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International Business

Major Assignment ONE
BA(Hons) in Business Enterprise
Unit 08: International Business [BCBST-606-1511]
Chayenne Burke
Chayenne Burke
Task ONE
Globalisation can be described as the process of enhanced interconnectedness among
countries. As such, it plays a vital role in maximising the potentials of available resources of
the country which will lead to improved economic development. The general perception is
that globalisation helps the rate and scale of trade growth which in turn, benefits smaller
countries from interconnectedness. Due to the ongoing pandemic, both trade and travel have
been recognised as significant factors of the spread of COVID-19. Consequently, globalisation
emerged as an essential mechanism of the transmission of this illness (Shrestha, et al., 2020).
This part of briefing will outline 5 aspects of how COVID-19 has been changing the role of
globalisation, including:
1. Technology
Technology plays an important role in the modern form of business being
globalisation. In addition, it has helped overcome major obstacles in globalisation and
international trade including transportation cost, lack of common ethical standard,
delay in information exchange and trade barrier. Conversely, key industries such as
transportation, retail, food supply, etc have been negatively impacted due to the
pandemic. As such, industries especially retail have opted to use technology to their
advantage during this pandemic (Ran, 2020). For example, Haier improvised and came
up with an innovative online experience platform one of them being IoC (Internet of
Clothing) where products are linked to help consumers match, purchase, wash and
store clothing (Haier, 2020).
2. Supply Chain
Without a doubt, COVID-19 has posed as a significant threat to supply chains
worldwide. The flow of raw materials and finished goods are being temporarily slowed
or stopped due to various national lockdowns, resulting in the disruption of
manufacturing. However, industries are slowly overcoming the affects of the
pandemic by increasing their investment in supply chain technologies such as robotic
process automation and Artificial Intelligence (AI) while reskilling their workforce
(Harapko, 2021). For example, Haier started struggling since the beginning of the
pandemic with the Chinese lockdown. This in turn caused production problems in
China as well as distribution problems in Europe. On the other hand, when China was
recovering, the virus was at its peak in Europe therefore, there was a drop in demand
(Lindert, 2020).
3. Economies of Scale
Globalisation allows multinational organisations to produce economies of scale that
decreases the costs and prices and as such, supports economic development. When
the pandemic hit, hospitals worldwide were running out of key equipment such as
masks and ventilators. Due to high demand, traditional factories could not keep up
and therefore, COVID-19 helped enhance the use of 3D printers worldwide. The
pandemic proved that customisable, flexible and distributed manufacturing has a
better outcome to shifts in the market as it can produce and distribute products at a
much faster pace than ‘old’ factories (Maney, 2020).
4. Marketing
COVID-19 forced all types of organisations to adapt and re-think their approach
including the execution of their marketing strategies. With national lockdowns in
place, in-home media usage went up such as gaming, streaming services, social media
platforms etc. This helped marketers realise the way people shop which generally
resulted in a higher focus on product price, specifications and features. As such,
organisations can shift their focus and advertise the right message on the right
channels while reducing costs (Saini, 2020).
5. Slowbalisation
Globalisation has been a defining feature of the global economy that brings together
economies primarily by more liberal trade flows. In comparison to the 21 st century
average growth rate, the global capacity of traded merchandise slowed down
significantly and even went in reverse in 2019. Adding the COVID-19 to the mix, many
countries have been hesitant to trade with other organisations and countries due to
uncertainty it brings. Therefore, internal spending has increased giving a way ahead
to slowbalisation. Large organisations with sophisticated supply chains spread
globally, should plan for ahead and assess the variety of possibilities. (Kupelian, 2020).
Figure 1: The global goods trade and GDP growth in tandem
Task TWO
International Monetary Fund (IMF)
The main role of IMF is to manage the global monetary system and monitor the financial and
economic policies of its members. In addition, the IMF maintains a record of economic
developments on a local, national and international basis while consistently consulting with
member states to provide them with macroeconomic and financial policy guidance
(International Monetary Fund, 2021). The IMF aims to reduce poverty worldwide, promote
international trade while encouraging financial stability and economic growth. Furthermore,
some of IMFs’ objectives include, to enable the expansion and stable growth of international
trade; to shorten the period and reduce the degree of uncertainty in the international balance
of payments of member states and to promote both international cooperation and exchange
stability (Kumar, 2020).
