International Business
Introduction: The term International Business refers to the Business dealings either related to Government or on private bases but done at international level. It is a very important and key component of International trade. It not only benefits the business person through the profit they earn but also provide a platform for the people relating to different parts of the world to communicate with each other hence, it creates a good example of globalization of the world. (Kadence Buchanan, n.p, 2006)
While talking about trading internationally, we cannot ignore a very important of its component that is Free Trade. If you are trading internationally and you have a lot of hurdles, regulations and limitations, of course you will not be able to enjoy the true essence of profit, which should be attained from your business.
For this purpose, free-trade arrangements are introduced between countries. Free-trade agreements are those by which countries remove the hurdles and strictness of taxes and duties on other countries to do business in their country. This can be a form of subsidies and done in order to promote FDI (Foreign Direct investment). (William H. Cooper, pp1, 2005)
What is international Business?
The term International Business is of interest to most people, as it is responsible for the increasing trend of world business as well as a great portion of world business depends on it now. In the present era, no matter a company is large or small it prefers to do business abroad and always willing to compete with the products available in the international markets. The business of most companies is done at international level and they get a lot of profit by doing transaction abroad. The companies internationally have put all their attention in exporting and importing rather than the business activities locally. (Kadence Buchanan, n.p, 2006)
According to many business experts, who explains the term international business and exporting theoretically: exporting is a usual phenomenon but practiced as a planned configuration and setup in an organized and managed way?
The exporting system can be widely explained as a means of capturing the target country’s market and understanding the environment and demand there, the source country make a pre-planned move towards the target country, and finally the source country operates the business running in the target country through a proper strategy implementation. The process however is not stopped here, in order to stay in a business and to compete, several changes and updating needs to be made regularly. (Kadence Buchanan, n.p, 2006)
The perspective we are explaining and looking about the international business shows that this term is mainly related to enterprises, these enterprises are situated anywhere on the globe and are in intense competition with each other. After a brief introduction of the term under study we will move toward the core literature of the paper discussing the components of International business and will have a deep insight in it.
Company’s Growth With respect to International Business: In order to understand the growth of the company with respect to international business we have look the networking and communication System Company’s develop. It is a very important aspect of International Business that how companies interact with the clients overseas. It is interesting to know that companies operating and doing business in different countries can share the scaffold and structure designed at one place. Even sometimes this networking of branches and doing business worldwide is so useful for companies that share the costs spend on expansion, enhancement, and modifications in the infrastructure, study required for the business and many such related issues.
Hence it’s clear that when countries interact with each other on sharing resources and expanding businesses actually they are doing trade without any limitations and hurdles and developing their own system of doing business transactions. (Kadence Buchanan, n.p, 2006)
Getting Benefits from International Business: How can be International business useful and for whom can be explained by considering this example. Lets take an example of the markets of Middle East, which is termed by many analysts as a vital market. (Kadence Buchanan, n.p, 2006)
The countries which comes in a Middle Eastern circle are full of ethnicity, tradition with wide and vivacious customs, the market of this region is diversifying and dynamic having full of potential. Although during last decades changes have been observed in this region but still comparing to the other parts of the world development and means of development have not been found at a large scale. Therefore even having a lot of potential and resources the countries which come in this block left behind in the development race and due to the requirement of proper reforming for the infrastructure starting any business there is a difficult task. (Kadence Buchanan, n.p, 2006)
The countries in this region like themselves to be differentiated according to their beliefs and enlightening values, also they have developed certain regulations for doing business, hence the enterprises which recognizes this criteria can get a very good opportunity of planning and doing business in these countries. Many of the firms have kept eye on this fact and now moving towards marketing their products and establishing businesses in Middle Eastern countries. (Kadence Buchanan, n.p, 2006)
We talk about the term International Business, understand the benefits, which can be taken by countries in general now we will talk about regional trade groups and their impact on International trade.
Regional Trade Groups: In this section we will talk about the regional trade groups and their impact in International trade and business. I would explain this topic by taking examples of few regional groups and their activities, how they are contributing in world business? And what they are getting from it?
Let’s start by looking at the concept of regional trade firstly and then we will move toward the important regional groups and their impact on international business and trade.
