INTERNATIONAL BUSINESS ECONOMICS

International Business Economics

International Business Economics

Statement

To what extent are the arguments for countries specializing and then trading with each other the same as those for individuals specializing in doing the jobs to which they are relatively well suited.

Discussion

International business has been conducted since national boundaries were formed, from the days of the Phoenician Empire to the present. (Sutherland, 2004) pointS out how, throughout history, IB has been used as a tool of governmental policy; either as an enabler, or as a form of coercion and control. Though IB has a long history, its economic, social, and political importance has increased with phenomena such as industrialization, transportation, globalization, and the growth of multinational enterprises (MNEs). As (Stutz, 2005) outlines, contemporary theory of International Business embraces elements of applied economics, finance, business policy and corporate strategy, organization theory, and of applied management fields such as marketing (Samuelson, 2004).

Early theories of IB assumed imbalanced power relationships between nations in relation to financial and physical resources. Mercantilists believed that the prosperity of a nation was dependent on its reserves of precious metals, which in turn would be increased through generating high exports and reducing imports. In the mercantile system, the state fulfilled an active protectionist role, through the application of selective tariffs to promote exports and minimize imports. Between the 16th and 18th centuries, protectionism was one of the key factors underpinning European imperialism and many European wars.

Naomi Klein considers the inherent tensions between the unifying effects of global markets and the social fragmentation of global production as problematic, due to their different impacts on socioeconomic structures. For others, globalization offers the only solution to the problems of social and economic exclusion and impoverishment. (Rugmaan, 2000) considers that, subject to supranational constraints to eliminate the excesses of corporate and individual greed and exploitation, a totally free market is the only course for future development. For Klein, however, fundamental problems of inequality cannot be addressed by the free market approach.

Despite the range of views and opinions on the benefits and problems of IB, it is apparent that there will be ongoing growth and development in the use of the Internet and of e-commerce. Individuals and organizations undertake transactions at a global level in real time, with increasingly open communications and transparency of pricing and costing structures. This has led to the development of new forms of interorganizational collaborations and networks and to novel ways of doing business, such as the reverse auction, whereby an organization seeks the lowest price for the supply of a particular product or service from bidders across the globe (Ritzer, 2001).

Some Characteristics of International Trade

The increasing prominence of international trade is illustrated by the fact that the growth of world merchandise trade has consistently outpaced the growth of world production since the middle of the 20th century. As a result, an increasing percentage of world production over time has been dedicated for sale in foreign countries rather than domestic economies.

Notwithstanding the importance of China as a major trading nation, ...