Advantage and disadvantage of globalization

Answer 1

Advantages: A) It is a relatively low-cost activity to get involved in international business and expand profit. B) A firm can further create economies of scale which should lead to lower cost and hence expansion of profit Disadvantages: A) In relation to location economies, a firm may not always be located in the best region for that specific area and is therefore restricted to the cost disadvantages of the current location (if present). B) The firm is further depended on the fluctuation of transportation costs. High transportation costs can make it uneconomical to get involved in the import or export of a certain good. C) Related to point B is the fact that exposure to a foreign market will likely involve government regulations. One of these can be the availability of trade barriers such as tariffs and quotas or other hidden barriers. D) Lastly, an exporting firm will have to work with an agent which is not necessarily loyal to one brand (product). This limited control over the marketing activities or other value added activities will unlikely expose the full potential of a certain market.

Answer 2

It is exportation which increases the number of jobs in the producing countries. The credit crunch has affected billions of people in the world forcing them to become redundant. The MEDC (richer) countries trade or export produce to other MEDC countries so both countries receive benefits. The exporting countries receives good pay since the buying country is MEDC based so is able to pay a good sum. In the receiving country, they benefit from a wider range of products which they can put up more expensively for customers so will build up profit. Without exportation, the world would be a lot worse off.

Answer 3

Advantages of Globalization:

• Resources of different countries are used for producing goods and services they are able to do most efficiently.
• Consumers to get much wider variety of products to choose from.
• Consumers get the product they want at more competitive prices.
• Companies are able to procure input goods and services required at most competitive prices.
• Companies get get access to much wider markets
• It promotes understanding and goodwill among different countries.
• Businesses and investors get much wider opportunities for investment.
• Adverse impact of fluctuations inproductions in one area can be reduced by pooling of production of different areas.

tages of Globalization:

• Developed countries can stifle development of undeveloped and under-developed countries.
• Economic depression in one country can trigger adverse reaction across the globe.
• It can increase spread of communicable diseases.
• Companies face much greater competition. This can put smaller companies, at a disadvantage as they do not have resources to compete at global scale.

Answer 4

Encouraging growth of the private sector.