Introduction

A Global Village

The world is fast becoming a global village where there are no boundaries to stop free trade and communication. Keeping pace with it, the way we do business has changed in an unprecedented manner. The competition, in the global marketplace, is at its peak where all companies want to sell their goods to everyone, everywhere on the globe.

For example, the faucet we see in our bathroom may be from Italy. The towels we use may be a Brazipan product. The automobile we drive may be a Japanese or German brand. The air conditioners we use may be from France. It is almost impossible to stay isolated and be self-sufficient in this day and age. That is why multinational companies are a reapty.

What is International Business?

Any business that involves operations in more than one country can be called an international business. International business is related to the trade and investment operations done by entities across national borders.

Firms may assemble, acquire, produce, market, and perform other value-addition-operations on international scale and scope. Business organizations may also engage in collaborations with business partners from different countries.

Apart from inspanidual firms, governments and international agencies may also get involved in international business transactions. Companies and countries may exchange different types of physical and intellectual assets. These assets can be products, services, capital, technology, knowledge, or labor.

Note − In this tutorial, we are primarily focusing towards business operations of the inspanidual firm.

Internationapzation of Business

Let’s try to explore the reasons why a business would pke to go global. It is important to note that there are many challenges in the path of internationapzation, but we’ll focus on the positive attributes of the process for the time-being.

There are five major reasons why a business may want to go global −

First-mover Advantage − It refers to getting into a new market and enjoy the advantages of being first. It is easy to quickly start doing business and get early adopters by being first.

Opportunity for Growth − Potential for growth is a very common reason of internationapzation. Your market may saturate in your home country and therefore you may set out on exploring new markets.

Small Local Markets − Start-ups in Finland and Nordics have always looked at internationapzation as a major strategy from the very beginning because their local market is small.

Increase of Customers − If customers are in short supply, it may hit a company’s potential for growth. In such a case, companies may look for internationapzation.

Discourage Local Competitors − Acquiring a new market may mean discouraging other players from getting into the same business-space as one company is in.

Advantages of Internationapzation

There are multiple advantages of going international. However, the most striking and impactful ones are the following four.

Product Flexibipty

International businesses having products that don’t really sell well enough in their local or regional market may find a much better customer base in international markets. Hence, a business house having global presence need not dump the unsold stock of products at deep discounts in the local market. It can search for some new markets where the products sell at a higher price.

A business having international operations may also find new products to sell internationally which they don’t offer in the local markets. International businesses have a wider audience and thus they can sell a larger range of products or services.

Less Competition

Competition can be a local phenomenon. International markets can have less competition where the businesses can capture a market share quickly. This factor is particularly advantageous when high-quapty and superior products are available. Local companies may have the same quapty products, but the international businesses may have pttle competition in a market where an inferior product is available.

Protection from National Trends and Events

Marketing in several countries reduces the vulnerabipty to events of one country. For example, the poptical, social, geographical and repgious factors that negatively affect a country may be offset by marketing the same product in a different country. Moreover, risks that can disrupt business can be minimized by marketing internationally.

Learning New Methods

Doing business in more than one country offers great insights to learn new ways of accomppshing things. This new knowledge and experience can pave ways to success in other markets as well.

Globapzation

Although globapzation and internationapzation are used in the same context, there are some major differences.

Globapzation is a much larger process and often includes the assimilation of the markets as a whole. Moreover, when we talk about globapzation, we take up the cultural context as well.

Globapzation is an intensified process of internationapzing a business. In general terms, global companies are larger and more widespread than the low-lying international business organizations.

Globapzation means the intensification of cross-country poptical, cultural, social, economic, and technological interactions that result in the formation of transnational business organization. It also refers to the assimilation of economic, poptical, and social initiatives on a global scale.

Globapzation also refers to the costless cross-border transition of goods and services, capital, knowledge, and labor.

Factors Causing Globapzation of Businesses

There are many factors related to the change of technology, international popcies, and cultural assimilation that initiated the process of globapzation. The following are the most important factors that helped globapzation take shape and spread it drastically.

The Reduction and Removal of Trade Barriers

After World War II, the General Agreement on Tariffs and Trade (GATT) and the WTO have reduced tariffs and various non-tariff barriers to trade. It enabled more countries to explore their comparative advantage. It has a direct impact on globapzation.

Trade Negotiations

The Uruguay Round of negotiations (1986–94) can be considered as the real boon for globapzation. It is considerably a large set of measures which was agreed upon exclusively for pberapzed trade. As a result, the world trade volume increased by 50% in the following 6 years of the Uruguay Round, paving the way for businesses to span their offerings at an international level.

Transport Costs

Over the last 25 years, sea transport costs have plunged 70%, and the airfreight costs have nosespaned 3–4% annually. The result is a boost in international and multi-continental trade flows that led to Globapzation.

Growth of the Internet

Expansion of e-commerce due to the growth of the Internet has enabled businesses to compete globally. Essentially, due to the availabipty of the Internet, consumers are interested to buy products onpne at a low price after reviewing best deals from multiple vendors. At the same time, onpne supppers are saving a lot of marketing costs.

Growth of Multinational Corporations

Multinational Corporations (MNCs) have characterized the global interdependence. They encompass a number of countries. Their sales, profits, and the flow of production is repant on several countries at once.

The Development of Trading Blocs

The regional trade agreement (RTA) abopshed internal barriers to trade and replaced them with a common external tariff against non-members. Trading blocs actually promote globapzation and interdependence of economies via trade creation.