CORPORATE MANAGEMENT

Corporate Management In Action



An Analysis Of The International Business Environment And The Development Of Global Organisations

Introduction

The world today has become a global village. Not only people have become socially, politically, environmentally and culturally interdependent worldwide but also the economies today are quite dependent on each other. Countries today have moved on to free trade concepts that include free trade areas. This concept of increasing interdependence upon each other is generally referred to as globalization.

Discussion

Globalization

Globalization is the concept of both shrinking of the world as well of the ever increasing consciousness of the whole world. It describes the cultural and economic changes that are continuously taking place due to the ever increasing cross border trade. It generally refers to the production and deliverance of goods and services, through elimination and reduction of barriers to international trade that include export fees, tariffs and import fees and on the movement of capital and investment the world over. Globalization works for more inter-connected and more interdependent world markets and businesses. The driving forces behind the emergence and rapid flourishing of globalization are the rapid advancement in technology, new and better ways of telecommunication and of course the internet. (www.investorwords.com)

Theories of International Trade

The global trade is governed by five theories in total. Mercantilism is the most former of these and is not applied in today's world. It states that countries should try to accumulate wealth by encouraging exports and restricting imports. This was accomplished by taking over colonies that had enough raw material to produce own goods, as well as government interventipons to restrict trade. Governments used to put tariffs on imports and used to subsidize industries to increase the exports.

Absolute advantage is the ability of a country to produce something more eficiently than any other country of the world using the same amount of resources as them. The absolute advantage theory states that trade should be allowed to flow freely as per demand of the markets and shall not be restricted by tariffs and other restricting mechanisms.

The comparative advantage theory states that a country should only produce the product in which it has a comparative advantage and import the others from the countries exporting them.

Factor proportions theory is another trade theory which states that countries import the goods whose resources are in short supply and export the products whose resources are abundant. This theory considers the fact that whether a country is capital intensive or labor intensive.

Then there is a theory which states that innovations and upgaradations in industries help maintain the competitiveness of nations in that industry. This theory is called the national competitive advantage theory. (voices.yahoo.com)

Companies go global to achieve economies of scope, economies of scale, or or they may bes looking for cheaper production costs. How can companies go global is another question that needs to be answered. Companies go global through exporting, licensing, franchising or producing their products somewhere else in the world. Choosing among these satrategies require a lot of ...