Answer the following 3 questions (each approximately 500 words):

1. What is globalisation and how does it affect domestic businesses? In your discussion, include both positive and negative impacts of globalisation. (6 marks)
2. When you compare Absolute Advantage Theory and Comparative Advantage Theory, which one appears to be more practical, and why? Also, explain how benefit from trade arises based on this theory using a numerical example of 2 countries producing 2 products.  (6 marks)
3. Donald Trump, president of United States of America, announced the imposition of tariff on Chinese imports in the recent past. Based on your understanding of the first 3 topics of this unit, (i) what could have been the reason/logic behind such a comment/decision, and (ii) what are the implications of such an intervention on domestic consumers?  (8 marks)

You are expected to use at least 5 academic sources (excluding the textbook) to support your viewpoints. 

Please place the word count for this assignment on the cover sheet. 10% more or less than 1500 words is acceptable. The marker may, at their discretion, discontinue marking if you go above 10% of the recommended word limit.

Question 1:

Globalisation mainly refers to the movement of capitals along with the goods, services and technology between countries. According to Cavusgilet al.(2014), it is considered as the action of the international integration among countries that arises from the integration of different views along with the other different aspects of the culture. In addition to that, the proper advancement in the field of transportation and telecommunication is also considered as the driving force in globalisation. These factors mainly generate independence of the different economic and cultural activities.

Globalisation is considered as the major concept that has become an important factor in domestic business organisations (IMF Staff 2008). It affects the economic conditions and highly influences the business operations and the entire society. In order to mitigate any rising challenges, domestic businesses have to maintain risk management procedures to handle adverse impacts. According to Wirtzet al.(2015),  one of the threats from globalisation is the high level of competition. Globalisation mainly enhances the level of competition worldwide between domestic businesses and multinational companies offering similar products and services targeting the same customers. Dufy(2015) has stated that with technological advancements, it has become necessary for business firms to external market factors into decision-making. Though globalisation increases the risks for any business, it has both positive and negative impact on its operations.

The major benefit of globalisation is that it enables economic integration. This is characterised by an economic arrangement in between the different regions generating lenient monetary and fiscal policy. The primary aim of this integration is to reduce the cost of the product for both the producer and the consumer along with the proper amount of enhancement in trading between the countries who take part in this process (Hill et al. 2017). Globalisation enables trading between the countries. It also enhances the chance of employment and political cooperation. On the other hand, the trade diversion and the national sovereignty are considered as the loophole. Bilateral trade agreements and regional trade cooperation have the capacity to divert the trade away from non-members despite posting economic benefits.

When it comes to the positive impact of globalisation, the first thing that comes under the limelight is the ample amount of employment generated. Additionally, globalisation opens up different avenues for business firms, thereby increasing the chance of growth through business diversification. Moreover, according to Buckley and Ghauri (2015), globalisation also helps to serve the customers in a better way. On the other hand, globalisation is often associated with a negative influence on cultural aspects. Along with that, it also generates income inequality in the country, and increased mechanisation leads to depletion of natural resources (IMF 2007). Domestic businesses have to weigh in both positive and negative impacts of globalisation before devising market strategies.

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