Globalization Free Economic

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Free Trade & Globalization

In recent times, the phenomenons of Globalization as well as Free trade have gained a huge prominence as a result of the merging of economies all over the world. Free trade refers to a system in which the trading of goods & services between various nations of the world take place without the imposition of any kind of restrictions by the concerned authorities (Cherunilam, 2005). In the similar manner, globalization of markets refers to the integration of traditionally differentiated and separate national markets into a single and large global marketplace.


It is well proven fact that free trade and globalization have definitely led to a large number of benefits.

Benefits of Free Trade: As a consequence of free trade and multilateral agreements, various types of benefits are gained by increasing the imports & exports of goods & services. In general, all nations do not possess the same level of production capabilities. In addition, availability of raw materials & resources, required levels of technological abilities and educational skills of the existing workforce play a crucial role in the development of a good or a service.

Free trade enables the creation of a wide range of opportunities for nations to concentrate on their core competencies along with the acquisition of goods & services at highly competitive prices. Importantly, free trade assists the countries to trade in a fair environment without bearing the burden of trade policies and tariffs.

Benefits of Globalization: Globalization helps in promoting prosperity and development for all the participating countries. It also leads to increased interdependence and integration on an international basis. As a result of globalization, goods and services can be transported in a fast and convenient manner, the chances of any kind of conflict between the nations is greatly reduced, free international trade increases notably, connectivity increases with the development of international mass media and principles of democracy are propagated. In addition, it assists in increasing the liquidity of capital, enhancing the investments of developed nations in developing nations, intensifying cross-border flexibility in business operations and directing the attention of international community towards environmental protection (Geddes, 2004, January). .

Examples of Pro-Globalization & Con-Globalization


Elimination of Cultural Barriers- With the help of globalization, the differences of culture & traditions between different countries is minimized to a great extent and proper execution of free trade practices is ensured. Among the major pro-globalization organizations in the world, World Trade Organization and World Economic Forum are the most prominent ones.


Shortage of Resources & Environmental Degradation- As a result of globalization, certain sections are deprived of various resources and fail to comply with the increased competitive pressure. In addition, globalization has put a serious pressure on the environmental conditions. Major anti-globalization organizations include Greenpeace and Friends of Earth.

International Economic Development

The development of economic wealth of various countries and areas for the growth & development of their residents refers to international economic development.

Models: There are various models which are suggested for international economic development. However, the three prominent models include-

a. Harrod-Domar Model- The model was given by Sir Roy Harrod of Britain and Evsey Domar of the USA. According to the economic relationship outlined by this model, growth rate of gross domestic product is directly related to the national saving ratio and inversely proportional to the national capital/output ratio. The model was used for the purpose of economic planning by the developing nations. As per this model, the desired saving rate can be determined with the help of a target growth rate (Hill, 2005).

b. Exogenous growth model- It is also known as the neoclassical growth model and was given by Robert Solow. The model determines various growth measurement sources which place importance on the role of technological change and accumulation of capital in the progress of an economy. In this case, only the income level can be determined by the saving rate.

c. Surplus labor- This economic development model was given by Lewis, Ranis and Fei (LRF). The model adopts a traditional assumption of subsistence wage and hence is better recognized as a classical model. The model focuses upon the specific economic situations of the developing nations such as underemployment of resources, unemployment of people and the dual nature of economic structure.

Sources: The economic development on the international level takes place as a result of free trade and globalization. As a result of free exchange of goods and services among various countries, there is an increased flow of revenue in the global economy. In terms of funding, the international economic development is facilitated by institutions like World Bank, International Monetary Fund (IMF) and World Trade Organization (WTO).

In addition to these bodies, regional trading blocs such as the European Union (EU), NAFTA, SAFTA, ASEAN etc. also promote the economic development all over the world. At the same time, constant developments in technology will also make a notable contribution towards international economic development.

Key Success Factors for International Development Projects

The major factors influencing the international development projects especially in terms of manufacturing include:

  • Political- This factor refers to the issues related with the national and regional level such as ambiguity in policies, rules & regulations and political volatility. In fact, these factors lead to a situation of indecision on the return of capital investment. A project may be hampered due to a political takeover, war or revolutionary movement, resignation by the government on account of corruption allegations and nationalization of assets without sufficient compensation (Critical Success Factors in International Development Project Management, 2008).

  • Legal- This factor refers to the sudden amendments in the policies of governments in relation to rules & regulations and conversion of currency, absence of proper regulatory systems, indecision over taxation rates and methods including customs & royalties, arbitration courts and the procedures through which electricity tariffs are determined.

  • Cultural- Cultural factors are associated with the objectives of the project and a lack of awareness about the local culture which makes a negative impact on the final outcome of the project. Thus factors like traditions, values, customs and beliefs need to be taken into account at the initial stages.

  • Technical- This factor refers to the application of technology in areas like design, engineering, construction, installation & operation of the equipment and its ability to accomplish the ultimate objectives of the project (Critical Success Factors in International Development Project Management, 2008).

  • Managerial- This factor explains about the inappropriate management of project by the concerned authority. This can be due to improper communication, vague objectives, responsibility, authority & accountability and slow decision-making process.

  • Economical- This factor refers to the issues related with the economic practicability of a manufacturing project such as changes in local economic conditions due to unanticipated economic conditions. Such conditions arise as a consequence of growing competition, low consumption and legal changes.

  • Environmental- This factor includes issues associated with pollution like noise, air & water pollution, invalid utilization of natural resources such as that of fuel, water, land and flora & fauna.

  • Social- Social factor comprises of opposition due to religion and customs of the project members and disagreement of the clients to new values and traditions.

  • Corruption Factor- This factor is associated with unnecessary political intervention along with the absence of legal institutions & transparency, bribery & corruption etc. which hamper the progress of international development projects and lead to inappropriate utilization of development resources.

  • Physical Factors- Physical factor refers to the situations which are beyond manual control including natural calamities like floods, fires, drought, typhoon, earthquakes etc.

Key Opportunities & Constraints for Riordan:

The organization is a dominant player in the sector of molding plastic injections. Riordan Manufacturing has its plants in California, San Jose, Georgia, Albany, Pontiac, Michigan and Hangzhou in China. As a result of international economic development, Riordan has the opportunity to extend its business to nearly all parts of the world. It can secure the raw materials as well as labor for its operations at highly competitive prices. Riordan can serve the segments comprising of the manufacturers of automotive parts and aircrafts, strategic departments, bottlers of different types of beverages and producers of different categories of appliances. Riordan can gain further business through acquisitions, modifications in existing product line and aggressive sale campaigns. At present, the organization can also secure benefits by the integration of global economies.

On the other hand, there are a large number of constraints which are hampering the potential growth of the organization. It is facing certain issues related with the dissatisfaction of employees. In addition, the sales figures of the organization are also indicating towards a significant decline especially in relation to the performance in previous years. As a result of international economic development, the organization has several concerns about issues like diversity, difficulty in managing the large size of operations and constant pressure of complying with rules & regulations of the concerned region.


Cherunilam, F. (2005) International Business: Text and Cases. New Delhi: Prentice Hall of India Pvt. Ltd.

Critical Success Factors in International Development Project Management. (2008). Retrieved August 15, 2008, from

Geddes, P. (2004, January). Benefits of Globalization. Retrieved August 15, 2008, from

Hill, W. L. (2005). International Business, Competing in the Global Market, (5th ed.). New Delhi: Tata McGraw-Hill Publishing Company Limited.