The term regionalism is very common now -a –days. Frequently we listen some news of an agreement that signed between two countries, two enterprises or two groups in order to improve their economic conditions and to eradicate any hurdles if there exist, in the path of their progress and success. The concept of regional trading system is not new to the world; in history we have found evidences of trading between countries, which went successful. If we talk about history, the example of German Zolleverein, which is a name of a union consisting of 18 states not so big. This union for trading was formed in 1834, this seems quite old but that was the agreement, which later caused the creation of Germany. Another good example is of European Union who combined together to achieve the true goal of success and trade benefits being united. (Jafferey A Frankley, pp 15,n.d)
Europe:
The progress economically, in Europe is mainly due to the EU, and to some extent EFTA that is short for the European Free Trade Area. The idea of becoming EU was originally promoted in order to avoid war like situations between the countries that comes under the territory of Europe. Any country residing within the borderline of Europe was welcome to join this Union, which was in best interest of them not only politically but also economically. Europe has played a role model in economic development since then however it’s a fact that initially the merging step was taken due to political issues.
By the passage of time we have seen that EU has been converted from just a union of countries into a wide international market for business. The idea worked a lot in the interest of the member countries as they contributed in world trade that the number of member increased from 6 to 24 in 2004. (Debra Johnson, pp38, n.d)
Although the affects of union of European countries for trade and security were so good but their affects outside Europe, internationally, cannot be decided with so much confidence. But somehow there are two main key points, which led us to the evidence that the prosperity of Europe itself has contributed in the world prosperity as well:
Many countries, which became part of EFTA thought that the further expansion and higher goals of EU could cause insecurity and losses politically and economically.
Another point was that the united Europe would be secure and protected to tie with or not. (Debra Johnson, pp38, n.d)
No matter these points were valid or not but EU being united has maintained its position, and prove to be an appreciated trading country for anyone internationally. Not only with developed countries but also with many developing states it has signed agreements. (Debra Johnson, pp38, n.d)
America: During 1980’s many of the states under American borderline face debt crises and economical restrain. This situation brought about a wave of disturbance in the economic life of America especially the Latin American countries. In 1990 when things became worse, the Latin American states finally took a decision to go for restructuring and converted their economic structure into a universal or large-scale economic market. They moved from strict import, export and business policies to free trade and many such techniques. (Debra Johnson, pp38, n.d)
For the expansion of economy and economic improvements the Latin American countries attracted towards NAFTA to get its membership, therefore NAFTA became as a gateway for improvement to theses countries. Earlier the NAFTA didn’t allow small and developing states to be its part but when the agreement with Latin American countries was enhanced and certain changes occur the member ship was opened for the developing Asian countries as well.
The NAFTA agreement was comparatively less strict than the EU. It allowed the trade in all types of goods between its member countries welcomes foreign investments and eradicates all hurdles in trade. It allows any state to be a member but differentiates from EU in a sense that there is no surety of agreement for a longer time. (Debra Johnson, pp38, n.d)
Asia: Like other big regions of the world Asia is also known as a very big area comprising of a number of states big or small and a lot of potential and resources to benefit the world if invested and involved in international business. According to an article published in New York Times, in the last decade a regional summit was held in which many Asian countries like Pakistan, Iran, and Turkey joined hands for the promotion of International trade and the promotion of economic stability including Central Asian Republics as well.
The member countries didn’t bound this group but other countries were also welcomed to join it, therefore Turkamanistan, Uzbakistan Kyrghystan and Azarbaijan which were once a part of former USSR also became the member of this summit. The summit went so good that Turkey and Iran which were once termed as confronting each other and having disputes on political terms clear their disputes and declared that they will if confront each other it will be on economic grounds. The summit resulted in the negotiations of introduction of business plans like joint development bank, improvement in transportation, communications, agricultural developments, industrial developments and many such issues.(n.n,1992,n.p)
The contribution of Latin America and Asia pacific in international Trade
A recent study made it is revealed that the Japanese have increased the rate of DFI in North American countries in last few years. The Japanese firms have progressed very fast by investing in industrialization. Japanese firms quite rapidly establish themselves as leading enterprises in South Asia. In this region the Japanese DFI have played a vital role in supporting small or large both sort of firms.
According to an analyst the ancient, political and economical relationships have promoted towards the formation of trade and dealings block and due to which the participant’s countries have reduced the trade hurdles between them and open the doors of prosperity and success on economic grounds. (Rene belderbos, pp 214,n.d)
Japan’s export progress by region in 2007
Regional Trading System is a very popular term and almost all the countries are familiar with it .The Chart above displays the year –wise export of Japan to different countries of the world, which shows that how much growth has been performed and achieved in doing business internationally.
