International Business
International Business Meaning and Definition
Business which is conducted internationally in more than
one country is termed as an International business. It
involves transactions of goods & services between the two
countries. These transactions are conducted at the global
level & across national borders. International businesses
are very large in size as they are performed at a global
level.
Their scales of operation are vast in size. International
businesses provide employment to a large number of
peoples. It is served as an important source for earning
foreign exchange for the country. All payments in these
businesses are done in foreign currencies of different
countries.
These businesses help in improving the standard of living
of people in different countries by supplying high-quality
goods. International business is of different types like
imports & exports, franchising, licensing, foreign direct
investment, etc.
International businesses provide employment to a large
number of peoples. It is served as an important source for
earning foreign exchange for the country. All payments in
these businesses are done in foreign currencies of different
countries.
NATURE OF INTERNATIONAL BUSINESS
International Restrictions
In international business, there is a fear of the restrictions
which are imposed by the government of the different
countries. Many country’s governments don’t allow
international businesses in their country. They have trade
blocks, tariff barriers, foreign exchange restrictions, etc.
These things are harmful to international business.
Benefits To Participating Countries
It gives benefits to the countries which are participating in
the international business. The richer or developed
countries grow their business to the global level and they
get maximum benefits. The developing countries get the
latest technology, foreign capital, employment
opportunities, rapid industrial development, etc. This
helps developing countries in developing their economy.
Therefore, developing countries open up their economy
for foreign investments.
Large Scale Operations
International business contains a large number of
operations at a time because it is conducted on a large scale
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globally. Production of the goods at a large scale, they
have to fulfill the demand at a global level. Marketing of
the product is also conducted at a large scale to make them
aware of the product. First, they fulfill the domestic
demand and then they export the surplus in the foreign
markets.
Integration Of Economies
International Business combines the economies of many
countries. The companies use the finance, labor, resources,
and infrastructure of the other countries in which they are
working. They produce the parts in different countries,
assembles the product in other countries and sell their
product in other countries.
Dominated By Developed Countries
International business is dominated by developed
countries and their MNC’s. Countries like U.S.A, Europe,
and Japan all are the countries that are producing highquality products, they have people working for them on
high salaries. They have large financial and other
resources like the best technology and Research and
Development centers. Therefore, they produce good
quality products and services at low prices. They help
them to capture the world market.
Market Segmentation
International business is based on market segmentation on
the basis of the geographic segmentation of the consumers.
The market is divided into different groups according to
the demand of the consumers in different countries. It
produces goods according to the demand of the consumers
of the different market segmentations.
Sensitive Nature
International Business is highly affected by economic
policies, political environment, technology, etc. It can play
a positive role to improve the business and can also be
negative for the business. It totally depends on the policies
made by the government, it can help in expanding the
business and maximizing the profits and vice-versa.
Characteristics of International business
Large Scale Operations
International businesses are conducted on a very large
scale. They perform their operations in different countries
globally. Their business activities are very large in size
ranging from production, marketing & selling of their
products. These businesses serve the demands of local
markets also where they are present & also demands of
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different countries globally. That’s why they produce a
large amount of goods & services to cater to the large
demands.
Earns Foreign Exchange
International businesses are served as an important source
for earning foreign exchange. Foreign Currencies of
different countries are involved in transactions in these
businesses. This helps in getting enough foreign exchange
reserves for the country.
Integrates Economies
Another important feature of international business is that
it integrates the economies of different countries
worldwide. It takes advantage of different economies &
aims at providing its services economically. It takes labor
from one country, technology from one country & finance
from another country. Also, it designs, produces,
assembles its products not only in one country but in
different-different countries. This helps in taking
advantage of different economies & becoming
economical.
International Restrictions
International businesses face large restrictions while
carrying out there operations in different countries.
Sometimes they are not allowed to inflow & outflow
goods, technology & different resources. There are
restricted by the government of different countries to not
enter into their countries. They face several foreign
exchange barriers, trade barriers & trade blocks which are
harmful for international business.
Highly Sensitive Nature
International businesses are highly sensitive in nature.
Proper market research is very essential for carrying out
these businesses effectively. Any unfavorable economic
conditions in one country will adversely affect the
business. If there is any economic, political or
technological change will directly influence the
functioning of the business. Therefore, these businesses
should change their activities from time to time to survive
the change.
FEATURES OF INTERNATIONAL BUSINESS
Large Number Of Middlemen
Separates Producers From Buyers
International businesses are very large in size. Their scale
of operations is not limited to one country but performs in
different countries globally. There is a large number of
middlemen involved in international businesses. These all
person renders their services properly for the efficiency of
the business. Their services help the business in easy
expansion & growth.
In international business, producers and buyers are at
distant places. This business involves the production of
products in one country and is sold in another country.
Buyers and producers are not in close contact with each
other like in case of Domestic business. They belong to
different nations which make it difficult to contact with
each other.
High Risk
Immobility Of Factors
The degree of risk associated with international business
is very high. These businesses require a large amount of
resources both in terms of money & manpower for
carrying out its operations. These need to carry out trade
in different countries at large distances. It requires a huge
cost & time to carry these goods & services. Also,
sometimes different economies face unfavorable
conditions which affect the business conditions.
