Essay Sample: Understanding the Complexities of Global Business and the Global Market

Intoduction

Global business can be defined as international trade, while a global market can be referred to as a company or an industry that is engaging in business activities internationally or across the world. This international business practices all commercial events that happen to promote the distribution of goods, resources, and services across the globe as a whole. International activities can occur in multiple formats, such as the movement of goods from one state to another, which encompasses the importation and exportation of products as a form of trade (Zhang, 2008, p.2). The formation and activities of trade, manufacturing processes, and distribution facilities in the global market are other forms of international business. The engagement in international business gives countries a room to take advantage of their comparative privilege. In foreign companies, theories of business and practices provide a diverse perception of the multidimensional aspects of global business activities through the use of examples and cases across the entire world. Moreover, it offers comprehensive coverage and in-depth analysis of the fundamental problems and combining trends of global business practices in the modern world.

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Theories and the Practice of International Business.

From what I learned in class concerning the theories and practices of international business is that global trade theories are generally diverse theories to define international trade. Therefore, trade can be referred to as a concept of two peoples or entities engaging in exchange of goods and services. International trade hence, can be viewed as a concept of this engagement in trade activities concerning people or entities I two or more counties globally. People engage in business activities simply because of trust in the benefits that accrue from this exchange since they might require goods and services. To comprehend better how contemporary international trade has evolved, it is fundamental to understand ways in which counties trade with one another over the last years. In previous years, economists across the world have established various theories to explain the mechanism of international trade. The critical historical approaches are referred to as classical, which is based on the country perspective.

During the twentieth century, various theories commenced shifting to define trade from a firm but not from a country perspective. These theories are known as contemporary and are company based theories. From the studies, mercantilism is one of the classical international methods that was developed early sixteenth century, which intended to create economic theory. This theory defined that a state's wealth was determined by the level of it's silver or gold holdings. In its general sense, mercantilists stated that a nation should increase higher its holdings of gold and silver by encouraging exports and discouraging imports in a country. In this regard, if individuals in other states by more exports than the imports, then they should pay you the difference in silvers and gold. This means that each nation aimed to establish a trade surplus and avoid deficits in a situation where the cost of imports is higher than the value of the exports. This theory reveals that counties expanded their wealth through the employment of their colonies across the world in an attempt to control high trade and enormous riches.

While mercantilism international trade theory is one of the earliest trade theories, it is still a vital part of contemporary thinking. Various nations such as Japan, Singapore, and Germany still believe in more exports while they discourage imports from other countries via a form of neo-mercantilism where governments encourage the merge of protectionist policies and limitations. Almost every nation in one point has made an effort to implement various types of protectionist policies to govern its critical industries for the economy of the country. On the other hand, firms and companies that are export-oriented usually advocate protectionist policies that pay subsidies of a particular country in the form of high taxes. The restriction of imports by counties has led to higher prices of clients, who usually spend more top goods and services made from foreign nations. Free-trade in counties encourages trade benefits for the entire national community, while mercantilism's policies only benefit several companies.

Another international trade theory that I learned in class is the absolute advantage theory, which was established by Adam Smith. In this theory, Adam Smith focuses on the ability of a nation to manufacturer goods and services at a cheaper cost and faster when compared to another country. According to Smith, trade between nations needs to be regulated or even restricted through the interventions by the government. He believes that business should generally flow according to the forces in the market. Manufacture of commodities will only become efficient since there will be incentive methods that tend to increase the rate of production, thus increasing specialization. In this note, an absolute theory further states that when there are increased efficiencies in industries, people will benefit and thus encouraging trade to take place in these nations. According to Smith, countries' wealth should never be judged by the amount of gold and silver it poses but by the living standards of its citizens.

