Critical Essay on Principles of Economics

Viewpoints of the Author

Organizations have significantly benefited from globalization. Case, Fair, and Oster elucidate that emerging markets in the developing countries have increased sales and organization get access to cross-cultural management. Free trade is promoted in a globalized world. Foreign trade and competition have improved causing an increase in firm's productivity and thus make more profits. Globalization as allows companies to get access to cheap labor and thus helped to cut down the cost of production. For this reason, the prices of the commodities have reduced and thus benefited the customers. The cheap products have raised the standard of living of citizens. Through globalization, as the authors elucidate, customers have an immense multitude of choice of products in the market due to differentiation. Besides, there is the production of quality products at low prices due to high competition. The customers are also able to get the commodities more efficiently and quickly.

Case, Fair, and Oster state that globalization has made countries to specialize in the production of the good in which it incurs a minimum cost of production for export. The authors also allude that a nation will import those commodities that depict to be costly for it to produce with the available resources. This is what is termed to be a comparative advantage, and they explain why countries engage in international trade even though a given nation could have the capacity to produce every commodity (Case et al., 2007). The authors go ahead to stipulate that each country has to produce the commodities that it is most endowed with its natural resources and this has to be in the excess capacity of its requirements so that it can exchange the surplus with other nations. Case, Fair, and Oster argue that the absolute differences evident in the costs of production between two commodities explain why trading activities take place between nations. Again, an absolute advantage which has been promoted through globalization and free trade makes nations to produce a commodity at a lower cost per unit compared to the cost that would be incurred by any other.

Globalization has significantly influenced the companies and revolutionized the way they do their businesses. According to the article, new markets have been opened, and due to this, many firms have increased their scale of production. The increase in the local market has also seen companies increase market share. Local competition has intensified, and companies are seeking for ways to keep pace with this to keep a competitive edge. The competition has made firms to employ new forms of technology in their businesses. Information outsourcing is also on the rise in the companies due to globalization and thus impacted on the productivity of the firms. Through free trade, companies seek to reduce their cost of production in the globalized world through outsourcing of foreign labor. Case, Fair, and Oster also emphasize that companies have also changed their operations regarding quick responses, technological adaptation and rapid production of products for sale. All these factors have culminated in a reduction in the prices that these firms charge in the market. Simply put, the foreign companies are able to produce and carry out their operations at a less cost, sell their products cheaply in overseas markets and hence increase the market share.

My Viewpoint

I certainly agree with the authors that globalization improves on the firm's productivity. Perhaps, exchange in technology has been a significant factor that has affected organizations worldwide. New technologies are embraced by international firms in attempts to exploit new opportunities and produce quality products. The strategies have also made the other firms to reduce their cost of production and increase sales. There is also a rise in the multinational corporations. New markets have been created overseas, and this significantly boosts the economy of the nation. This idea also has increased the real-time communication abilities among international organizations allowing access to the greater international corporation. The world has simply turned into a small village, and companies strive to meet the market expectations. These strategies have also seen the scale of product differentiate increase in the world. Comparative and absolute advantage are concepts that have fuelled globalization and made nations to develop economically.

However, despite the immense positive impact that is associated with globalization, it has to be noted that the move has also adversely affected firms. Indeed, global market leads to hidden costs such as shipping expenses and time delays which affects companies. Furthermore, the concept of the open economy which is promoted in the globalized world has adversely affected the local organizations. Many organizations worldwide face stiff competition from the foreign investors, and this poses a risk of making the local firms run out of business. Globalization is also to be blamed for increased unemployment which affects the consumer purchasing power. Notably, job insecurity is a worry to many consumers because firms outsource for cheap labor from other countries.

Reference

Case, K., & Fair, R. (2007). Principles of Economics. Upper Saddle River, NJ: Pearson Education.