Globalization and International Business and How They Affect Each Other - Essay Example

International business Insert Insert To define globalization and international business and show how they affect each other International business is defined as the study of commerce transactions that take place across international borders that is between two or more nations, countries, and regions. Globalization is defined as a process extension of global linkages that is interaction and incorporation between companies, organizations and people from different nations. Globalization is believed to be aided by information technology and driven by trade between nations and investments. This process has high impacts on environment, culture, and physical well-being of people. This process can affect the political system of the country (ABE, 2001). Globalization is driven by a) Technology Technology has been the best driver to modern globalization. Introduction of Commercial jets and containerization has enabled import and export that brings on board all kinds of commodities and raw materials. Perishable real like flowers, vegetables saw a boost since commercial jets were there to enable fast, efficient transportation to the required destination (Belge, 1995). Microprocessors have seen the invention of practical business computing and electronic money transfers via the internet. Global e-business and e-commerce have been created due to technology. Telecommunication industry has enabled communication at low rate; this has made information reach required the destination thus improving global business (Ferrier, 2004). b) Cost Due to different cost of raw materials and skilled labor in the various countries, firms can take advantage in order to lower their cost of production (Ferrier, 2004). c) Political drivers Rules and regulations governing trading must allow free trade and direct investment from foreigners. Privatizations of firms are allowed as in the case of Canada and Europe (EU) privatizing its companies to china (China Economic Journal, 2014). The establishment of General Agreement on Tariffs and Trade (GATT) which was enacted during the year 1947 and the World Trade Organization (WTO) established in 1995 has also engineered globalization. d) Market As local markets become more and more drenched, global market remains the better most option to adopt. Rising customer needs, improved global marketing channels, and improved transportation channels are also motivating factors to choose internationalization (Ferrier, 2004). e) Global Competition Entry to the world market means increase in global competition among firms and organizations. Interdependence between countries in terms of raw materials, import and export which encompasses foreign direct investment (FDI) in the case of China investing in EU and Canada supports globalization (Meaunier 2012). Effects of Globalisation on International Business Globalization and international business affect each other positively and negatively. Primarily, economically globalization has opened up more opportunities due to migration of businesses (Daniels et al., 2011). Those in support of globalization (pro-globalization lobby groups) beliefs that globalization increases opportunities for each and everyone in the globe. They argue that the increase in competition is good since it makes production agents more professional in producing their market produce. Cost of goods and products will be lowered since companies may opt to import raw materials at cheaper rate from neighboring countries. Entrepreneurs will get ready markets for their products in other countries through export market developed by globalization. Customers will get modernized commodities from local and international markets at favorable cost (Bowles and Wang, 2013). Due to the information chain established between countries, marketing of products is much easier and cheaper due to globalization (Slywotzky et al., 2006). Organizations can create different marketing strategies in order to compete globally. They must be able to venture into foreign markets and learn from other entrepreneurs. Through extensive learning from foreign counterparts, businesses can create unique models of business. Globalization has also led to better-skilled workforce due to competition and demand for foreign products by locals and capability to handle new technology in place. Free trade is another great benefit of globalization. Countries can freely exchange goods and services. A country can specialize in producing goods not available in that region at low cost using resources from another country. It will eventually lead to; significant competition, economies of scale due to ability to specialize in a certain commodity, and consumers can get a good at low prices. Free movement of skilled labor gives workers a chance to look for greener pastures in different nations around the world (Brown and Labonté, 2011). It is also beneficial to countries since they can get skilled labor from other states if they experience labor shortage. Some countries like UK had to recruit nurses from the east to fill the shortage. Countries with high unemployment also use the opportunity to look for jobs for their citizens elsewhere. It is evident in Eastern Europe; workers had to migrate to the west (Pettinger 2012). Due to the issue of specialization, countries can produce only what they are good at a comfortable rate and this lowers prices for consumers and increase economy of scale. Investment by multinational companies has increased, and this can significantly improve the economy of a developing country. China has seen great investment in gas and oil in Canada ( Woo, Y.P 2012). Other benefits of globalization include; companies through globalization can access worldwide market, and consumers can get a variety of products at cheaper prices. World powers have been created through merging of nations, and this is beneficial to all people globally. There is an exchange of information and technological know-how between countries. Through inter-trade, people learn different cultures, and the healthy cultures can be imported to one country to benefit its citizens (Casillas and Acedo, 2012). Since the finance is our central interest, governments and organizations are trying their best to sort out environmental and security problems for each other like global warming and terrorism. Socially, countries have become more free and liberal to each other, and people can live in any part of the world. Internet, air travel, and mass communication are as a result of globalization. World trade organization together with the global economic forum are organizations supporting globalization in the world. World trade organization is a governmental organ with 159 members currently; it was created to formulate rules governing globalization and capital flows through member agreement process (Fairclough, 2009). It supervises member countries to ensure the set rules are followed. World economic forum, on the other hand, is a private organization that governs non-profit organizations, but does not have decision-making power. Cost of globalization Anti-globalization lobby group do not support the process since they believe that people and nations with fewer resources are likely not to function with competition pressure from more advanced countries. Anti-globalization groups include Greenpeace, friends of the earth, Oxfam and G-77. Other organizations include U.S textile and European farm lobby. These groups are against globalization because of fear of competition. Kamen it 2008 says that low cost achieved due to globalization is not fair to all. Some businesses will incur a loss due to this strategy since consumers will opt for cheaper commodities from other countries that may curtail operations of local companies and enterprises (Ferguson, 2005). The situation in the US and China, US garments industry has shifted manufacturing job to China where it is cheaper to produce