A Troubling Trajectory

A Troubling Trajectory

The Economist’s article “A Troubling Trajectory” reflects the theories outlined by Hill in the first chapter (Globalization). The article is about Apple’s success in the year 2007 when it globalized its iPhone business. The author is intrigued by the Apple's well developed global supply chain network that ensured smooth flow of products to the Asian markets. However, the competition in the smartphone market has since intensified, especially in China. Such competition can be linked to Porter's theory of national competitive advantage (Hill 43).

 Porter suggested that the trading pattern is influenced by four national attributes that include conditions of the domestic demand, supporting and relating sectors and factor endowments. Other factors include the strategy of the business entity, market rivalry and the structure of an business entity. In this case, Chinese smartphone companies like Xiaomi utilize a competitive strategy targeted at global firms such as Apple. The Chinese organization targets the domestic market with cheap smartphones hence constricting Apple's market share in Asia (The Economist). The surging costs of Apple smartphones are due to the supply chain expenses, international taxes and logistical costs. Such costs are common for firms that intend to globalize their businesses. However, they can be minimized if the organization can decentralize its production units to cut on the operation cost.

The author notes that the growth rate for international trade has been faster than that of a global GDP. On average, the global trade business experienced a 7% annual rise during the years before the recession in US and Europe. However, the growth has been significantly low during the post-recession period, averaging below 2% annually. Therefore, such uncertainties in the global economy have fuels unpredictability of the product life-cycle theory (The Economist). Today, Apple’s products are influenced by the performance of the Asian market, hence the rippling effect on the company’s performance around the globe.

The presence of trade barriers hinders the expansion of international business. As such, radical measures to eliminate them, for instance, the conception of WTO, World Bank and IMF has resulted in better trading prospects. Besides, the maturity of supply chain innovation is evident in the trade slowdown in relation to global GDP growth. China opened its borders for international trade to stimulate growth. As businesses pitched camp and set factories in the country, the citizens were recruited to form the workforce. In the long run, the country has achieved significant and dynamic benefits from the business. It expounds on the use of comparative advantage theory as stated by Hill (17). 

As businesses globalize, some devastating effects emerge such as the overdependence on foreign demand. In addition, the local workforce relies mainly on global firms. In Germany, for instance, more than 25% of workers relied on volatile foreign demand. This led to massive layoffs and job cuts when the global economy plummeted. While some forms have learned a lesson on the need to stabilize the local business environment, the trend is set to recur because other well-established multinationals cannot pull-back on heavy investments abroad.

In summary, diversification is fundamental for organizations that engage in global trade. It is imperative to eliminate overreliance on production and delivery of a unitary product or service. Global demand composition is shifting away from traded services and goods. Besides, there is a need for distinct countries to specialize in the production of services or goods in their dominant areas that they have an absolute advantage. 

Works Cited

Hill, Charles W. L. International Business: Competing in the Global Marketplace. , 2013: 1-65. Print.

The Economist. A Troubling Trajectory.http://www.economist.com/news/finance-and-economics/21636089-fears-are-growing-trades-share-worlds-gdp-has-peaked-far. Published 2014. Accessed February 3, 2016.