Explain How Globalisation Has Affected The Growth of International Business

Introduction to Globalisation

Globalisation is often referred as global Westernization. The great achievements of the west are now spread to the world, which is a huge benefit. Throughout history from the Renaissance, the Enlightenment and the Industrial Revolution, western countries has influence a great increase on living standards. But on the negative side, Capitalism of the west has policies that does not concern the poverty in the world. ( Lechner – Boli. 1998. 3 )

The world is moving into a new era of economy. In which there are no boundaries between countries to trade and invest a certain product. Distance will no longer be the issue, due to the increasing advances of transportation and telecommunications technology. Countries are dependent to each other, to create a global economic system. These process is knows as Globalisation, where it has made a significant change on today’s global economy. The number of goods, services , and investment are growing faster every day. Over $4 trillion in foreign exchange transactions are dealed every day, and $15 trillion of goods are sold between countries, while $3.7 trillion of services are spent daily. ( Mcgraw – Hill. 4 )

This essay will discuss and explain how Globalisation has affected the growth in international business. Is it a harm or a benefit to the global economy? How has the world coped with the changes that Globalisation has made? And what are the affects to international business?  My main aim is to be able to answer these issues and have a better solution for the future of our economy.

The Impact of Globalisation

First topic will cover on the impact of Globalisation. It is a phenomenon that has made it easy to pursue international business strategy. Trade liberalization has been given between countries with a reduction trade barriers. Which increases relationships among firms and its buyers all around the globe. (  Hirst- Thompson. 1999 ). However, many of the local firms has not taste the benefits. Few examples of how local market has tough time competing to foreign firms. In January 2010, China and the Association of South East Nations ( ASEAN ) has signed the free trade agreement causing import duty for imported products to be at zero percent. The chinese took the opportunity to enter the Indonesian Batik market. Entering Solo which is the largest textile trading center in Central Java. Now local markets are being threatened, and many of them has closed its business due to the tight competition and the cheaper price china offered. ( Viva News 2011 ). A batik maker said “ What is being imported from China is not batik, but textile. So we shouldn’t be worried. Our society is smart enough and knows how to distinguish good batik from copies”. ( The Jakarta Post 2010 )                                       Local competitors are still striving to run its business and compete with the foreigners.

Globalisation has led to essential economic growth, but the benefits have not been shared equally among countries. ( Hirst- Thompson. 1999 ). But Globalisation has given a chance for small countries to participate on international business. Which is contributing to the growth of international business. For instance, a country like Zimbabwe is able to be the leading tobacco exporter in the world. Regardless to the economic and political downside that are happening there, Zimbabwe are fighting for its place in the global market. Earning just over $430 million from tobacco export. ( Bloomberg 2010 ). These cases proves that Globalisation has positives and negatives global impact. Here are some key positives and negative impacts.

Impact of Globalisation on International Business

Positive Impact:

    1. Global production can be enhanced.
    2. Increasing prosperity in the community of a country.
    3. Expand the market for domestic products.
    4. Can obtain more capital and better technology.
    5. Provide additional funds for economic development.

Negative Impact:

    1. The Development of foreign trade system became more liberized, inhibiting the growth of of industrial sector.                 
    2. Can worsen the balance of payments.
    3. The financial sector is increasingly unstable.
    4. Aggravate the process of long-term economic growth. ( Lechner – Boli. 1998. )

The Role of Technological, Transportation and Trade

Moving on to the second topic, which is reasons behind how globalisation has made such tremendous effects on the growth of international business. The role of technological change has been very important. Since the World War II, there has been massive change in communication, information processing, transportation technology and of course the discovery internet and World Wide Web. Communication technology makes it much easier for firms and buyers to do business all over the world. Wherever they are located and the size of the market, It provides businesses to expand at a lower cost. Another key reason is the introduction of containerization and commercial jet aircraft. It has increase the quality of transshipment from one place to another. With Containerization, the cost of shipping goods is reduced over long distances. Previously it would take weeks and many labor workers to move goods, but now it is more efficient. Air shipments has counted to be 28 percent of thr earnings of U.S. trade, which is an 7 percent increase from 1965. ( Mcgraw – Hill. 15 ). In addition, the role of trade are also one of the role of globalisation. World trade manufacturing goods are increasing from $95 billion to $12 trillion in 50 years since 1955. Non- tariff barriers and low tariff has increased trades especially among the rich countries. Japan, Korea , and China exports their product to rich countries to increase the standard of their living. Countries also locate its manufactaring product overseas in order to get lower cost of labour and to be closer to the markets. ( BBC News 2007 )

Key Trends of Globalisation

Further on to the next issue, many economists have their own view upon Globalisation. Whether it is good or bad, here are some few trends that affected global economy. The first trend is western countries will gain high profits in their economies, while they also pay lower wages for workers. The second trend, poor countries will be full of migrants in their cities. Coming to our last trend, which is strong growth, but with low inflation and interest rates. Globalisation has increase prosperities all over the world, including the United States and Europe. Also the poorer countries in Asia, that has now developed itself into a strong competitor to the west. For example one of the developing country, Indonesia has been affected significantly by Globalisation.

 Conclusion

I have reach the aim of my essay, which is to explain and discuss about how globalisation has affected the growth of international business. This research shows that globalisation has positives and negatives impacts. Whether it is good or bad, the poor and rich countries have felt the differences made by globalisation. Some experts believes that the spread of globalisation will beat poverty. But of course with the existence of free trade and free market, which has not been fulfilled yet. In the future, poorer countries should benefit the same as the rich countries. Prosperity should be the main task of globalisation, instead of evil greeds that exploit nations. Equal benefits among countries are the next global economy. To increase the living standards all over the world. Let us hope that crisis will be avoided in the coming years, and Globalisation will be the main factor of it.

Word Count : 1370 Words

Bibliography

Online Research

Web Pages   : http://news.bbc.co.uk/1/hi/business/6279679.stm

Content         :  Globalisation Shakes the World

Access Date :  13/03/2011

Web Pages   : http://www.thejakartapost.com/news/2010/06/12/danarsih-santosa-batik-more-just-fabric.html

Content         : Danarsih Santosa: Batik is more than just fabric

Access Date : 10/03/2011

 

Web Pages   : http://us.en.vivanews.com/news/read/119587-chinese_batik_packs_indonesia_s_klewer_market

Content         : China’s Batik Packs Indonesia’s Klewer Market

Access Date :  10/03/2011

 

Web Pages   : http://www.bloomberg.com/news/2011-03-01/zimbabwe-s-tobacco-earnings-rise-33-as-sales-jump-outweighs-drop-in-price.html

Content          :  Zimbabwe's Tobacco Earnings Rise 33% as Sales Jump Outweighs Drop in Price

Access Date  :  10/03/2011

 

 

Offline Research

 

Lecher, Frank J, Boli John, 2004, The Globalization Reader, 2nd Edition, Blackwell Publishing, USA and UK.

Hill- McGraw, 2011, International Business, Competing in the Global Marketplace, 8th Edition, Mcgraw- Hill Company, USA.

Hirst, Paul, Thompson, Grahaeme, 1999, Globalization in Question, 2nd Edition, Blackwell Publishing, USA and UK