Professional Documents
Culture Documents
International Business When business activities are performed on an international level; these
can be termed as international business. Basic functions, processes and techniques of
international business are essentially the same as those involved in domestic business. What
is different is the environment within which these functions are performed and processes are
carried out. International Business environments are unfamiliar and different from the
domestic environment. These variations may need adaptation for business success.
When business operations are carried out in more than one country apart from the home
nation, then it is termed as international business. A business firm is known as a multinational
enterprise (MNE) when it carries out its production or operations in more than one country.
An MNE is also referred as a multinational corporation (MNC) or transnational corporation
(TNC).
Environment refers to sum total of what is around someone which includes living things and
natural forces. It is also referred as the conditions that affect the behavior and development
of a business enterprise. When we combine these two words International Business and
Environment, it refers to conditions or surroundings prevalent in foreign countries that affect
the functioning of a business firm and its activities.
Environmental factors are mostly external to a firm and are largely uncontrollable. The
business environment of a firm comprises of Micro and Macro environment. Micro
environment or task environment or operating environment consists of those individuals or
groups which are very close to business and with which the organizations comes into frequent
and direct contact in its business activities. It primarily consists of customers, suppliers,
marketing intermediaries, competitors, and public. Macro Environment or remote
environment refers to factors which are external to a business enterprise and are less
controllable as compared to factors under micro environment. These include political, legal,
social, cultural, technological and international environment
The environment of each country varies from the other and if a business firm has to operate
in more than one country, then it should have a thorough understanding of differences in
environmental factors amongst nations. The strategies that work well in one country might
not work in the other country due to differences in cultural, political, legal and economic
factors.
1
Globalization
We often hear the word globalization in many contexts and repeated frequently as a concept
to denote more trade, foreign companies and even the ongoing economic crisis. Before we
launch into a full-fledged review of the term and its various manifestations, it is important to
consider what exactly we mean when we say globalization.
Globalization is the free movement of goods, services and people across the world in a
seamless and integrated manner. Globalization can be thought of to be the result of the
opening up of the global economy and the concomitant increase in trade between nations. In
other words, when countries that were hitherto closed to trade and foreign investment open
up their economies and go global, the result is an increasing interconnectedness and
integration of the economies of the world. This is a brief introduction to globalization.
Further, globalization can also mean that countries liberalize their import protocols and
welcome foreign investment into sectors that are the mainstays of its economy. What this
means is that countries become magnets for attracting global capital by opening up their
economies to multinational corporations.
Further, globalization also means that countries liberalize their visa rules and procedures so
as to permit the free flow of people from country to country. Moreover, globalization results
in freeing up the unproductive sectors to investment and the productive sectors to export
related activities resulting in a win-win situation for the economies of the world.
What Is Globalization?
Globalization is a process of interaction and integration among the people, companies, and
governments of different nations, a process driven by international trade and investment and
aided by information technology. This process has effects on the environment, on culture, on
political systems, on economic development and prosperity, and on human physical well-
being in societies around the world.
But policy and technological developments of the past few decades have spurred increases in
cross-border trade, investment, and migration so large that many observers believe the world
has entered a qualitatively new phase in its economic development. Since 1950, for example,
the volume of world trade has increased by 20 times, and from just 1997 to 1999 flows of
foreign investment nearly doubled, from $468 billion to $827 billion. Distinguishing this
current wave of globalization from earlier ones, author Thomas Friedman has said that today
globalization is farther, faster, cheaper, and deeper.
This current wave of globalization has been driven by policies that have opened economies
domestically and internationally. In the years since the Second World War, and especially
during the past two decades, many governments have adopted free-market economic systems,
vastly increasing their own productive potential and creating myriad new opportunities for
international trade and investment. Governments also have negotiated dramatic reductions in
barriers to commerce and have established international agreements to promote trade in
goods, services, and investment. Taking advantage of new opportunities in foreign markets,
corporations have built foreign factories and established production and marketing
arrangements with foreign partners. A defining feature of globalization, therefore, is an
international industrial and financial business structure.
2
Technology has been the other principal driver of globalization. Advances in information
technology, in particular, have dramatically transformed economic life. Information
technologies have given all sorts of individual economic actorsconsumers, investors,
businessesvaluable new tools for identifying and pursuing economic opportunities,
including faster and more informed analyses of economic trends around the world, easy
transfers of assets, and collaboration with far-flung partners.
What is 'Globalization?'
Globalization is the tendency of investment funds and businesses to move beyond domestic
and national markets to other markets around the globe, thereby increasing the
interconnection of the world. Globalization has had the effect of markedly
increasing international trade and cultural exchange.
Public policy and technology are the two main driving factors behind current globalization.
Recent implementations of government policy, both domestic and internationally, have
opened economic borders for countries across the world. Over the past 20 years, world
governments have integrated a free-market economic system into fiscal policies, monetary
policies and trade agreements. This evolution of economic systems has stimulated domestic
production potential and opened countries to increased financial opportunities abroad. World
governments now focus on decreasing barriers to trade and actively promote international
commerce in relation to investments, goods and services.
Technology has also been a major reason for the growth in globalization. Advancements in
information technology (IT) and the flow of information across borders have empowered
individuals to take control of their financial lives. Technology has helped people become
more informed about economic trends and allows people to transfer financial assets and take
advantage of investment opportunities. Technology has increased the ability to communicate
internationally, closing the gap between different cultures.
While globalization has radically increased incomes and economic growth in developing
countries and lowered consumer prices in developed countries, it also changes the power
balance between developing and developed countries and affects the culture of each affected
country. And the shifting location of goods production has caused many jobs to cross borders,
requiring some workers in developed countries to change careers.