The main problem that faced absolute advantage theory is that Smith argued how some nations might be good at producing goods and services hence benefits from a diverse area, which is contrary to the argument that another country may not have any absolute meaningful advantage. To respond to this problem, David Ricardo, an economist, established another international trade theory known as comparative advantage theory. According to my learning in class, I learned that Ricardo argued that if a particular nation had an absolute advantage while producing products, trade and specialization between two countries could still happen. A comparative advantage occurs when a state fails to manufacture products more efficient than another nation. The contrast between absolute and comparative theory is that absolute theory focuses mostly on absolute productivity while, on the other hand, comparative theory comparative dwells much on the relative productivity differences.

Both comparative and absolute theories play a vital role in helping countries establish products that would be advantageous to countries. The two theories assume that free and open markets would help countries come up with the best goods they would produce. Bertil Ohlin and Heckscher established the Heckscher-Ohlin international trade theory, which focused more on how a nation could get comparative privileges by producing commodities that make good of factors that are plenty in the country (Zhang, 2008, p.5). This theory is based on the production factors of a particular country, such as labor and capital, which finances the investment for plants and equipment. The approach established that the cost of a specific factor or resource was based on demand and supply purpose. Factors that were in mass supply would be cheaper, while the elements in massive demand would be relatively costly. This theory is also referred to as factor proportions theory, which establishes that nations would manufacture goods and export them, especially the ones that need factors that were in massive supply. However, countries only import commodities that require resources that were in low supply but rather in high demand.

Raymond Vernon comes up with another international trade theory, which he referred to as the product life cycle theory. This theory originated in the field of trade, which established three distinct phases of the product cycle. These stages include standardized products, the new product, and the maturing stage of a product. The theory believes that the production of a new commodity will happen entirely in the home state of its innovation. From studies, this theory was significant to explain the production success of the United States. America production process was the dominant worldwide manufacturer in many companies and industries after World War II. This theory has been used to explain the contemporary trade patterns, especially in areas where innovation and production processes occur in the world. For instance, international companies carry investigations and development in improving trade in areas where labor and facilities are cheap. Some of the countries that offer skilled labor, as well as new studies at a low cost, include China and India.

Michael Porter develops an international trade theory referred to as Porter's theory, which revealed that the competitiveness of a particular country in a company lies in the ability of the company to innovate and upgrade itself. This theory dwells on showing why some specific counties are more competitive in certain industries. To explain this concept, Porters come up with four determinants combined. The first one was the local market resources, which identified the cost of the factor proportions. This aspect considers the resources of a country as a determinant factor of the commodities a nation will export or import. This theory added more elements such as skilled labor, the technology of a nation, and infrastructure. This factor plays a fundamental role in providing sustainable competition merits to a country. The second stage is the local demand conditions, which states that a sophisticated home trade is critical to ensure ongoing innovations.

Additionally, Porter identified the other determinant as local complementary industries in which he believed that for a particular country to continue being competitive, big firms benefit from effective and efficient supports from related counties. Porters also thought a local firm characteristics entails company strategy, company structure, and industry rivalry. Local strategy impacts on the industries' competitiveness. The theory also identifies that a country's government plays a significant role in national competitiveness. From the X culture project that I carried out the in-class assignment, there is a correlation between my concepts and the above discussed international theories since they are based on realities facing various countries and companies globally. Furthermore, the ideas in these theories have been used by multiple economists and counties to understand the facts on international trade and offering alternative measures to promote business globally. The concepts of these theories and those of the textbook match the realities and the practices that are experienced in the market globally since address challenges that are happening in the real market world.

Conclusion

From the discussion above, global business can be seen as an international trade while a worldwide market can be defined as a company that is engaging in business activities internationally or across the world. These global business activities and practices all commercial activities that happen in an aim to promote the distribution of goods, resources, and services globally. From the concepts I learned in class regarding the theories and practices of international business, global trade theories are generally diverse theories to define international trade. Mercantilism is one of the international theory that was developed in the early sixteenth century, which intended to create economic theory. This theory described that country wealth was based on the level of it's silver or gold holdings.