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How changes in the world economy since 1945 have affected room for maneuver of multinational firms - Essay Example

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Over several centuries, trade has always flowed across states, borders, and civilizations thus joining economic fortunes and acting as a channel for social practices, technologies, and ideas…
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How changes in the world economy since 1945 have affected room for maneuver of multinational firms
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Download file to see previous pages Over several centuries, trade has always flowed across states, borders, and civilizations thus joining economic fortunes and acting as a channel for social practices, technologies, and ideas. International trade began to flourish at the beginning of the nineteenth century. The trade grew geographically between nations that were industrialized and in the imperial patronage, it grew between the underdeveloped peripheries and the urban centers. During the century, the average export to GDP ratio for developed economies rose to about 11% and for individual trading countries particularly in Europe, higher ratios were recorded (Gruber, 2007). This however did not last for a long time as the First World War coupled with depression of inter-war brought international trade to a halt, introduced imperial trading blocks, and increased trade tariffs substantially and other restrictions on import. Since 1945 however, there emerged far-reaching trading systems. Most countries began to trade with a large number of other countries. Regional trading became supportive of and complementary to more widespread multinational link. Even though the majority of trade took place between OECD nations, things began take a different route pretty first. These changes in the world economy since 1945 affected room for maneuver of multinational firms. Such changes included: The Latin American and Eastern Asia industrializing economies began taking a substantial share of world trade; the liberalization in India, China as well as other developing countries, which made these countries more than ever set to intensify their trading ties beyond borders. Another change was the growing communication and transportation infrastructure, which reduced uncertainties and costs of trade according to Karlsson & Honig (2009). This growth in transportation and communication reduced significantly the investment required by multinational firms to venture in foreign economies. The crumbling of communism after 1945 also brought very many nations into the international trading system. The formation of GATT and later WTO created a legal infrastructure, which was more accommodating than other previous systems before 1945 and the tariffs were also substantially decreased. Discussion The improvement in communication and transportation boosted the process of internationalization process of firms. Before 1945, communication infrastructure was still very poor. In 1956, the most noteworthy improvement in communication came to pass when for the first time the American telegram as well as telephone opened a telephone cable that was transatlantic by means of microwaves amplification technology. Following this advancement, multinational corporations for instance Ford began utilizing this new communication network to exchange information as well as manage operations based in other countries from their headquarters in the United States. According to Gruber (2007), though telephone cable tremendously enhanced enterprise communication after 1945 especially in urban areas, a huge portion of the world never utilized that opportunity optimally. Nevertheless, the introduction of satellite communications in the early 1980s started a new chapter in the world of multinational firms as it ended isolation and made the world a global village, multinational firms could now operate from almost anywhere in the world as communication made everything quite simple for them. The collapse of communism and the emergence of capitalism after 1945 saw many other nations accepting the American style globalization. The fall of communism gave the Anglo-American powers an opportunity to institute the system of the United Nations and establish the institutions of international economics such as the World Trade Organization (WTO). Financial collaboration was also introduced and this was a great opportunity for the multinational fir ...Download file to see next pages Read More
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