Topic > Essay on Factors of Globalization - 1368

Porter's theory of competitive advantage, which emerged in 1990, contradicts the fact that comparative advantage and Heckscher-Ohlin theories cannot provide an explanation of why some countries prosper and others fail to succeed in international competition. He distinguished four qualities that help or hinder the creation of competitive advantage; Factor endowments, demand conditions, related/supporting industries, and firm strategy, structure, and rivalry. So far, Porter's study has not been adequately tested to know how well it holds up (Hill, Cronk & Wickramsekera 2014). Regardless, the key drivers of globalization have transformed the nature of international business and are perhaps the reason for the success of international business since 1970. The decline of trade and investment barriers has allowed international business to grow further. Once a company exports/imports goods from other countries or engages in foreign direct investment, it becomes an international company. The lowering of trade and investment barriers is a characteristic of international business. This enables the growth of foreign direct investment and moves towards regional economic integration. The benefits of political push on international businesses include; the diverse variety of goods available to consumers through new trade theory, low prices, economic growth and competitive advantages. The disadvantages are; potential risk factors, foreign debt, exchange rate instability and high costs. Weakening barriers also allows international businesses to locate production in the ideal area for that activity. Thus, a company can design a product in one country, produce segment parts in two different countries, produce in another country, and then market the finished product around the world. Technology has changed the nature of international business by introducing