Ques: Outline atleast 5 key theories of global business and its management dealt through

cases. And 2 managerial implications for each of the concepts discussed.

Answer:
Global business refers to international trade whereas a global business is a company doing
business across the world.
A global enterprise is one which owns and manages the functions in two or more countries.
For example :-
Unilever ltd, coco cola, Hyundai, Samsung

FEATURES OF GLOBAL ENTERPRISE

 Huge capital resources
 Foreign collaborations
 Advanced technologies
 Product innovations
 Expansion of market territory
 Centralized control
Changes in policy and immense changes as well as new development in the field of
technology have resulted in the growth spirit that has eventually led to meeting down of
international boundaries and led to global outreach of products and services.
One of the major advantage of globalisation in perhaps its ability to promote international co
operation policies are being created and nutured which support the development of trade and
in the long run benefit all countries.
THEORIES
 THEORY OF MERCANTILISM
Mercantilism was one of the earliest efforts to develop an economic theory. The
objective of each country was to have a trade surplus or a situation where the value of
exports are greater that the value of imports and to avoid trade deficit.
Although mercantilism is one of the oldest trade theories it remain part of modern
thinking countries such as japan, china, Singapore, Taiwan, still favour exports and
discourage imports.

 THEORY OF ABSOLUTE ADVANTAGE : ADAM SWITH

When one country can produce a unit of good with less cost than another country first
country has absolute cost advantages in producing that good, both countries gain from
trade.
 In relation to Hyundai case: industry in south korea despite large size the motor
vehicle market in south korea. Korea is insufficient to sustain indigenous as Hyundai
the country is a world center of new technology development. Collectively korean’s
abundance of production factors in cost effective labours, knowledge workers, high
technology and capital represent key – location specific advantage.

 COMPARATIVE ADVANTAGE : RICARDO THEORY DAVID RICARDO THE

PRINCIPLES OF POLITICAL ECONOMY& TAXATION-1817

A country was a comparative advantage in producing a good if opportunity cost is

lower than other countries.
A country would specialize in doing what they do relatively better. Barriers to trade
may exist.

 HECKSCHER – OHLIN THEORY (FACTOR PROPORTION THEORY)

The theory discusses a proportion in which different factors of production are

available in countries. The proportion are available in countries. The proportion in
which they are used in producing different goods. This theory is based on countries
factors of production.

Land, labour and capital which provides the funds for investment in plants and
equipment.

For example,
China and India are home to cheap, large pools of labour . Hence these countries
become the optimal locations for labour intensive industries.

Leontief Paradox
Over the decades many economists have used theories and data to explain and
minimize the impact of paradox.
However, what remains clear is that international trade in complex and is impacted by
numerous and often- changing factors.

New- Trade theory based on ECONOMIES OF SCALE

 PRODUCT LIFE CYCLE THEORY

Raymond Vernan, a Harvard business school professor, developed the product life
cycle theory. The theory originating in the field of marketing stated that a product life
cycle has 3 distinct stages:

1. New product
2. Maturing product
3. Standardizing product
 The theory assumed that production of new product will occur completely in the home
country of its innovation.
The product-life cycle theory has been less able to explain current trade patterns when
innovations and manufacturing occur around the world.
For eg: global companies even conduct research and development in developing
markets where highly skilled labor and facilities are usually cheaper.
The case of Siemen’s
A disturbing phone call from a Saudi Arabian businessman. The caller said he
represented a Saudi consulting firm that had been a business partner of siemens. The
US securities and exchange commission (SEC) claimed that siemen’s made some
payments to obtain contracts.

 PORTER’S COMPETITIVE THEORY

Porter’s theory stated that a nation’s competitiveness in an industry depends on the

capacity of the industry to innovate and upgrade.

Porter identified four determinants:

1. Local market resources and capabilities

2. Local market demand conditions
3. Local suppliers and complementary industries
4. Local firm characteristics

Porter’s theory along with other modern firm-based theories offers an interesting
interpretations of international trade trends. Nevertheless, they remain relatively new
and minimally tested theories.

CONCLUSION

These theories have helped economists government and business houses help better
understand international trade and how to promote, regulate and manage it. These
theories are occasionally contradicted by real-world events.

Countries don’t have absolute advantages in many areas of production or services and,
infact the factors of production aren’t neatly distributed in between countries. Some
countries have a disproportionate benefit of some factors.

Globalization has bought people and business closer, utilization of resources at the
fullest.

Global business concepts help many companies make successful attempts. New
thinking, new concepts and innovations ideas help to make business more viable, more
understable, and more appealing in the market.