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International Economics in the context of globalization Essay

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Updated: Apr 22nd, 2019

Recent reports and surveys conducted have indicated that the rate of globalization has increased over the last decade. Due to this tremendous increase, the business operations, framework and platform have been forced to change in order to cope with new and emerging markets.

Three are various factors that have aided in the significant increase of globalization, for example technology and global trade, which in turn has influenced the way multinational companies, whose mode of operation embrace international standards by importing and exporting both human and business cultures across borders all over the world, operate their businesses. This new facts and changes have been a challenge in which the multinational companies’ administrations have had to cope with in order to survive the global market

Multinational companies across the globe have significantly increased over the last two decades, resulting to considerable implication in the guideline and governance of international business trade and investment. Despite the fact that MNCs were responsible for globalization across the world, recent changes in the global scene has influenced the way companies operate in the current business world.

Due to the nature of transactions carried by these companies, there has been a considerable shift in the framework and principles of trading and business operations by cross border transactions. As these global transactions take place, more and more countries and cultures interact and engage each other as the MNCs seek to increase their operations and profitability globally.

As result these has been a large and diverse resource to manage and ensure that they do not conflict and affect the company operations negatively, for example, human resource which comprises different cultures and as a result, harmony and tolerance should be incorporated by the management to ensure no cultural conflicts arise.

Therefore as globalization increases, the CEOs or management of MNCs should also seek to it that their company operations are in line with the challenges brought about by globalization.

This is due to the fact that more and more countries are getting involved in international trade with other countries, thus the international trade and market has tremendously increased in view of, sales, acquiring of resources and raw materials while reducing risks and competition from other countries by diversifying its products and modes of operation.

Due to these recent changes in international trade, the trade platform has changed forcing other businesses that are engaged in international trade adopt to these changes if not, they face winding up their business(Khan 2006, p.52)

Besides these factors, other factors influencing international transactions include, technology, socioeconomic and cultural factors. Given the capability of the MNCs in international trade, their administration has taken steps to see to it that their business are adapting to this change in the global trade. Thus by doing so, these MNCs have accelerated the pace of globalization thereby making the global world trade and financial markets more cohesive and interdependent.

For example countries in Asia where majority of the MNCs are located have resulted in economies that are interdependent making the countries almost have a similar GDP growth rate. As a result of these companies they assist multiple countries to manage their economic output and manage their local consumption.

This has resulted in diversity of goods and services being produced by the countries. Consequently the management should ensure a stable business environment since irrational activities by one of the MNCs may have adverse effects across other business entities and economies of other regions as well (Karrington 2005, p. 87).

Consequently due to countries embracing specialisation in their mode of trade, MNCs also have had to change their production since by producing goods that are not compatible to the ones the local region is producing has become very expensive and uneconomical (Wilson 2007, p. 145).

Even though the governments have always offered incentives to the MNCs in order to ensure that their operations are still running smoothly, it has not enabled them to continue with their traditional mode of business hence forcing the management come up with other strategies in their businesses and revolutionize the type of goods they are producing to the global market while at the same time cutting down the cost of production (Shanklin & Ryans 1987, p. 89).

In addition countries or certain region blocks have become specialized in their production of goods and services in the last decade. For example, China, Japan and Korea have become specialized in the manufacturing industries while African countries have become specialized in the agricultural sector (Zeira 2005, p. 85).

Due to this factor, the policies and trade regulations are tailored to suit the core economic factors of a certain country in order to benefit from international trade, majority of the MNCs that were established a long time ago have had very difficult times in diversifying into different sectors of business which are in inconsistent with the local country.

Consequently the management of such companies have to either to relocate to other countries that support their businesses or change their production to one that is in conformity with the local economy (Mohr, Stanely & Sengupta 2005, p. 263)

In addition due to technology advancement in the world, innovation and exchange of ideas across the globe has drastically increased resulting in change in the way globalisation is affecting the MNCs.

For example due to the internet, consumers all over the world have access to same goods and services as a result, the MNCs have to ensure that the goods and services that they are producing do not become irrelevant in some countries but undertake major inventions and innovations in order to add value to their products and services hence retaining global demand of their of products.

In addition they should ensure that their products can be accessed quickly and the information about new products is readily available for the global market by use of technology related communication for example the internet (Kotker 1983, p. 21)

In conclusion, though MNCs were one of the founding factors that led to globalization in the world, other factors in the world have affect the way globalization is taking effect which in turn has affected the MNCs mode of operation. Therefore for the companies to be relevant in the business world, their CEOs or management have to change their business strategies to embrace the new changes in the global trade and continue maintaining its desired profitability levels (Oswald & Sanfey 2009, p. 257).

Reference list

Alan M & Thomas L 2001, Oxford Handbook of International –Business, Oxford University Press, London.

Karrington , H.W. 2005. Perfect competition and the transformation of economics: south economic journal , Vol 5,125-231.

Khan, M. 2006. The supply and demand for exports: A Simultaneous Approach, Vol 14, 124-178.

Kotker, G 1983, Principles of marketing, 2nd edn, Pearson education, New York.

Mohr, J, Stanely, F & Sengupta, S 2005,Marketing of high-technology products and innovations, Jakki Mohr, Missoula.

Oswald, A & Sanfey, P 2009, Profits, and Rent-Sharing, The MIT ecomonic review, Vol. 12,pp 22-27.

Shanklin, W & Ryans, J 1987, Essentials of marketing high technology, revised edn, Lexington Books, New York.

Wilson, R 2007, A Bidding Model of Perfect Competition: The Review of Economic Studies, Vol. 10, pp.452-501.

Zeira, J 2005. Income, distribution and macroeconomics: The Review of Economic Studies Ltd, Vol. 5,pp. 45-65.

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