Introduction to Global Business Essay

Total Length: 3454 words ( 12 double-spaced pages)

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Chapter 1

Globalization is delineated as the socio-economic transformation and development process of eradicating trade, investment, cultural information technology, and political barriers across nations. The benefits of globalization include increased growth in the economy, political integration in various expanses, and interdependence among countries of the world. The key international institutions that facilitate globalization include the International Monetary Fund (IMF), the World Bank, and the World Trade Organization (WTO). To begin with, the IMF plays a significant role in global financial stability by facilitating global trade that promotes job creation, poverty reduction and economic growth. It also encourages exchange rate stability and an open system for international payments. Secondly, the World Bank aids in trade liberalization, transference of information and knowledge to developing countries to underpin sustainable development. Lastly, the WTO established the General Agreement on Tariffs and Trade (GATT), which encompasses global trade in goods through the considerable decrease of tariffs and other trade barriers. The advancement of information technology has a positive impact on globalization by propagating the Global Use of IT and advancing the digital generation. Regardless of the positive impact of globalization, some of the arguments against it include job losses and income immobility and countries losing control over their economic policies and developments. With increase in diversity, there is associated erosion of communities.

Chapter 2

This chapter focuses on the evolution of international business. In particular, international business can be outlined as all public and private commercial transactions that exist between countries of the world. Foreign direct investment encompasses the inflows of capital from overseas for the investment in local plant and equipment in the production of goods and services and purchasing local companies. There has been a progressive foreign direct investment globally with the world total increasing from $205 billion in 1990 to $1,823 billion in 2008. There are major advantages of international trade. First, there is a greater amount of goods and services to choose from. Second, the level of competition between domestic and international firms leads to decreased prices for goods and services. Lastly, there is increased quality of life and higher standards of living.

Taking this into consideration, there are three key theories of international trade. Mercantilism proposes that a country could only increase its wealth from external trade if it had a trade surplus. The specializations theory asserts that free trade motivates nations to specialize in the manufacture of goods and services they can produce through the most efficient level of production. Lastly, the Factor Endowments theory outlines that countries predominantly export goods and services that largely utilize their abundant factors of production. In the contemporary, there are both socio-economic and geo-political justifications for managed trade. These include protecting local infant industries, health and safety reasons, avoiding creation of export cartels and also outlining any questionable labor practices.

Chapter 3

In summary, this chapter elucidates regional economic integration, how it evolved, and its advantages and disadvantages. Regional integration can be outlined as the execution of several economic and political strides by member states to augment their global competitiveness as well as special trade access. The phases of regional integration encompass free trade area, customs union, common market, and economic union. The most extremely advanced regional integration is the European Union (EU). Through the Maastricht Treaty, it was formed as a comprehensive economic union with free movement of labor amongst member states and the Euro was espoused as the common currency. The North American Free Trade Area (NAFTA) is another example, and it is a FTA between the United States, Canada and Mexico. Its purpose is to expand trade through eradication of all trade barriers. The other example is the Association of South East Asian Nations (ASEAN).

Regional integration does have its costs and benefits. Some of the advantages include increase in the level of international competitiveness within the region, improving economic growth, increasing peace and cooperation in the region, and freeing flow of capital, labor and technology. However, it does have its shortcomings such as the imposition of regulations that fail to consider national differences, eradication of jobs and increasing level of unemployment in protected industries and also diminishing the powers of the national government.

Chapter 4

The fourth chapter encompasses the international flow of funds and exchange rates. To begin with, balance of payments of a country indicates the transactions between one nation and the rest of the world for a certain time period. The current account indicates the activities of both consumers and businesses within the economy with regard to the trade balance, income balance, and net transfers.
On the other hand, the financial account encompasses a domestic nation's assets overseas, assets owned by foreign countries within the domestic nation and the net financial derivatives. There are three kinds of foreign exchange markets that include the fixed, managed floating and the independent floating exchange rate systems. The elements of the foreign exchange market includes the forex market, which is split into the spot market, futures market and forward market.

The international monetary system has evolved over the years. It started out with the gold standard where the monetary system had different currencies pegging their currencies to the market value of gold. This moved on to the Bretton Woods Agreement that included an international system having the U.S. dollar pegged at fixed rate to gold whereas the other currencies were fixed to the dollar. The International Monetary Fund was created to ascertain the stability of the global monetary and financial system.

Chapter 5

The fifth chapter of the book encompasses the cultural setting of global business. One of the key elements of culture is language and this takes into account verbal communication and non-verbal communication. Values are also imperative as they are the basic beliefs that are prevalent within a society. Other elements include religion, attitude, education, manners and customs. Hofstede and Tropenaars propose different cultural dimensions. Hofstede proposes dimensions such as individualism vs. collectivism, time orientation, power distance and masculine vs. feminine. On the other hand, Trompenaars proposes universalism vs. particularism, specific vs. diffuse, neutral vs. emotional and achievement vs. ascription.

There are various cultural dimensions of doing business in different regions of the world. For instance, in Japan, a slight bow and hand shake are fitting. It is imperative not to look directly into the eyes of the hosts, and business there has a group orientation and not individualistic. In Korea, there has to be a personal relation prior to discussion of business aspects with foreigners. Elders are given respect for their wisdom and knowledge. In China, Guanxi is adhered to and this is a philosophy delineating friendships among superiors and their subordinates.

Chapter 6

Chapter six takes into account the legal, economic and political setting of global business. To begin with, there are four different global political systems. These include democracy, Athenian democracy, representative democracy and totalitarian government. Economic-wise, there are three major national economic philosophies including capitalism, socialism and communism. Political risks encompass the political issues in a certain nation that can have a significant adverse impact on how business is undertaken in such a country. Micro-political risks include the political risks that solely influence a certain industry or group of companies in a certain nation whereas macro-political risks include the political risks that fundamentally influence all businesses in a certain nation. Political risks in tandem with global terrorism has given rise to the Terrorism Risk Insurance Act that covers business against risk of terrorism.

Another aspect of global business is corruption. This is a circumstance where businesses are capable of unlawfully changing pertinent public or private decision making through bribery, extortion and blackmail. Public corruption encompasses making such unlawful payments to government whereas private corruption incorporates business corruption that encompasses individuals and private businesses. The legal setting takes into account the civil, common and theocratic law legal systems. Some of the types of laws include tax, contract, criminal, product safety, antitrust and dispute settlement laws.

Chapter 7

Chapter seven delves into corruption and ethics in global business. For starters, ethics can be delineated as the branch of philosophy that takes into account the values related to human behavior, with respect to whether actions are right or wrong, whether there were good or bad intents and the consequences of such actions. Integrity, on the other hand, means abiding by moral and ethical principles. There are four steps in making an ethical decision. First, all facts and situations are defined. Second, all individuals impacted by the circumstance are ascertained together with their rights and obligations. Third, alternative decisions and consequences are identified, and lastly, the right thing to do is determined and then implemented. Ethical business dealings necessitate mutual trust, fair transactions and honest communication. Corporate social responsibility (CSR) takes into account an organization's obligations to the society, incorporating the wellbeing of people and places impacted by its activities. Ethics can be taught through five key aspects and these include personal integrity,….....

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Gaspar, J., Kolari, J., Hise, R., Bierman, L., & Smith, L. M. (2016). Introduction to global business: Understanding the international environment & global business functions. Nelson Education.

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