The Group of Twenty (G-20)
G-20 is made up of a group finance ministers and central bank governors from 19 of the
world’s most powerful economies, including developing nations as well as the EU (Kenton,
2020). The role of G-20 consists of bringing together developed and emerging economies that
are systemically important to address key global economic issues as well as financial stability
(McBride & Chatzky, 2019). G-20 main objectives include:
Achieve global economic stability and sustainable growth through policy coordination;
Promote financial regulations that mitigate risks and avoid potential financial crisis
Develop a new international financial architecture.
The World Bank
The World Bank is an international organisation that offers help to both middle-income and
low-income countries and offer developmental assistance in order to grow their economies
(Hall, 2019). In addition, it has one fundamental purpose that is to help developing countries
achieve economic and social growth by increasing productivity so that citizens can live a
healthier and better lives. Moreover, the World Bank has three main priorities which are to
end poverty and increase opportunities for the poorest people, create sustainable economic
growth, as well as invest in people and increase resilience to threats that can reverse years of
worth of progress. The World Bank established the following goals:
To provide member countries with long-term resources for economic rehabilitation
and growth;
To encourage long-term capital investment in order to maintain Balance of Payments
(BoP) and a sustainable growth of international trade;
To provide funding for loans to small and large businesses, as well as other ventures
in member countries and
To ensure the implementation of development programs in order to bring about a
smooth transition from a wartime to peace economy (Chand, 2020).
The World Trade Organisation (WTO)
The WTO is the only foreign body that deals with international rules of trade. As such, its main
role is to ensure a smooth flow of trade as freely and inevitably as possible (World Trade
Organisation, 2021). Moreover, the WTO established the following six main objectives:
1. To create and implement rules for international trade;
2. To provide a venue for negotiations and monitoring further trade liberalisation;
3. To settle any trade disputes;
4. To enhance the transparency of decision-making process;
5. To join forces with other major international economic organisations that are involved
in global economic management and
6. To assist developing countries in taking full advantage from the global trading system.
(Anderson, 2020)
The United Nations (UN)
The main role of the UN is to maintain world peace and security by solving international
differences and disagreements that can lead to disputes in the future. In addition, the UN
establishes four main objectives including:
1. Continuously enhancing consistency within the UN;
2. Increasing the effectiveness of developed countries' involvement in global processes;
3. Reaching an improved stability between the global and regional dimensions of
development, in terms of standard, analysis and norm setting as well as technical
assistance and
4. Strengthening the interconnections between the UN normative, analytical and
operational work.
(United Nations, 2021)
BRICS refers to the emerging national economies of Brazil, Russia, India, China and South
Africa. At the time BRICS was formed, the economies of the involved countries were
experiencing a significant growth, creating concerns in terms of their impact on the global
economy. Together BRICS emerging markets represent 42% of the world population and over
31% of the world’s GDP (Dooley, 2020). The following are 5 consequences that BRICS is having
on the world’s economy and trade:
Figure 2: Gross Domestic Product (GDP) growth of the BRICS countries from 2001 to 2015
1. BRICS is Dividing the World: BRICS is dividing the world (East and West) and due to
this economic power, BRICS got restrained from the international institutions leading
to competition. At the moment, the global economy faces an unhealthy competition
as BRICS is challenging the West in order to change the global economic order to a
much fairer and representative one (Mminele, 2016).
2. Doubling of Resources: BRICS wanted to reform the global governance system and as
such, introduced the New Development Bank (NDB) to finance infrastructure and
sustainable development project in BRICS countries as well as developing countries
and other emerging economies. Moreover, this can be seen as doubling of resources
since it mimics the role of the World Bank creating an unhealthy competition. It would
be ideal for the two banks to work as one so as to provide a better financial stability
and greater efficiency.
3. Competition: Another major consequence is the cost competition in product markets,
non-tariff barriers to trade, changing patterns in global commodity flows and
regulative deficiencies. An example includes concerning intellectual property rights
and different institutional barriers to foreign investment (Havlik, et al., 2015). Due to
BRICS countries’ similar economic structures and development trends, both economic
competition and conflicts will arise (Wenping, 2017).
4. Changes in Global Economy: BRICS countries have taken an increasing share of global
economic growth. The International Monetary Fund (IMF) estimated that in 2016, the
contribution to the global economic growth of these countries was around 60%.
Furthermore, the IMF estimated that in the coming years, the contribution of these
economies will account for about 70% of global economic growth. This is another
consequence as it will further divide the East and West while opposing as a further
threat to the Western countries (Yifan, 2018).
