01 International Business Assignment Sample
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Introduction
In the modern time, the international business and globalization play an essential role to develop the economy at large scale. It is identified that the globalization began at large scale in 1820 but it grew very fast late 19th century and early 20th century. It is because the connectivity of world economy was quickly increased among the countries. In addition to this, the term globalization is recently established in 1970 for the economic meaning. As well, the IMF (International Monetary Fund) has identified four important aspects of the globalization in 2000 such as:
- Movement of trade, transactions,
- Movement of capital and investment
- Migration and movement of people
- Dissemination of knowledge
So, form the above aspects, it can be said that the globalization is the integration of market in the global economy and help to increase the inter-connectivity of national economies.
Globalisation and international business
Globalisation is a process of geographical distribution of service activities of the business at the global level. In which, an organization increases their business by trading in the global economy as well as the globalization provides goods and service across the border to be a global brand. In addition, globalization is a process of free movement of people, goods, and service across the international boundaries in an integrated manner. In the globalization situation, the national boundaries are opened for free trade and foreign investment to up the economy and go global (Ueda, 2012). This situation of the world is helpful to increase the interconnection and integration of the economies of the world.
International business includes trades and transactions at a global level. These trades and transactions include trades of goods, technology, knowledge, capital, skills, and people for improving the revenue of an organization. In this, a business exchange their goods and services across the national boundaries to develop the business at the global level (Beck, 2018). The international business involves cross-border transactions of the goods and services of a business between two or more countries. The international business transactions include the exchange of capital, skills, people, physical goods, and services (finance, banking, insurance, and construction) from one country to another.
Advantages of globalization
In the current scenario, globalization has many potential and current benefits for the economy, counties, culture, people and international producers. It is an incentive for the business organization of the different counties to provide special and unique products to get comparative advantages (Henderson, 2017). A business can access large market by the use globalization and experience high demand for organizational products.
Cost effective– The globalization provides cost effectiveness for a business by enabling different less costly options. This theme provides the economic benefits to the firm where the firm gets the advantage of the reduction in the average production costs. As same, a business firm has the advantage of using the raw material at cheap cost by accessing worldwide market (Maurer and Degain, 2012). So, the business firm can develop the product at lower cost and face the competitor at lower cost strategy in their own market. The globalization can also be helpful for a firm to earn a high profit by a reduction in cost with an increase in revenue.
Profit maximization– The globalization is very useful for a firm to maximize their profit. In order to develop a business at the global level, the globalization opens different opportunities for the business. In which, a firm can use the foreign direct investment to multinationals their business and increase the demand for the product (Manolică and Roman, 2012). In the increased demand will also be helpful to increase production and revenue which will affect the profit maximization.
Increase free trade and communication– The globalization opens the areas of free trade and communication for the business and country in the global economy. In which, there are different trade agreements are developed by the international trade to increase the global economy. Moreover, the free trade is much support for the internalization by reducing the barriers like value-added taxes, subsidies, tariffs, and other barriers between two or more countries (Popp, 2012). The Business firms also get the benefits that they can develop the manufacturing unit in less developed counties to avoid the regulation. It is because the less developed countries have less strict regulatory regimes.
Access to technology– The globalization is also beneficial to access advanced technology from other countries for increasing the revenue. The extensive growth of the technology is only possible only by the globalization because it helps to share the technology one country to another and in an effective way (Savrul et al., 2014). The globalization helped the technology to provide a path by sharing the information and technical equipment like internet, satellites, digital devices, etc. At the same time, the organization can use the technological advantage to increase the productivity.
Help the customers– According to the current business scenario, it is identified that most of the customers need high-quality products and services at a cheaper price. It can be possible only by the globalization because an organization can produce the less costly product by collecting the low-cost products from different markets (Maurer and Degain, 2012). If an organization produce a low-cost product then it is possible that it can sale its low price. So, it can be said that the globalization is helpful for the customer to provide low price products, with high technology and different choices.
Disadvantages of globalization
The dark side of globalisation highlights the disadvantages associated with the globalisation with regards to international trade and damage to local business.
Loss of product identity: One of the negative influences of the globalisation is the changes in trade aspect brought by market integration which has affected the source as well as the identity of products in particular domestic products (Danakol et al., 2017). The products sources have been distorted that are made locally in the globalised era. This has increased the concern among the firms and individuals that manufacture these products. It can be said that globalisation has threaten the local business.
