Posted at 10.11.2018
The interconnected economies has produced stunning world trade opportunities and higher monetary growth before however, the increased competition between different countries in addition has led to the disputes over trade obstacles, currency speculation especially in case of China vs USA. Relating to Pettis (2010), the professor of funding in Peking University's Guanghua College of Management "things are going to worsen before we reach a point where market leaders in the three or four major economies can come to an arrangement over the long-term solution".
In other words, the globalization has produced great results but, is also producing the tensions of its own kind. This essay will briefly try to explain the globalization in the perspective of creation and then, will go through the trends, opportunities and threats for the international business. It will summarize the WEF's Davos 2010 total annual meeting and can elaborate its effect within the next section. Finally, the last section will look in to the steps and advice can be viewed as by the companies and governments to cross the tide of negative growth cycle and lowered international trade.
Globalization of trade and creation is a steady phenomenon which includes been accelerated within the last few decades after the governments in several countries abolished various rules and only more open trade policies. The study on hard disk drive industry by Gourevitch et. al. (2000:301) found that the ability of the US firms to change their development location rapidly across the globe has made them competitive. Moreover, along the way they have able to increase the employment of employee inside USA and other areas of world as well.
Industries around the world can be broken down into two categories broadly: Processing and Services. In fact, the globalization of creation is an extremely interesting topic to analyze because it is happening beyond the restrictions of industrial commodities or the end products. While looking into the primary pursuits like Agriculture, international shareholders like George Soros's Adecoagro are buying the farmlands for taking advantage of numerous land available for sugarcane production. Likewise, many companies are following a suit to seize the land in Brazil plus some other Latin American countries and shifting the creation to new avenues (Kassai, 2010).
In Service industry one of the main destinations for freelancing the IT work is India. The progress in internet technology and World Wide Web services has provided a great chance to the industries across the world to coordinate the work simultaneously from different places. The advisory committee on IT from the Canadian Institute of Chartered Accountants (2003) suggested in their research paper that, the changing environment is vital to understand and outsourcing of computer services provide operational, scientific and financial benefits. Furthermore, in the production sector shifting of development from high wage developed economies like UK and USA to producing world happened steadily over time. Lately, China became the most significant exporter on earth leaving behind Germany (THE PLANET Factbook, 2010). The shift in the manufacturing base to Chinese land was accelerated due to the opening up of market to foreign buyers and companies. The deliberate try out of developing world governments has provided the bonuses to the manufacturers from advanced economies to move their bases to these countries while exploiting the reduced cost labor and quick access to raw materials.
Moreover, the shift in production to other countries and reshipping back again the created products to the country of origin has also happened because of the emergence of FTAs. For example, following the creation of NAFTA in 1994 the US companies place their factories in Mexico near the Mexican boundary and ship back again the cheaply manufactured goods (Tutor 2u, 2010:7). In the same way, a fresh FTA launched at the start of 2010 by the China and ASEAN are focusing on an interchange of fresh material and created products; taking the price good thing about China in making without really moving the production basis. Therefore, we can see the globalization of creation is quite complicated and affected at various levels (Walker, 2010).
According to BBC (2009), the wave of protectionism is coming from the developed nations this time. In the same way, the downturn has hampered the trade progress and matching to estimates in International Trade Figures Statement (2009) by WTO the international trade was down by more than 10% in the last 1 / 4 of 2008.
The main concern arisen from the existing scenario is the negative sentiment routine accelerated by the monetary downturn. Furthermore, the trade imbalances between major economical players in world trade are also exacerbating the problems in trading conditions. Subsequently, this has triggered heightened level of global tensions.
One of the fallout of the circumstances is the tariff wars on the list of spectrum of economies. For example, EU extended the sneaker tariffs on Chinese and Vietnam. This decision came after a number of trade dispute were occurring between European union and China (BBC, 2009).
Nevertheless, the stake of all countries in future progress is too great to dismiss. One of the important finding by WTO is the fact that, to bring the expansion and dynamism in a overall economy is highly reliant on international business. In reality, to achieve a certain level of growth, much higher level of growth in export and import is needed. So, International trade provides an opportunity to intensify the growth. Additionally, in a study on inflation and the globalization which effectively means increase in international trade talked about that, irrespective of the immediate evidences the globalization is in some way stabilized the GDP and hence the inflation (Ihrig et. al. , 2007). Likewise, other significant benefits associated with increased trade are the push to technology, higher circulation of money, benefit of cost differential in development or services and benefit for cheap labor employees.
