International

Business
and Trade
(MGT8)
Ma. Concepcion M. Desepeda
 Differentiate globalization, international trade and international
business.

Globalization is the word used to describe the growing interdependence

of the world’s economies, cultures, and populations, brought about by
cross-border trade in goods and services, technology, and flows of investment,
people, and information to maximize returns and benefit the common good.
International trade is the exchange of capital, goods, and services across
international borders or territories. It is the exchange of goods and services
among nations of the world. All countries need goods and services to satisfy
their people. Production of goods and services requires resources. Every
country has limited resources; therefore a country solely cannot produce all
the goods and services that it requires. Required goods which cannot be
produced or the amount is insufficient as required, need to be provided from
other countries. Similarly, countries sell their products to others also when the
production of goods comes in surplus quantities than demanded in the
country.
International business, on the other hand, encompasses all commercial
activities that take place to promote the transfer of goods, services, resources,
people, ideas, and technologies across national borders. International
business occurs in many different forms, the movement of goods from one
country to another (exporting, importing, trade), contractual agreements that
allow foreign firms to use products, services, and processes from other
nations (licensing, franchising), the formation and operations of sales,
manufacturing, research and development, and distribution facilities in
foreign markets.

 Give at least three factors that could the affect future of globalizations
and elaborate.
The three factors that could affect globalization’s future are physical,
social, and competitive factors. The physical and social factors would be
empowered by the process of globalization, more and more business activities
have taken place. The local businesses still remain in the context of practicing
trade across the globe. In competitive factors, the level of competition they
will experience in foreign markets is more dynamic and complex than in
domestic markets. And this will result to better quality of goods and services,
lower prices and functional design since businesses compete against other
businesses worldwide.

 What are the reasons why companies engage in international business

and why its growth has accelerated?

Companies engage in international for a variety of reasons, but the goal is

typically company growth or expansion. Whether a company hires
international employees or searches for new markets abroad, an international
strategy can help diversify and expand a business.
One of the reasons are, first, to expand sales. The first and foremost
reason is that western multinationals would like to expand their sales and
acquire newer markets so that they can record impressive growth rates.
Considering the fact that the developing countries are peopled with
consumers who have aspirations to western lifestyles, it is, but natural that
the western companies would like to target this need and hence, expand into
these markets. Moreover, with declining sales in one region, the western
companies hope to recoup the losses by expanding into other markets.
Further, the attractive rates of return in the emerging markets are another
reason as well.
Second, is to acquire resources. This is one of the most important reasons
for companies to expand internationally. The manufacturers and distributors
look for foreign capital, technology and information that they can use at home
in order to reduce costs. The companies sometimes operate abroad to acquire
something which is not readily available at home country so as to improve the
cost and product quality. It is possible too that setting up the industry in
another country is cheaper than transporting the raw material from other
country to home country.
Third, they engage in international business to minimize the risk. They
seek foreign markets to minimize swings in sales and profits arising of
business cycle i.e. recession and expansions, which occur differently in
different countries. For example there would be recession in one country
where the sales are growing very slowly on other hand there would be a
developing country where there is high demand for its products due to its
expanding markets.
Fourth, is to lower cost of production. They go international to find
alternative sources of labor. Labor in developing countries is much cheaper
when compares to developed countries, labor cost has a direct impact on the
cost of production which affects the bottom line of the companies. Some
companies look to international countries for lower-cost manufacturing,
technology assistance and other services in order to maintain a competitive
advantage.
And lastly, companies go international to broaden their work force and
obtain new ideas. A work force comprised of different backgrounds and
cultural differences can bring fresh ideas and concepts to help a company
grow. For example, IBM actively recruits individuals from diverse backgrounds
because it believes it’s a competitive advantage that drives innovation and
benefits customer.
International business has growth dramatically in recent years because of
strategic imperatives and environmental changes. Strategic imperatives
include the need to leverage core competencies, acquire resources, seek new
markets (they diversify their business to attain profitability and uncover new
markets) have great opportunities (to boost their sales and profits by selling
their products in these markets), and match the actions of rivals ( as
international companies are using overseas market entry as a counter
measure to increase competition). In addition, more companies operate
internationally because new products quickly become known globally,
companies can produce in different countries, and domestic companies,
competitors, suppliers have becomes international too.

 How do globalization’s future being affected by physical and social

factors and competitive factors?

The globalization’s future being affected by physical and social factors

would be chartered by the process of globalization, more and more business
activities have taken place. On the other hand, local businesses remain in the
context of practicing trade across the globe. In competitive factors, the level
of competition they will experience in foreign markets is more dynamic and
complex than in domestic markets. The result is better quality of goods and
services, lower prices and functional design since businesses compete against
other businesses worldwide.

 What is the role of World Trade Organization in the international trade

and business?

In brief, the World Trade Organization (WTO) is the only international

organization dealing with the global rules of trade. Its main function is to
ensure that trade flows as smoothly, predictably and freely as possible. It has
a crucial role to play in the international trade, global economics, political and
legal issues arising in the international business because of the globalization.
World Trade Organization facilitates implementation, administration and
smooth operations of trade agreements between the countries. They provide
forums for negotiations among its members concerning their multilateral
trade relations in other countries. It is also cooperates with the International
Monetary Fund and the World Bank with a view to achieving greater
coherence in global economic policy making. Overall, the WTO is an
international body which not only takes are of the international trades but
also actively participates on business improvisation. It always put required
effort to keep the peaceful trans-boundary trades and to solve the disputes if
arises among the member countries.WTO plays an important positive role for
the international trades and its always beneficial for the countries to trade
trans-boundary being the member of the WTO.