There is a large degree of immobility of factors in
international business. Factors like labour and capital
cannot move freely like in case of inland trade. There are
certain laws and regulations like immigration laws,
qualification, citizenship etc. which impose several
restrictions on the movement of these factors. Government
of different countries have different fiscal policies and
therefore they accordingly prohibit the flow of capital in
their countries.
Intense Competition
International business faces a large number of risks
internationally. These businesses invest large amounts in
advertising their products. There are a large number of
competitors in the international market. There is tough
competition in terms of price, quality, design, packing, etc.
Business needs to focus on these things to face the tough
competition going on.
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Heterogeneous Markets
International markets are homogeneous in nature and
differ from each other. These markets lack homogeneity
due to difference in culture, tradition, climate, habits,
preferences, weigh and measures etc. These markets are
different from those which are in a single country.
Behaviour of buyers in international business differs from
country to country due to difference in the socio-economic
environment of different nations.
International Business
Large Operations
International businesses are conducted at a very large
scale. They perform their operations in different countries
globally. Their business activities are very large in size
ranging from production, marketing and selling of their
products. These businesses along with the demands of
local markets where they are present also serve the
demands of different countries globally. That’s why they
produce a large amount of goods and services to cater to
the large demands.
Foreign Currency Payments
International Business involves different currencies of
different countries as all payments are done in foreign
currency. These businesses serve as an important source
of earning foreign exchange for the country. Foreign
currencies of many countries are involved for transactions
in these businesses. This helps in maintaining adequate
foreign exchange reserve for country.
International Rules And Regulations
International businesses are bound to follow several
international rules and regulations of different countries
where they operate. They face large restrictions while
carrying out there activities and are not allowed to inflow
and outflow goods, technology and several resources in
different countries. International businesses are also
restricted by government of many countries to not enter
into their countries. They face several foreign exchange
barriers, trade barriers and trade blocks which are harmful
for international business.
Large Middlemen
There are large numbers of persons involved in
International business for their proper functioning in
different countries. These businesses are very large in size
and their scale of operations is not limited to one country
but performs in several countries globally. This requires a
large no. of middlemen’s for performing different
activities. These all person renders their services properly
for the efficiency of business. Their services help the
business in easy expansion & growth.
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order for goods is received by exporter till the time when
they are finally delivered at their destination.
Scope and Importance of International Business
Meaning of International Business
International business is the process of implying business
across the boundary of the country at a global level. It
focuses on the resources of the globe and objectives of the
organization on the global business.
International business refers to the global trade of
goods/services outside the boundaries of a country.
International business conducts business transactions all
over the world, it is also known as Global Business. It
includes transaction between the parties in different global
location.
If you are making a transaction with the International ecommerce websites i.e, AliExpress, Amazon, E-bay than
you are making an International transaction. The trade
allows a country to specialize in producing and exporting
the most efficient products that can be produced in that
country. International business consists of the movement
to other countries of goods, products, technology,
experience of management and resources.
SCOPE OF INTERNATIONAL BUSINESS
FOREIGN INVESTMENTS
Foreign investment is an important part of international
business. Foreign investment contain investments of funds
from the abroad in exchange for financial return. Foreign
investment is done through investment in foreign
countries through international business. Foreign
investments are two types which are direct investment and
portfolio investment.
EXPORTS AND IMPORTS OF MERCHANDISE
Merchandise are the goods which are tangible. (those
goods which can be seen and touched.) As mentioned
above merchandise export means sending the home
country’s goods to other countries which are tangible and
merchandise imports means bringing tangible goods to the
home country.
Multiplicity Of Documents
LICENSING AND FRANCHISING
International business requires large no. of documents
from importing and exporting goods among different
countries. These documents are like commercial invoice,
shipping bill, Certificate of origin, inspection and
insurance certificate, mate receipt etc. There is a series of
documentation followed right from the point when an
Franchising means giving permission to the new party of
the foreign country in order to produce and sell goods
under your trademarks, patents or copyrights in exchange
of some fee is also the way to enter into the international
business. Licensing system refers to the companies like
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Pepsi and Coca-Cola which are produced and sold by local
bottlers in foreign countries.
SERVICE EXPORTS AND IMPORTS
Services exports and imports consist of the intangible
items which cannot be seen and touched. The trade
between the countries of the services is also known as
invisible trade. There is a variety of services like tourism,
travel, boarding, lodging, constructing, training,
educational, financial services etc. Tourism and travel are
major components of world trade in services.
GROWTH OPPORTUNITIES
There are lots of growth opportunities for both of the
countries, developing and under-developing countries by
trading with each other at a global level. The imports and
exports of the countries grow their profits and help them
to grow at a global level.
BENEFITING FROM CURRENCY EXCHANGE
International business also plays an important role while
the currency exchange rate as one can take advantage of
the currency fluctuations. For example, when the U.S.
dollar is down, you might be able to export more as foreign
customers benefit from the favourable currency exchange
rate.
