International business involves all commercial transactions-?private and governmental-?between parties of two or more countries. Global events and competition affect almost all firms-?large or small. However, the International environment is more complex and diverse than a firm’s domestic environment. Globalization is a difficult concept to measure. Currently, about 25 percent of world production is sold outside of its country of origin, restrictions on imports continue to decline, the foreign ownership of assets as a percent of world production continues o Increase. ND world trade continues to grow more rapidly than world production. Recessionary contraction in recent years has at least temporarily reversed this trend. That said, on a value basis, only a few countries (mainly very small nations) either sell more than half of their production abroad or source more than half of their consumption from foreign countries. Further, the principal source of capital In almost all nations is still domestic. Following are seven interrelated factors that have contributed to the spiraling growth in globalization.
Factors in Increased Globalization There are seven factors that are often cited as having contributed to the Increased growth in globalization. 1. Increase in and Expansion of Technology Vast improvements in transportation and communications technology-?including the development of the Internet-?have significantly increased the effectiveness and efficiency of International business operations. Today, a much larger portion of the population Is Involved In the development of new products, than Just the production of products. . Liberalizing of Cross-Border Trade and Resource Movement Over time most governments have lowered restrictions on trade and foreign investment in espouse to the expressed desires of their citizens and producers. The primary motives for this change Include giving citizens greater consumer choice and lower prices, international competition making domestic producers more efficient, and the hope that liberalizing will cause other countries to also lower trade barriers. 3.
I OFF government, banks, transportation companies, and other businesses greatly facilitate the conduct and reduce the risks of doing business internationally. 4. Growing Consumer Pressures Because of innovations in transportation and communications technology, consumers re well-informed about and often able to access foreign products. Thus competitors the world over have been forced to respond to consumers’ demand for increasingly higher quality and more cost-competitive offerings. 5.
Increased Global Competition The pressures of increased foreign competition often persuade firms to expand internationally in order to gain access to foreign opportunities and to improve their overall operational flexibility and competitiveness. How companies become global players can be discussed using the terms born-global companies and clustering. 6. Changing Political Situations The transformation of the political and economic policies of Eastern Europe, Vietnam, and China has led to vast increases in trade between those countries and the rest of the world.
In addition, the improvements in national infrastructure and the provision of trade-related services by governments the world over have further led to substantial increases in foreign trade and investment levels. 7. Expanded Cross- National Cooperation Governments have increasingly entered into cross-national treaties and agreements in order to gain reciprocal advantages for their own firms, to Jointly attack problems hat one country cannot solve alone, and to deal with areas of concern that lie outside the territory of all countries.
In addition, people the world over are concerned that globalization will bring the homogeneities of products and traditional ways of life-?including language and social structure. 2. Economic Growth and Environmental Stress Clearly, economic growth can result in both positive and negative consequences, including damage to society and the environment. While globalization can, in fact, support the sustenance of natural resources and the maintenance of an environmentally sound planet, unless the positive consequences of globalization improvement on a worldwide basis will, at best, be problematic. 3. Growing Income
Inequality and Personal Stress Offspring, the process of shifting domestic production to a foreign country for the purpose of serving the home market at a reduced cost, speeds up the process of altering the relative economic discrepancies between the two countries involved. Thus, even if the overall global gains from globalization are positive, there remains a continuing challenge to bring about the positive gains in ways that minimize costs to the losers. It is easy to think about the impacts of globalization at a macro level, but individuals are impacted very specifically causing stress and insecurity.