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Globalization of bussines and international trade relation

Globalization In business, globalization is a term used to describe the spectrum of changes occurring in societies and economies as good and services capital, people, technology, and ideas flow more freely across international borders.

Business Globalization Processes: Advantages and Disadvantages


Business, like any other contemporary area of human expertise, is gradually joining all globalization processes. Globalization in business means the wide expansion of a single business idea throughout the world. Despite all the emerging barriers, businessmen try to expand their influence in the territories of their potential profit. The barriers might be different, starting from political, economic and finishing with religious and geographical ones. They are overcome with ease if treating the whole thing seriously. Globalization puts both positive and negative impact on business as the world state of affairs always presupposes two sides of a coin. Those who have already felt the influence of globalization on their business can make judgments whether it is a favorable process or a detrimental one. Advantages The major advantages of business globalization are viewed through the prism of two aspects: increase of market and foreign currency. No one will deny the fact that globalization processes stimulate the development of business potential in any corner of the world.

With the opportunities globalization give it is possible to improve ones own performance due to the help of other affiliate companies in other part of the world. Secondly, globalization allowed the boosting of business in comparatively undeveloped areas and countries with poor economic and political conditions. Besides, the flow of capital, which goes to those regions from the home companies, substantially ameliorates the general situation in the local markets. Disadvantages The major disadvantages of globalization are seen in three aspects: recession impact, unequal payments and shift in employment. If the country of home business suffers from recession or major economic issues, its affiliate companies in other countries will be affected either. The most disapproving thing in globalization is unequal distribution of wages between the subordinates in different countries. In one country the wages might be higher and in the other country the wages are lower, although the spectrum of work is analogous.
Effect of communication: 1. 2. Positive effect Negative effect Positive effect: Out sourcing of work and intellectual capital Reduced manufacturing costs Goods and services available world wide

Negative effect: Increase social and economic issues Loss of jobs & lowering of wages Profits driven leads to exploitation of labour

international trade Definition:


The exchange of goods or services along international borders. This type of trade allows for a greater competition and more competitive pricing in the market. The competition results in more affordable products for the consumer. The exchange of goods also affects the economy of the world as dictated by supply and demand, making goods and services obtainable which may not otherwise be available to consumers globally.

The value of a country's total exports minus the value of its total imports. It is used to calculate a country's aggregate expenditures, or GDP, in an open economy.

GLOBALIZATION AND INTERNATIONAL BUSINESS

The Nature of International Business


MODULE GUIDE 7.1

Globalization creates international business opportunities. International business is done by global sourcing, import/export, licensing, and franchising. International business is done by joint ventures and wholly owned subsidiaries. International business is complicated by different legal and political systems.

The Trade Relationship


The nature of the relationship between the exporter and the importer is critical to understanding the methods for importexport financing utilized in industry.
There are three categories of relationships (see next exhibit):
Unaffiliated unknown Unaffiliated known Affiliated (sometimes referred to as intra-firm trade)

The composition of global trade has changed dramatically over the past few decades, moving from transactions between unaffiliated parties to affiliated transactions.

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The Trade Relationship


The nature of the relationship between the exporter and the importer There are three categories of relationships
Unaffiliated unknown Unaffiliated known

Affiliated (sometimes referred to as intra-firm trade)

The composition of global trade has changed dramatically over the past few decades

GLOBALIZATION

International Business
World Trade Organization
a global institution to promote free trade and open markets around the world. Location: Geneva, Switzerland Established: 1 January 1995 Created by: Uruguay Round negotiations (1986-94) Membership: 149 countries (on 11 December 2005) Budget: 175 million Swiss francs for 2006 Secretariat staff: 635 Head: Pascal Lamy (Director-General)

Globalization
International Business
Conducting commercial transactions across national boundaries

Five Reasons to Pursue International Business


1. Expanded profit potential 2. More customers 3. More capital 4. Lower cost suppliers 5. Lower costs of labor

GLOBALIZATION

International Business

Exporting
Local products are sold abroad

Importing
The process of acquiring products abroad and selling them in domestic markets.

Licensing
one firm pays a fee for rights to make or sell another companys products.

Franchising
a firm pays a fee for rights to use another companys name and operating methods.

Example for government and business trade relation


Government tax levied on a product as it enters or leaves a nation

Potential results
Export tariff
Transit tariff Import tariff
+ +
Protect domestic firms from competitors Generate income for the government Reduce competitiveness of home-based firms Raise consumer prices

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CONCLUSION
In conclusion I would like to state m estimation that despite all the formidable obstacles and stumbling blocks the effectiveness of the Globalization and cohesive efforts of people and the government will help to stand a positive stead prevail over the disadvantages. It will fortify to prevent migration which is inherent in third-world and back water countries and reduce social inequality which in its turn will benefit the advantages of the Globalization. All these mentioned facts are time-consuming and labour-intensive process but it will distinctly fortify and develop the Globalization.