LIMITATIONS OF THE DOMESTIC MARKET
If the domestic market of a country is small then the
international business is a good option for the growth of
the business in the host country. Depression of domestic
market firms will force to explore foreign markets.
IMPORTANCE OF INTERNATIONAL BUSINESS
Spreading Of Business Risks
Presence of international businesses around the globe
helps in spreading its risk. In case, if there is a loss incurred
by this business in any one of the countries then that can
be easily adjusted with the profit earned in other countries.
International business transferred their surplus goods or
resources in one country to another country which helps
them in reducing their risk.
Economies Of Scale
These business are able to enjoy economies of scale due to
their large scale production. International businesses
produce large amount of goods for selling in different
countries. With the increase in amount of production, per
unit cost of producing goods goes down which helps them
in earning large profits.
Cost Advantage
International business takes cost advantage over its
competitors by producing goods in one country and
exporting them in another country. They carry on their
production in a country where factors of production are
easily and cheaply available. This helps in minimizing the
cost of product and earn huge profits by selling them at
better prices in other countries.
Improves International Relations
International business helps in strengthening the economic
relations among nations. These business helps other
nations by exporting them goods of their requirements. It
helps in developing better mutual understanding among
countries due to which they are ready to support each other
in time of needs.
Market Expansion
Provide Employment Opportunities
International businesses are opened to perform business in
different countries across the globe. These business keeps
on expanding its activities and explore new markets for
selling more and more products. The international
business earns high amount of profits which helps them in
expanding their market share.
International business employs large number of people for
carrying out its operations across the globe. They perform
large scale operations in many countries for which they
require large amount of human resource.
Brings Foreign Exchange
The international business earns large amount of foreign
exchange by selling its products among different
countries. All payments are received in terms of foreign
currency which are used by its home country for payment
of imports. The foreign exchange earned by these
businesses helps in the overall economic development of
the country.
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Government Support
These businesses also enjoy government support for
carrying out their operations and expanding their size. The
government provides tax and financial benefits to these
businesses as they earn a large amount of foreign reserves
for the country.
ADVANTAGES AND DISADVANTAGES OF
INTERNATIONAL BUSINESS
Advantages of International Business
International Business
Increased Revenues
The revenues of the companies which are trading
internationally are much more than the companies which
are trading in the domestic country. The customers of the
MNC’s are more because they have customers all over the
world and their reach to customers is higher than the
domestic companies. This leads to higher selling of goods
in the global market and it leads to increased revenues of
the company.
Reaching New Customers
International business is all about reaching new customers
in the market of different countries. The domestic
companies are restricted to their home customers and
MNC’s are having a large customer base all over the
world. MNC’s reach customers at a global level because
they expand their business in different countries. Products
of MNC’s are reached to the customers globally.
Accessing New Talent
The success of a company depends on the employees and
management who are working with the company. This
plays an important role in decision making and actions of
the company. Expanding to the international level could
give you access to talented, valuable employees and
business partners who helps you in taking the enterprise to
new heights.
Optimum Utilization Of Available Resources
International business reduces the wastage of resources as
it works in the different countries and uses the resources
of all the countries, they are working in. This leads to the
optimum utilization of resources. Every country which is
producing the goods are producing it at maximum
advantage.
Benefits To Consumers
In the international market, consumers can choose
between domestic goods and international goods.
Consumers can have a good quality of products at a low
price compared to that of the quality and price of domestic
products. Consumers have a large variety of goods to
choose from according to their taste and preference.
Product Flexibility
If there is a product whose demand is less in the domestic
market then it can be sold in the international market if
there is demand for it in the foreign markets. The
companies have to find countries in which the demand for
their product is higher and they can also sell it on the
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higher prices if there is high demand. It can also offer a
wide range of products in the global market.
Brand Image
If the company deals in the international market and target
the customers of the different countries globally then the
brand name is popularized among the country and it
enhances your brand image in the foreign market. Image
of the brand is enhanced by international growth and the
rapid market boost leads to brand image development. It
can also lead to expansion of property, copyrights,
trademarks to new countries.
Disadvantages of International Business
Language Barriers
Language barriers are one of the major disadvantages of
international business. Different countries have their
distinct local languages and culture, which makes it quite
difficult to communicate efficiently with peoples. These
differences create barriers in developing better trade
relations among nations.
Economic Dependence
International business leads to more dependence of underdeveloped countries on developed countries. They import
large amounts of goods for their development from these
developing nations. Too much reliance on other nations
led to exploitation of the economy and industrial
development of importing countries.
Mis-Utilization Of Natural Resources
Another major disadvantage of international business is
that it may exhaust the natural resources of nations due to
the excessive exports. Several nations make overutilization of their resources for the sake of earning more
profits which will have adverse effects on their economy
in the long run.
Exploitation Of Home Industry
International business leads to exploitation of home
industries of an importing country. Developed nations
even adopt dumping policy and sell their products at prices
below the cost of production. This excessive foreign
competition and unrestricted imports create a threat for the
survival of domestic industries.
Servicing Customers
International business finds it difficult in providing aftersale services to its customers. Differences in cultures and
languages create main problems in communicating to
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people for solving their issues. Companies are required to
communicate as per different time zones, distinct
languages, and should set up 24×7 customer service
centers.
