Concept of Globalization and International Business, Factors Affecting Globalization

Concept of Globalization

Globalization

Globalization is the phenomenon of different components of economic activity, lifestyle, culture, and thought interacting and integrating across many nations in the world. The main driver of globalization has been the development and innovation in various forms of transportation and information technology, which has led to interdependence and interrelations among cultural and economic activities.

Currently, the world's nations are highly dependent on one another in terms of their means of earning income, hence the term "globalization" mainly refers to commercial and corporate activity. The development of least developed and emerging countries was significantly impacted by the globalization trend. Globalization has allowed underdeveloped countries to adopt the technologies and development models of wealthy countries.

The term "globalization" is wide and covers how several elements interact. For the sake of simplicity, the four factors of political involvement, technological connectivity, interpersonal contact, and economic integration can be used to understand the wide nature of globalization.

• Political engagement: The increase in a country's membership in international organizations As an illustration, Nepal's affiliations with international organizations including the UN, WB, and IMF.
• Technological connectivity: Internet hosts, internet users, and secure servers are used to evaluate it.
• Personal contact: Remittances, overseas trade, travel, international phone traffic, and private transactions are all included.
• Economic integration: It alludes to cross-border trade, transactions, foreign direct investment, capital movements, and financial investments.

Concept of International Business

The term "international business" refers to economic activities that cross national borders to transfer resources, goods, services, expertise, ideas, and information. Raw materials, human resources, capital, technology, and other products and services are all examples of resources. The finished or semi-finished items that require assembling are referred to as the goods. Legal advice, accounting, banking, insurance, management consulting, trade services, health services, education, and other services are also included in the list of services. Innovations, inventions, technologies, managerial abilities, and intellectual property rights are all examples of knowledge, skills, and ideas. A database, their channel, and information networks connected to one another are all examples of information flow. Individuals, businesses, governments, and international organizations can all be actors in international trade.

Companies and business organizations play a key role in fostering globalization and benefiting (or suffering) from it. International transactions are the cross-border business activity of various firms that involve the exchange of products and services. International commerce and investment facilitate cross-border transactions. Exporting goods and services to purchasers (importers) in another nation across a border is referred to as international trade. Comparably, foreign investment is the placement of resources for financial gain in another nation.

Factors affecting globalization

The following list includes dynamic components, which interact to influence the process of globalization:

• Economic liberalization
  The door to globalization had been opened by economic liberalization. International trade and investment were significantly impacted by trade laws and tariff structures. Because of the removal of tariffs and non-tariff trade barriers made possible by the rise of international trade under WTO rules and regulations, trade between nations has become simple.
• Resources and market
  Natural resources such as water, minerals, coal, natural gas, and petroleum contributed significantly to the process of globalization. Because of their natural resources, some nations have alliances with other resource-rich nations. For instance, because we lack petroleum resources, the Nepalese market is accessible to Indian consumers.
• Technological breakthroughs
  The globe has become a virtual global village as a result of technological advancements, particularly in the fields of science, technology, and information technology. Mass production was made feasible by technological development in the manufacturing sector, which sparked the industrial revolution. The large-scale manufacturing made it possible to export manufactured items to other nations. Similar to that, it started the practice of importing laborers from foreign nations. Different modes of transportation were established by the advancement of transportation technology, which encouraged the efficient movement of people and products from one location to another. On the other hand, information technology reduced the size of the real world by making it a virtual one. The development of IT made it simpler to connect people and nations around the world.
• Multilateral institutions
  The creation of the UN during the post-World War II era paved the way for the eventual development of several other international entities. Through numerous trade talks, multilateral organizations like GATT and the WTO helped to open up markets and lower trade barriers, so facilitating global trade.
• International economic integrations
  Following the Second World War, many economic organizations were created by nations to encourage international trade and investment. In order to address their shared economic issue, European nations established the European Union. Another instance of eight distinct nations cooperating to address theoretically shared economic challenges is the founding of the South Asian Association for Regional Cooperation (SAARC).
• Move towards free marketing system
  The collapse of centrally planned economies in China and the former USSR also paved the way for globalization. The free market system is becoming more prevalent in these economies. China currently has the greatest economy in the world.
• Rising research and development cost
  Businesses were forced to make investments in the research and development sectors due to the fierce rivalry for bringing new and creative products to market in order to satisfy consumer demand. The concept of a multinational company arose as a result of the need for business organizations to expand outside of their home countries in order to cover the escalating costs of research and development.

References

Shenkar, O., Luo, Y., & Chi, T. (2015). International Business. New York: Sage.