International Business Environment - Essay Example

International Business Environment Introduction Globalization entails liberalization of trading activities as well as investments, which results in increased interrelation between different countries. Globalization has transformed the world into a village by making physical distance less of a barrier to investments. The business environment has been greatly shaped by globalization. The main contributing factor to increased globalization is improved technology, which has transformed aspects such as communication and transport making business transactions easy, cheaper, and faster. The last few decades have been characterized by increased globalization. Numerous companies have internationalized their business operations by transforming their business operations from national to global levels. Additionally, governments are increasingly opening their economies for international companies to invest. Globalization has its benefits and challenges. However, it is almost inevitable and the global economy is expected to continue influencing operations of businesses. This paper addresses the question on whether globalization is good or not. The discussion will involve a brief explanation on how different schools of thoughts perceive globalization. Additionally the drivers of globalization, its implications on international business, the benefits, and challenges of globalization to the international society in general will be discussed. Globalization as Perceived by Various Schools of Thought International business entails any business activity conducted across national borders. The activities may involve sell of goods or services but must be done between two or more countries. Most multinational companies may have their management located in one country. However, they are international since they carry out business activities across more than one nation. International business has become a common phenomenon that influences decision in the political social as well as economic arena. International business operations are characterized by opportunities as well as challenges (Bray, 2003; Stefanovic, 2008). The term globalization means different things to different people. Some view globalization as increased worldwide interconnectedness in different aspects such as cultural as well as social ones. Hyperglobalists describe globalization as a phenomenon that exposes people to international market resulting in denationalization of economies. Skeptics consider globalization to be the economic interdependence resulting from economic integration. However, skeptics oppose hyperglobalist argument that globalization leads to denationalization. Conversely, skeptics claim that globalization leads to increased influence of national governments on the global economy (Bray, 2003). Transformationalists agree with the hyperglobalists’ argument that globalization reshapes social, political, and economic societies. However, transformationalist fail to agree with hyperglobalists’ argument that globalization leads to assimilation of the global societies into a single society. They argue that existence of a single business system does not mean that the global economic society is unionized (Bray, 2003). Drivers of Globalization Although the process of globalization has been going on for a long period, it has intensified in the recent past. There are several factors also referred to as drivers that are responsible for the increased pace of globalization. The main driver of globalization is technology. The economic world has made a great leap in technological advancement. Communication plays a major role in the business environment (Devemdra, 2009). This is because most business operations involve deals, which require discussions. Additionally, communication technology shapes other business operations such as advertisement and marketing. Therefore, the rate of growth in information technology determines the rate of at which companies can expand their operations to global levels. With increased growth in information technology, business transactions can be carried out without face-to-face interactions. Employers can hold meetings with their employees through video conferencing, which has led to effective business coordination at a low cost (Stefanovic, 2008). Additionally companies with different branches can coordinate them effectively since it is easier to send and receive information regarding the business activities in the different branches. Additionally, individuals in the business world can easily share information resulting in enhanced business operations. However, advancement in information technology is also responsible for increased cases of misconducts in the business world. Happenings such as cybercrime have increased. By making use of different technologies, individual from different parts of the world can hack into an organization and access sensitive information, which they can be used against the company. Additionally, cases of fraud have become more common with globalization (Devemdra, 2009). Another driver that has enhanced globalization is government policies. International business entails doing business across different nations. Different governments have different policies that dictate business operations. The legal systems play a major role in shaping international business. International business operates in an environment characterized by great uncertainties. Some governments have laws barring foreign companies from investing in the country. Others have strict restrictions under which the multinational companies are expected to operate. Moreover, global companies are expected to observe certain legalities while doing business in foreign countries. Therefore, the policies and laws governing the business world in different regions of the world determine the pace of globalization (Hamilton & Webster, 2012). Political environment, which is often determined by government policies, is another crucial globalization driver. Some countries are characterized by numerous tariffs that could be trade or non-trade. Additionally, some governments may implement political policies that affect globalization. Moreover, political policies play a major role in determining the political and economic stability of a country. Countries with poor government policies are likely to be faced by political instability and slow economic development. This is likely to lead to reduced investment by foreign companies. Therefore, the government policies play a major role in determining the business environment hence globalization (Mirwoba1, 2009). Another globalization driver is competition. When a company expands its operations to a global level, it has to change its marketing systems to cope with the great competition that characterize the global economy. Competition has resulted in increased formation of joint ventures and alliances between companies as they strategize to penetrate foreign markets. This results in increased pace of globalization. Additionally, globalization results in increased interdependence between countries. With globalization, there is increase in number of companies in the international market competing for the existing market opportunities. Another competitive driver of globalization is increase in world trade (Devemdra, 2009). An additional globalization driver is the cost of operation. When companies are deciding where to expand their operations, they consider the lifestyles adopted by persons in the target country. The economic status of persons living in the country determines the spending culture of the people. This is fundamental since it determine the chances of success of a given service or