Rivalry Among Nations
International business may also lead to tension among
nations due to intense competition of exporting more and
more products. This can hamper international peace and
can often lead to war among nations.
Importance of International Business
Market Expansion
International businesses are opened to perform business in
different countries across the globe. These business keeps
on expanding its activities and explore new markets for
selling more and more products. The international
business earns high amount of profits which helps them in
expanding their market share.
Brings Foreign Exchange
The international business earns large amount of foreign
exchange by selling its products among different
countries. All payments are received in terms of foreign
currency which are used by its home country for payment
of imports. The foreign exchange earned by these
businesses helps in the overall economic development of
the country.
easily and cheaply available. This helps in minimizing the
cost of product and earn huge profits by selling them at
better prices in other countries.
Improves International Relations
International business helps in strengthening the economic
relations among nations. These business helps other
nations by exporting them goods of their requirements. It
helps in developing better mutual understanding among
countries due to which they are ready to support each other
in time of needs.
Provide Employment Opportunities
International business employs large number of people for
carrying out its operations across the globe. They perform
large scale operations in many countries for which they
require large amount of human resource.
Government Support
These businesses also enjoy government support for
carrying out their operations and expanding their size. The
government provides tax and financial benefits to these
businesses as they earn a large amount of foreign reserves
for the country.
WHAT IS GLOBALIZATION?

Globalization is defined as the free movement of
goods, services, people, technology and information
around the globe. It is a process which leads to the
integration of various local and national markets in the
world economy. Globalization describes the
interconnectedness and interdependent of different
countries around the world.

It promotes international trade which leads to an
increase in interactions among people, government
and companies of several nations. It encourages the
cross border transactions across the globe with less
restriction. Globalization helps in improving the
economies of less-developed or poor countries by
providing access to better goods or services, job
opportunities and modernization.

It assists the companies in gaining competitive
advantage by buying cheap raw materials and labour
from abroad or manufacturing in other countries
where operating cost is low. Globalization helps
businesses in making their presence worldwide.
Companies are able to reach millions of customers
which lead to an increase in their profitability.
Spreading Of Business Risks
Presence of international businesses around the globe
helps in spreading its risk. In case, if there is a loss incurred
by this business in any one of the countries then that can
be easily adjusted with the profit earned in other countries.
International business transferred their surplus goods or
resources in one country to another country which helps
them in reducing their risk.
Economies Of Scale
These business are able to enjoy economies of scale due to
their large scale production. International businesses
produce large amount of goods for selling in different
countries. With the increase in amount of production, per
unit cost of producing goods goes down which helps them
in earning large profits.
Cost Advantage
International business takes cost advantage over its
competitors by producing goods in one country and
exporting them in another country. They carry on their
production in a country where factors of production are
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ADVANTAGES OF GLOBALIZATION
International Business
7
Multinational corporations are easily able to enter and
invest in a large amount in many countries. This way
nations are able to generate a large amount of foreign
exchange.
Various advantages of globalization are as follows:




Wider markets: Globalization enables the companies
to enter the international market easily. It leads to free
movement of goods and services among different
nations around the world. Companies can approach a
large number of customers worldwide and have a
better chance to improve their sales.
DISADVANTAGES OF GLOBALIZATION
Disadvantages of globalization are as discussed below:
Creates unemployment: Globalization leads to
unemployment in many countries. Many companies
for taking advantage of low manufacturing cost
operate all their activities in foreign countries rather
than in their home country. It results in creation of
unemployment in home country.

Provides wider talent pool: Globalization provides
the opportunity for attracting creative minds around
the globe. Companies have a wider option of
recruiting talented staff both from the home country as
well as from several other countries abroad.
Labour drain: Labor drain is another important
disadvantage of globalization. It facilitates the free
movement of labour due to which workers frequently
migrate to place where they are getting better wages
and opportunities. Countries find it difficult to retain
and hold on their best-skilled manpower.

Reduces labour exploitation: Globalization enables
the free movement of labour among countries and save
them from exploitation. They can easily migrate to
places where they are getting better opportunities.
Globalization removes all restrictions from country
borders which facilitates the frequent migration of
people in search for work anywhere.
Tax avoidance: Globalization has made the tax
avoidance by big corporations quite easy. These
corporations outsource all their activities in countries
where there are less corporation tax or minimum tax
restrictions. This way they pay very less tax in
countries from where they operate most of their
business.

Environmental degradation: Globalization has
negative effects on the environment. It has encouraged
free trade among countries which has increased the
usage of non-renewable resources. Companies are
easily able to outsource their production in countries
where environmental standards are less strict. All this
lead to an increase in pollution and global warming.

Extinct small scale industries: It has increased the
overall competition in the market by allowing entry of
large numbers of multinational corporations.
Domestic firms lack skills and technologies as
compared to these big corporations and are not able to
compete with them.
Economies of scale: It enables the businesses to
benefit themselves from economies of scale. Business
can acquire cheap raw materials and labour from
abroad which would lower their cost. They can also
operate their manufacturing activities in other
countries where the cost of operation is low. This
would bring down the average cost and prices for
customers.

