Key Drivers Associated with Globalization in the Context of Growing Economic Interdependence - Coursework Example

Name: Instructor: Course: Date Key drivers associated with globalization in the context of growing economic interdependence There exist a number of key drivers that are closely associated with globalization and more so in relation to the ever growing economic interdependence between countries. One of the major drivers to globalization is the development of international institutions such as the WTO and the regional trade agreements. Through such trade agreements countries have been able to be more collaborative with each other (Birkinshaw 78). Through this there have been the transfer of ideas from one country to another and thus some standards have been also accepted in other countries. Through this key driver the interdependence between countries has also increased and countries tend to major on what they can do best. Another key driver of globalization is the emergence and the continued development of multinational corporations. Multinational corporations are those firms and corporations that have based their operations in more than one country and their services and production facilitates even outside the countries of origin. The corporations tend to foster economic interdependence between various national governments. Through the investments that are usually made by the multinational corporations there is a wide range of substantial benefits and more so to the living and working conditions of a great number of people in the world (Birkinshaw 103). Through multinational corporations there have been the diffusion of certain organizational best practices and models and thus they are therefore seen as being major forces behind the convergence of the globe. The other major driver of globalization in relation to interdependence between countries is the development of communication and transport systems. Through this one is usually able to make business contacts with even companies that are in other continents even without travelling. In respect to this, there has been the development of technologies such as web conferencing where people are able to conduct meeting even without meeting and this has decreased in level of money spent since they do not have to travel to other countries (Birkinshaw 99). Also through the improved level of transportation people are able to move from one place to another and conduct business there. Thus based on the development of transport and communication systems the economic interdependence between countries seems to be on the rise. Culture shock and how it can be reduced in international business In the business world we are currently living in the importance of international cooperating and negotiation seems to be on the rise. Each and every company tends to be involved in international business activities and thus the need to deal with all the intercultural issues that may arise. Culture shock is commonly termed as the personal confusion that an individual may feel in instances when he is experiencing an unknown way of life when he/she visits a new country, move to a new social environment or at times travels to a different kind of life (Macionis and Gerber 54). There exists a number of ways of reducing culture shock and the first is the need for efficient international human resource management. Based on the continued growth of companies, networks, strategic alliances and cross cultural mergers and acquisitions there have been an increase in the number of expatriates. Efficient international human resources management will play a great role in reducing culture shock in international business. The other major way of reducing culture shock is apposite expatriate recruitment. Besides the technical as well as professional skills, the behavioral components need to be considered in the process. Or else it is likely that the person been sent to the other country will not perform his/her duties as expected and the expatriate will tend to experience severe and intense culture shock. Another way of reducing culture shock is through intercultural training. Cross cultural training seems to be effective when it comes to sensitization of individuals on any cultural issues and thus in a way it facilitates the adjustments to the culture in the foreign country and eventually there is an improvement in the performance of the work and it also helps the employees in developing a global mindset (Macionis and Gerber 52). There are three core aspects that contribute to the successful transition into a foreign job and they are language instruction, cultural training and assistance based on daily matters. The first two ought to be done in advance that is prior to the international postage and it is also highly recommended that the employee ought to be notified in advance. Practical assistance ought to start immediately as the new employee arrives in the host country. The main types of political risk in international business and how each of these risks affects international business activity Political risks can commonly termed as the changes that may occur in the political environment that may in a way have an adverse effect on the values of the core business activities of a firm. The political risk tends to occur in every nation but what differentiates them is the degree of the risks that is when it is low in other countries other countries tend to experience higher risks (Theodore and Gerald 77). In essence there tend to be two major categories of the political risks with one of them being based on the features of political risks and the other category being based on the actions or controls of the local government. The political risks that fall under the first category are the ownership risk, transfer risk and operating risk. Under the ownership risk the operations of most businesses tend to be threatened with expropriation and takeover by the government and thus the owners may in the long run end up losing their property. Under the operations risks the policies that have been put in place by the government in the host country may hamper certain business operations for example property, marketing and finance (Theodore and Gerald 53). This may in a way have adverse effects on international business since it would make it impossible for the firms to operate effectively. The other type of political risk is the transfer risk. Under this risk the policies that have been implemented by the government may have adverse and noteworthy effects on the exchange rates in the country. Such policies at times lead to the devaluation of the currency and also economic downturn and this has an adverse effect on the ability of the company to be able to transfer capital out to other countries. In most scenarios when companies create wealth in other countries they are usually forced to return a substantial amount to the host country government. Based on this international trade may be on the decrease since due to devaluation of the currency the companies will not be able to transfer capital into other countries (Theodore and Gerald 67). The other types of risks are those that have been induced by the local government and they include confiscation, domestication and expropriation. All these risks may at times hamper the effective functioning of international trade. China’s transitional economy and how the current Chinese economy differs from the prior to the “open door” policy? Transitional economically termed as the economy that tends to be changing from a centrally planned economy into a free market. The Chinese transitional economy has also undergone economic liberation and in this case the market forces are the ones setting the prices rather than the central planning units. In addition to this there was the eradication of certain trade barriers and there was a push to privatize a number of state owned businesses as well as resources and the financial sectors were created in order to make possible for macroeconomic stabilize as well as the free movement of private capital. But in relation to this china did not privatize its public corporations but they opted to protect them (Branstetter and Robert, 340). Where countries such as Russia and other eastern European countries adopted a quicker and aggressive paced model China choose a gradual transition mode. The reform path in China has bewildered the deep and widespread belief that steady restructuring and public ownership cannot be effective even in transitional strategies. There tend to be noteworthy differences between the prior open door policy and the current Chinese economy with the major one being based on the fact that in theory the open door policy seems to work but put in reality it does not. Hence despite the fact the open door policy as a number of associated benefits most of them are not achievable and thus the current economic system in china seems to be the best. Another major difference is based on the fact that in the prior open door policy the Chinese government had lifted the regulation in regard to the participation of the foreign capital in various domestic enterprises and they had also banned the transfer of profits. This is not the case on the current economic system in china (Branstetter and Robert, 342). Through this the FDI’s rushed forward and they attain a significant portion of the manufacturing sector in the country. This is not the case currently as most sectors are basically owned by the Chinese and in instances when foreigners are involved they do not operate alone but they are forced to form joint ventures with the locals. Works cited Birkinshaw, Julian. Entrepreneurship in the global firm, London: Sage, 2000. Print. Branstetter, Lee, and Robert, Feenstra. “Trade and foreign direct investment in China: a political economy approach,” Journal of International Economics 58 (2002): 335-358. Print. Macionis, John, and Linda Gerber. "Chapter 3 - Culture." Sociology. 7th edition ed. Toronto, ON: Pearson Canada Inc., 2010. 54. Print. Theodore, Moran, and Gerald, Thomas. International political risk management: Vol. 3: Looking to the future. Washington: World Bank Publications, 2005. Print. Read More