Globalization, Trade Theories, and US Tariffs: A Business Report

This report provides a comprehensive analysis of globalization and its impact on domestic businesses, defining globalization and discussing its positive and negative effects. It then explores the Factor Proportions Theory and the International Product Cycle Theory, including their limitations and real-world examples. Finally, the report examines the rationale behind the US tariffs on Chinese imports imposed by Donald Trump and analyzes the implications of these tariffs on domestic consumers. The analysis is supported by at least five academic sources, providing a well-rounded perspective on the topic.

Global business

What is globalization and how does it affect domestic businesses? In
your response, include a definition of globalization, and discuss at least
three positive and three negative impacts of globalization.
Globalization refers to the worldwide integration of financial, economic, trade and
communication services. It means to open up the economy for international trading. It gives a
broader look of the world with free transport of movement of goods and services worldwide
(Sonnemann, 2015). Globalization has created a high impact on the world’s economy. There are
financial impacts, economic impact, Ecological impacts as well as cultural Impacts. There was
an integration of all the financial norms and alignment to all the standards. Due to globalization,
the government norms, rules and regulation started affecting the other country’s or the whole
world’s economy in direct or an indirect way. There is a high understanding of cultural values
and bring technological advancement also. Now people belong to a different culture started
respecting the culture of other people. They actually understood now that how to create
international relationships with the help of globalization. Globalization has also created an
impact on the availability of resource and irreversible damage to ecosystem. So it is a
contradictory point for all the benefits of Globalization (Schilling, 2017). Some countries are
very much affected by globalization and it has been discussed on international level.
Globalization is impacting domestic economy in a broad way. There are so many local traders
who are unable to do their business efficiently because there is a high competition. Now the
people started using international brands and they have given a preference to the same. Due to
this all the domestic brands are suffering a lot. People usually think that the international
product are much better in quality if compare to the domestic products and it is not the reality.
There is a direct increase in the promotional cost for domestic companies due to the launch of
international brand. Such international brands have a high brand image in the market and they
have invested a high capital in the market. There are some positive as well as negative impacts
of globalization (Barannyk, 2017).

Positive impacts-
1. It helps in enhancing the free trade opportunities for the domestic as well as
international dealers and they started in investing different countries.
2. There is an easy exchange of information and fast transit of goods due to globalization.
1. As economies involved in international trade, the opportunities of war has been
decreased (Matsumoto et al., 2017).
2. It helps people in creating an understanding about different cultures and to adopt them
in a positive manner.
Negative Impact-
1. With the initialization of globalization, there is a reduction in job opportunities because
of international trade. People became so unsecure about their jobs. Organizations get
their work done from other countries where there is an availability of cheap labor (Sears
and Hoetker, 2013).
2. There are some countries where there are no rules and regulation regarding protection
of environment so developed countries utilized the same by carrying on their
production activities in such countries and providing harm to the environment (Engen
and Elisabeth Holen, 2014).
3. Globalization creates a high fluctuation and it also leads in increase in competition.
Developed countries are forced to reduce the prices of the product as per the rates of
same product in other countries. It is harming social welfare in the countries.
Explain Factor Proportions Theory and International Product Cycle Theory. Also discuss one
limitation for each of these two theories using real examples.
Factor Proportions Theory- This theory is also known as Heckscher-Ohlin Theory. This theory
basically states that there are different factors of production and availability of these factors
varies from country to country (Davidson, Griffin and Baxter, 2006). Every country has special

factors and it leads to differentiate the same in terms of availability of resources. This theory
focuses on two factors of production- labor and capital. There is a two countries model that
states that the countries which have abundant capital can export the capital intensive resources
or raw material and the countries that possess cheap labors can export labor intensive
commodity. There should be a proper selection of products according to the availability of
factors of production. There are different advantages that help in leading an organization by the
sale of a particular product as they have the availability of resources that are not available to
every organization (Franklin, 2011).
The countries where there is a cheap labor and expensive capital are known as capital rich
country and the countries that possess cheap capital and expensive labor is known as labor rich
country. There is an example of US and England, these two countries possess a high amount of
capital but still import of goods is more expensive for them in comparison to the exports. US is
known for the usage of innovative methods of production by using latest technology. In India,
there is an availability of cheap labor so it basically tries to adopt labor intensive methods of
production (De Toni, 2016).
International Product Cycle Theory- Raymond Vernon has described in detail about the
international product cycle theory that was discovered by him in 1960s. It basically elaborates
that whether a product is suitable for the exposure in the international market. It explains the
full life cycle of a product that consists of various stages. The three stages are-
1. New product Introduction stage- This is known as the first stage of product life cycle. It
is the introductory stage when a product is launched in the market and introduced to
the public (Hill et al., 2018). For creating a new product, firstly it is important to create
an innovative idea. It starts from targeting a small segment of the market and then
grabs more chances of development of that product n the world’s economy. There is a
high possibility to make the product successful in developed countries because in such
nations, public possess a high disposable income. In order to maintain a balance,
organization creates products on a local level so that they can get the feedback and
reviews of customers and modify the product as per their likes and demand. As per the

