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oHuman, animal and plant diseases can spread more quickly through globalization. What is International Business?International Business is all commercial transactions- private & governmental- between two or more countries. Private companies undertake such transactions for profit; governments may or may not do the same in their transactions. International business is a term used to collectively describe all commercial transactions (private and governmental, sales, investments, logistics, and transportation) that take place between two or more regions, countries and nations beyond their political boundary. Usually, private companies undertake such transactions for profit; governments undertake them for profit and for political reasons. It refers to all those business activities which involve cross border transactions of goods, services, resources between two or more nations. Transaction of economic resources include capital, skills, people etc. for international production of physical goods and services such as finance, banking, insurance, construction etc. Figure: International Business –Operations & Influences.It is important to note that the strategies that firms take when doing international business is usually different. This is because the best way of doing business abroad may not be the same as the best way at home. This divergence occurs mainly due to two main reasons 1) Mode of Entry of the firm and 2) Physical social and competitive condition which differ among countries. Growth of FDI and World Trade From 1990 to 2000: Global output increased by 23% Global trade increased by 82%
3 Global FDI increased by nearly 600% Why ? Factors in Increased GlobalizationoTechnology is expanding, especially in transportation and communications (e.g. explosive growth of low cost high power computing which decreased the real cost of processing information, the emergence of the WWW which makes easier for buyers and sellers to find each other, the development of commercial jet aircraft super freighter and containerization which plummeted the cost of transportation) oGovernments are removing international business restrictions. This is due to reasons such as: Citizens wants variety, Competition prompts domestic producers to be more efficient and finally to induce other countries to lower their barriers in turn. oInstitutions provide services to ease the conduct of international business. (e.g. Letter of Credit, Insurance). oConsumers know about and want foreign goods and services. (e.g. due to TV and internet) oCompetition has become more global. (e.g. global sourcing of raw materials can lead to firms becoming more cost efficient). oPolitical relationships have improved among some major economic powers. oCountries cooperate more on transnational issues.