Name of the school
. In my opinion, Globalization is not a new phenomenon because for thousands and thousands of years, governments, companies and even people have been interacting in different ways. information technologyGlobalization can be defined as a process that includes integration as well as interaction amongst people, governments of different nations and companies. It is a process driven by investment as well as international trade which is aided by
The key drivers of Globalization since the 1970s
There are a number of factors that drives globalization. I will point on just a few factors that I feel are key. One of such factors that drive globalization is the removal of barriers associated with international trade and investments. I feel that the main enemy of development is imposing of too much policies and bureaucracies processes. When there are a lot of policies put into place to regulate the flow of goods and services from one country to another, globalization is hence undermined. Bodies like GATT came up and ensured that 100 nations achieved further decreases in terms of tariffs and WTO saw to it that there was a mechanism for resolving disputes and enforcing trade laws. I strongly believe that by removing of barriers around borders in the countries of the world was detrimental to globalization.
From my reading of the lecture material, I agree that another great driver of globalization is the development of technology in terms of telecommunications and microprocessors, the internet and the World Wide Web as well as transport technology. Such developments ensures that countries can interact with one another in more effective ways through teleconferencing, emails, sharing of multimedia messages amongst other ways, moreover feedback on goods and services exchanged between different countries can be relayed directly through social media and such forums. I also believe that better transport systems have to a large extended, pave way for increased globalization. This is achieved through the existence of commercial aircrafts, the introduction of containerisation and super freighters.
Lastly, I think that when there are heavy tariffs imposed on goods and services exchanged between different states, the smooth flow of trade is interfered with. Therefore another driver of globalization is the reduction on tariffs rates which now stands at about 4%. With these reductions, countries are therefore not shy to participate in trade with other countries.
How Globalization has altered the nature of international business
I have mentioned a few drivers of globalization, it is important that we take note that these factors have altered the nature of international business in different ways. To begin with, increased globalization has led to trade between different countries being more economical due to improved transport technology, the internet and a worldwide communication networks.
The nature of international business has changed by the virtue that around the 1960’s the United States dominated the world economy and trade. They for instance dominated in the Foreign Direct Investment (FDI) and its multinationals also dominated in the international business scene. However, increased globalization has seen other countries like Brazil, China and India experiencing rapid growth. Furthermore, Forecasts predict that developing nations may account for more than 60% of world economic activity by 2020, while today’s rich nations may account for only about 38%. This is to say that with globalization, US no longer dominates the international trade.
In addition to this, from my reading I agree that there is change in Foreign Direct Investment through the fact that the stock of FDIs previously generated by the rich countries has been declining steadily, there has been a sustained growth in cross-border flows of FDI. Again, the flow of FDI has been directed at developing nations most notably China in fact in 2009, China’s FDI in US companies exceeded US investment in Chinese entities.
The nature of international business has also changed through the changing nature of the multinational enterprise (MNE) most notably the Predominance of US and Japanese MNEs that began to decline in the 1990s. The developing nations MNEs on the UN’s Top 100 list are now: Hutchinson Whampoa (Hong Kong, China), Vale SA (Brazil), Cemex (Mexico), Tata Steel (India), Citic Group (China), Petronas (Malaysia) and Rusal (Russia). In addition, there has been a rise in mini-multinationals. This is the growth of small and medium-sized multinationals whose number is rising steadily. Examples of such mini-multinationals are Comvita in New Zealand and
Lochard in Australia
In my opinion, another worthy to mention change in international business is the changing world order. I agree that the collapsing of Communism in former Soviet Union presents quiet a number of opportunities for business for all countries of the world. Again, China’s development in terms of its economy poses great opportunities as well as risks, despite the control impost by the Communist. In addition to this, Mexico, Latin America and Asia also present great new opportunities. Further, the 2008–2009 Global Financial Crises led to re-assessment of whether or not governments should interfere in markets of industrialised economies.
In a nutshell, according to my observations, the general picture of international business now is characterised by the world becoming more favourable to international business than before,
the world is now moving towards an even more global economic system.
However, I feel that it is important to point out some controversies surrounding the subject of globalization. Its paramount to highlight that globalization to some extend has come with its risks. For we can quote the Asian financial crisis in 1997 and 1998, we can also talk of the Global Financial Crisis of 2008–2009 and the emergence of sovereign wealth funds (SWFs). We are unable to ignore the Anti-globalisation protestors who highlight the disruptive forces of globalisation. They now turn up at all major meeting of global institutions and their fear is that globalisation is changing the world in a negative way for instance they are worried that jobs are being lost to low-wage nations and that free trade makes firms of advanced nations move their manufacturing facilities to less developed nations that have lax labour and environmental regulations. The critics further postulates that economic power is slowly moving from national governments towards organisations like the United Nations (UN), World Trade Order (WTO) and the European Union (EU). To them, the gap between the poor and the rich has become wider and thus benefits of globalisation are not being shared equally. In my opinion, I think that much as globalization might come with risks the benefits of globalization far outweighs the risks it poses. Some of these benefits that I can point out are that free trade amongst countries leads to a country only specialising in production of goods and services that they can produce with minimal disadvantages and cheaply for that matter. Again, when a country is free to invest and trade with other countries, it becomes easy for a country to raise its standards due to the healthy spirit of competition. In a nutshell, I think that globalization has improved the lot of world’s countries more than it has brought them risks.
To conclude, this reading has changed my thinking in such a way that I now see globalization in a broader perspective, its drivers, how it has changed the world of international business as well as some of the risks that it poses to the world.