5. Slowing
1. Exchange Rates
Fluctuations in the exchange rate can impact any organisation especially if the
organisation imports or exports its goods overseas. As such, organisations need to
monitor the exchange rates as the value of goods are extremely sensitive and change
constantly according to the fluctuations (Lobel, 2016). For example, COVID-19 was the
main cause for exchange rate fluctuations worldwide in the year 2020 and therefore,
Haier’s forex teams’ main focus was to manage these uncertainties and avoid any
losses while creating value.
2. Demand and Supply
This factor is of utmost importance when it comes to decision-making, and
organisations must always think in terms of supply and demand. In addition,
organisations must always assess the market and check if there is a potential market
of buyers who are interested in the product (Dowell, 2019). For example, Haier
decided to move their operations overseas to make its products more responsive to
specific consumers within foreign markets.
3. Consumer Behaviour (Social and Cultural Factor)
It is crucial for organisations to understand that the products or services they bring
into the market can strongly impact society. As such, organisations must recognise the
impact they can have on consumer behaviour as it relates to general influence and
purchasing decisions. This relationship is two-sided, with the business side focusing on
generating profits whilst the consumer side wants to make smart purchasing decisions
(Lazzari, 2019). An example would be that we are living in a much faster world and
busy lifestyle. This lifestyle is putting pressure on the consumer appliances industry to
produce products that save time and energy such as Haier’s robot vacuum cleaner.
4. Employment Law
The industry evolves according to the political and legal environment changes
worldwide. Hence, every organisation must be up to par with the aforementioned
forces in order to ensure that the right decisions are being made. One of these forces
refer to employment law. This imposes additional costs to the organisation as
additional money has to be spent on recruitment, training and wages. Moreover,
employment law varies from one country to another and therefore, if an organisation
operates within different countries, it must abide by the current law in place in that
particular country. For example, Haier must ensure that both equal pay and minimum
wage is given to each employee working for them worldwide.
5. Climate Change
Organisations must consider external factors such as natural and physical forces. For
example, Haier Europe was one of the first large organisations to embrace sustainable
development. Through the pressure made by external forces, Haier shifted their
business activities to a more environmentally friendly. Haier sought to identify and
implement a policy that included social responsibility (Haier, 2019) and as such,
started to produce smart products including washing machines that enables the
consumer to save more on detergents -‘smart dosing’.
1. Consumer Behaviour
Task SIX
1. Heckscher-Ohlin Trade Theory
China’s trading trends are often seen as a representation of the dominance of
Heckscher-Ohlin trade theory in terms of international trade. Throughout the years,
China has established itself as one of the leading countries that specialise in exporting
labour – intensive goods. The Heckscher-Ohlin theory considers two factors of
production being capital and labour. The theory proposes that a moderately labour
rich country will have a comparative advantage in labour intensive goods and will
export the same. However, a labour rich country will have comparative advantage in
capital intensive goods which it could potentially export (Deb & Basu, 2016). This
theory discusses that countries like China, are producing and exporting goods that
require factors or resources that are in great supply and thus, cheaper production
factors. For example, China is notorious for cheap, large amounts of labour and
therefore, it became popular as an optimal location and an international exporter for
labour-intensive industries like clothes and textiles.
2. Human Skills-Technology Theory
Keesing developed this theory as an alternative model to the Heckscher-Ohlin theory.
Instead of focusing on the difference in capital and labour across countries, Keesing
emphasised differences in endowments and intensities of both skilled and unskilled
workforce. With this being said, some counties have more skilled workforce than
others where products need greater amounts of skilled workers than others.
Therefore, countries that have greater endowments of skilled workers will have
comparative advantage in products that have intensive in skilled labour (Henegedara,
2011). Nowadays, China is moving away from cheap labour to a more advanced type
of production such as electronics (Bain, 2021).
3. Global Strategic Rivalry Theory
This theory was developed by Krugman and Lancaster with the aim to investigate the
impact on trade flows evolving from global strategic rivalry among multi-national
enterprises. This theory argues that organisations must encounter global competition
in their respective industry and in order to be successful, they must also develop
competitive advantage/s. For example, China is selling less cheap products and more
branded items that are successfully competing with already well established brands.