The WTO report of 2007 as shown in the table below reveals the statistics of trade related technical assistance by region. The table contains the regions on one side and assistance related to trade, which is contributed by these countries in the world trade jointly.
It is said that during the last 20 years almost, the world has experienced diversifying economies internationally and locally. Within three decades of First World War, the countries around the globe realize the importance of international trade and economical ties, therefore countries started doing business, dealings, and other business activities took place widely among the people and enterprises residing in different countries.
Due to this International Business, between the countries the world has no doubt become a global village and the regional trade groups have developed and involved themselves in this activity so deeply that it has in some way benefited the world. The following may be some highlights of how this trading system has benefit the world:
1. The issue of exchanging goods across borders has been resolved at a large scale and there are no economical and business barriers between the countries. At commercial level there are no borders and limitation for productions and business.
2. The involvement of technological advancements has played a vital role in shortening distances between countries and businesses. There is no hurdle in checking what the other branch of your company is doing in the north or south corner of the world by means of a simple e-mail, fax or calling.
3. By observing its positive impacts, more and more countries even developing countries are willing to participate in international trade and contributing their proportion in the world economy
4. Over the decade a tremendous increase in multinational companies and ISO standard companies have been observed. By 1957 it is said that there were only two or three dozen such companies but recent study revealed the fact that currently there exist thousands of companies of ISO standard which are operating worldwide increasing their network and managing business around the globe.
5. Looking at the growing trend of international trade WTO is keeping a close watch on these activities and its growth and accepts that the markets internationally are not growing on individual basis but trade in the current era is in hands of some major dominant parties.
The WTO has offered some agreement for the countries in this business so that the overall network stays stable and controlled. (Eleni Deroukakis, pp3, n.d)
Conclusion:
Starting from the definition of international business, which refers that it is an activity involving a firm, which resides mainly at some country on the globe and markets its products globally to share and export it to different parts of the world. We talk about the definition and moved toward different countries and regions, which are involved in international trade. We talk about large organizations like EU and NAFTA and small countries like Japan that how they are operating and managing activities worldwide and getting benefit from it.
By using the graphs and tables it was quite clear that how much percentage each region is giving in the world trade, however it was beyond the scope of the topic we discussed in this paper to include the details of all the transactions made by these countries and regions, their products and facts and figure but they can be easily accessed from WTO annual report of 2207-08.
After taking a flash back and glimpses of what ever we studied in this paper, I would like to draw a conclusion that however it is a fact that international trade takes a lot of business out of the country through outsourcing and off shoring,( which means to hire labor from abroad ), but on contrary the amount or percentage the target country earns from source country is much lesser than the percentage of profit added in real GDP of the country actually owning the business.
The last but not the least we come to know from this study that in any business either locally or internationally needs some management and supervision to main its stability. For these purpose organizations like WTO, Bassel Accords and Kyoto Protocol operate worldwide for the control and management of trade internationally and to handle issues happen between countries around the globe.
References
Debra Jhonson, Colin turner. International Business: Themes and Issues in the Modern Global Economy, Routledge, 2003
Eleni Deroukakis, n.d., performance Based Codes, [Online], Available,
http://opencrs.com/rpts/RL31356_20050624.pdf
Accessed on 25th Dec 08
Jafferey A Frankley, Ernesto. Regional Trading Blocs in the World Economic System
Peterson Institute, 1997
Japanese breakdown exports
http://media.rgemonitor.com/images/blogs/japan__breakdown_by_exports.gif
Accessed on 27th Dec 08
Kadence Buchanan, n.d, Understanding the importance of International Business, [online], Available
http://ezinearticles.com/?Understanding-the-Importance-of-International-Business&id=290035
Accessed on 25th Dec 08
New York Times, Asian republic Joint Trade Regional Group, [Online], Available,
http://query.nytimes.com/gst/fullpage.html?res=9E0CEFD71330F93BA25751C0A964958260
Accessed on 27th Dec 08
Picture of Asian and American contribution in world trade
http://www.maf.govt.nz/mafnet/unff-planted-forestry-meeting/conference-papers/Image64.gif
Accessed on 27th Dec 08
Table- Trade Related technical Assistance by region, WTO annual report 2007
http://www.wto.org/english/res_e/statis_e/Statis_e.htm
Accessed on 27th Dec 08
William H. Cooper, 2006,CRS Report for Congress, [Online], Available,
http://opencrs.com/rpts/RL31356_20050624.pdf
Accessed on 25th Dec 08