Increase global investment: It has enabled countries
in attracting both short-term and long-term
investments from across the globe. Multinational
corporations by operating internationally invest a
large amount of funds in different nations which helps
in improving their economy.

Lowers global inequality: Removing regional
disparities and inequality is another important role
played by globalization. It helps in raising the
standards of living of people by supplying better
quality products at the best prices in different
countries. Nations are able to acquire better
technologies and ideas from abroad which help in
overall economic development.

Earns foreign exchange: Globalization enables the
countries in earning the sufficient foreign exchange. It
allows free trade among countries and removes all
restrictions on import and export of goods or services.
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What are Some Advantages of Globalization?
Researchers have concluded various positive effects
of globalization which some developed countries
enjoy today. It's hard to encounter each of them, but
let's focus on some essential points.
Global Market
Among all effects of globalization, this one is
beneficial. It means encouraging nations to
specialize and produce plenty of goods available in
their local market. Different countries produce
different products and what is most surprising there
is no country which is self-sufficient. Some countries
with developed economies don't have enough raw
materials for their factories, while the rest accumulate
costs more than it should. Worldwide integration has
led the way to cheap raw materials. Now states can
purchase them and produce low price products with
a good profit. Developed countries advertise for the
low-income community to buy their products with
compatible prices. They also sell goods to
developing countries because they are affordable.
They are supposed to promote the economic growth
of the country from where they buy their raw
materials as they invest their money overseas by
building industries to produce cheap goods.
The larger the market, the more the returns. This
concept has extended businesses in developed
countries. They have also expanded by acquiring
companies in developing countries, partnering and
merging with others to reach out to a big market and
produce cheaper goods due to the availability of
materials and labor. Availability of cross-border
market encourages companies from developed
countries to create various goods because they have
consumers worldwide. Some of them produce
vehicles, other clothes or foods. There are a range of
products invented in developed countries and sold
elsewhere.
Cross-Cultural Management
Each country has got its own culture. Culture pertains
to the way particular people do things as well as their
values and believes. Incorporating all cultures to form
a global one is not easy. For instance, gender
equality is not recognized in some legal systems, and
they do not allow women to lead or engage in
business. Before globalization, many countries
would not allow females to acquire education, and
even if they did, they were supposed to do jobs such
as teaching or nursing. Now a lot of states have
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adopted features of American culture even in the way
they carry out business. For instance, one of the
United States features is keeping time as well as
understanding its value. They don't like
procrastinating with ridiculous activities. Population
in developed and underdeveloped countries have a
culture of engaging in activities which are profitable
either socially, economically or spiritually. Here
becomes a new global culture. Globalization is a
causality of cultural erosion in communities from both
developed and developing countries.
Competition
Competition is a healthy way of doing business.
Without it, companies would not pioneer some
innovations in cross-border trade. It is the main
reason why the quality of goods and services
improve as well as why the prices drop. Competition
affected industries in some developed countries to
source cheap raw materials and labor to decrease
prices. People from the first-world can afford
themselves to buy products from domestic industries
and foreign ones. Competition causes increased
communication of ideas and innovation as people try
to find a competitive advantage for their business.
Job Opportunity
About 90 percent of the first-world population earns
for living through employment. Initially, job
opportunities were quite scarce, and everyone who
graduated from college applied in a certain
government sector, but most of them ended up
working as a casual laborer in industries with a low
income. Globalization has brought this trend to a halt
as more job opportunities are now available locally
and internationally. By using technology, one can
access employment opportunities, work remotely
and even have more than one job.
Many students come out as entrepreneurs ready to
grow their own business and create job opportunities
for others. Globalization has brought in diversification
which helps student interact with foreigners. They
exchange ideas on available opportunities in various
countries, and such discussions broaden their mind
on how to find employment or other ways of making
a decent living. The major standards of living have
improved due to an extended labor market.
Reducing the Gap between the Rich and the Poor
Globalization has notably declined the gap between
rich and poor people. For many centuries there has
International Business
9
been a wide gap between these groups, a gap that
seemed to widen every year. Globalization enabled
poor people to have access to job opportunities. A
long time ago people who worked in government
sectors and companies got high salaries, but now
even overeducated employees earn a little money.
As a result, many employers hire qualified workers
and pay them less than they deserve. Due to their
expenses of maintaining companies' specific image,
the highly paid workers live a stressful life while the
low-income people seem to have a stress-free
experience. The number of low-income people
working as casual laborers has continued to
decrease as most young people acquire education.
These young, educated people perform multitasking
jobs to get enough money to enable themselves and
their family to live a decent life. Consequently, a
constant difference between the rich and the poor
reduce considerably. Most industries employ only
skilled workers due to complicated systems of
operation. Those without skills seek employment in
other states. Instead of staying without an income,
most people don't mind the displacement as long as
they are going to earn for a living
Legal Effects
Investments
It is a significant problem in most developed
countries. Due to worldwide integration, people travel
a lot. Some of them move abroad for studying,
business, visiting relatives, work and access hospital
services.
