International Business
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Social changes are taking place rapidly and it was not until recent that the words global, globalizing, globalization came into use more often and has made globalization increasingly omnipresent (Ritzer, 2009). The concept refers to the compression of the world and the intensification of consciousness of the world as a whole; which surpasses the physical borders rendering trade in the form of international business and free trade. Also, nations are moving away from self contained economies towards a wider prospect of interdependent and integrated system of trade (Hill, 2007).
According to Ritzer (2007), Globalization is an accelerating set of processes involving flows that encompass ever-greater numbers of the worlds spaces and that lead to increasing integration and interconnectivity among those spaces. In simple terms globalization can be said as the coming together of different worlds and getting connected over distances or it is the advancement due to human co-operation across national boundaries. Burnes (2009) highlights his views on the diversion of approaches to the practise of change management that have emerged due to globalization; now the emergent approach has taken over from the planned approach as a dominant approach to change. He also claims globalization as the single biggest challenge organizations face today. Therefore, it can be said that globalization is the most important change that has taken place in human history and we are living in the global age (Bauman, 2003). All organizations in a bid to survive and succeed must develop global strategies. In incorporating todays global realities into practise, Global organizations have to adapt to approaches in managing research and development and in areas concerned to production, marketing and finance to fulfil the consumer needs, who are quality sensitive and time-bound towards the products and services they consume. Despite the different views and definitions on globalization; Reich (1998) points out the driving forces behind globalization as:
The growth of international competition;
The fall of communism;
Economic liberalization;
The removal of trade barriers;
The advent of new and fast paced communication technologies.
World economists have not written much about globalization, until lately in the 1900s saw a global change and movements towards greater free trade across the globe. Thus, globalization becoming a focal point of research in the world economy and much impetus has been placed on globalization in international trade. Also, with the global trends changing gradually, it is vital to know the theories persisting and understanding why these have been successful in shaping the economic policies of so many nations. This has enabled the weaker nations to analyze the competitive environment that international businesses must compete in. The history of international trade has seen trade taking place between bilateral countries or between countries having strong bonds. The new structures and ideas in the global process started with the concentration on colonial history, which branched out later. With colonies being recognized and formed and trade taking place all over, the world became a global village and the idea of “rise in the west” was formed or it was viewed as a liberal era of free trade under the gold standard.
The aspects that differentiate between international and domestic organizations are: geographic dispersion, multiculturalism (Adler and Gundersen, 2008) and globalization of production (refers to sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality by exploiting the factors of production mainly land, labour and capital). Therefore, due to its vastness organizations need effective organizing operations to cope up with globalization and turn it into a reality. Organizing operations deal with the creation of organizational structures, systems and culture which play an essential role in the implementation of an organizations strategy (Daniels et al, 2010). Mullins (2007) justifies, In globalization, strategy and organization are inextricably twined. According to Burnes (2004), the 3 other challenges that organizations have to deal with are:
How to achieve sustainability in a world of dwindling natural resources and increasing environmental workforce?
How to manage an increasingly diverse workforce (multiculturalism)?
How to manage ethically?
Free trade has been possible since the practise of globalization, restricting the impact of trade barriers. Free trade involves a situation where the government does not attempt to influence through quotas or duties what citizens want to buy from another country or vice-a- versa. Especially with concerns to improved technology and transportation, the use of internet and the existence of delivery services (DHL) making it possible to deliver products at the earliest. The international trade has reformed and shaped the economic policies of many nations giving rise to the formation of the WTO (World Trade Organization), World Bank, IMF (International Monetary Fund) and regional trade blocs (EU, NAFTA, ASEAN, SAARC)(Hill, 2007).
Examples:
The consumers in Kansas (USA) buys the Japanese made car because its a better deal when compared to cars made in home country.
Software companies in the west buy from suppliers in China as they offer attractive price to the buyers (cheap labour).
The average tariff rates on manufactured products have reduced. In Great Britain it reduced from 4.8% (1990) to 3.2 %( 2005) (Hill, 2007).
The developing countries are emerging