Papa John’s globalization: Declining trade barriers and FDI

Globalization of production is one of the significant factors that Papa John’s have likely benefited due to the declining trade barriers. The reducing tariffs charged on imports and low restriction on imports and export licenses are some of the significant factors that have driven the globalization of production.    Globalization of production can be described as the sourcing of products and services from different world location to take the cost and quality advantage associated with factors of production originating from different nations (Hanson, 2001). As a company dealing in various lines of food products, Papa John can import inputs such as beef which is one of the primary raw material it uses in its production from countries that produce high-quality beef at a lower price.

Besides, lower trade barrier enables Papa John’s to view the world market as a single unit as its products and services can easily cross the border because the cost involved in the process is minimized through reduced export licensing and trade regulations. Apart from the declining trade barriers, foreign direct investment which was highly regulated during the 1920s and 1930s has enabled Papa John’s to seek opportunities in other international market and directly capitalize in firms across boarder through partnerships and joint venture which are some of its significant growth strategies (Market line Papa John’s, 2019). Therefore, the declining foreign direct investment and low trade barriers are an advantage to the company in terms of globalization efforts.

Technological advancement on Papa John’s globalization

Technology has enhanced the global connection of people and in so doing it has eased the trade flows, and capital flows, thus enabling Papa John’s to penetrate the international market by incurring low costs quickly. First, the coordination of foreign subsidiaries has been made easier by the advancement in communication technology enabled through microprocessor development as international outlets can easily synchronize their operations through the help of internet communication. And for that reason, Papa John’s can situate its subsidiary in another country knowing that coordination, which is a consideration of global business, is not a problem. Besides, technology has reduced the time needed to transport goods from one country to another. Also, technology has lowered the transportation costs hence making transportation of goods between countries where the company operates efficiently. Ease in transit has been enabled through developments such as the invention of modern ships, freight jets, among others.

For this reason, tech has enabled Papa John’s to have quicker and cheaper movement of goods and services from one country to the other. Moreover, through technology, Papa John’s can study the new international market and evaluate its competitiveness, making it easier to expand to such markets after acquiring knowledge. Besides, fast capital flow from the parent company to subsidiaries has been made possible through money wiring technologies, therefore, making funding of subsidiaries in international market easier.

Currency fluctuation on Papa John’s product prices

Exchange rate fluctuation occurs through currency appreciation and deprecation.  The exchange rate has a direct impact on the costs of imports and export goods (Hill & Hult, 2017). In case the US dollar depreciates against other country’s currency where Papa John’s operates, the price of the US goods becomes cheaper as compared to those of the foreign products. However, if the value of the Dollar goes up, the prices of the domestic goods (US goods) increases while that of goods in the foreign market goes down. An appreciation of foreign currency makes imports less expensive, thus lowering the demand for the domestic products which the company trades in. (Juliao, 2019) Therefore, if the demands and supply rule is considered, in a market where demand is price elastic, the prices of the goods where the firm operates will go down due to the surplus in the market.

If the company imports some of its inputs from a foreign country, and the Dollar depreciates against that foreign currency, the cost of importation will become expensive as the company would require more dollars to buy the goods; an increased cost of production may translate to the product pricing making the products more expensive. However, when the Dollar appreciates, the cost of production will become cheaper because imports will be less expensive. As a result, the prices of the goods produced by Papa John’s may be more affordable. For example, when a dollar depreciates against a Euro, exporting products to Europe would become expensive, and this will increase the variable transportation cost, which will, in turn, make prices of goods more expensive. In sum, currency appreciation increases the price of the domestic product while depreciation lowers the cost of the local goods.




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