The Importance of Global Trade: Theories and Business Strategies

This report delves into the critical importance of global trade and its profound impact on both national economies and individual businesses. It begins by defining globalization and international trade, highlighting their interconnectedness and influence on GDP, technological advancements, and sector growth, with TESCO plc. as a case study. The report then explores the benefits of global trade, such as increased profitability and market expansion, as well as the challenges businesses face. It discusses key international business theories like Porter's national competitive advantage theory and the ANSOFF matrix, illustrating how companies like TESCO apply these strategies. Furthermore, the report examines various international business strategies, including foreign acquisitions and joint ventures, concluding that global trade is essential for economic growth and improved living standards. The analysis covers the interconnectedness of markets, increased competition, and the role of technology in facilitating international business, providing a comprehensive overview of the topic.

Running head: IMPORTANCE OF GLOBAL TRADE
IMPORTANCE OF GLOBAL TRADE
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Table of Contents
Introduction......................................................................................................................................2
Discussion........................................................................................................................................2
The importance and impact of global trade and globalization........................................................2
Different theories and tools of international business.....................................................................3
International business strategies adopted by international businesses............................................4
Conclusion.......................................................................................................................................4
References........................................................................................................................................4

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Introduction
Globalization refers to the interdependence of two or more countries upon each other for
the different economic purposes such as trade. International or global trade therefore refers to
flow of goods and services from one country to another. However organization are faced with
many problems when they carry out global trade (Ball et al. 1999). Some of these challenges
includes- challenges related to free movement of goods and services, technology change and
other similar changes. The Company selected for the purpose of this study is TESCO plc.
TESCO plc. is a merchandise retailer based in UK. The main aim of the paper is to discuss
about the importance of global trade and to discuss about different international theories related
to the international trade and globalization. Therefore the paper will discuss about the different
theories related to international trade, the importance of global trade and also different business
strategies used by organizations for carrying out international business.
Discussion
The importance and impact of global trade and globalization
The importance of globalization and global trade can be understood from the fact that it
plays a very important role in determining the GDP of a country. Moreover interdependence
between different countries have been possible due to globalization that further affect the
economies through trade (Hill 2008). International trade has contributed to the growth and
development of certain important sectors of the economy such as ICT and the transport.
Moreover international trade provides a number of benefits to businesses such as profitability
prospects, opportunity for expansion and reduced dependency upon local markets. The same
benefits have also been enjoyed by TESCO as it operates across 11 countries which helps it the

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company in meeting the needs of a wide range of customers (Scheuerman 2017). Further
customers are able to select products and services from a wide variety of choices due to global
trade. Some of the major impacts of the international trade and globalisation includes-
interconnectedness, maintaining competitiveness and also technology and efficiency (Picciotto
2017). Globalisation has made it possible for markets to remain connected with each other across
the entire world. More products and services are available and the relationship between the
countries is also regulated due to the international trade. Competition has been increased as a
result of globalisation and countries can now make use of better technology with the help of
globalisation.
Different theories and tools of international business
Some of the major international business strategies includes- porters national competitive
advantage theory and ANSOFF matrix. Porter’s national competitive advantage theory takes into
consideration four major factors called the local firm characteristics, local market demand, local
suppliers and also includes local resources and capabilities. Therefore organizations looking for
expansion need to take into considerations all these factors. The same has been done by TESCO
while carrying out its expansion into the Europe. TESCO plc had to carry out analysis of the
local firm characteristics, the local market demand for its products, the availability of the local
suppliers and also includes the local resources and capabilities. For instance: TESCO aims at
reducing cost by taking supplies of material from domestic suppliers in Europe and therefore it
ensures regular supply of material by maintaining good relationship with the suppliers. Another
major international business theory includes the ANSOFF matrix (Meyer and Peng 2016). The
ANSOFF matrix helps the top management in determination of strategies for growth and
expansion of business. According to the ansoff matrix there are four major strategies that can be

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adopted by the business: market penetration, market development, product development and
diversification. TESCO has been able to carry out its business successfully due to its product
diversification strategy from food retail to non-food retail.
International business strategies adopted by international businesses
The international business strategy refers to and includes the plans of that guide the
transactions between businesses. The international business strategy use by TESCO plc.
includes- foreign acquisitions, joint ventures and also includes greenfield investments. These
strategies may have a number of risks and benefits in relation to goods and services that are
being offered by the company.
Conclusion
Therefore from the above discussion, it can be concluded that global trade plays a very
important role in the economic growth of the country and also helps in improving the standards
of living of people. From the paper, the importance of global trade has been understood such as
organizations can take advantage of specialized resources and also gain competitive advantage.
Further the paper also discusses about the impact of global trade. From the paper, the different
theories associated with international business such as the ansoff matrix and others have been
seen. The international business strategies that are used by different international organizations
have also been understood from the paper.

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References
Ball, D.A., McCulloch, W.H., Frantz, P., Geringer, M. and Minor, M., 1999. International
business: The challenge of global competition.
Hill, C., 2008. International business: Competing in the global market place. Strategic
Direction, 24(9).
Meyer, K. and Peng, M.W., 2016. International business. Cengage Learning.
Picciotto, S., 2017. Rights, responsibilities and regulation of international business.
In Globalization and International Investment (pp. 177-198). Routledge.
Scheuerman, W.E., 2017. Economic Globalization and the Rule of Law 1. In Constitutionalism
and Democracy (pp. 437-460). Routledge.