Question

(a) Globalization of markets is the phenomenon where consumer’s preferences and tastes across different societies converge into a global norm. How does this phenomenon lead to the merging of historically distinct and separate national markets from the perspective of international businesses?   

Answer:

(b) Identify and explain how specific advances in communication and transportation technologies over the past decades have driven globalization of markets?

Answer:

(c) How does globalization of markets for a product or service benefit existing consumers?

Answer:

(d) Usually gains from international trade accrues to all countries irrespective of their size. However according to one specific trade theory, it is especially crucial for smaller economies (i.e. those with relatively small domestic markets) to embrace international trade. Identify this trade theory and explain the rationale (according to this theory) behind the increased necessity of smaller economies to embrace international trade?

Answer 1

a) Yes, the statement that globalization of markets is the phenomenon where consumer’s preferences and tastes across different societies converge into a global norm is correct. By globalization of market the companies:-

1)Moves away from an economic system in which national markets are distinct entities.

2)The companies does not have any problems of trade barriers and barriers of distance, time, and culture, and towards a system in which national markets are merging into one global market.

3)Firms promote the trend by offering the same basic products worldwide. I.e the product they produce can be sold worldwide.

4)  By globalization of market consumers tastes and preferences are converging on some global norms.

b) The advances in communication and transportation technologies over the past decades have driven globalization of markets in the following ways:-

1) Increase in the speed and volume of the communication, both internally and externally, making coordination of globally dispersed activities much easier.

2) Because of advancement in communication the language barrier is no longer a issue,the effective use of the internet in different languages and cultural settings will be a strong driver for globalization.

3)Due to advancement in technology and transportation time and space has ceased to exist.

4)The advancement in technology and transportation provides the communication network that facilitates the expansion of products, ideas, and resources among nations and among people regardless of geographic location where they live in.

5) It also facilitates excellent channels for exchanging information.

C) Globalization of markets for a product or service benefit existing consumers in the following ways:-

1)With the quickening and intensifying flows of information and communication, people can now access more information from all over the world, all from the comfort of home.

2) Because of globalization, the customers get the products and services at a cheaper price due to intense competition prevailing in the market.

3) Consumers have the opportunity to buy a range of products, they are not limited to one type of brand.

d) The theory which being referred here is of comparative advantage.

According to this theory, Comparative advantage is an economic term that refers to an economy's ability to produce goods and services at a lower opportunity cost than that of trade partners. A comparative advantage gives a company the ability to sell goods and services at a lower price than its competitors and realize stronger sales margins.

The increased necessity of smaller economies to embrace international trade is discussed below:-

1)Global growth and Economic development, International trade has been an important factor in promopting economic growth. This growth has led to a reduction in absolute poverty levels.

2) New revenue potential for small economy, By taking business globally or internationally, countries access to a much larger base of customers. If product or service is a success, then country can enjoy increased revenues from these new customers even if countries have saturated your markets domestically.

3) International business encourage not only developed countries but small countries as well to obtain foreign exchange that can be utilized to import merchandise from the global market.

4) Employment opportunities, it helps a country in enhancing its development prospects and furthermore make opportunity for employment.