Local economies and business: In addition to this, the foreign products with superior technological features are available at lower cost than the domestic producers which is replacing the local goods available at high prices. This is due to the tax subsidy or support from the government to foreign traders. The local producers have been facing unfavourable policies, unfair trade practices and there is lack of tax subsidy or government support which is damaging the local business (Zinkina et al., 2013). Thus, globalisation disadvantage can seen be in terms affect on local economies.
Wealth inequality and poverty: The disadvantage of globalisation can also be linked with regards to exploitation of the developing economies by increasing use of resources and increase in transportation of raw materials. The FDI influence has a threatening effect on developing companies as it has a negative influence on the local businesses, creates wealth inequality among nations and loss of employment in the home country (Bishop et al., 2011). It is often argues that globalisation focus on developed economies contributes in wealth improvement but makes poor nation poorer and impacts poverty.
Environmental degradation: Another disadvantage of globalization includes adverse effects on the environment. For instance, the increase in transportation has led to increase of fuel consumption and thus, increased the pollution level and land disturbances for new road infrastructure. The overall transport system has been responsible for depletion of ozone layer which has increased the risk of the greenhouse effect. The industrial wastes are causing land and water pollution affecting the aquatic plant an animals. For instance, the leaking oil containers of British Petroleum caused severe damage to the ecosystem which highlights the risk of globalization on the environment. Thus, globalization has led to environmental degradation and caused air, land and water pollution and has a dominant role to increase the concern about the greenhouse effect.
Risk and the opportunities for the firms due to the globalization
Although, there are different advantages for the firms because of globalisation but at the same time, there are also different issues that are also faced by the firms in the business management. In this, increasing level of the competition is one of the major issues that are faced by the firm in the business. It is because fur to the globalization, it is now easy for the firms to expand to business and to target the customers at international level. Due to the globalization, it is also easy for the employees to work across the world. So, it can be stated that globalization is one of the major reason for the firm behind to create the issues of increasing level of the competition. This issue create the issue for the firm to sustain in the competitive market and to have the consistency in the customer base. Because of this, it can be illustrated that increasing level of the competition in the market is one of the major risks that is created due to the globalization.
Apart from this, there are also different risks that are also faced is the increasing demand of the customers. It is because due to the globalization, the availability of the products is quite high that increase the demand of the products in the market so it is a big issue for the firms to complete the demand of the customers on time and in an effective manner. In the same concern of this, from the research of Anderson (2011), it is illustrated that due to the globalization, competition level is high and each and every firm is trying to get the competitive advantage and to target the customers. So, due to this, it is needed for the firms to provide the products for the customers in time for retaining the customers and to develop a good customer base. Because of this, it can be stated that there are different risk for the firms due to the globalization, provide the products for the customers on time is one of the major risk for the firms at international level. Apart from this, in the research findings of Ezcurra and Rodríguez-Pose (2013), it can be determined that there are different risks that are faced by the firms at the international and national level due to the globalization but at the same time, in the research of Bishop et al. (2011), it is also stated that the risk because of globalization is occurred as per the country to country. It is because in the UK, there are different rules and the regulations and the in Australia, it s quite different that means there are different risks as per the country rules and the regulations that are faced by the firm due to the globalization and affect the business of the firm as well. Therefore, it can be stated that there are different issues as per the country wise that are faced by the firm in the high occurrence of globalization create the many issue for the firms in the successful business management.
However, there are different issues and the risks that are faced by the firms due to the globalization but at the same time; there are different business opportunities for the firms at the national and the international level that can to be gained by the firm. In the same concern of this, from the research of Danakol et al. (2017), it is illustrated that due to the globalization, it is easy for the firm to expand the business international level and to develop a large customer base that is not quite easy by using the other ways of the business expansion. The reason in this is that due to the globalization, it is easy for the firms to expand the business from one country to another country without facing any issue and the challenges. Due to the globalization, all country makes their rules and the regulations for dong the business by other firms easy. It helps the firms to expand the business and to develop a large customer base. The main advantage and the opportunities of the globalization are taken by the small and the medium enterprises. It is because due to different strict and the regulations; it was not possible for the SMEs to go at global and to expand their business. So, for all these firms the implementation of the globalization played a major role and crated lots of business opportunities for the firms at international level. Because of this, it can be determined that globalization created the lots of business opportunities for the firms at national and the international level as well. On the other hand, from the research findings of Jaumotte et al. (2013), it is illustrated that globalization also support the technology advancement that helps the firm to get the opportunities.