Unlike the previous years of high profile meetings and glamorized adjustments, this season was quite plus much more right down to business. Representation from a few of the countries like US and Russia were almost zero whereas, other like India, China was having realistic number of officers representing them (BBC, 2010).
The most important theme on the plan at the economical website was about banking institutions and reforms related to them. Leaders like Leader Nicolas Sarkozy has directly criticized the bankers and argued for removing the financial imbalances like in trade (World Economic Forum Annula Meeting, 2010). Similarly, there is a consensus that the progress and economic power is shifting to the appearing economies therefore, they will play increasingly important role in the lasting recovery. Also, there have been business meeting kept by the prominent business people to increase business opportunities. For example, the boss of your Kenya centered software company 'Joel Selanikio' distributed the panel with leader of google 'Eric Schmidt' (BBC, 2010).
As expected, the discourse at the Davos Annual meeting revolved about the coordination between the various stakeholders of the progressively more interconnected world market. Among the important message come out from the meeting was that, the business leaders, governments, bankers, general culture and all the should collaborate to strengthen the economic recovery. There is not a direct mention of the international business but, questions increased about the systemic hazards of globalization, present business models, plans and polices. These regions of discussion weren't really ground breaking but, this event got bought the already emerging consensus further near to extensive consensus.
The message surfaced from the annual meeting is seen in the executive conclusion of the annual conference (2010). The heading of the twelve-monthly meeting "Improve the Condition of the World: Rethink, Redesign, Rebuild" itself says that, the only way forward to repair the potholes is possible by coordinating the regulations worldwide. Additionally, it stress on the new financial order through refined change in laws, regulations and international coordination.
On the other side, the particular reference to the controversial subject matter of exchange rate manipulation outlined by the leaders speaks about the difference between different countries. Importantly, all these things directly or indirectly impact the international trading opportunities in future. At present, the things are going to settle down And only greater coordination to improve the world trade and hence the development but, only the future will tell the way the consensus over the year will influence the true international trade.
Governments and companies have great stake in prioritizing and formulating the right strategies to offer with the profound rooted systemic problems with the world economical system. There are numerous important points which the government authorities need to focus more than ever. The restoration is fragile so the international business development. The great recession of the century needs outstanding insurance plan initiatives for longer than normal. Governments must continue to support the economies to improve the end result and subsequently the self confidence for trade. More importantly as said by the chief executive Sarkozy the attempts of the international community should be well synchronized and well managed to prevent another crises. In the same way, the export oriented countries like Germany, China and South East Parts of asia should rebalance their economies in favor of consumer led progress. This can not only decrease the global imbalance but, also lead to ecological trade balances between the countries. Subsequently, the broader effect of this rebalancing will be on the leaders of the countries like USA, European union never to to resort to protectionist plans.
The global business went through the dip during the last recession. The economic climate in the american countries is stabilized but, not strong enough to start to see the pre recession expansion in close to term. Therefore, it is strongly suggested for the banking industry that they shouldn't resort to the extreme risk taking behavior in search of higher earnings. However, they shouldn't restrained themselves in providing the credit to genuine debtors as this will hamper the progress of the business within the country and in mix border circumstance too. Similarly, the companies can improve their profits by pursuing the road of innovation. History endorses this idea that, only constant creativity can contributes to increased margin and sustainability of firms. Moreover, as the globe going to become more and more linked they must take good thing about new technologies in bringing out the best results. Companies in advanced countries can increase their competitive benefit by investing in niche regions of products especially, that are hard to reproduce like aerospace, inexperienced energy, electric autos etc. Just as, the companies in the fast finding and catching producing world can also take benefit of cheap labor, considerable high skilled employees and new opportunities opening up in the growing markets.
Over the time, the processing has shifted to expanding low cost places like China and countries in East Asia. Similarly, the Information technology outsourcing happened to the countries like India, Philippines etc. However, the procedure of globalization is very complex and the recession has shifted some things from this craze. Big economies over the world were enticed to implement protectionist options but, the overall outcome of various international gathering like at Davos produced an optimistic consensus and only the increased coordination.
Finally, the current business environment is not so favorable for the international business but, as the recovery will become clearer and firmer the trade will also increase. The fundamental thing needed from the firms and government authorities is a detailed coordination between them and readjustment according to the new economic conditions. This will set a path for the lasting and balanced growth and hence increased global trade and business.