Chapter 2: Importance of International Business
2.3 REASONS FOR RECENT GROWTH IN INTERNATIONAL BUSINESS
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International business has grown rapidly Because of developments in communication
technology, business confidence, freer borders, and increased global competition.
Developments in Communication Technology
Technology such as email, conference calls and video conferencing is one of the main
reasons for growth in international business. For example Estèe Launder offers the
internet to communicate with customers. Customers visit a company’s website and the
company can build database from the website visits. They use it to market products to
those customers. Technology makes business communication easier, but has
limitations. Employees need to know time zones for different countries when conducting
business. If you have a conference call with people in different countries you need to
schedule it within business hours of all parties involved. If you send an email or fax from
Montreal at 9am a recipient in Hong Kong will most likely not see it till another 10 hours.
It’s more efficient than scheduling phone calls outside of work hours.
Time Zones
There are 24 time zones in the world. Time is measured in hours ahead of or behind
the time in Greenwich, England.
Before the introduction of time zones, each different city would have its own local time,
which would make railway schedules very confusing. Sir Sanford Fleming, a Canadian,
was the inventor of time zones in 1878.
Developments in Transportation
Faster means of transport have greatly increased international trade. In the 1800s,
crossing the Atlantic took 3 weeks by clipper ship. Now it takes 3.5 hours in a Concorde
jet. The availability of perishable goods such as fruits, vegetables, and meats, has
increased due to refrigerated containers on trucks, trains and ships.
Canada’s transportation system includes 5 modes of transportation: ship, rail, airplane,
truck, and pipeline.
•Shipping by sea is used for national and international deliveries. Maritime transport of
bulk cargo and container shipping accounts for 80% by volume of international trade.
•Rail is widely used within North America. The Canadian rail system is one of the
world’s most efficient transportation systems.
•Trucks and busses are used for inter-continental transport. Trailers for tractor trailers
are often carried on rail, then moved to a truck.
•Air is used for national and international deliveries, mainly for small and light, important,
or valuable goods. Hamilton International airport is a busy cargo airport, as well as
Mirabel International airport just outside of Montreal.
•Pipelines across Canada and the United States are used to transport natural gas and
crude oil over great distances.
Freer Borders
Recently, business transactions across borders have become smoother. Countries that
have very few barriers to moving goods, services, and resources across their borders
become attractive to businesses in other countries. The lowering of customs duties and
the reduction of other trade barriers can be negotiated through trade agreements
among countries and groups of countries.
The World Trade Organization (WTO) was formed to reduce restrictions in international
trade. The WTO helps with agreements that have been negotiated and signed by
countries all across the world. The WTO helps producers of goods and services,
exporters, and importers. The WTO helps in the following areas:
-Trade negotiations.
-Trade disputes.
-Monitoring of national trade policies.
-Technical assistance and training for developing countries.
-Cooperation with other international organizations.
Business Confidence
International trade has become less risky, less costly, and less time-consuming.
National and international institutions such as banks, postal services and insurance
companies, for example, have agreements that provide for better credit services,
currency conversion agreements, and insurance against damage and nonpayment.
With reduction in business risk, companies can feel confident in searching world wide
for new ideas, products, manufacturing processes, and intellectual property to import
them to the home country or to establish a presence in another country. Thanks to
increasing security of the internet, wireless communications is easier and safer. Large
courier companies that operate worldwide now also make deliveries predictable and
timely. The ability to plan confidently allows companies to operate more efficiently, and
more reliably.
Global Competition
Global competition has grown steadily over the last few years. New products are being
introduced and new companies arising. If a company sets up in a country and makes a
new product, improves on an old one, or begins resale of already available goods, this
creates competition for all business’ that manufacture related products.
When Disneyland Paris opened in 1992 with 3.5 billion, it was the first trans-European
theme park. And it relied on the attendance of all of Europe to survive. Although there
were some minor financial difficulties, other companies were inspired to follow Disney’s
example:
Universal Studios – Spain
Warner Brothers – Germany
LEGO – Denmark, UK, USA, Germany
Disney may be the largest theme park operator in the world, but that may soon change
due to the many competitors.