Critical Issues in Global Business - Essay Example

Critical Issues in Global Business Name: College: Course: Tutor: Date: Introduction The World Trade Organization (WTO) is a global organization which was established in 1995 to liberalize trade in the international market. Currently, the company has 153 members which represent about 95% of total trade in the world. WTO regulates trade, formalize trade agreements and offer dispute resolution procedures which should be adhered to by its members (World Trade Organizations 2009). The WTO poses a lot of opportunities to business organizations which operate in states or nations which are members. These opportunities can be of great importance in enhancing the productivity and profitability of a business organization if well exploited. However, the WTO also poses some threats to business organizations operating in states or nations which are members. Such threats can throw a business organization out of the market if proper strategies are not implemented. WTO is a mixed fortune to business organizations (Myrna 2009). Opportunities to the World Trade Organization The WTO offers various opportunities which are crucial in enhancing sustainability and competitiveness of business organizations. The main objective of WTO is liberalization of trade across the world. In other words, the organization aims at breaking the barriers of trade in the global market. Liberalization of trade is of importance to member countries since it increases opportunities for economic risk reduction as well as export expansion. Joining WTO, gives a country or its business organizations an opportunity to explore more foreign markets for exporting products. This is an opportunity because it enables business organizations to diversify its external trade and go beyond limited trading activities (Alan, 2009). Moreover, WTO mandates all countries which are members to adhere strictly to the most favored nation principle. This principle states that member country is supposed to get unfettered access to global market at equal terms enjoyed by other members. Membership to WTO presents an opportunity for marketing globally competitive products and services (Dahal and Sharma 2004). Since WTO mandates countries which are members to treat foreign products or services just like the domestic ones, attaining membership enables a country’s products and services to be treated similar to those of the importing country. This is an opportunity to the member countries since they experience acceptance of their goods and services in foreign markets (Bossche 2005, p.39). Besides, WTO supports trading partnerships between countries so long as their terms and conditions do not violate the organization’s rules. As a result, any country which obtains membership with the WTO is supposed to continue with its partnership arrangements with other countries so long as the partnership agreement does not interfere with the rules of WTO. Moreover, membership to WTO provides a country with the protection of international rules. Such provisions bring about predictability environment and give assurance to market for products and services of the domestic business organizations (Dahal and Sharma 2004). Besides, since WTO is multilateral trading organization which is rule-based, its membership reduces bilateral pressures emanating from trading partners. In this regard, the member countries are able to penetrate other countries’ market without more restrictions. This results to increased sales volume of domestic products in international markets. Business organizations operating in member countries will be able to enhance their sales volume due to the increased demand of their products and services in the market. Moreover, WTO exposes a country to a competitive environment thus enhancing consciousness and active participation in identifying competitive advantage areas. In other words, the organization enhances creativity and innovation within its member countries. Business organizations in a member country rate themselves with international organizations thus calling for more creativity and innovation in order to survive in the competitive market (Myrna 2009). Besides, WTO makes the trading environment for business organizations more conducive by ensuring that all member countries apply trade policies effectively. Such a function of WTO encourages countries or business organizations in member countries to export more products including those which could not be exported earlier. This gives countries an opportunity to market their products to all parts of the country (Dahal and Sharma 2004). Another opportunity brought up by WTO is the increase of employment opportunities and foreign investment. WTO member countries attract more foreign investors due to reduced trade barriers. In this regard, more employment opportunities are created thus reducing the unemployment rate within a country. Such an aspect plays a major role in improving the economy of a country. In addition, WTO introduces a rule-based trade policy regime which enhances transparency and reduces uncertainty in business operations. Failure of business parties to know the price expected in international market discourages many investors from conducting a trade a cross boarders. WTO ensures that relevant and adequate information is provided to traders intending to enter international market. This reduces the uncertainty thus motivating traders to carry out more businesses in international markets (Ahmed, 2004). Threats to the World Trade Organizations