International Business Will Have to Manage Significant Shifts in Global Power over the Next Few Decade - Essay Example

? International business International business means shift of the focus from a domestic economy to a ‘higher degree of internationalization’. The establishment of The World Trade Organization in the year 1995 following the General agreement on trade and tariff (GATT) represents an extensive and legal international trading system. With globalization the power and regulations of the international organizations required a greater shift. Based upon the idea of capitalism, the world became divided into two categories – the capitalist west or developed countries and the developing or emerging economies like India and China which serve as the grounds of investment of foreign capital. These developed nations hold the key to production while the emerging economies provide mainly the labor and infrastructure necessary for the investment. Technological upgradation has been a key to economic growth and the developed nations have proven this. Technology aims to create objects which are vital for human living. With new developments in research and owing to globalization, these economies like China and India have also realized the importance of technological development (Johnson & Turner, 2009, pp. 1-3). On the grounds of progress in technology it can be inferred that US reigns supreme though India and China have been investing constant efforts towards the same with China a few steps ahead. Technology is usually purchased and sold in the form of capital products incorporating machines and other systems of production. Information regarding technical and commercial aspects is subject to property related rights. In fact there are six elements connected to technology. These are “geography, culture, economy, people, business, and government” (Li-Hua, 2004, p.28). China has one of the most composite legislative and political systems and this creates hindrances for businesses. The government takes a clear role in issuing licenses and in spite of the loose ends in legislation China is encouraging towards foreign investments. Government has also issued the intellectual property rights in order to protect the “copycat reputation” of the nation. The business houses need to safeguard against “confidentiality, corruption and conflict of interest” (Ripard, 2010). India despite her colonial history has higher level of acceptance towards foreign investments. India’s regulations have been loosened and the economy opened when the country faced sudden crisis in balance of payments (Kochanek, 1974, pp. 118-119). Recently both America and India have shown their doubts regarding the products of the telecommunications sector from China. Experts suspect that, “India’s move to obstruct the orders from the Chinese telecommunications has kicked off a sequence of events that resulted in billions of dollars of lost revenue for global telecom market vendors and significant project delays for India’s telecom service providers” (Petrou, 2010). Chinese equipments involve a risk of security, according to Indian buyers and this might risk important information which might lead a firm to ethical problems. Even United States have raised security related issues and the senators from US requested the Obama administration to go through a submission of quotation from Huawei Technologies in China. The crucial causal factors behind the success of Chinese vendors are cheap labor, “a home-field advantage in China’s hot telecom market” and “access to an almost unlimited line of credit through government banks”. These facilities are likely to persist. (Petrou, 2010) China, especially Beijing has future plans for forming an environment which facilitates “homegrown next-generation mobile technology and electric cars”. When assistance was provided to the Chinese local producers in the form of energy resources and technologies at subsidies Beijing received the accusation of breaking free trade principles. This led to filing of a case in the WTO by Washington. China is working fast to create self reliance in the field of technology by promoting industries like semiconductors and clean energy (to bring down dependence on oil). The nation is also concentrating on development of industries which require low efficiency and carbon. This could prove to be a sensitive issue for the country because this is also a period when the western nations are working towards creation of more jobs by promoting outsourcing and exports of technology to these emerging economies. According to Zhu, China’s recent efforts towards development in the technology sector are in line with the WTO principles and China’s efforts would provide scope for both domestic and international businesses (McDonald, 2011). International business in India is growing with time and with passing days more and more opportunities and possibilities are opening up. The annual rate of the growth of the business sector is more than 7% and with stability in the relation with the neighboring countries it is expected to grow more in the near future. With ‘high skilled man power’, excellent performing stock market and ‘budding middle class’ the country is gaining more opportunities of exploring business. The diverse culture of the country makes international business opportunity in the country more robust. The eastern part of India is the land of Intellectuals’, the southern part is the technological Hub, the western part is known to be the commercial capital and the northern part is the ‘hub of political power’. The sectors of the country which are increasing the potential of business opportunities internationally are the information technology sector, the electronics hardware, telecommunication, biotechnology and the pharmaceuticals industry, the sector for research and development, banking sector and other financial institutions including insurance and pensions, the capital market of the country, the chemicals industry and the hydrocarbons, the agriculture sector of the country along with food processing, the growing retail sector, logistics, the sector of power and non conventional energy, and the manufacturing and the infrastructure sector of the country. Off course IT finds its application in all these sectors. If these sectors are properly tapped then the international business opportunity of the country is really huge. Thus India is continuously striving towards being the ‘knowledge capital of the world’. (International Business in India, 2010) The special economic zones (SEZs) in the coastal cities of India have brought about widespread alteration led by market forces. China has however thought ahead of India in this respect and SEZs have been established in 1979 in China. From 1991 onwards market forces were liberalized and export subsidies as well as import promotion licenses were destroyed. These zones will offer the investors special incentives like an open labor market and entry without duty. (Preeg, 2008) Both India and China are currently involved in a technology race and according to Preeg (2008) China has almost reached the goal of becoming an advanced technology based nation. India stands second in this prospect. There has been a growing apprehension about US losing its competitiveness in exports of technology. In this context, a select committee of National Academics of Science reported the apprehensions abut the lost lead in technological field of US. There has been a shift in export type towards technology industries for China (manufacturing) and India (software and service sector). This might bring up challenge to the competitive position of US. However US follows a factor substitution technology where it can constantly take advantage of the cheap labor supply of these economies and is a supply side economy (Komiya, 1962). The most important factor lies in the strong history of industrialization following up to this tertiary stage of pose industrialization or the age of the service sector boom which India has been experiencing already without any technological progress suitable for the industrialization phase. US have a strong base to build which China is progressing tactfully while simultaneously ensuring adequate inflow of foreign aid. US is self reliant in terms of technology and even at this stage the emerging economies are dependent on US capital investments. While US remains at the numero uno position, China is a little bit ahead of India in terms of building a self reliant economy based on technological advancement. References International Business in India, (2010), India business directory, available at: (accessed on 28th January, 2011) Johnson, D, & C, Turner, (2009), International Business, Taylor and Francis Komiya, R. (1962), Technological Progress and the Production Function in the United States Steam Power Industry, The Review of Economics and Statistics, Vol. 44, No. 2, pp. 156-166. Li-Hua, R. (2004), Technology and Knowledge Transfer in China, Ashgate Publishing McDonald, J. (2011), China to step up controversial technology plans, available at: http://www.physorg.com/news/2011-01-china-controversial-technology.html (accessed on January 30, 2011) Preeg, E.H. (2008), India and China, CSIS Petrou, A. (2010), India, USA are deeply suspicious about Chinese telco kit, TechEYE, available at: http://www.techeye.net/business/india-usa-are-deeply-suspicious-about-chinese-telco-kit (accessed on January 30, 2011) Read More