Role of international business in minimizing firm’s risk
These are several reasons for the companies to engage in international business such as to increase sales, resource acquisitions, deal with market uncertainty etc. Thus, it can be understood that involving in international business the company deals with risk of its stagnant growth owing to mature market and saturation of target markets in the home country and other business locations. For instances, many Western MNCs have invested in the emerging markets that are recording positive growth rates above 5 percent (Bishop et al., 2011). The involvement of a company in international business also assist the company to effective manage political, economic and social factors risk. As the macro-environmental factors vary from nation to nation, the company spread as well as diversify the risk of operating in one market or country. According to Ezcurra and Rodríguez-Pose (2013), the motivation of firm to operate in international is to minimise risk for its business. The diversification of risk in international markets assists the company to currency fluctuations, consumer consumption trend, and other uncertainties in business. It helps to deal with the weakening of currency or currency depreciation in one market and cope it will the strong currency in other operating markets. The currency volatility under the ongoing globalisation has resulted in currencies to peg to Euro and US dollars to prevent volatility and fluctuations. Also, countries such as Germany and China have experienced the power of unification of global currencies that are helpful it the businesses in maintaining growth and place it in better position to mitigate risks. Thus, it can be noted that an increasingly international marketplace helps to mitigate risks and secure the profits in another market with positive growth.
Conclusion
It can be summarised that globalisation process through market integration of economies has led to many advantages such as increased international trade growth, foreign investments, capital flows, resources acquisition and interconnectedness technology, culture and social aspects. However, the cost of globalisation highlights disadvantage in terms of disrupting product identity sources, loss to local business and local economies, environmental degradation etc. The effect of globalisation also presents risk and the opportunities for the companies which realises the fact which varies from nation to nation. The globalisation also plays a supportive role in helping the company to minimise risk associates in the volatile market by its operating in the increasing international business arena.
Reference
Ueda, K., 2012. Banking globalization and international business cycles: Cross-border chained credit contracts and financial accelerators. Journal of international Economics, 86(1), pp.1-16.
Beck, U., 2018. What is globalization?. USA: John Wiley & Sons.
Henderson, D., 2017. The role of business in the world of today. In Business, Capitalism and Corporate Citizenship (pp. 24-27).
Maurer, A. and Degain, C., 2012. Globalization and trade flows: what you see is not what you get!. Journal of international commerce, economics and policy, 3(03), p.1250019.
Manolică, A. and Roman, T., 2012. Globalisation–advantages and disadvantages from the perspective of the manufacturer. EDITORIAL BOARD, p.747.
Popp, L.E., 2012. Difficulties and opportunities of the spiritual dimension in globalisation. Revista de cercetare si interventie sociala, 36, pp.197-223.
Savrul, M., Incekara, A. and Sener, S., 2014. The potential of e-commerce for SMEs in a globalizing business environment. Procedia-Social and Behavioral Sciences, 150, pp.35-45.
Danakol, S. H., Estrin, S., Reynolds, P. and Weitzel, U., 2017. Foreign direct investment via M&A and domestic entrepreneurship: blessing or curse?. Small Business Economics, 48(3), pp. 599-612.
Zinkina, J., Korotayev, A. and I. Andreev, A., 2013. Measuring globalization: existing methods and their implications for teaching global studies and forecasting. Campus-Wide Information Systems, 30(5), pp.321-339.
Anderson, W., 2011. Internationalization opportunities and challenges for small and medium-sized enterprises from developing countries. Journal of African Business, 12(2), pp. 198-217.
Bishop, T., Reinke, J. and Adams, T., 2011. Globalization: Trends and perspectives. Journal of International Business Research, 10(1), p. 117.
Ezcurra, R. and Rodríguez-Pose, A., 2013. Does economic globalization affect regional inequality? A cross-country analysis. World Development, 52, pp.92-103.
Jaumotte, F., Lall, S. and Papageorgiou, C., 2013. Rising income inequality: technology, or trade and financial globalization?. IMF Economic Review, 61(2), pp. 271-309.
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