According to Van den Cate, the world no longer consists of closed national economies. Accordingly, all countries have opened their borders to international trade. For that reason, the idea of a borderless economy is now real (Van den Cate). Additionally, the need to open economies to foreign investments has resulted into internationalization.
Consequently, developing countries’ local industries are now fully liberalized (Van den Cate). However, local companies now face competitive pressure from domestic and foreign rivals.
Therefore, for the less developed countries, international trade is an opportunity as well as a threat. Accordingly, internationalization can either expand or restrain the possibilities of a developing country. This essay discuses the impact of internationalization on developing countries.
According to Banerjee and Nikolaos, internationalization has led to the development of local firms in developing countries. As these firms exploit new markets elsewhere, they expand and grow. This growth leads to developing countries’ economic growth.
Consequently, firms accrue benefits from economies of scale. Additionally, firms from developing countries are able to spread their risks when they enter an international market. Furthermore, internationalization has also brought new skills to developing countries (Banerjee and Nikolaos). These skills are within the workforce that comes with foreign investment or trainings offered to the locals.
Moreover, through internationalization, a developing country increases its possibilities of accessing new technologies and ideas. In addition, these countries are also able to promote their brands to new audiences (Banerjee and Nikolaos). For that reason, their companies and brands gain regional or worldwide recognition.
However, most developing countries believe that internationalization give them a raw deal. For instance, most of the developing countries rely on few goods as their main exports. On the other hand, their counterparts from the developed countries have multiple goods on their export list. For that reason, a developing country accrues less benefit from exports than a developed county.
Additionally, developing countries cannot control prices of their goods and services in the international market. Prices of goods in the international markets are controlled by major economic powerhouse. For instance, the dollar determines the pricing of imports and exports in most instances. Consequently, the economies of developing countries are at the mercy of the dollar.
Furthermore, since developing countries’ economies are not based on manufacturing, they import manufactured goods from developed countries (MissNikki). However, prices of the manufactured goods increase all the time. As a result, the economies of these countries are stretched due to overspending on these goods.
Moreover, trade barriers stand on the way of developing countries that try to export manufactured goods (MissNikki). Quotas and tariffs are some of these barriers. Quotas limit the amount of a good produced by these countries. This clearly indicates that all decisions relating to international trade are made by the developed world.
From a developing country point of view, internationalization has serious flaws. For that reason, there are trade problems between developed and developing countries. Moreover, these problems are preventing developing countries from getting the most out of the international trade. The main problems include trade barriers, imbalances in exports and imports and pricing of goods and services.
Nonetheless, internationalization provides new opportunities to a developing country. These opportunities include access to new markets, skills, technologies and information. Therefore, if exploited well, these opportunities can increase a developing country’s gains from the international market.
Banerjee, Diptesh and Nikolaos. 2010. Internationalization Process in Developed and Developing Countries. Web.
MissNikki. 2010. Trade Issues between Developed and Developing Nations. Web.
Van den Cate, Roel. “The Impact of International Trade on Less Developed Countries”. Business Intelligence Journal 2.1 (2009). Print.