Despite the fact that WTO poses significant opportunities, it also poses some threats to its member countries thus discouraging some countries from being members. Liberalization and globalization brought out by WTO creates new dynamics of enterprise development, production as well as international competition. As a result, it is costly and more complex for business organization to adopt effective strategies to address the new dynamics brought out by liberalization and globalization of business operation. This is a major threat to domestic business organizations since they may make substantial losses due to application of poor operational strategies (Dahal and Sharma 2004). Increased competition is a threat to domestic business organizations. Due to reduction or elimination of trade barriers, foreign business organizations find it easier to enter international markets. International business organizations are usually characterized by advanced technology and broad capital base thus they can easily dominate the market of a country. Business organizations in member countries may fail to survive the stiff competition. Increased business competition in a country lowers the rate of entrepreneurship. Most of entrepreneurs fail to survive in a more competitive market thus lowering the economy of a country (Steve 2006). Besides, some of the policies of the WTO can be utilized by developed countries to exploit third world countries. For instance, policies regarding sanitary and phytosanitary and protection of intellectual property have been used by some countries to bar imports on some items. Countries impose various trade barriers and argue that they are protecting animals, plants or human health as provided by Sanitary and Phytosanitary Measures. Such policies discourage many third world countries from being a member of the WTO (Columbus 2003, p.38). Moreover, trade related investment measures established by WTO poses threats to some countries. This agreement allows patenting of expressions, ideas, creations, innovations and technology which should be adhered to by all members. The agreement has the potential of inflating price of technology which is more important for upgrading the production equipments of business organizations. Increase in prices of technology bars local business organizations from utilizing advanced technology thus affecting the quality of their services and products adversely. Technology is one of the major external factors which affect business organizations operations. Failure of a business organization to utilize advanced technology in production and operation is likely to lower its competitiveness (Khan 2002, p.15). As a result, survival of small and medium enterprises is threatened by adoption of WTO policies. Besides, export-oriented small scale business organizations are likely to face more challenges in the form of standards set by importing countries. Most countries especially developed countries set high technical standards which should be met by exporting countries. Such standards act as barriers to trade since they prevent some business organizations from exporting their products to certain jurisdictions (Dahal and Sharma 2004). Conclusion It is evident that WTO poses a mixed fortune in the corporate world. World Trade Organization poses some opportunities which could be of great significance to countries and business organizations if well exploited. WTO breaks many of the barriers to trade thus enabling member countries to export their products and services to foreign markets. Attaining membership enables a country’s products and services to be treated similar to those of the importing country. Membership to WTO also reduces bilateral pressures emanating from trading partners. In addition, WTO enhances consciousness and active participation of business organizations in identifying competitive advantage areas. Increased employment opportunities and foreign investment are important opportunities which can be attained by a country by being a member of WTO. However, WTO poses some threats which discourage countries from being members. Some of the threats include creation of new dynamics of enterprise development, production as well as international competition, increased competition and establishment of policies favoring developed countries. However, the opportunities posed by WTO are substantial as compared to threats thus countries should embrace the idea of joining the membership of WTO. References Ahmed, H 2004, ‘WTO Regime and Engineering Industry’, Economic Review, vol.35, no.8, pp.33-34 Alan, M 2009, ‘China to Become World’s Largest Exporter’, Joc Online, vol.1, no.2, pp.2-2. Bossche, P 2005, The Law and Policy of the World Trade Organization, Cambridge University Press, Cambridge. Columbus, F 2003, Asian Economic and Political Issues, Nova Publishers, ISBN 1590336968. Dahal, N and Sharma, B 2004, WTO membership: Opportunities and Challenges for SMEs in Nepal, viewed on, 17 August 2009, < http://www.sawtee. org/pdf/publication/smesfinalbook.pdf Khan, S 2002, Trade and Environment Difficult Policy Choices at the Interface, Zed Books, ISBN 1842770993. Myrna, A 2009, Policy Adjustment to Exploit Opportunities in WTO, APEC and AFTA: Tradable Goods Sector, viewed on, 17 August 2009, < http://ideas.repec.org/p/phd/dpaper/dp_1999-11.html> Steve, T 2006, ‘Vietnam’s WTO Status: Threats or Opportunity’, Plastics News, vol.18, no.41, pp.1-14. World Trade Organizations 2009, What is the WTO, viewed on, 17 August 2009, < http://www.wto.org/>. Read More