The population of developed countries prefers to
invest money in profitable businesses rather than
deposit it in banks. The reason is, they strive to earn
for a living remotely because investments assure
they will gain good profits without any efforts.
Unfortunately, such an option is available only for
those people in developed countries as usual
defaults of economies in third-world states make it
insecure. People are afraid to invest their earnings
because they can not predict whether their national
currency will be equivalent to the US dollar next year.
Others spend it by establishing firms and industries
in foreign countries where they gain profits.
Through globalization, people get to know what's
happening in other countries. Media services cover
events which occur in other countries. As a result,
various turmoil could be solved by international
mediators. Those who perform acts against human
rights
are
arrested
and
sentenced
by
intergovernmental courts. Equally, those who
practice illegal business aiming to get competitors
out of trading are prosecuted. Nevertheless, lots of
states are not satisfied that a particular IGO
interferes domestic policy and dictate them how they
should operate within own boundaries. Imposed
economic sanctions prosecute governments which
refused to adopt international conventions and follow
their laws.
NEGATIVE EFFECTS OF GLOBALIZATION
It has had a few adverse effects on developed
countries. Some adverse consequences of
globalization include terrorism, job insecurity,
currency fluctuation, and price instability.
Terrorism
However, not all of them are totally honest. Lots of
terrorists came to a foreign country with a worker visa
having a hidden goal to perform a terrorist attack. It's
a problem that has posed fear among citizens
whocan't trust their neighbors. Unfortunately,
terrorists recruit young people, residents of the
country and makethem believe they are doing the
right things. That's why there are fear, mistrust, and
tension in society.
Advanced technology
Job Insecurity
Advanced technologies are a result of globalization.
A constant need for innovations appeared due to the
lack of quick data transfer and public communication.
Lots of inventors have tried to serve the needs of
modern society by improving technology. Its
advancement has paved the way for positive effects
of globalization in countries that initially did not want
to associate with others. Such states select partners
forcooperation depending on religion rather than the
economy.
Before globalization, skilled people got employment
in government sectors and companies where they
received high salaries. Job opportunities were
waiting for those who completed colleges and earned
a degree. People would resign a job and quickly get
another. Due to globalization, there are many people
seeking employment all over the world. Employers
take advantage of cheap labor. One can get a
dismissal because of a slight mistake as the
BA FIN 102: INTERNATIONAL BUSINESS & TRADE
10
employer can find a skilled worker who is ready to be
paid less.
developed states. Although the fight against poverty
is not over, there is a great improvement.
Price Instability
Availability of Employment
Price instability is a significant effect of globalization
on business. Some people establish industries
overseas where they get cheap raw materials and
labor. They can cut production costs and sell their
goods at a low price. Due to competition, some highquality products differ in prices. No matter how the
World Trade Organization has tried to control price
fluctuation, their efforts are not successful. These
companies reach out to consumers using modern
technology. Successful businesses are for those who
can find a competitive advantage and especially
make high-quality products for a low price.
Most developed countries have lots of educated
jobless people. Globalization gives them job
opportunities in other countries. Their primary
advantage over the residents of the developed
countries is the fact that they offer cheap services.
They are also open to learning as they consider
themselves lucky to have a new life.
Education
Globalization has had numerous positive effects on
some developing countries. It's the reason for the
fast growth and development of these countries as
people invest in these states improving their
infrastructure, technology, and total production.
Below are some positive effects of worldwide
integration on developing countries.
Globalization has enabled further studies. Most
developed countries have advanced schools and
colleges. They encourage people from overseas to
study there. While it is just a business venture like
any other, students from developing countries take it
as an advantage to get further education and skills to
use in their careers. The investors from developed
countries settle abroad with their families, what's
more, they want to have good schools for their
children. As a result, they donate to local schools,
advance the curriculum and hire qualified teachers.
Following this way, most developing countries have
very advanced high schools and universities. There
is no need to move to developed states to seek
education because it is readily available in these
countries. Enhanced education is a positive impact
of globalization in developing countries. The
governments of most developing nations provide free
training to encourage parents to school their children.
Education is compulsory in most developing
countries due to globalization because, without it,
investors and traders would have a hard time hiring
locals.
Poverty Eradication
Technology
Before globalization, developing countries have had
plenty of resources which they didn't know how to
use. Their population was uneducated as well as
there were no roads or means of transport.
Nowadays people understood the significance of
education and standards of living as foreigners
settled in these countries. Consequently, locals went
to schools established by the settlers and got
employment in their companies and industries. Some
of them went abroad for further studies. They were
able to raise the living standard of their families by
using new knowledge. Today, due to globalization,
companies established by locals ofsome developing
states are the major competitors of those from
Globalization has helped to transport technology to
developing countries. Some investors and foreigners
who have got a bargain with the people from
developing countries needed to communicate with
them and exchange ideas as well as information. The
fastest way to do it was through using of modern
technology. It has greatly helped people from
developing countries. Most of them can buy and sell
goods online at a low price. They work remotely with
companies in developed countries. Interaction with
people through social media, the Internet and other
platforms have opened new horizons on how to
improve standards of living. Media coverage has
attracted lots of volunteers from developed countries.
