Globalization and International Business

Globalization - the process by which businesses or other organizations develop international

influence or start operating on an international scale. It is the spread of products, technology,
information, and jobs across national borders and cultures. In economic terms, it describes an
interdependence of nations around the globe fostered through free trade.
On one hand, globalization has created new jobs and economic growth through the cross-border
flow of goods, capital, and labor. On the other hand, this growth and job creation is not
distributed evenly across industries or countries. Specific industries in certain countries, such as
textile manufacturing in the U.S. or corn farming in Mexico, have suffered severe disruption or
outright collapse as a result of increased international competition.

Globalization motives are idealistic, as well as opportunistic, but the development of a global
free market has benefited large corporations based in the Western world. Its impact remains
mixed for workers, cultures, and small businesses around the globe, in both developed and
emerging nations.

Globalization Explained
Corporations gain a competitive advantage on multiple fronts through globalization. They can
reduce operating costs by manufacturing abroad. They can buy raw materials more cheaply
because of the reduction or removal of tariffs. Most of all, they gain access to millions of new
consumers.

Globalization is a social, cultural, political, and legal phenomenon. 

 Socially, it leads to greater interaction among various populations.

 Culturally, globalization represents the exchange of ideas, values, and artistic expression
among cultures.
 Globalization also represents a trend toward the development of single world culture. 
 Politically, globalization has shifted attention to intergovernmental organizations like
the United Nations (UN) and the World Trade Organization (WTO).
 Legally, globalization has altered how international law is created and enforced.

Globalization
The process by which businesses or other organizations develop international influence or start
operating on an international scale.
Globalization allows companies to find lower-cost ways to produce their products. It also
increases global competition, which drives prices down and creates a larger variety of choices for
consumers. Lowered costs help people in both developing and already-developed countries live
better on less money.
Globalization is about the interconnectedness of people and businesses across the world that
eventually leads to global cultural, political and economic integration. It is the ability to move
and communicate easily with others all over the world in order to conduct business
internationally.

Importance of Globalization in the Society.

Because of globalization, you can purchase cheaper goods, communicate with individuals from
all over the world, and work in just about any country. Importantly, globalization has also
opened our eyes to various cultures, which has increased people's understanding of one another.

However, globalisation is also affecting us in a negative way. Increased transportation and the

global shift of polluting manufacturing industries has resulted in environmental degradation.
Pollution is affecting people's health and having a negative impact on biodiversity levels
globally.

It has had a few adverse effects on developed countries. Some adverse consequences of
globalization include terrorism, job insecurity, currency fluctuation, and price instability.

Criticisms of Globalization: Growing Income Inequality

Increase in Social Tensions
Globalization by virtue of being a process that benefits elites and the educated more has
contributed to social tensions where the native populace without the benefit of English speaking
skills or the necessary attributes to partake of the fruits of globalization end up resenting the
success of the class that benefits from globalization. This has resulted in social tensions wherein
those left out of the process of globalization envy those who have benefited from it and this leads
to periods of unrest and fights at the slightest provocation. Indeed, as one of the experts on
globalization, Amy Chua puts it, the world is on fire because of these inequalities, and it is high
time the policymaking elite in all the countries did something to alleviate and redress the gross
imbalances resulting from globalization.
Lack of Class Mobility
The ongoing global economic crisis has brought home the fact that youth born into a certain class
are likely to remain in that socio-economic class without hopes of social mobility or progress.
This is because globalization has skewed the game in favor of those with the required skills and
attributes and has restricted the upward movement of people along the social ladder. Though this
is just one reason, the other reason of class stratification and lack of opportunities are equally
pernicious as far as the limitation of social mobility is concerned. Therefore, it is high time for
the elites to address these problems because ultimately the rising tide should lift all boats and not
only those that belong to the privileged class.
Final Thoughts

