INTBUS-18 International Business and Trade

INTERNATIONAL BUSINESS AND TRADE ARTICLE REVIEW

Title of the Article: GLOBALIZATION AND ITS IMPACT ON INTERNATIONAL BUSINESS
Author: Rabiul Islam1 , A. Fakhrorazi2 , H. Hartini3 , Md. Abu Raihan4
Title of the Journal: Humanities & Social Sciences
Year of Publication: 2019
Introduction:
Globalization can be defined as the opening of a wider local and nationalistic outlook of an
interdependent world global market with free transfer of capital, goods, and services across
national border frontiers. Globalization can also be defined as shrinking of globe, where the
increasing unity of the world economic order through reduction of barriers to international
trade, such as tariffs, import quotas, and export fees. Globalization does not hinder the
movement of free market; however, it would have a negative impact if applied to a fragile
economy. Globalization, if properly implemented, will result in a more equitable world order
where wealth is evenly distributed among the poor and the rich. On the contrary, it may cause a
serious impact on the world order where the weak are subdued and the strong remain
powerful.

In political economy, states allocate and distribute power, where it is viewed as divided between
relational power, which means the ability to cause another actor to do or not to do something.
States can be as an alternative scheme to view power divided as hard power and soft power,
where hard power is about the application of coercive force to compel another actor to do
something while soft power is about using the influence of culture, beliefs, and values to
persuade another actor to do something. Market is about the realm of individual action and self-
interest and tends to emphasize concerns of efficiency.

However, the international political economy is a network of bargains between and among
states that deal in power and markets deal with wealth. These bargains determine the
production, exchange, and distribution of wealth and power elsewhere. Bargain in international
political economy can take many forms. Some are the formal agreements signed, ratified, and
enforced and the other bargains are merely conventions, understandings, or rules of thumb.
However, some of international political economy bargains reflect the rational power, which is
the power of one player to get another to do or not do something. All various environmental
impacts of trade policies on natural resources are difficult to assess, but evidence indicates the
presence of both negative and positive impacts (Islam et al., 2010; Islam & Siwar, 2010; Islam et
al., 2017a, 2017b, 2017c).The aim of this paper is to boost the knowledge regarding
globalization and its impact on international business.

Summary of the Article:

Trade agreement, cross-border capital flow, migration patterns, spread of technology, and
information transfers are the major elements of globalization. A country must sign bilateral,
regional, or multilateral agreements with another country for trade agreement and it must
design to eliminate or decrease trade barriers between countries. There are five stages in the
history of globalization. First is the social globalization, in which social globalization is the first
dominant theme due to the arrival of many kinds of people with the spread of our ancestors in
the whole world. Political globalization seems to be the second dominant theme due to which
our ancestors set up small, rural, urban, and community life. So, it will lead to establishment
political systems across different parts of the world. Third is the cultural globalization. In terms
of expanding the new technologies and cultural aspects over the world, countries that have
political systems also have their own culture. For example, English language, religions and
traditions. Fourth is economic globalization. Economic globalization becomes more important
since the revolution in 1757. Fifth is integrated globalization. The 21st century is viewed as the
emergence of integrated globalization. Many countries are move from self-contained economy
to more integrated and interdependent economy with free flow of goods and finances.

More integrated and interdependent economic systems will also have many positive impacts.
New products are rapidly introduced to market within less than one year and offer undeniable
benefits to the business activities. Next, it is possible for the company to expand their business
to the global market and then will build good image and reputation among consumers and good
perception towards organizations. However, globalization not only offers benefit to
organizations, but also to consumers and countries. Consumers can have quality products, lower
priced products, and more choices to let them to compare the same type of products and then
make their purchasing decisions in the global market. Globalization leads to several economic
developments for the country. It also increases democracy and decreases communism. Lastly,
globalization increases the standard of living in developing and developed countries

However, globalization has disadvantages or challenges to the firm that expand its market at the
global level. The first impact is political stability, the second impact is bureaucracy, third impact
is the fluctuations in currency exchange rates. Further, corruption can limit the commercial
activity and investment in a foreign country. Challenges for firms would also come from
industrial piracy, thus, firms must get protection from governmental acts to ensure that their
products are not easily imitated by other people. Factors like environmental protection, human
rights, and laws in foreign country could not be neglected as any mistakes will led to failure of
business. Lastly, management errors cause huge monetary losses and are yet another challenge
for multinational corporations with many branches across the globe.

Globalization has led to an increase of competition between companies in the market. The
company that can produce the product or service with the lowest costs and price and high
quality can let them do business successfully in the global market. Globalization has led to the
 improvement of the use of technology in developing and under-developed countries, the
developed countries can invest in developing and under-developed countries because of
globalization. Globalization has led to the increase of opportunities in all countries. The
opportunities for the people increase because of the growing number of industries and
resources. The impact of globalization on international business is causing the trade and
investment barriers to decline. Globalization has caused all countries to come together and
reduce trade and investment barriers across countries. This has proved to be beneficial to all
countries because they can easily trade and invest.

Globalization affects every level of industry and every nation. Failure to keeping up with changes
leads to us being left behind. Globalization is a trend in every nation. In the 21st century, in
order to reach the top, companies are taking step to expand internationally through trade and
investment. It has shortened the gap between nations by trade and investment; however, it can
also get negatively affected by other sources, such as a country’s economies, politics, social
instabilities, and natural disasters. A country can learn from other countries’ expertise and
through competing among each other, we can learn from each other and make it as our own
competitive advantage.

Conclusion

Globalization refers to processes that potentially encompass the whole globe. One should be
able to identify the degree to which globalization process has actually evolved. It also refers to
efforts to measure the extent of globalization and justify our focus on economic globalization. Its
processes lead to new or modified governance institutions as they move toward genuine
globalists, as they have to capitalize on opportunities created and reduce costs imposed by
globalization processes. Globalization can make more efficient markets that should be strived
for by every economy. Moreover, globalization process will cause multiple producers competing
for a hold of the economies. This is a good sign for consumers, as the quality of goods and
services will be improved due to competence. Through globalization, foreign direct investment
tends to increase at a much greater rate resulting in the growth in world trade, promotion of
technology transfer, industrial restructuring, and the growth of global companies. It enables
large companies to achieve economies of scale that reduce costs and prices, which in turn
support further economic growth and provide more wealth equality throughout the world.
Lastly, globalization is a powerful real aspect of the new world system, which is one of the most
influential forces of the future course of a nation or country. Partly, as a result of these different
interpretations, there are very different responses to globalization, with some policymakers,
scholars, and activists seeing it as a force for improving the world economy while others see it as
a negative impact to the world economic system.