With this being said, Chinese smartphone manufacturers such as Apple and Samsung
are stealing away customers and market share from other tech giants like Huwawei
(Presse France, 2016). These companies are continuously playing ‘cat-mouse’ games
with each other on a global level as they try to force their own strengths and nullify
those of their competitors.
Political Factors
China’s government is constantly interested in empowering local organisations and as such,
rules and regulations are applied for different industries. Industries must ensure that they
fulfil the needs of these law so as they can continue to grow their organisation. However, if
Haier is interested in expanding their operations globally, they must comply with different
laws including import and export laws, trade laws, copyrights, tariffs, employment laws etc.
These obligations come with a cost for Haier, but on the other hand, it has the possibility to
return long-term revenues. Moreover, if the political position of a particular country is
unstable, it will influence the growth and commerce of Haier in that country.
Economic Factors
The economic conditions of a particular country can have an impact Haier. With this being
said, if the country has a weak economic growth and moving towards inflation, Haier’s sales
will be negatively affected since individuals will not have the power to purchase their
products. Conversely, if the country has a stable economy, Haier will be able to benefit from
the opportunity to grow and expand as well as generate profits. In addition, Haier’s business
in different countries can be affected by factors like price fluctuations, trade laws and
exchange rates.
Sociocultural Factors
The general perception is that Chinese products are cheap and have poor quality and as such,
this assumption can affect their business in certain countries. If a country’s population is
hesitant when it comes to purchasing foreign products like in the case of Haier (Chinese
brand), then that will cause a huge problem. Therefore, Haier would need to introduce
acceptability for their products with the possibility of facing losses from the start in that
particular country. Furthermore, the population distributions, lifestyles that the majority of
the population identifies with, education levels and buying habits can all be factors that can
affect the potential sales of Haier either positively or negatively.
Technological Factors
Haier showcases innovative technology products and as such, the organisation must
constantly keep up with the latest technology advances by researching and developing their
products in order to maintain a high growth rate. Haier must take into consideration the
expectations of customers from certain countries they want to expand in. If these customers
are expecting both convenience and higher technology at a preferred price, Haier must be
able to provide that technology in order to keep their market safe. Additionally, it is of utmost
importance that Haier does not fall back in terms of technology so as to keep competing with
their competitors.
Haier has good support from the
Declining economic growth in a
Chinese political system.
country will affect the buying power
Haier must abide by the laws of
of individuals therefore, affecting
international markets.
Haier’s sales.
Although this can be costly for Haier,
Different countries have different
it can return revenues in the long-
price fluctuations, trade laws and
exchange rates that can affect
Political instability in other countries
Haier’s business.
can affect the business and growth
A stable economy within a country
will help Haier grow and generate
of Haier operating in that country.
Individuals in other countries might
be hesitant to buy foreign products.
Chinese brands are considered to in
Haier offers products with the latest
Customers have high expectations
lack quality and cheap prices.
and always expect the latest tech
Lifestyle trends, consumer buying
from Haier.
patterns, education levels.
1. Transfer Function
Research and development funding.
The basic and most evident function of the foreign exchange market is to accomplish
transfers of purchasing power between two countries, i.e., facilitate the conversion of
one currency from one conversion to another. Moreover, several credit instruments
are used to affect this transfer of purchasing power including, foreign bills, bank draft
and telegraphic transfers. While performing the transfer function, the role of FOREX
is to fulfil international payments by paying off debts. For example, If the exporter of
China import goods from the UK and the payment is to be made in pounds, then the
conversion of the yuan to the pound will be carried out by FOREX.
2. Credit Function
Another function of FOREX is to facilitate international trade by providing credit, both
national and international. The foreign exchange market offers importers a short-term
credit that normally has a maturity period of three months to help with the smooth
transfer of goods and services from one country to another. For example, if a Chinese
organisation wants to purchase goods from the UK, they can pay for the transaction
by issuing a bill of exchange in the FOREX, mainly with the three months maturity
3. Hedging Function
This function of FOREX is to hedge foreign exchange risks. The parties involved in the
foreign exchange transaction are often concerned about the fluctuations in the
exchange rate. With this being said, the fluctuations in the exchange rate could either
result in a gain or a loss to the person or business involved. Due to this reason, the
foreign exchange market provides the services for hedging the foreseen or actual
liabilities or claims in exchange for the forward contracts. Usually, this three-month
contract that buy or sell the foreign exchange for another currency during a fixed
period, at a price agreed beforehand. Therefore, at the time of the contact, no money
is exchanged.