In concluding this article, it is worthwhile to remember that any economic growth must be
equitable and environmentally and socially responsible. Growth without equity and consumption
without justice are likely to lead to chaos and unrest and if the events of the Arab Spring are
anything to go by, the first shots in the war between the haves, and the have-nots are are being
fired. Therefore, the fact that globalization has worsened the income equalities and has
contributed to social tensions and unrest means that despite the heady and giddy promises of the
process, the fact remains that virtually nothing on the ground has changed

Difference Between Domestic and International Business

Last updated on October 7, 2017 by Surbhi S

Trade refers to the exchange of goods and services for money, which can be undertaken within
the geographical limits of the countries or beyond the boundaries. The trade which takes place
within the geographical boundaries of the country is called domestic business, whereas trade
which occurs between two countries internationally, is called international business.
Comparison Chart

BASIS FOR
DOMESTIC BUSINESS INTERNATIONAL BUSINESS
COMPARISON

Meaning A business is said to be domestic, when its International business is one which is
economic transactions are conducted engaged in economic transaction with
within the geographical boundaries of the several countries in the world.
country.

Area of operation Within the country Whole world

Quality standards Quite low Very high

Deals in Single currency Multiple currencies

Capital Less Huge

investment

Restrictions Few Many

Nature of Homogeneous Heterogeneous

customers

Business research It can be conducted easily. It is difficult to conduct research.

Mobility of factors Free Restricted

of production
Definition of Domestic Business
The business transaction that occurs within the geographical limits of the country is known as
domestic business. It is a business entity whose commercial activities are performed within a
nation. Alternately known as internal business or sometimes as home trade. The producer and
customers of the firm both reside in the country. In a domestic trade, the buyer and seller belong
to the same country and so the trade agreement is based on the practices, laws and customs that
are followed in the country.
There are many privileges which a domestic business enjoys like low transaction cost, less
period between production and sale of goods, low transportation cost, encourages small-scale
enterprises, etc.

Definition of International Business

International Business is one whose manufacturing and trade occur beyond the borders of the
home country. All the economic activities indulged in cross-border transactions comes under
international or external business. It includes all the commercial activities like sales, investment,
logistics, etc., in which two or more countries are involved.

The company conducting international business is known as a multinational or transnational

company. These companies enjoy a large customer base from different countries, and it does not
have to depend on a single country for resources. Further, the international business expands the
trade and investment amongst countries.

Key Differences Between Domestic and International Business

The most important differences Between domestic and international business are classified as
under:

1. Domestic Business is defined as the business whose economic transaction is conducted

within the geographical limits of the country. International Business refers to a business
which is not restricted to a single country, i.e. a business which is engaged in the
economic transaction with several countries in the world.
2. The area of operation of the domestic business is limited, which is the home country. On
the other hand, the area of operation of an international business is vast, i.e. it serves
many countries at the same time.
3. The quality standards of products and services provided by a domestic business is
relatively low. Conversely, the quality standards of international business are very high
which are set according to global standards.
4. Domestic business deals in the currency of the country in which it operates. On the
contrary, the international business deals in the multiple currencies.
5. Domestic Business requires comparatively less capital investment as compared to
international business.
 6. Domestic Business has few restrictions, as it is subject to rules, law taxation of a single
country. As against this, international business is subject to rules, law taxation, tariff and
quotas of many countries and therefore, it has to face many restrictions which are barriers
in the international business.
7. The nature of customers of a domestic business is more or less same. Unlike,
international business wherein the nature of customers of every country it serves is
different.
8. Business Research can be conducted easily, in domestic business. As against this, in the
case of international research, it is difficult to conduct business research as it is expensive
and research reliability varies from country to country.
9. In domestic business, factors of production are mobile whereas, in international business,
the mobility of factors of production are restricted.

Conclusion

Carrying out the activities of international business and its management is far more difficult than
conducting a domestic business. Due to changes in political, economic, socio-cultural
environment across the nations, most business entities find it difficult to expand their business
globally. To become a successful player in the international market firms need to plan their
business strategies as per the requirement of the foreign market.

Prepared by:

Ms. GEMALYN D. AGUILAR, MBA

Course Instructor, MGT 304