Globalization refers to the international operation of business activities and the transfer of information between countries. Globalization has affected business activities both positively and negatively. Global markets have emerged and many companies are operating in several countries. This has created competitiveness of the companies since the global markets are larger than regional markets. Globalization is the process of integrating the global economies, societies and cultures by connecting communication and trade networks. Economic globalization refers to the integration of global economies by enhancing trade, foreign direct investment, sharing of technology, movement of people and flow of capital. The factors which influence the rate of globalization are the world economies, technology, and socio-cultural, political and biological aspects.
Information communication technology (ICT) refers to the exchange of ideas and knowledge between people, countries, communities and cultures by the application of modern technologies. The tools of ICT allow the users participate in the exchange and exploration of information in different parts of the world. People are able to exchange ideas, experiences between different countries, communities and cultures. ICT has increased the rate of globalization and has connected many international economies (Rice, 2005).
The essay focuses on globalization, international business and the use of information communication technology. These aspects have been discussed to have some benefits and drawbacks to the global economic activities. Regulation of the global economies by World Trade Organization has been discussed briefly. Empirical studies and social theories about the aspects of international business, ICT and globalization have also been discussed.
Impact of globalization and ICT on international business
Adam Smith established the theory about comparative advantage where countries produce commodities according to the resources they have. Smith and other classical economists discussed the theory of absolute advantage and they suggested that opening up trade has more benefits than closing up the boundaries of an economy. Hecksher-Ohlin theory also discuses the concept of globalization and international trade.
International business is defined as the commercial transactions between two or more countries. These transactions involve private businesses, governments, international investors and others. The main aim of any business activity is to make profit but some organizations are involved in the international trade for other reasons such as politics, social and civic growth. ICT has increased the flow of information between people involved in trade. Improvement in trade activities has promoted global economic growth since there are many economic gains when different countries trade together. Trade creates income to both the private and public sector of any economy. Trade is accelerated through globalization and the use of ICT.
Globalization has improved the exchange of technologies and knowledge. This has increased the capacity of businesses to expand on the number of innovative products in the market. The public sector alone cannot accommodate all the skilled labor in a country and trade provides more employment opportunities for the people in a nation. As economies become more global people with skills can move to countries where there is high market potential for their labor. The introduction of internet has increased efficiency in trade by enabling people transfer information more easily. Trade attracts private investment and this generates more capital in the economy. The gross domestic product of a country increases with increase in trade. Growth and development of an economic is accelerated by trade since more income is generated and the living standards of the people are improved.
Benefits of international business, globalization and ICT
Production according to comparative advantage has been encouraged by the improvement in global trade. Countries are encouraged to produce goods which they can produce most economically. Different countries have different resources which give them the potential to create income generating products. Through international trade resources are utilized optimally since an economy will specialize in the production of products which it has greater advantages. Exploitation of these resources has been enhanced through globalization since the existence of large markets in the global scene has encouraged people exploit these resources to provide commodities to the consumers. The information about the existence of global markets has been created by the use of ICT.
International trade has encouraged countries to specialize in the production of goods and services since different countries can produce goods which they have a comparative advantage and buy the rest form other countries. The mobility of factors of production has been accelerated by globalization and the knowledge about the existence of markets for the resources. More industries are encouraging division of labor to increase the productivity of labor factors of production. Industries in the global market have developed with the expansion of international trade. These industries create more employment opportunities to the citizens of a country. As the par capita income of the people increases their living standards is improved. Poverty alleviation campaigns have encouraged improved international trade and efficient flow of information as some of the strategies to enhance development of nations.
Opening up the domestic market to international trade has created more advantages than disadvantages. The international prices are lower than the domestic prices. The consumers obtain goods and services at lower prices. The competition created by the international trade encourages the domestic firms to be efficient in their production systems. The customers are provided with a wide variety of products to select from.
Disadvantages of international business, globalization and ICT
International business and globalization have brought about negative aspects in the economy in that spill over effects of poor economic practices are spreading to other economies. Since the global markets connect all countries poor economic practices of one country will eventually affect other countries in the economy. One practical example is the 2007-2009 global economic meltdown which was caused by poor lending activities of US banks. The subprime mortgage market contributed to the failure of the US economy leading to a ripple effect other economies.
Williams (2009) claims that the crisis was initiated by the subprime mortgage lending crisis in US. The banking sector issued many loans to subprime mortgage intermediaries. Due to the expanding market in the sub prime mortgage market many banks issued unsecured loans to the intermediaries. The climax of the boom was reached in 2007 when the prices of products started to increase and many subprime mortgage lenders were unable to repay their loans. This led to massive default of debts and banks registered huge losses. This reduced the lending capacity of many banks. The resulting effect was lack of credit in the economy and the collapse of many companies.
