Question

Discuss one logistical trend that has led to an increase in Globalization. Talk about both positive and negative impacts that this trend has developed or caused for other companies. Remember to analyze and not just report.

Answer 1

The trend of formation of more number of trade agreements on bilateral basis and multi lateral basis, is the indication that globalization has spread faster than before. With increase in trade agreements, nations commit to trade with each other and it becomes the basis of international trade. Earlier, it was only European Union and NAFTA, but now it is SAFTA, ASEAN and other agreements. It has made positive as well as negative impacts upon the companies. The first positive impact is that it created markets for the companies where they can sell their products without any significant tariffs. It increased their presence in international markets. The second benefit, is the ease of entry due to agreements. Now, companies can opt for the different mode of entry and it can happen without duties. The third benefit is the increased scope of international strategic partnerships and sharing of technological know hows and overflows. It also improves the technological environment.

Though, this trend has some negative impacts also for the companies. The first such impact is the increased level of competition and shrinking market share if quality is not maintained. The second impact is the trade diversion and it happens to those who belong to the countries that are not the part of trade agreements. The third impact is the increased level of forex risk that can affect the value of their assets due to change in exchange rate.