products. Companies will thus calculate the cost of expansion when deciding whether to expand their operations. Therefore, globalization is greatly determined by cost. Additionally the global economic status determine the rate of globalization. Economic crisis like the ones witnessed in 2008 lead to economic uncertainity slowing the pace of globalization (Herrmann, 2012). Another driver attributable to increased globalization is the economic drivers. Financial markets have become internationalized making it easy for companies to expand and operate in the international global market. Due to globalized economy, the communication as well as travel systems have been revolutionized resulting in improved environment for conducting business. Additionally, market drivers such as convergence of income among different countries, convergence of the ways of life have encouraged globalization. Moreover, there has been increasing growth in inter-country channels, creation of international brands, and enhanced marketing channels (Mirwoba1, 2009). Implications of Globalization on International Business On one way or the other, globalization has affected business operations both positively and negatively. Globalization has greatly shaped the business environment. Companies can easily hire individuals from different regions of the world. Therefore, companies are able to employ the best employees made available by globalized business environment. Having skilled workforce is crucial in business advancement (Herrmann, 2012). Additionally, this has led to increased competitiveness as companies focus on obtaining the best workforce across the global. Therefore, globalization has attracted creative and resourceful individuals into the business world resulting in enhanced business operations. To demonstrate the implications of globalization on the international business, it is important to describe the benefits and challenges of globalization on international market (Hill, 2008). Benefits and Challenges of Globalization to the International Society The issue of whether globalization is good or bad has been highly discussed by the different schools of thought. Globalization has benefitted economies of different countries in different ways. It has enabled increased economic growth. When foreign companies invest in a given country, they provide job opportunities to the natives improving their economic status hence their lifestyles (Hill, 2008). Another benefit of globalization is the decrease in the price of good and services. Consumers benefit from investment of foreign companies since competition results in decrease in cost of product and services. Additionally, companies are forced to improve the quality of their goods and services to be able to compete in the global market. Additionally, globalization results in increased democracy in the business world. This is because monopoly is reduced. Additionally global business decisions are made by organizations encompassing different countries and not individual countries (Devemdra, 2009). Globalization creates an appropriate environment for growth of economies in developing countries. This is because foreign companies investing in these countries provide enabling services, which encourage economic growth. Additionally, globalization has led to enactment of sensible policies by various governments as they try to encourage foreign companies to invest in their countries. This has improved the international market environment enhancing business (Hill, 2008). Opponents of globalization consider it more of a challenge to the international business society. They argue that the effect of globalization on governments, civil society, and stakeholders in different business are more as compared the benefits. One argument put forward to support this claim is that globalization has contributed to unequal distribution of resources across the globe. This has led to some countries benefiting from globalization while others pay the cost that arises from globalization but reap little or no benefit from globalized operations (Herrmann, 2012). Another argument that opposes globalization is that it leads to instability especially in the developing world. When companies extend their operations to other countries, controversies may arise. Other companies in the host country might start viewing multinational companies as their rival. A good example occurs in mining business operations where foreign companies have to import expertise labor from their mother countries. Companies in the host country as well as surrounding communities may demonstrate rivalry toward such companies. This can affect relations between countries. Additionally, globalization results in competition for market. Third world countries act as major market for goods from the developed countries. Developed countries might develop rivalry due to shared interests resulting in political instabilities (Hill, 2008). Another effect of globalization is increase in domination of third world countries. In most cases, globalization involves multinational companies from the developed world extending their operations into the developing countries. Therefore, the wealth created may end up being shifted to the developed countries. However, the resources used in creating the wealth are obtained from the host countries. This is equivalent to exploitation especially in businesses involving use of natural resources. This leads to continued domination of economies of developing countries by the developed countries. Additionally, some multinational companies exploit people in the developing by offering jobs but paying them extremely low wages. Additionally, the working conditions are often poor and demeaning (Hill, 2008). Conclusion The term globalization has become a common slogan as far as the business world is concerned. In the international business, the term is used in reference to increased interdependence between economies of different countries. With improved technologies, companies can expand their business operations across the globe and manage them effectively. However, globalization has positive as well as negative impacts on the international business environment. Globalization has opened up opportunities in the business world. However, the opening up has led to unequal distribution of wealth resulting in increased gap between the rich and the poor countries. Additionally, some global companies take advantage of their employees especially those in third world countries. Therefore, globalization has led to increased abuse of human rights. Certain factors determine the rate of globalization. These factors involve technological advancement, which determines the rate of growth of aspects such as communication and transportation. Legal and political policies also play a role in determining the rate of globalization. Works Cited Bray, M 2003, Comparative Education in the Era of Globalisation:Evolution, Missuions and Roles, Policy Futures in Education, 1(2), pp. 209-224. Devemdra, T 2009, Globalisation and International Business, Deep & Deep Publications, London. Hamilton, L & Webster, P 2012, The International Business Environment, 2 ed. Oxford University Press, London. Herrmann, A 2012, Globalization and its Effect on International Business, Awareness Society International 21st Annual Conference. Global, New York. Hill, J 2008, International Business: Managing Globalization, SAGE, New York. Mirwoba1, S 2009, Rethinking Ethical Issues in Global Business Environment, KCA Journal Of Business Management, 2(2), pp. 16-34. Stefanovic, Z 2008, Globalization: Theoretical Perspectives, Impacts And Institutional Response Of The Economy, Economics and Organization, 5(3), pp. 263 - 272. Read More