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Current Trends in International Business

International Business has become global because practically all 200 countries of the world now engage in international trade and investment to a significant degree. This trend is facilitated by easier and cheaper communication and transportation as well as by countries opening their borders to foreign goods, services, capital, labor, technology and firms. This development is threatened by wars, political upheavals, economic recessions and anti-foreign feelings - as has always happened in the history of business and is now expressed in opposition to "globalization." International business is a complex topic, because the environment it operates in is constantly changing. First, businesses are constantly pushing the frontiers of economic growth, technology, culture, and politics, which also change the surrounding global society and global economic context. Secondly, factors external to international business (e.g. developments in science and information technology) are constantly forcing international businesses to change how they operate.

Growth in Information and Communication Technology

Information and communication technologies, also known as ICT, are changing the landscape in which businesses operate. ICT includes phones, the Internet, computers and other hardware and digital services that facilitate the exchange of information across wide geographic areas. Aside from engendering an entire new generation of businesses (e.g. the "Tech" boom of the late 1990s, the growth of Google, Amazon, Yahoo, etc.), ICT has also reshaped how businesses operate by providing them with fast, organized, and (mostly) quality information from a number of sources (e.g. think about how iPhone, Microsoft Office, and email impact daily business operations). In the words of journalist Thomas Friedman, "the world is flat," because of the impact of ICTs on globalization.

Growth in Emerging Markets

The growth of emerging markets (e.g. India, China, Brazil, and other parts of Asia and South America especially) has impacted international business in every way. The emerging markets have simultaneously increased the potential size and worth of current major international businesses (e.g. General Electric, Wal-Mart, and Microsoft), while also facilitating the emergence of a whole new generation of innovative companies. According to "A special report on innovation in emerging markets" by The Economist magazine, "The emerging world, long a source of cheap labour, now rivals the rich countries for business innovation."

Increasing Influence of States on International Business

International business is increasingly influenced by politics and government. For example, the global recession from 2008 to 2010 led to the U.S. nationalizing (even if temporarily) major U.S. companies like General Motors, and major states like China and the United Kingdom passed economic stimulus packages that were each valued at least 5 percent of their respective GDPs

(Gross Domestic Product). Ian Bremmer, the President of the leading political risk firm The Eurasia Group, argues that the recent era has heralded in a new era of "State Capitalism," which will drastically change how businesses conceive of the global economy and the ability for businesses to remain truly independent. It is observed that, while foreign direct investment continues to dominate international business, international contracting as outsourcing is growing rapidly in significance as one of the key cost-reducing elements in the strategic options of multinational enterprises. The systemic nature of MNEs networks leads to the emergence of asymmetric properties of, and synergistic relations between, the constituent elements (HQs, regional HQs, subsidiaries and outsource partner firms, etc.). In concert, the various network nodes responsible for manufacturing value added transformations, and the inter-relationships accountable for economic transactions, comprise what has been referred to as the global factory From an FDI or international contracting perspective, OO are nothing new with one exception. The increasing complexity of techno-economic activity, which enabled the componentization of production, that is, the slicing up of industry stages of production and firm value chains into different sub-stages, and their subsequent global distribution over geo-economic space but within the organizational boundaries of MNEs, is now having the same impact on services [through digitization of data, information, statistics and knowledge and information and communications technologies (ICTs)]. The relocation of international production beginning circa 1975 is being added to by the international relocation of services provision. This latter trend began in earnest circa 1990 and is continuing apace. (i) since the 1960s, the rate of world trade growth has outpaced that of world output growth; (ii) between 1980 and 2000, the rate of FDI growth outpaced that of world trade growth; (iii) approximately three-quarters of world trade are held internally within the

international operations of MNEs. This is manifest as geo-spatially distributed and operationally integrated, and managed as cross-border collaborative intra- and inter-firm relations; (iv) the growth of vertically integrated intra-industry trade, which accounts for about 30 per cent of world trade, at about 40 per cent since 1975, has outpaced that of FDI growth; (v) the growth of financial capitalism which has outpaced world output growth (at least until the great recession of 2008 arguably). That is, the ratio of global financial assets to annual world output has soared from 109 per cent in 1980 to 316 per cent in 2005. In 2005, the global stock of core financial assets reached $140,000 billion. MNEs, FDI, export-import trade in intermediate products and SOO, as well as the finance capital that enables global trade, have therefore become the preponderant integrating factors in the world economy. Furthermore, trade in intermediate products and SOO resulting from FDI have become significant in improving the efficiency of resource allocation, specialization, value-chain disaggregation and productivity in higher-cost locations (HCLs) as well as LCLs The current crisis looks set to accelerate the shifting of the anchor of the world economy from the US to Asia with the future focus being on the faster growing economies of China, India, Vietnam and Indonesia. The next decade is likely to see these Asian economies playing a leading role in driving global growth and a shifting inexorably eastwards of the centre of economic power. As an integral part of the global economic system, all of the countries in the region are going to see a slowdown and

many companies are already feeling knock on effects. However, an equal certainty is that these economies will emerge stronger and faster than their western counterparts and are undoubtedly going to be key drivers of global demand over the next decade. This shift in economic power has far-reaching implications for global corporations who until now were focusing on the developed western markets and used Asian markets as a sourcing or export

Activity : Write a one page summary of current trends in International Business.


Submission is due on Wednesday lunch time. (20/07/11)