In the global economies the crisis was at the peak in July 2008 but after that it started to decline. The decline of the crisis started towards the beginning of 2009. The US economy started to regain their normal operational capacity. The economy has not yet recovered and a lot of investment is required to regain the normal economic situation as before. Many countries have formed partnerships to eradicate the crisis. However, not all sectors of the economy have fully regained from the recession. Some industries have failed completely and they are doomed not to recover. It will take a lot of time for the global economies to recover completely from the impacts of the crisis.
The United States have the largest economy in the world and many countries depend on US for trade and other economic activities. Since US is a market for many commodities from other countries there was an extension of the crisis to other economies causing a global economic meltdown. Many economies declined since they had no market for their goods. Inflation increased as prices persistently increased. The entire world encountered economic crisis which resulted into failure by all sectors of the economy in the world.
The use of ICT and globalization of many economies has brought about terrorism activities. Terrorists can conduct their activities successfully by communicating and developing strategies about destroying other countries by the use of ICT facilities. The banking sector has been blamed for financing terrorists. These banks transfer money to the accounts of terrorists groups and are able to communicate with them. The opening up of many economies has created a great threat to terrorisms since people are free to enter and leave a country. In terms of trade the developed countries have benefited more by opening up of markets. Developing countries continue to lag behind. Global recession and terrorists attacks have affected the activities of international trade.
Regulation of international business and ICT by WTO
Globalization of international economies has been enhanced by the establishment of World Trade Organization (WTO) which acts as the guardian of international trade and practices. The international law has been created to safeguard the interests of various countries. WTO has become the custodian of international law on trade. Various trade agreements have been established to enhance trade between countries. The trade agreements are established to enhance communication between trading countries. World Trade Organization was created to control trade between the member countries. More than 95 percent of the world trade is regulated by WTO (Fergusson, 2008). WTO was established after the General Agreement on Tariffs and Trade (GATT) was abolished. The organization was founded in 1995 to take over the activities of GATT. After the World War II countries discussed ways of promoting economic development through trade. Open trade was among the key factors discussed as a tool to enhance trade through removal of discriminatory trade barriers.
Globalization and ICT are two inseparable aspects about international business. The increasing globalization has created advantages to all countries of the world. There has been an improvement in the economies of the countries involved in international trade. ICT has increased the flow of knowledge about the efficient means of trade as well as improving transfer of technologies between countries. Globalization has increased trade between nations and has also enabled access to many technologies and knowledge about production. Trade has been used as a tool for alleviating poverty in many countries. WTO has been successful in improving trade between the member countries. More regional and multilateral trade agreements have been established after the creation of WTO. International trade has been effective in alleviating poverty in developed and developing countries. Economies have expanded their operations and more gross domestic product has been generated by countries with improved systems of international trade
Information communication technology (ICT) refers to the exchange of ideas and knowledge between people, countries, communities and cultures by the application of modern technologies. The tools of ICT allow the users participate in the exchange and exploration of information in different parts of the world. People are able to exchange ideas, experiences between different countries, communities and cultures. ICT has increased the rate of globalization and has connected many international economies (Rice, 2005).
The essay focuses on globalization, international business and the use of information communication technology. These aspects have been discussed to have some benefits and drawbacks to the global economic activities. Regulation of the global economies by World Trade Organization has been discussed briefly. Empirical studies and social theories about the aspects of international business, ICT and globalization have also been discussed.
Impact of globalization and ICT on international business
Adam Smith established the theory about comparative advantage where countries produce commodities according to the resources they have. Smith and other classical economists discussed the theory of absolute advantage and they suggested that opening up trade has more benefits than closing up the boundaries of an economy. Hecksher-Ohlin theory also discuses the concept of globalization and international trade.
International business is defined as the commercial transactions between two or more countries. These transactions involve private businesses, governments, international investors and others. The main aim of any business activity is to make profit but some organizations are involved in the international trade for other reasons such as politics, social and civic growth. ICT has increased the flow of information between people involved in trade. Improvement in trade activities has promoted global economic growth since there are many economic gains when different countries trade together. Trade creates income to both the private and public sector of any economy. Trade is accelerated through globalization and the use of ICT.
Globalization has improved the exchange of technologies and knowledge. This has increased the capacity of businesses to expand on the number of innovative products in the market. The public sector alone cannot accommodate all the skilled labor in a country and trade provides more employment opportunities for the people in a nation. As economies become more global people with skills can move to countries where there is high market potential for their labor. The introduction of internet has increased efficiency in trade by enabling people transfer information more easily. Trade attracts private investment and this generates more capital in the economy. The gross domestic product of a country increases with increase in trade. Growth and development of an economic is accelerated by trade since more income is generated and the living standards of the people are improved.