increase in sales, companies simultaneously increases the production practices and
starts exporting the products to other countries. It leads in increase in revenues also. By
doing the whole procedure, companies decrease the chances of risk (Pérez-Llantada,
2012).
2. Product mature stage- Product mature stage is the stage when the product becomes
famous and people start buying the same. In this stage the demand of the product is
high and manufacturer starts expanding production process to fulfill the demand of the
customers (Warner, 2010).
3. Product Standardization- It refers to the export of products from domestic market to
less developed market. High competition leads to saturation in the market and to boost
up the product, there is a need of some innovation or adding new features to the
products. Sometimes, companies need to reduce the process of the products.
Donald Trump, president of United States of America, announced the
imposition of tariff on Chinese imports in the recent past. Based on your
understanding of the first 3 topics of this unit, (i) what could have been
the reason/logic behind such a comment/decision, and (ii) what are the
implications of such an intervention on domestic consumers?
Donald Trump is the US president and he has announced a very different tariff on the import of
Chinese items. The memorandum signed by him related to this imposition of 60 billion dollars
of imports that has been done from China creates a very high impact because it has also
restricted the investments done by people of China in USA. Donald Trump has decided this
because according to him Beijing had adopted unfair trade practices to get the benefits in US
that majorly includes the tax observation of intellectual law of property. It was also observed
that the import from China was very high and people of US started using Chinese products a lot

because they are comparatively cheaper. It has also created impact on domestic consumers and
they suffered due to this because the prices got increased due to the applicability of tariff. They
are paying a higher amount for a product that they got in a very low amount sometimes back. It
has created a very high impact on the prices of some products like accumulators, batteries and
electrical appliances. US imports a high amount of products from China and the tariff imposed
directly create inflation on the prices of the products. There is an increase in prices of
machineries, vehicles and construction industry material. For coping up with this issue, US
manufacturer started import from some other countries but still they have to remain concern
about the prices. Manufacturers have to make some evaluations on continuous basis to
evaluate the supply chain.

References-
Barannyk, L. (2017). The impact of globalization challenges on pension provision
development. Geopolitics under Globalization, 1(2), pp.34-44.
Davidson, P., Griffin, R. and Baxter, A. (2006). Management. Milton, Qld.: John Wiley & Sons
Australia.
De Toni, A. (2016). International operations management. London: Routledge.
Engen, M. and Elisabeth Holen, I. (2014). Radical Versus Incremental Innovation: The Importance
of Key Competences in Service Firms. Technology Innovation Management Review, 4(4), pp.15-
25.
Franklin, M. (2011). Managing business transformation. Ely, Cambridgeshire, U.K.: IT Governance
Pub.
Hill, C., Hult, G., Richardson, T. and McKaig, T. (2018). Global business today. [Whitby, Ont.]:
McGraw-Hill Ryerson.
Matsumoto, M., Masui, K., Fukushige, S. and Kondoh, S. (2017). Sustainability Through
Innovation in Product Life Cycle Design. Singapore: Springer Singapore.
Pérez-Llantada, C. (2012). Scientific discourse and the rhetoric of globalization. London:
Continuum International Pub.
Schilling, M. (2017). Strategic management of technological innovation. New York, NY: McGraw-
Hill Education.

Sears, J. and Hoetker, G. (2013). Technological overlap, technological capabilities, and resource
recombination in technological acquisitions. Strategic Management Journal, 35(1), pp.48-67.
Sonnemann, G. (2015). Life Cycle Management. Dordrecht: Springer.
Warner, A. (2010). Strategic analysis and choice. New York [N.Y.]: Business Expert Press.