Currency Fluctuation
International trade buys and sells products using the
US dollar. The price of dollar fluctuates day-to-day in
developing countries, this results in imbalanced
economy and unnormal prices for goods and
services. National currencies are affected the most
by IGOs.
WHAT ARE THE POSITIVE EFFECTS OF
GLOBALIZATION?
Positive effects on Developing countries
BA FIN 102: INTERNATIONAL BUSINESS & TRADE
International Business
Consequently, most people can satisfy their basic
needs such as food, clothing or medicines.
Foreign Investments
Globalization brought in the need for people from
developed states to invest in some developing
countries. Foreign investment is one of the results of
globalization that culminates in many developments
in these countries. For instance, some investors want
raw materials and goods to be transferred faster to
the industry and the market respectively. The only
way to do this is to help each government in the
building of efficient infrastructure. The local people
get jobs from these industries and companies
established in their country. Investors boost the
country's economy by paying taxes to the
government. They help to improve institutions such
as schools and hospital through the government
agencies which benefits the locals and their family
members.
NEGATIVE EFFECTS OF GLOBALIZATION
Although the developing countries have had many
benefits from globalization, there are a few negative
impacts it has caused in the developing countries.
Displacements of Workers
Thanks to globalization, there are employment
opportunities all over our huge world. However, most
people have had to leave their families for many
years as they work abroad. As a result, couples have
divorced, remarried and left destitute children at the
mercy of volunteers and shelters. Some children
haven't been able to meet their old-aged parents'
needs because the money they earn from their job is
not enough. Lots of seniors die due to sicknesses
and lack of financial and emotional support from their
children.
Unemployment
In almost all developing countries over half of the
working population relied on casual jobs in industries
until globalization took root. The advancement of
technology has reduced such employment and
increased global need for skilled professionals.
Majority of people in developing countries don't have
skills, while the available jobs are poorly paid due to
high demand caused by globalization. Most of the
people are left unemployed and unable to meet their
basic needs resulting in increased criminal activities
such as burglary, pickpocketing, murder and drug
11
abuse. The rate of unemployment and poverty keeps
growing as the gap between the rich and the poor
widens.
Increased Lifestyle diseases
Globalization has brought in the consumption of
processed foods, planting crops using chemicals to
minimize the duration of growth and increase profit.
In order to benefit from business, animals such as the
cows are fed on chemicals that make them produce
a lot of milk or increase in weight for those that are
sold for the meat industry. Due to increased ingestion
of chemicals from foods, chronic diseases are on the
rise. The mortality rate is high. Furthermore, there is
a reduction in the lifespan in the developing
countries.
Abandonment of Culture
Every community, society, or nation has its values
and beliefs, that is to say - own culture. They are
essential because they mold the acceptable behavior
of the people in a particular community. The elders
or leaders ensure that the people behave in a morally
upright way. However, globalization mixed different
cultures. Then people reconsidered their authentic
rules and customs regarding their culture as
primitive. Some nations from developing countries
adopt the western culture and abandon there's own.
The community leaders can no longer pursue their
own domestic policy punishing citizens for crimes
them as they did before because they are regarded
as backward and primitive by international society.
They adopt the culture which is quite strange and
distant from their nature, due to such policy, people
conduct themselves regardless of actual laws. As a
result, there is an increased crime as acts such as
rape, divorce, and domestic violence get on the rise.
POSITIVE EFFECTS OF GLOBALISATION
Various positive effects of globalization are welldiscussed in the points given below: –
Transfer Of Technology
The transfer of technology on global level results in
alteration of technology which is a good sign. Any
country can easily borrow technology from other
developed countries via agreement and can
implement within their areas for overall development.
Communication can be easily established with
anyone around the globe by utilizing the advanced
technology at lower cost, minimal efforts and time.
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12
Standardization Of Living
People’s standard of living has changed largely with
the emergence of globalization. The process of
globalization via integrating the economies help
nations in fighting against poverty and improving the
standard of living of their peoples. It is proven by
many researches that countries open to global trade
have faster rate of economic growth and their living
standards also tend to increase.
Affordable Products
The process of globalization provide access to high
quality products at affordable prices. With the
availability of latest technology, countries are able to
provide better products to their countrymen at
affordable prices. Globalization encourages high
competition in domestic sectors due to which
companies reduce price for their products or follow a
penetration price strategy.
Employment
It also plays an efficient role in improving the
employment opportunities in nations. The setting up
of special economic zones across distinct parts of
nation have raised the number of jobs available
worldwide. Numerous export processing units have
been established all over the world that helps in
employing large number of peoples. Many
multinational corporations of west are providing
employment opportunities to peoples via outsourcing
employees from different parts of world.
Better Services And GDP Growth Rate
The process of globalization always offers better
services to people. With the help of technological
advancement, various services such as water
supply, internet, electricity supply, mobile networking
and any other services have become much easier
and better than before. The easy accessibility to
internet services around the globe is also the
outcome of globalization. It also ensures the
participation of each nation in uplifting the GDP
growth of world.
