Global Markets and Business Opportunity

Increasingly, nations and businesses use their comparative or absolute advantages to enter global markets and reach more customers. The following table shows population and GDP data for the five most populous countries in the world. You’ll recall from the economic environment module that GDP, or gross domestic product, is a monetary measure of the market value of all final goods and services produced in a period, and the GDP growth rate is the increase or decrease in GDP over a period of time, expressed as a percentage.

Access to Factors of Production

Recall that the factors of production required for a successful business venture are natural resources, capital, human capital, and entrepreneurship. Access to global markets enables countries and companies to acquire these factors of production when they are nonexistent, scarce, or just too costly at home. For example, India is one of the largest providers of telephone-based customer service (labor) worldwide. With a population second only to China, low labor costs, and a large English-speaking population, call centers in India can provide customer support for businesses with customers in the United States at a lower cost than using workers in the U.S.  

Innovation and Ideas

Many companies enter global markets, and, once there, discover unmet needs or unique products and services. They are then able to use their discoveries to expand an existing product line or introduce new products in other markets or at home. For example, many people credit the United Kingdom with inspiring the development of the craft beer industry in the United States. The United States saw the creation of the first fast food hamburger chain with the opening of White Castle in Wichita, Kansas in 1921 but now American fast food brands such as McDonalds and Burger King have spread all over the world.^[2]

Risk Reduction

Because operating a business globally is complicated, it may seem like a contradiction that risk reduction is one of the benefits of a large global market. However, if a country or a company trades with multiple foreign partners, they are less dependent on the success of any single partnership. Similarly, if a nation or business has multiple global sources for factors of production and one source becomes unavailable, they will still have access to what they need from other countries. For example, in 2022 due to the Russian invasion of Ukraine, Ukraine was unable to export mustard seeds.^[3] If you were a mustard manufacturer and you also bought mustard seeds from Canada, you might have to pay higher prices because of a decrease in supply but you could still manufacture your product.

In summary, the size of the global market makes global trade attractive. By using their absolute and comparative advantages, countries and companies can use resources to produce and trade the things that benefit them the most.

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