Benefits of international business, globalization and ICT
Production according to comparative advantage has been encouraged by the improvement in global trade. Countries are encouraged to produce goods which they can produce most economically. Different countries have different resources which give them the potential to create income generating products. Through international trade resources are utilized optimally since an economy will specialize in the production of products which it has greater advantages. Exploitation of these resources has been enhanced through globalization since the existence of large markets in the global scene has encouraged people exploit these resources to provide commodities to the consumers. The information about the existence of global markets has been created by the use of ICT.
International trade has encouraged countries to specialize in the production of goods and services since different countries can produce goods which they have a comparative advantage and buy the rest form other countries. The mobility of factors of production has been accelerated by globalization and the knowledge about the existence of markets for the resources. More industries are encouraging division of labor to increase the productivity of labor factors of production. Industries in the global market have developed with the expansion of international trade. These industries create more employment opportunities to the citizens of a country. As the par capita income of the people increases their living standards is improved. Poverty alleviation campaigns have encouraged improved international trade and efficient flow of information as some of the strategies to enhance development of nations.
Opening up the domestic market to international trade has created more advantages than disadvantages. The international prices are lower than the domestic prices. The consumers obtain goods and services at lower prices. The competition created by the international trade encourages the domestic firms to be efficient in their production systems. The customers are provided with a wide variety of products to select from.
Disadvantages of international business, globalization and ICT
International business and globalization have brought about negative aspects in the economy in that spill over effects of poor economic practices are spreading to other economies. Since the global markets connect all countries poor economic practices of one country will eventually affect other countries in the economy. One practical example is the 2007-2009 global economic meltdown which was caused by poor lending activities of US banks. The subprime mortgage market contributed to the failure of the US economy leading to a ripple effect other economies.
Williams (2009) claims that the crisis was initiated by the subprime mortgage lending crisis in US. The banking sector issued many loans to subprime mortgage intermediaries. Due to the expanding market in the sub prime mortgage market many banks issued unsecured loans to the intermediaries. The climax of the boom was reached in 2007 when the prices of products started to increase and many subprime mortgage lenders were unable to repay their loans. This led to massive default of debts and banks registered huge losses. This reduced the lending capacity of many banks. The resulting effect was lack of credit in the economy and the collapse of many companies.
In the global economies the crisis was at the peak in July 2008 but after that it started to decline. The decline of the crisis started towards the beginning of 2009. The US economy started to regain their normal operational capacity. The economy has not yet recovered and a lot of investment is required to regain the normal economic situation as before. Many countries have formed partnerships to eradicate the crisis. However, not all sectors of the economy have fully regained from the recession. Some industries have failed completely and they are doomed not to recover. It will take a lot of time for the global economies to recover completely from the impacts of the crisis.
The United States have the largest economy in the world and many countries depend on US for trade and other economic activities. Since US is a market for many commodities from other countries there was an extension of the crisis to other economies causing a global economic meltdown. Many economies declined since they had no market for their goods. Inflation increased as prices persistently increased. The entire world encountered economic crisis which resulted into failure by all sectors of the economy in the world.
The use of ICT and globalization of many economies has brought about terrorism activities. Terrorists can conduct their activities successfully by communicating and developing strategies about destroying other countries by the use of ICT facilities. The banking sector has been blamed for financing terrorists. These banks transfer money to the accounts of terrorists groups and are able to communicate with them. The opening up of many economies has created a great threat to terrorisms since people are free to enter and leave a country. In terms of trade the developed countries have benefited more by opening up of markets. Developing countries continue to lag behind. Global recession and terrorists attacks have affected the activities of international trade.
Regulation of international business and ICT by WTO
Globalization of international economies has been enhanced by the establishment of World Trade Organization (WTO) which acts as the guardian of international trade and practices. The international law has been created to safeguard the interests of various countries. WTO has become the custodian of international law on trade. Various trade agreements have been established to enhance trade between countries. The trade agreements are established to enhance communication between trading countries. World Trade Organization was created to control trade between the member countries. More than 95 percent of the world trade is regulated by WTO (Fergusson, 2008). WTO was established after the General Agreement on Tariffs and Trade (GATT) was abolished. The organization was founded in 1995 to take over the activities of GATT. After the World War II countries discussed ways of promoting economic development through trade. Open trade was among the key factors discussed as a tool to enhance trade through removal of discriminatory trade barriers.
Globalization and ICT are two inseparable aspects about international business. The increasing globalization has created advantages to all countries of the world. There has been an improvement in the economies of the countries involved in international trade. ICT has increased the flow of knowledge about the efficient means of trade as well as improving transfer of technologies between countries. Globalization has increased trade between nations and has also enabled access to many technologies and knowledge about production. Trade has been used as a tool for alleviating poverty in many countries. WTO has been successful in improving trade between the member countries. More regional and multilateral trade agreements have been established after the creation of WTO. International trade has been effective in alleviating poverty in developed and developing countries. Economies have expanded their operations and more gross domestic product has been generated by countries with improved systems of international trade
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