Improvement Of Infrastructure
Globalization facilitates the development of
infrastructure facilities within the countries as they
can easily import required technology from
developed nations. The governments are also able
to deliver their peoples the services more efficiently
owing to infrastructural advancement. Development
BA FIN 102: INTERNATIONAL BUSINESS & TRADE
of infrastructure means the overall development of
respective nations, thereby making them more
enabling to offer services to people. It is worth
mentioning that evolution of infrastructure and the
economic growth are harmonious with one another
towards the development of country.
Foreign Exchange Reserves
It assists countries to earn large amount of foreign
exchange
reserves.
Globalization
promote
international trade in between countries such that
distinct countries engage in buying and selling goods
with one another. They do financial transaction in
foreign currencies which results in both inflow and
outflow of foreign exchange reserve. There is a
constant capital flow in international financial flows
with the help of globalisation. This flow of capital
enables countries in building up the foreign
exchange reserves.
Economic Growth
Globalization leads to economic growth of countries
by opening free flow of good/services in between the
nations. It entails the efficient utilization of resources
wherein surplus resources are exported and deficit
resources are procured from other nations.
Globalization increases the international exchange of
products, information and technological advances
that ultimately leads to economic development for
any country taking part in global economy. Rise in
economic growth means better living standards,
higher wealth and incomes, and often less poverty in
a country, -in short, it denotes the overall well-being
of country.
Extensions Of Market
Above all, the process of globalisation promotes
extension of market all over the globe. For example,
businesses may witness saturation of their product’s
demand domestically, but through globalization the
domestic companies can sell their products in foreign
countries where demand is growing increasingly.
Low demand for product in one country can be easily
tackled with high demand in another countries via
globalisation.
Access To New Talent
The globalisation in addition to new markets, enable
businesses in finding out new and specialized talent
that is not present in their nearby market. Companies
have an option to bring in more talented workers from
overseas. For example, globalization allow
International Business
businesses to explore tech talent in booming markets
such as Stockholm or Berlin, rather than Silicon
Valley. Also, international PEO enable companies in
employing workers overseas without having the need
to establish legal entity, making the process of global
hiring much easier.
NEGATIVE EFFECTS OF GLOBALIZATION
Unequal Economic Growth
Globalization, however, tends to raise the economic
growth for many countries, but that growth is not
equal. Rich countries get more and more benefit as
compared to developing countries, that ultimately
brings in inequality among country’s growth. It
operates more towards the interest of richest
countries, and continues dominating the world trade
at the expense of developing countries. The role of
less economically developed countries (LEDC) in
world market is to provide North and west with
cheaper material labour.
Exploits Cheaper Labour Markets:
It has an effective role to play in exploitation of
cheaper labour markets. Businesses are able to raise
jobs and economic opportunities in developed
countries, where labour cost is quite cheaper.
Employer take advantage of cheap workforce in such
markets, whereby they dismiss workers on small
mistakes as they know skilled workforce will be
readily available at low cost. Globalization has added
a lot of job insecurity and due to this, there are large
number of peoples seeking jobs all over the world.
Causes Job Displacement:
Globalization results in lot of job displacement in
high-cost countries. It does not increase the number
of job opportunities, but redistributes jobs via
transferring production from high-cost nations to lowcost nations. As a result of this, a large number of
peoples in high-cost countries lose their jobs due to
the movement of production overseas.
Lack Of Local Businesses:
The policy of globalization poses great threats for
local and domestic businesses operating within the
country. It allows big multinational companies having
large resources and infrastructure to establish their
supply chain and distribution in distinct countries.
These big companies due to their large scale of
operations provide goods and services to peoples at
lower prices in comparison to local businesses. This
13
exploits the business conditions for domestic
companies who struggles to compete with such big
brands. For instance, New York local hamburger joint
may struggle to compete with the prices of
multinational burger making company.
Increases Potential Global Recessions:
Globalization increase the chances of global
recession occurrence by making all countries
interdependent on one another. The economic
system of many countries is dependent on other
countries such that if economy of one country starts
to struggle, then this can set off chain reaction
affecting different countries simultaneously. It may
even lead to much worse condition bringing a
financial crisis on worldwide level.
Expensive Domestic Goods:
The globalization presents an open market for the
locally produced goods. Goods produced in one
country can be freely made available in other
countries where the demand is high. This will
ultimately make the goods expensive in one country.
For example, domestic goods such as fruits,
vegetables, cereals, etc. are transported and sold at
higher prices in nations facing scarcity of such items.
Hinders Establishment Of Small And Cottage
Industries:
Globalization up to large scale hinders the progress
and development of small and cottage industries in
country. Due to the entry of big multinational brands
in domestic market, small industries face strong
competition from big market players. Multinational
companies offer better quality product at economical
prices as compared to local companies. It finally
restricts the personal independence of small and
cottage entrepreneurs.
Price Instability:
The price instability is a major effect of globalization
on business enterprises. Many people set up their
industries internationally where cheap raw materials
and labour are available. They are able to cut
production costs and sell of their products at lower
prices. Few high-quality products differ in prices
because of the stiff competition. The efforts of World
Trade Organization for controlling such price
fluctuations are also not successful.
BA FIN 102: INTERNATIONAL BUSINESS & TRADE