other country. It impacts on an
economic development of host country by transferring new and advanced technology which are
integrated in the international markets. Main positive impact of FDI on host country is that it
helps in the economic development. Foreign Development Investment assists the foreign
investors to utilise their necessary resources and also, assets in order to use the advanced
technology. FDI is helpful in improving the economic growth of host country.
b)
Product Life Cycle refers to an economic theory which is made by the Raymond Vernon.
This theory is according to the market of United States. This theory used through the United
States country to define various kinds of foreign Direct Investment. On the basis of view point of
Raymond Vernon, the life cycle of every product stage with its development stages and also end
with its decline stage. This theory suggest that the product establish from locally and also
increase in the international markets in order to host country demand of its products and services
(Cuervo‐Cazurra, 2012). This product life cycle theory defines the trade as well as FDI. In this
theory of Vernon Product Life Cycle included four main stages and these are introduction,
growth, maturity and also decline.
Introduction is a first stage in the product life cycle. Under this the firm introduced the
new product at the market place where the consumers are not aware regrading the new products
which are developed by company. In order to develop the demand of new good and services,
producers give the promotions of new goods in order to tart the sales in an effective manner.
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After developing the products successfully at the local markets, then there is a need to form to
develop its products to the introduce at the international level. In context to create the demand of
products, it is necessary for firm to do investments for aware the customers for increasing the
sales and also profit level. The firm developed the new products on the basis of needs and
preferences of consumers which can satisfy them. At this introduction stage, profit level is
minimum and there are only small number of competitors at the market place (Doha, Das and
Pagell, 2013). After enhancing the sales of new products, the next stage is automatically
developed.
Growth is a second stage in the Vernon's Product Life Cycle theory. At this stage, the
demand for new introduced products enhanced sales. In this the cost of manufacturing is
minimum and profit level is more. Under growth stage, the more relives are entered in to the
market with their version of own goods. The competitors start to selling their products on the
minimum cost. In order to enhancing the sales and also attract the new customers firm spend
more money on promotional schemes and give many advertisement with the help of newspapers,
televisions, banners, holders etc. In order to growing the products more, it is necessary to
introduce same products to the international market .
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Illustration 1: Vernon Product Life Cycle
(Source: The relationship life cycle, 2017)

Maturity is a third stage of the Vernon Product Life Cycle. In this stage the demand of
product is not much high and also sales of that good and service goes down. At this maturity
stage, there are many strong competitors are available ta the market place and to maintain the
market share, suppliers can be minimise the cost. In this the profit level of firm minimised, but
business will remain be attractive de to the high cost and volume. But on the other hand, the
demand of this maturity products are increase in the international countries but it is concerned
with the developed countries. At this stage, firm will begin to looking for some effective
commercial opportunities like for instance adopting or developing innovative products
(Felbermayr, Prat and Schmerer, 2011).
Decline stage is the last stage of Vernon's Product Life Cycle theory. At this stage, the
products is familiar to customers or can say that they know about the features and quality of
products. The sales of products goes down day by day. Under this a market became at the
saturation point and the goods are not sold longer and also not much popular. An investments in
this stage is reduced. If products will at the decline stage in home country then firm can
introduce the same products to the foreign country and it can also be shift the manufacturing to
developing countries for enhances the profit level.
Concept of product life cycle is an effective one as this help help enterprise in take
decision related with products and also assist in choose right promotional tool for increase sale of
company's product. One of the main feature of this concept is that it can be use by companies
during process of internationalism. Whenever an enterprise decide to launch its product in new
or different country then it is very important right strategy must be choose by firm as this ensure
growth and success of that product and also enhance profits of enterprise. One of the main
feature of this concept is that it help organisation in generate more number of revenues (Fujita
and Thisse, 2013). For example, if one product is comes to a decline stage in one country then in
this case by launch the same product in another country company can earn huge amount of
funds. Further, this ensure optimum utilisation of resources and increase efficiency of production
process.