garments that in US. It has helped china grow extremely fast but on the other hand it has reduced, US wage growth due to jobless citizens. In this case, globalization is good and is bad. The garment industry will benefit from cheap labor but the US citizens will be left jobless. In some countries, globalization has led to environmental degradation due to multiple investments and pressure for cheap workforce to maintain competitiveness (Katusic, 2013). It has resulted in erosion of social justice and increase in the gap between rich and poor due to cheap labor thus low wages to workers (Daniels et al., 2011). Availability of cheap labor in china is beneficial to the country. Economically it has put china as the richest country but socially mental illness is on the rise due to poor working conditions, low salary, and even deaths. It was reported that nine workers died at Global Electronic Manufacturer Foxcom due to harsh conditions of work (the straits times, 2010). Even though free trade increases market to sell goods, it also increases the risk of malfunction for small companies due to open competition from developed companies. Globalization has increased the use of non-renewable resources, pollution, and global warming. Mining has wasted lots of land in many countries creating deadly trenches for the locals. Free labor movement has seen some countries losing skilled workers to well-paying countries. Movement that takes place on the resources from one area to another has seen significant waste of oil be it on the train, sea or air (Lenz and Steinhaus, n.d.). Local economies can be destroyed since highly rated companies may choose to buy all natural goods from a certain area leaving locals with none. Socially, culture degradation has been reported in many countries; many young people have chosen to adopt cultures that favor them more; the western cultures. Some companies invest in a country but avoid paying taxes or pay fewer taxes thus unfair competition to local firms. Due to emerging technologies people with know how may decide to rip off the world (Mazlish, 2010). For globalization to be enjoyed in full, organizations must have the correct information about the venture. This information may include customization, organizational structure and customer connection activities. Other vital information includes global focus and global operation strategies. Organizations must ensure that the best risk management systems must be put in place. Laws must be enacted to govern human rights, political instability, inequalities, and environmental matters. All these actions, when put together, will benefit organizations, nations, and businesses globally. Is globalization a new trend? Globalization is not a new trend. In the past, people have migrated from their homes to different areas of the world to control other countries (conquest), to search for prosperity, for exploration and probably for trade. For years, traders have traded their goods globally. Soldiers launched invasions on orders from their rulers. Powerful nations captured new nations into empires (Measuring Globalization, 2001). The first globalization was taken in 16th and 17th century when the scramble for Africa began. Nations were looking for gold, silver, and spices. Other nations established companies like the east Indian company. There was rapid growth in trade and investment between colonies and European powers and American colonies. This first era saw the start of the first world war due to increasing in immigration restrictions and increased tariffs (Nederveen Pieterse, 2012). In the 19th century nations had been fully interconnected thus in our local supermarkets we can buy products from different centers of the world for example we can purchase oranges as far as from south Africa, best wine from Italy. Clothes imported from Indonesia. One can be able to watch television stations from all over the world (Raschke, 2011). Cars also imported from different countries. You can make telephone calls to any part of the world. People have also migrated from various parts of the world. What affect one part of the country undoubtedly affects all areas of the world. For instance, if drought hit America and affects wheat price of bread rises undoubtedly, and it affects the price of bread globally. Instability in Ivory Coast affects chocolate prices. Disputes between oil producing countries heighten oil prices. If terrorism hit the U.S, the stock markets will be affected (STEGER and WILSON, 2012). The 20th century has seen full globalization; communities are more interconnection and co-dependant in economic, culture and environment than the later century. Integration of nations may lead to ‘new world order’, which will see nations dissolve in favor of superpower government. Trend of globalization include; expansion of international corporations in several countries like coca-cola, Unilever, IBM, and Shell. Global finance markets like New York, Frankfurt and Hong Kong provides easy access to financing around the world. Immigration, transformation of cultural and religion has led to the emergence of multicultural societies. Globalization has led to Emergence of trading blocks like NAFTA (the North American Tree Trade Agreement), Association of Southeast Asian Nations (ASEAN) and the European Union. Globalization has changed and is still changing; a rise of new economic powers in America and Asia has changed the direction of investment flow. Emerging issues that arise from the field of economy and powers such as Brazil, India, and China have become a major target of FDI (Foreign Direct Investment). These same countries also invest in other countries under FDI. China has been seen as the great investor; it has so far invested in the EU, US, and Canada. China has an oil company in Canada namely CNOOC- Nexen (the china national offshore oil corporation limited). China has invested in wineries and shipping businesses in the European Union. This FDI has affected countries in one way, or another in terms of employment, growth and income distribution. China has benefitted in FDI since it has created employment for its citizens and improved their economy. Climate change and change in technology will eventually change globalization and international business once a more (Asia pacific foundation of Canada 2010). The future of globalization and international business The future of globalization can only be discussed by using the Holy Bible. The rise and falling of nations were foretold in the bible. Nations like Babylon, Greek and Roman Empire, were foretold (Daniel 2). America and British were to rise to power. God also foretold interconnection and advance in technology, “but you, O Daniel, shut up the words, and seal the book, even to the time of the end. Many shall run to and fro, and knowledge shall be increased” (Daniel 12: 4). The bible explains that, a union of the group of nations will rise and replace the super power America. The nations, America and Britain, will be attacked, defeated and taken into captivity. A false church will back the rising union. The union will become the leading trading block trading all over the globe dealing in all products human beings inclusive (Revelation 18:3, 9-18). This influential union will unleash a temporary period of great wealth, but not all people or nations will benefit (Transnational Justice, Counterpublic Spheres and Alter-Globalization, 2012). After all this, a super government will replace the union and will usher in a period of lasting peace, wealth and security for all people and nations (Isaiah 9:6-7). Jesus Christ, who will make the world one again, will rule this super government. There will be no more inequality, exploitation, and no more poverty. Conclusion Globalization has greatly improved living standards of people in almost all countries of the world especially the developing countries by lowering cost of living and providing jobs. 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