1.

Identify and discuss key legal issues or concerns affecting

international business.
2. Define Globalization and explain the seven factors or forces
behind the growth of globalization.

ANSWER

Globalization refers to the widening set of interdependent relationships among people from
different parts of a world that happens to be divided into nations. The term sometimes refers to
the elimination of barriers to international movements of goods, services, capital, technology,
and people that influence the integration of world economies

Factors/Forces:
1. Increase in and application of technology - When looking at ways to increase efficiency and
productivity in your business, the use of technology is something that has to be considered first
and foremost. The goal for businesses is to successfully execute an overall strategy by having
employees engaged and performing at the highest level possible.

2. Liberalization of cross-border trade and resource movements - To protect it's own industries
there is restriction across borders for goods and services. There is an restriction that set limits
on IB activities because regulations can change at any time and also contribute to a climate of
uncertainty.

3. Development of services that support international business - Companies and governments

have developed a variety of services that facilitate global commerce. Take sales in a foreign
country and currency. Today, because of bank credit agreements—clearing arrangements that
convert one currency into another and insurance that covers such risks as nonpayment and
damage en route—most producers can be paid relatively easily for goods and services sold
abroad.

4. Growth of consumer pressures - Greater affluence has also spurred companies to spend more
on research and development (R&D) and to search worldwide—via the Internet, industry
journals, trade fairs, and trips abroad—for innovations and products they can sell to ever-more-
demanding consumers. By the same token, consumers are more proficient today at scouring the
globe for better deals, such as searching the Internet for lower-priced prescription drugs abroad.

5. Increase in global competition - The present and potential pressures of increased foreign
competition can persuade companies to buy or sell abroad.

6. Changes in political situations and government policies - Governments seem more willing to
support programs, such as improving airport and seaport facilities to foster speed and cost
efficiencies for delivering goods internationally. They also now provide an array of services to
help domestic companies sell more abroad, such as collecting information about foreign
markets, furnishing contacts with potential buyers, and offering insurance against nonpayment
in the home-country currency.

7. Expansion of cross-national cooperation - Governments have come to realize that their own
interests can be addressed through international cooperation by means of treaties, agreements,
and consultation. The willingness to pursue such policies is due largely to these three needs: To
gain reciprocal advantages., To attack problems jointly that one country acting alone cannot
solve, To deal with areas of concern that lie outside the territory of any nation
Differences in political ideologies often pose operating problems. The fact that countries use
diverse legal principles to regulate the business environment aggravates this situation.
Moreover, new forms of business activity along with changing patterns of trade and investment
put MNEs in uncertain legal situations. In the following, we profile legal aspects of day-to-day
decision-making in the MNE.

Operational Concerns
MNEs obey local laws on starting, running, and closing a business. Activities such as hiring
workers, obtaining credit, protecting investors, paying taxes, trading across borders, and
enforcing contracts must comply with applicable laws. In theory, business regulations are
efficiently designed, easily accessible, and straightforwardly administered. Moreover, simple,
well-designed work rules discourage corruption by removing the incentive to bribe regulators.
The World Bank, along with the World Economic Forum, concludes that better business
conditions consistently boost economic growth, job creation, and trade. The globalization of
markets progressively standardizes legal systems. Attracting foreign investors requires positive
reputations and records. Memberships in international organizations accelerate this trend. The
European Union requires all member countries to satisfy standards for the rule of law; the
World Bank requires borrowers to agree to legal reforms; the WTO imposes a raft of legal
obligations. Despite this convergence, enduring variability differentiates how countries regulate
basic business operations. The World Bank evaluates several features of the business
environment, studying how the role of regulation influences economic performance.

Strategic Concerns
Routine concerns focus managers’ attention on the day-to-day operations of opening, running,
and closing a business. Strategic concerns direct their attention to long-term issues that shape
the competitiveness, profitability, and sustainability of the firm. A country’s legal environment
influences each aspect, shaping an MNE’s strategic decisions on making a product, marketing it,
and safeguarding its proprietary features. Let’s inspect some key concerns.