Concept of product life cycle can be use by firms in order to take right decision related
with exasperation of same product in different countries. This guide managers and provide a
right time to launch a specific product in other country. Further, this also help mangers in
choose the right tool of promotion so large number of individuals can be influence to buy the
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product. All this ensure success of product and increase profits of company. Along with this, this
guide company in utilise all its resources to an optimum level.
c)
Eclectic Paradigm refers to a theory which gives a three- tiered framework for a business
firm to follow at the time of identifying that it is effective to pursue a direct Foreign Investment.
This framework is based on an assumption that firms will neglect transactions in an open market
when all the internal transactions are carried the minimum costs (Hirst, Thompson and Bromley,
2014). This theory is used for determining the strategy of a business in order to increase its
business operations by the foreign Direct Investment (FDI). An Eclectic Paradigm is included a
holistic approach which is based on determining the relationship among the different
components. It gives a procedure in identifying a strategy of a company regarding increase its
business operations with the help of Foreign Direct Investment.
Under this there are three main factors are included and these are ownership,
internalisation and also location advantage. In order to invest in the foreign country these t6hree
advantages are necessary. Ownership is a particular advantage which refers to the competitive
benefits of a business firm in order to get engaged in the Foreign direct investment (FDI). It is
concerned with the problems which are related to the different rights of ownership as well as
proprietary informations which an organisation many hold. It involves the problems of copy
rights, patent rights, naming, trade mark and the management of specific internationally of the
available capabilities and also skills which are necessary in the foreign market. The majority of
this kind of advantages are regraded as a intangible in nature (Hu, 2011). It is helpful in give the
competitive advantage for investing companies in order to engage in the international or foreign
production.
Location advantage is the second benefit which is helpful in invest in the foreign
countries. It refers to alternative regions as well as countries in order to undertaking some values
to adding some activities to the multinational business firms. In this there should be some types
of location advantage at the market place is trying to get enter. To expanding the business at the
international level, it is necessary for firm to set the location for doing the further production
related activities.
Internalisation is a last advantage and it is considered as a most necessary advantage of
Eclectic paradigm. The main focus of this theory is on identifying the best things for company in
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order to develop a specific goods through considering with the third party. For a business firm,
this advantage is more effective to work with the various location to keep maintain the
performance of internal work. Under this advantages company should be organise an
exploitation and also the creation to its core competencies. In order to generating the more profit,
a business firm sell its products in to the international market for earning more profit and it is
also helpful in reaching the product at the growth stage (Kozak and Martin, 2012). This
advantage is based on the cost related theory. From introducing the product at the international
level, the development and also growth of company will be enhanced. It is helpful in increasing
the sales as well as productivity of business in an appropriate or effective manner. It is necessary
to an organisation to develop and also exploitation of its related core competencies which are
necessary in expanding the business.
If firm will invest in to abroad countries then it is necessary to a company to fund out the
suitable places and also invest at the beneficial work. If one country expand its business in to
another country then it will beneficial to they home country and with the help of this positive as
well as healthy relationship will be developed among the two countries. Regarding producing
goods. Home country should do the production on the basis of host country and also produce
goods and services on the basis of customers demands and preference. It will be helpful in
attracting the large number of customers towards the firm. From this sales and profits level of
firm will be increased and company can capture the large market share in host country.
