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Globalization and International Business
To outline the historical perspective of globalization of business To explain the concept of globalization To elucidate the factors influencing globalization To discuss the various techniques for measuring globalization To examine the reasons for support and criticism of globalization To discuss global business expansion strategy for emerging market companies To explicate the concept of international business To delineate the motives for international business expansion To expound the strategy for managing business in the globalization era
The forces of globalization have hardly been as intense before as to be explicitly evident as influencing our daily lives. The advents in information and communication technology (ICT) and the rapid economic liberalization of trade and investment in most countries have accelerated the process of globalization. Markets are getting flooded with not only industrial goods but also with items of daily consumption. Each day, an average person makes use of goods and services of multiple origins—for instance, the Finnish mobile Nokia and the US toy-maker’s Barbie doll made in China but used across the world; a software from the US-based Microsoft, developed by an Indian software engineer based in Singapore, used in Japan; the Thailand-manufactured US sports shoe Nike used by a Saudi consumer. The increased integration of markets— goods and financial—the mobility of people with transnational travels for jobs and vacations, and the global reach of satellite channels, the Internet, and the telephone all have virtually transformed the world into a ‘global village’. ‘Globalization’, one of the most complex terms used in international business, has wide connotations. Interestingly, ‘globalization’ is a term not only used and heard frequently, but also as often misused and misinterpreted. Globalization is used to
refer to the increasing influence exerted by economic, political, socio-cultural, and financial processes across the globe. Globalization not only offers numerous challenges to business enterprises but also opens up new opportunities. In the earlier era of restrictive trade and investment regimes with much lower degree of interconnectedness among countries, companies solely operating in their home markets were generally protected and isolated from the vagaries of upheavals in the international business environment. Therefore, developing a thorough conceptual understanding of international business has become inevitable not only for the managers who operate in international markets, but also for those who operate only domestically. This chapter brings out the historical perspective of the globalization of business, which reveals that India and China were the world’s two most dominant economies till the early nineteenth century whereas the US, the UK, and Japan emerged as strong economies only lately. Economic restrictions became pervasive around the world after World War I, leading to de-facto de-globalization. Besides, the import substitution strategies followed by most developing countries, which gained independence from colonial rule in the post-World War II era, considerably restricted international trade and investment. A number of multilateral organizations set up after World War II under the aegis of the United Nations, such as the World Bank (WB), the International Monetary Fund (IMF), the General Agreement on Tariffs and Trade (GATT), and the World Trade Organization (WTO), facilitated international trade and investment. Elucidating the conceptual framework of globalization, the chapter delineates a holistic approach to define the term, encompassing financial, cultural, and political aspects, besides the economic. Movers and restraining factors of globalization have also been examined at length....