Q1. Write a note on Globalization.

Ans :According to business terminologies, globalization is defined as the worldwide trend of businesses expanding beyond their domestic boundaries. It is advantageous for the economy of countries because it promotes prosperity in the countries that embrace globalization. In this section, we will understand globalization, its benefits and challenges. Benefits of globalization The merits and demerits of globalization are highly debatable. While globalization creates employment opportunities in the host countries, it also exploits labour at a very low cost compared to the home country. Let us consider the benefits and ill-effects of globalization. Some of the benefits of globalization are as follows: 1. Promotes foreign trade and liberalization of economies. 2. Increases the living standards of people in several developing countries through capital investments in developing countries by developed countries. 3. Benefits customers as companies outsource to low wage countries. Outsourcing helps the companies to be competitive by keeping the cost low, with increased productivity. 4. Promotes better education and jobs. 5. Leads to free flow of information and wide acceptance of foreign products, ideas, ethics, best practices, and culture. 6. Provides better quality of products, customer services, and standardized delivery models across countries. 7. Gives better access to finance for corporate and sovereign borrowers. 8. Increases business travel, which in turn leads to a flourishing travel and hospitality industry across the world. 9. Increases sales as the availability of cutting edge technologies and production techniques decrease the cost of production. 10. Provides several platforms for international dispute resolutions in business, which facilitates international trade. In spite of its disadvantages, globalisation has improved our lives through various fields like communication, transportation, healthcare, and education Q2. Why do nations trade? Discuss the relevance of Porters diamond model in todays business context. Answer:-The answer to the above questions would be that countries world over are endowed with different natural, human, and capital resources. Each country varies from the other in combining these resources (land, labour and capital). In a globalised set-up, every country cannot be as efficient as the best in producing the goods and services that their residents demand. As a result, they have to trade off their decisions to produce any good or service based on opportunity cost. Opportunity cost model helps us understand the choice of producing one good or another. The production decision of the country depends on whether it is more efficient to produce the goods and services with lower opportunity cost with increased and specialized production, or to trade those goods, with goods of higher opportunity cost. If a country can produce more of any goods or services with the same resources used by any other country, it is said to have an absolute cost advantage in the production of

those goods or services. For example, India has absolute cost advantage in cutting and polishing of diamond. Around 68% of the diamonds from all over the world are cut and polished in India. India is the largest producer of diamond jewellery in the world. On the other hand, India would import items which can be imported at a lower cost than it would take to manufacture these items locally, for example Swiss watches where Switzerland has absolute advantage. Thus countries trade their production decision based on absolute cost advantages. Trade in globalised set-up has been used as an instrument for enhancing a countrys economic growth and is usually beneficial to both the exporting and importing countries. Nations even if they have an absolute cost advantage in the production of goods that are to be traded vis a vis its