In the present time period, Eclectic paradigm is relevant in find out that firm should
invest or not in other countries. Basically firms are interested to invest its money or doing
production process in that countries where the cost of labour is not much high or cheap (Lambin
and Meyfroidt, 2011). Like for an example, there are two different countries Bangladesh and
United States. In Bangladesh country, the rate of labour is not much high, so the United
Kingdom country invest its money to produce its goods in Bangladesh. It will be helpful in
increasing the sales and also minimize the cost of production. Firm can also invest in those
countries in which there are more resources are available at large scale and also the rules and
regulations of government is not much strict as comparison to other countries. If the resources
will be properly available then in this case the production process will be done properly and the
cost of production will be reduced (Pieterse, 2015). With the help of this the firm can produce as
well as provide the good quality of services as well as products to people. In order to expand the
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business in to the other countries, there is a need of government support. It is necessary that
government should formulate those rules which are beneficial for those firms which want to
expand its business in to the other countries. The business firm wants to expand its business in
those host country where the population is more than the other countries. It will be helpful in
enhancing the sales as well as productivity of a company at the large scale in an effective or
proper manner.
CONCLUSION
It has been concluded from the given essay that globalisation is necessary in making the
economic growth of country and also enhancing GDP rate of a country. Under this given essay
studied about the benefits and also limitations of globalisation and motivation of companies to
trade internationally. Under this there is also discuss about the four stages related to the theory of
Vernon’s Product Life-Cycle and it is applies in the internationalisation of firms. Framework of
Eclectic Paradigm is necessary in business and it provided many benefits to company to decide
about the investment in the international countries.
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REFERENCES
Books & Journals
Amin, S., 2014. Capitalism in the age of globalization: The management of contemporary
society. Zed Books Ltd..
Baylis, J., Owens, P. and Smith, S. eds., 2017. The globalization of world politics: An
introduction to international relations. Oxford University Press.
Bos, J.W., Economidou, C. and Sanders, M.W., 2013. Innovation over the industry life-cycle:
Evidence from EU manufacturing. Journal of Economic Behavior & Organization.86.
pp.78-91.
Breznitz, D. and Murphree, M., 2011. Run of the red queen: Government, innovation,
globalization, and economic growth in China. Yale University Press.
Cetorelli, N. and Goldberg, L.S., 2012. Banking globalization and monetary transmission. The
Journal of Finance. 67(5). pp.1811-1843.
Cuervo‐Cazurra, A., 2012. Extending theory by analyzing developing country multinational
companies: Solving the Goldilocks debate. Global Strategy Journal. 2(3). pp.153-167.
Doha, A., Das, A. and Pagell, M., 2013. The influence of product life cycle on the efficacy of
purchasing practices.International Journal of Operations & Production
Management, 33(4), pp.470-498.
Felbermayr, G., Prat, J. and Schmerer, H.J., 2011. Globalization and labor market outcomes:
Wage bargaining, search frictions, and firm heterogeneity. Journal of Economic
theory. 146(1). pp.39-73.
Fujita, M. and Thisse, J.F., 2013. Economics of agglomeration: cities, industrial location, and
globalization. Cambridge university press.
Hirst, P., Thompson, G. and Bromley, S., 2015. Globalization in question. John Wiley & Sons.
Hu, F.B., 2011. Globalization of diabetes. Diabetes care.34(6). pp.1249-1257.
Kozak, M. and Martin, D., 2012. Tourism life cycle and sustainability analysis: Profit-focused
strategies for mature destinations. Tourism Management. 33(1). pp.188-194.
Lambin, E.F. and Meyfroidt, P., 2011. Global land use change, economic globalization, and the
looming land scarcity. Proceedings of the National Academy of Sciences.108(9).
pp.3465-3472.
Pieterse, J.N., 2015. Globalization and culture: Global mélange. Rowman & Littlefield.
Potter, A. and Watts, H.D., 2010. Evolutionary agglomeration theory: increasing returns,
diminishing returns, and the industry life cycle. Journal of Economic Geography. 11(3).
pp.417-455.
Steger, M.B., 2010. Globalization. John Wiley & Sons, Ltd.
Stromquist, N.P. and Monkman, K. eds., 2014. Globalization and education: Integration and
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Online
The relationship life cycle. 2017. [Online]. Available through:
<https://www.ghanaweb.com/GhanaHomePage/NewsArchive/The-relationship-life-
cycle-555147>
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