Reflective Marker OF international business

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    Business
  • Document type:
    Assignment
  • Level:
    Undergraduate
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    1324

Reflective Market of International Business

Reflective Market of International Business

Introduction

Globalization has become a buzz concept in the modern day society. However, the concept of globalization has been applied since time memorial. Despite the increased application of the concept, there is still no universal definition for the term. Economists define the term globalization as the integration of capital, labor and commodity markets. Bauernfeind (2006, p. 3) defines globalization to mean a shift towards an integrated and interdependent world economy. Ritzer (2010, p. 2), however, defines globalization as the integration of the world economies and finance aided by information technology. Therefore, using integration as the threshold, it becomes apparent that globalization is not a new phenomenon because there have been at least two episodes of globalization since the mid-19th century. Despite increase increased recognition of the globalization phenomenon, Hill et al. (2016, p. 13) notes that little research has been devoted to the drivers of globalization. This paper seeks to examine the key drivers of globalization since the 1970s and demonstrate how globalization has altered the nature of international trade.

Key Drivers of Globalization

Technological Innovation

The technological changes that have occurred since the 1970s are cited as a major driver to globalization. Since the 1970s, there have been many technological changes that have occurred and this has removed the barriers to distance, time and ignorance that once made long range relationships very complex. Among the technological innovations that have greatly driven globalization since the 1970s include the internet, transport technology and microprocessors and telecommunications. Ritzer (2010, p. 47) states that the proliferation of the internet and World Wide Web, for instance, has turned the world into a global community by removing barriers to times and distance. Hill et al. (2016, p. 27) shows that there are more than 2.39 billion people that are connected through the internet today. The internet has not only removed the barriers to location, distance and time, but also made it much easier for buyers and sellers to connect with each other. The internet has altered the nature of international trade in the sense that it has made it possible for buyers and sellers from different parts of the world to easily connect with each other and transact a business, notes Bauernfeind (2006, p. 23). Beside, with the internet, many businesses have introduced e-commerce tools that allow buyers to shop online regardless of their location.

Transport technology is another major technological advancement that has played a major role in promoting globalization. In this respect, the world has experienced developments in a number of transportation technologies that have greatly improved the speed of transportation and even lowered their costs. One such was the development of the jet engine whose use in aviation facilitated transportation of people and goods as observed by Hult and Hill (2015, p. 101). The other transport technology that greatly facilitated globalization was the adoption of containerization in international shipping that made shipment of goods across borders possible.

The other technological innovation that facilitated globalization is the emergence of new products, such as personal computers, microprocessors and cell phones, which contributed immensely to socio-political and economic changes. Ritzer (2010, p. 49) noted that the development of these communication and information processing technologies has greatly lowered the cost of international communication and the cost of coordinating and controlling international organization.

The other key driver to globalization other than technological innovation is the declining barriers to trade and investment. Since the end of World War II in mid 1940s, all the nations around the world began the process of eliminating barriers to free flow of services, goods and capital between countries. For instance, the formation of the General Agreement on Tariffs and Trade (GATT) saw more than 100 countries around the world coming together to form an economic block that resulted in the elimination of certain barriers to trade, such as tariffs. The same applies to the formation of the World Trade Organization (WTO) that has not only reduced trade barriers for member states, but also created a mechanism for resolving disputes that might arise between member states and enforce trade laws, according to Hult and Hill (2015, p. 121). Accordingly, the removal of trade barriers through elimination of tariffs has helped increase the level of international trade in terms of imports and exports, as well as foreign direct investments.

The other key driver of globalization that is worth mentioning is the changing ideas regarding how to regulate and organize economic activities. In particular, the common widely held belief that private enterprise, free trade and competitive markets enhance efficiency and economic growth. The other idea that has facilitated globalization has to do with the belief among international lawyers that harmonization of legal systems, rules and standards is the best answer to addressing business issues.

Ways in which Globalization has Altered the Nature of International Trade

Globalization has been a boon to international trade. The effects of globalization have particularly been felt on the international trade, where globalization has increased the volume of foreign trade to a level never seen before. First, Hill et al. (2016, p. 66) argues that globalization has changed the nature of international trade by making its cheap and easy for countries to trade with one another. For instance, Mukherjee (2008, p. 29) and Savrul and Incekara (2015, 90) note that there has been increased wave of regional economic integration in the recent past that has resulted in the formation of regional economic blocks, such as the GATT and the WTO among others that have greatly promoted international trade. They have done this by making trade and investment easy by eliminating trade barriers, such as tariffs among member states and this has helped increase the volume of international trade and investments. Besides, Peng (2016, p. 42) argues that globalization has also changed the nature of international trade in that it has made it possible for countries that are geographically positioned far from each other to do business easily and cheaply something that was difficult or impossible in the olden days. For instance, globalization has increased interconnectedness among the world markets. Hill (2013, p. 16) cites that globalization has also increased communication and awareness of the available business opportunities in far corners of the world aided by internet technology. In fact, now investors can easily access new investment opportunities that are available at far distance while potential profits and risks are also within the reach of investors something that has been made possible by improved communication technology.

Conclusion

Globalization is indeed one of the greatest phenomena that have occurred in recent history. The effects of globalization are seen through increased integration of the world capital, markets, and finance and labor markets. However, as described above, the key drivers of globalization since the 1970s have been the technological innovations, declining trade and investment barriers, as well as the changing ideas regarding how to regulate and organize economic activities. Additionally, it has been demonstrated that globalization has changed the nature of international trade by making it easy and less costly for world economies to trade with each other.

References

Bauernfeind, M 2006, Drivers of globalization: integration of theories and models. GRIN Verlag, Berlin.

Hill, C. W. L 2013, Global business today: Eighth edition. McGraw-Hill Higher Education, London.

Hill, C. W. L., Hult, T. M., Wickramasekera, R., Liesch, P. W., Mackenzie, K. S. 2016. Global business today: Asia-pacific perspective, 4th edition. McGraw-Hill Higher Education, London.

Hult, G. T. M., & Hill, C. W. L 2015, Global business today. McGraw-Hill Higher Education, London.

Mukherjee, I 2008, “Impact of globalization on international trade”, The ICFAI Journal of International Business, vol. III, No. 1, pp. 28-45.

Peng, M. W 2016, Global business. Cengage Learning, Oxford.

Ritzer, G 2010, Globalization: A basic text. John Wiley & Sons, Hoboken.

Savrul, M., & Incekara, A 2015, “The effect of globalization on international trade: The Black Sea Economic Cooperation case,” International Conference on Eurasian Economies, pp. 88-94.