Officially Globalisation can be defined as the “process of interaction and integration among the people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology.”2 But if it’s that simple then why are some countries so reluctant in opening up their borders ?Today globalisation is much more controlled and there are many organisations present and active to help countries achieve globalisation. One of the main elements of the process of globalisation is the process of “Laissez Faire” or free trade. According to this principle, it is believed that the best option for countries is to engage in free trade and that state interaction should be kept to minimum. Economic principles like theory of Absolute Advantage and theory of Competitive Advantage explain the concept of free trade and support that minimum state intervention is the best for any nation. But this does not always stand true.
Globalization ensures internalization of the products produced by different countries. The use of globalization in business aids in securing changes in production structure. In the end, the business entities make links with the deepening of capital in international flows. The process of globalization is a process that is likely to be reversed (Datel 125). Countries have alternatives to work with policies that govern different regions and countries during business interaction.
If the United Sates would want to open a business somewhere abroad, it would have to get help from WTO on how to function the business in that particular country. Of course every organization has its cons and pros. The pros of this type of organization are that it promotes trade and has standard rules that generates by law and terms of trade. The cons are that most of the decisions of the organization are dominated by more powerful and larger economies that have a higher voice in the voting power. Industrials countries could benefit more than poor countries.
The advantages of the political driver on international businesses include; the diverse variety of goods available to consumers through the new trade theory, low prices, economic growth and competitive advantages. The disadvantages are; potential risk factors, foreign debt, exchange instability and high cost. Weakening the barriers also permits international businesses to station production at the ideal area for that activity. Thereby, a firm may outline a product in one nation, produce segment parts in two different nations, manufacture in another country and afterward trade the finished product around the globe. Technology has altered the nature of international business by introducing
Also, they reduced the barriers to exchange and signed many international agreements to promote trade and investments. Mostly, the issue that people think in globalization is the trade in good and services. It is one of the most noticeable aspects in globalization, however, not only the local trade is known but also the international investments are the one that brings the world together. This type of investments can change whole methods of products through the transfer of technology, knowledge, and management techniques. Moreover, globalization and the foreign investments put up many questions about the change of culture, political relationships, and economics around the world.
Why are many governments in today’s world liberalizing cross-border movements of goods, services, and resources? In the past, all countries around the world had restricted the movement of people, services, and goods across their borders but today these restrictions have been reduced due to the idea of open economies. These open economies allow for a a higher level of efficiency for businesses to compete with foreign companies which grants the idea of globalization to expand. Globalization is all about deepening the relationship and broadening interdependence among people from different countries. In the business world, globalization creates opportunities (as well as threats) for people, companies, and countries to engage in a number of diverse foreign environments.
In this case therefore, globalization includes both a description and a prescription. This paper examines the economic and political dimension of globalization and tries to link them with development and underdevelopment in the first and third world counties respectively. It outlines the role of the multinational corporations, international trade and fiscal agreements in the globalization process. The description in globalization lies in the widening of international flows of trade, finance and information in a single integrated global market, while on the other hand prescription is brought in the sense of liberalizing national and global markets in the conviction that free flow of trade and information will be reason for production of best outcome growth and human interests and welfare. In addition, the most important aspects of economic globalization are breaking down of national economic obstacles and barriers, the international broadening of trade, monetary and production of activities and the emergent power of global corporations and international financial institutions in these processes.
Tariffs are duties, also known as taxes, which each country puts on the imports and exports of that country. The government of the country in question wages a tariff. The World Trade Organization (WTO) oversees all countries. Absolute advantage supports the concept of globalization, because this concept ensures that one country can produce a product better and more efficient than another country. By importing or exporting this product or good, the countries that use this product can easily trade other products or goods.
This creation was motivated by the wish to gain “ first mover advantage” and to get lock-in new clients in other markets. Most of the born global firms work on offering value-added goods and services, particularly knowledge based firms that are coming from emerging markets and accessing global markets to target a variety of customers at home country and worldwide. Generally, some firms may choose to sell their creative ideas to particular incumbent firms for number of reasons. For example, some firms may choose to sell their innovations in order to protect them from being over consumed. On the other hand some firms may choose to sell their ideas to avoid risks that could be involved in the process of using them to produce specific products or services.
If an enterprise make a large profit, other enterprises are bound to enter into the specific market to capture some of the high returns. This attracts other businesses to enter into the market and eventually their competition will drive down the prices and eventually eliminate monopoly power (Stigler 2008). Foreign competition and the opening of markets cause implications to existing monopolies in a country and they have a significant economic effect on the industry profit rates. The less restrictive trade policies that are in place encourage more competitive pricing behaviour in domestic markets and have a negative effect on the domestic producers profit rates (Espinosa & Espinosa 2014, p. 343).... ... middle of paper ... ... numerous positive aspects of international trade, some of them include a boost in economic growth, both locally and nationally as well as creates a fairer competitive market space. The outcomes of international trade are explained throughout this essay.