International Trade Theory Essay

International Trade Theory Essay Question 1

Internationalisation is the process of corporation or generally enterprises operate in international markets. Internationalisation strategy on the other hand, is a strategy that is adopted by multinational firms in their quest to sell their commodities in outside markets. Get Legit paper writing services on International Trade Theory Essay today.

According to Johanson & Vahlne (1977), this is often achieved by corporations by finding out the consumers need in a certain market and then designing their commodities in a way that they meet the specific need. This paper contains a detailed description of internationalisation strategy including why corporations are adopting it as well as how it is being implemented.

Companies have adopted internationalisation strategy so that their commodities can easily fit into the cultures as well as the language of the specific targeted market. This gives them a golden opportunity of generating new revenues and most importantly the profits. They are numerous times when a once well performing company starts declining in the local market and is no longer profitable.

international trade theory essay

Often when such firms internationalise, they related with the local communities within the specific target markets and they profitability is restored. Some companies do so well in the local market that their next goal is creating a brand that it internationally recognised for example the case of Coca-Cola. This has frequently been the reason why firms adopt the internationalisation strategy.

There are a number of ways which internationalisation strategy can be implemented. The most popular one according to Fernández & Neito (2005) is multi-domestic strategy. Here, companies identify the local requirements of any given market and respond by designing [products that suit the local taste. This is contrary to forcing foreign goods and services to the locals. The aim here is to make the commodities suit the local language and culture.

Global Strategy is another way of achieving internationalisation strategy. The firms come up with generally an acceptable good or service then modify it so it suits the requirements of a specific market. The modifications involved here are minor thus the company using it enjoys economies of scale for providing a lot of the same commodities in a large diverse market.

The final way of achieving internationalisation strategy is a combination of both the multi-domestic and global strategy as is referred to as transnational strategy. The firms match the taste within a given market with the efficiency desired. The transnational strategy is very popular among fast-food chains for example KFC and McDonald’s.

In conclusion, it is safe to point out that internationalisation strategy has efficiently been implemented by corporation throughout the world and yet is still the future of business. It is an efficient way of increasing sales and profits of any given firm as well as creating a global brand for it.

International Trade Theory Essay Question 2

International trade is the exchange of goods, services, and capital across international borders (Fujita, Krugman & Venables, 2001). International Trade Theory Essay are the various economic analyses of the origin, patterns as well as implications of international trade. They therefore explain international trade. There are numerous International Trade Theory Essay but they are all classified into two categories that is: the country based trade theories and the firm based trade theories.

international trade theory essay

The country-based trade theories are also referred to as the classical trade theories and were developed by economists before World War II. Firm-based trade theories are also referred to as modern trade theories and were developed by professors in business schools after World War II. This paper shall give a detailed description of the various International Trade Theory Essay.

Mercantilism is the earliest International Trade Theory Essay that according to Fujita, Krugman & Venables (2001) was developed in the 16th century. According to this theory, the amount of gold and silver held in any given country determines its wealth. Therefore, exports should be encouraged for they increase the amounts of gold and silver holding and imports discouraged for they deplete the gold and silver holdings. This basically means increasing trade surplus and avoiding trade deficit at all cost. Despite being the oldest theory it is still used today in counties like Taiwan, China, and Japan.

The second classical trade theory is the absolute-advantage trade theory. It was developed by Adam Smith in 1776, and focuses more on a counties ability to produce a given commodity better than another. According to Adam Smith, the respective governments of the countries involved in trade should attempt to regulate trade between them. The fair competition will thus encourage efficiency in production.

The last classical trade theory is the comparative advantage theory. That was introduced by David Ricardo in 1817. According to him, a country should specialise with the product it is efficient in producing and trade it with what they are not efficient in producing. This theory too advocated for International Trade Theory Essay that is free from government intervention.

The most recent modern International Trade Theory Essay is the global strategic rivalry theory. It was introduced in the 1980s by Kelvin Lancaster and Paul Krugman. They emphasised that firms should expect global competition. To survive, they need to improve their efficiency with shall grant them a competitive advantage over their global competition.

Lastly is the Porters national competitive advantage theory. It was developed by Michael Porter in 1990 and stated that any industries capability to upgrade or even innovate, is what determines the competitive advantage of that country in the industry. To explain this theory, Porter linked four determinates of national competitiveness that is: the characteristics of the local firms, capabilities and resources of the local market, local supplies, and local demand.

international trade theory essay

International Trade Theory Essay References

Fernández, Z., & Nieto, M. J. (2005). Internationalization strategy of small and medium‐sized family businesses: Some influential factors. Family Business Review, 18(1), 77-89.

Fujita, M., Krugman, P. R., & Venables, A. J. (2001). The spatial economy: Cities, regions, and International Trade Theory Essay. MIT press.

Johanson, J., & Vahlne, J. E. (1977). The internationalization process of the firm—a model of knowledge development and increasing foreign market commitments. Journal of international business studies, 8(1), 23-32.

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