Impact of International Business on the Global Economy

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2010

Niki Geiersbach

119

THE IMPACT OF INTERNATIONAL BUSINESS ON THE GLOBAL ECONOMY

Niki Geiersbach

Abstract
With the dawn of globalization, international business is becoming increasingly popular. Multinational organizations are among the most profitable in the world. A company needs to be aware of the language and culture of the country where it plans to embark with its investment. Politics and laws of the nation can either make international business easy or hard. With the success of international business, its future is gleaming, on a global scale.

Geiersbach N. - The Impact of International Business on the Global Economy

120

Business Intelligence Journal

July

The International Business Imperative
Revolutionary changes in technologies have provided the mechanisms that propel the growth of international business. The intensification of competition at both domestic and international levels has driven firms to look beyond their domestic markets for new opportunities. The progressive removal of barriers to trade and capital movements has stimulated greater flows of exports, imports and foreign direct investment (FDI). Multinational enterprises have emerged as the key agents of international economic coordination. They provide the capability to generate innovations and deliver new goods and services to the market; they also provide the capability to exploit these technological advances at a global level; and they are a depiction of the capacity of international managerial co-ordination to operate efficiently across international boundaries. Furthermore, the growing economic strength of the newly-industrializing countries (e.g. Taiwan, Hong Kong, Singapore, Korea) and the opening up of China and Eastern Europe have provided an additional stimulus to international business activities (Wei).

A 30-second advertising spot proved to be a costly mistake for Doubletree Hotels Corporation. The advertisement was the announcement of a $31 million marketing campaign to illustrate the warm, friendly atmosphere of the hotels. Deemed offensive to the Muslim community, the spot portrayed employees of the hotel dressed in Arab-style clothing and bowing to the guests. This was interpreted as the employees worshipping or “praying” to hotel visitors. As the Muslims worship the one true God, this advertisement was seen as ridicule of reality. Moreover, translation errors are the cause of the majority of blunders in global trade. The Coors slogan “Turn it Loose,” turned into “Drink Coors and Get Diarrhea.” Even the largely popular “Got Milk?” campaign lost its edge when it was introduced in Mexico as “Are you Lactating?” As is obvious, these mistakes and others like them can result in a devastating loss of revenue for companies in today’s global marketplace. Hence, it is very important to know its culture before conducting international business with a country (“International Business Customs”).

National Trade and Investment Policies
The 1996 National Trade Estimate of the European Union explains the notions of national trade and investment policies. The European Union and the United States share the largest two-way trade and investment relationship in the world. In 1995, the US had a trade deficit with the EU of $8.3 billion, $3.4 billion less than that recorded in 1994. In 1995, US merchandise exports to the EU were $123.6 billion, an increase of $15.9 billion from those in 1994. US imports from the EU totaled $131.9 billion in 1995, or 10.4 percent greater than those in 1994. The stock of US foreign direct investment in the EU was $256.1 billion in

Culture and International Business
Chevrolet was unsuccessful at marketing the Chevy Nova in Mexico, and the result was lost revenue because inn Spanish, “No va” means “it doesn’t go.” The American Motor Corporation named one of its products the “Matador,” to create images of strength and virility. But “Matador” means “killer” in Puerto Rico, where the...
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