international business

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1 Introduction to International Business

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Chapter Overview Globalization, the growing integration of economies and societies worldwide, is recognized as one of the most important topics in international business. The pendulum of opinion swings from approval on one side to disapproval on the other. For example, rapid economic growth and poverty reduction in some developing nations have been perceived as a positive aspect of globalization. From the negative end, significant international opposition exists

over concerns that it has increased inequality and environmental degradation.1

No precise, widely agreed-upon definition exists for such an extensively used term as globalization. Furthermore, the array of definitions seems to be increasing rather than subtracting over time, taking on political, economic, cultural, and other connotations. However, the most prevalent perception of globalization stems from the “observation that in recent years a quickly rising share of economic activity in the world is taking place between people who live in different countries (rather

than in the same country).”2

Globalization is not a new phenomenon, but has been an aspect of humanity from earliest times, as widely scattered populations gradually became involved in more extensive and complicated economic relations. The growth of modern globalization began towards the end of the nineteenth century, mainly among the nations that are currently developed or prosperous. Growth slowed considerably during the first half of the twentieth century. This slowdown was caused by many factors, including a worldwide sense of growing protectionism in a context of bitter national and great power strife, world wars, revolutions, rising authoritarian ideologies, and massive economic and political instability.

Since World War II (WWII), the pace of globalization has been steadily increasing, engendering a continuous improvement for international relations. The improved post-war relations were brought about in part by the creation of institutions such as the General Agreement on Tariffs and Trade (GATT) known today as the World Trade Organization (WTO), which provides the enforceable agreement for

signatory member nations to conduct global business. Additionally, developing nations were invited to become engaged on a wide range of multilateral international trade issues for the first time in history.

The pace of globalization continued to accelerate during the last decade of the twentieth century. Nations, in their desire to capitalize on the new economic realities of the twenty-first century, eliminated or reduced barriers to international trade and investment. A shift in greater dependence on market and private enterprise has engendered the attitude of being open to the outside world. In many countries (especially communist and developing) the evolving realities demonstrated that developmental outcomes were failing as a result of high levels of

planning and intervention by the government.3

Chapter One provides an overview of the opportunities and challenges of cross border commerce. The overview begins with a section that provides the functional definitions to be used throughout the text, describes the importance of global trade, and discusses the concept of global business. Next a historical overview of international trade is provided. Description and discussion is provided regarding driving forces, the rise of the multinational corporation, and the impact of globalization on business as related to the political, social, economic, and cultural. The chapter concludes with an exploration of the mindset and characteristics of a successful global business manager.