Because of globalization, international market or global market came into existence. International or global market then is composed of different countries trading products and services with each other. Companies have been going out of their home countries and starting to build their names in other countries. This is basically the reason why we see imported products being displayed in supermarkets and department stores such as wines from Italy, gadgets and cellular phones from Asia, and shoes from Germany. Some of the international trade theories that support globalization are mercantilism, free trade, comparative advantage, absolute advantage, Heckscher-Ohlin theory, the product life-cycle theory, new trade theory, and Porter’s theory or the national competitive advantage.
Rugman (2009) argued that globalization has four major drivers: market, government, competition, and cost. Market globalization drivers are factors that usually affect the demand for a specific product or service such as consumers’ common preferences, increasing consumers from different countries, and global market distribution. Governments had taken the initiative to take off international trade and investment barriers and establish free trade. They also reduced trade tariffs and eliminated restrictions in the quantity of products and services to be imported or exported. Globalization is greatly influenced by competition. For instance, a company might consider establishing a satellite office in another country to deliver their products to foreign consumers. Because of this act, other competitors would also want to go global and promote their companies to diverse markets. Other examples of competitive drivers are increasing number of alliances between multinational companies and increasing globally-centered companies. Almost all companies would want to maximize profit thereby minimizing their costs.