A. What is globalization, and what are some of the traditional international trade theories that support the concept of globalization? Globalization refers to the shift toward a more integrated and interdependent world economy. General Agreement on Tariffs and Trade (GATT) and its successor, the World Trade Organization (WTO); the International Monetary Fund (IMF) and its sister institution, the World Bank; and the United Nations (UN). (Hill, 2009) McDonalds would be a great example of international trade. There is a McDonalds in most foreign companies. Wal-Mart is also a company that performs business with the international world. Mercantilism, comparative and absolute advantage are all theories of international trade according to our text.
B. List the major drivers of globalization and give three examples of each. Two macro factors underlie the trend toward greater globalization. One major driver of globalization is inexpensive labor (cheap labor). This is when companies go to other countries that will work for less and produce their products there. This will bring more revenue to the company and will help that countries financial status. This happens in Iraq, contractors hire third country nationals to come and work on Military installations for little or nothing. These foreigners do it because it is more than what they could make in their own country. Another major driver of globalization is the cost of goods (raw goods). This will determine if it is cost productive to do business with that country. Look at American made cars and there production. Most of the parts that are on the cars come from all around the world. However the car is American because that is where it was manufactured. In order for a company to make a profit they must be able to buy the goods they need at a good price. Technology is also a driver of globalization. The internet, eBay, Craig’s list and MySpace all of these help with the globalization of technology.
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