Global business refer to international corporate consolidation or trade between many different nations with a main purpose; to satisfy services, maximize profit, minimize cost while guarding individuals, and corporations growth. “These transactions take on various forms, which are often interrelated. Primary types of international business are import-export trade and foreign direct investment (FDI). The latter are carried out in varied forms, including wholly owned subsidiaries and joint ventures.” Additional types of international business are licensing, franchising, and management contracts. Franchises like McDonalds that has more than 32000 restaurants or Starbucks with almost 20000 locations around the globe. (Czinkota,2004) Global business is successful only when satisfaction and understanding between the involved parties is gain, if an American Company wants to enter Colombia or Japan; they must understand and agree to different laws, cultures, currencies, and societies if they want to stay there for the long run. “The basic principles of business still apply, but their application, complexity, and intensity vary substantially.
To operate outside national borders, firms must be ready to incorporate international considerations into their thinking and planning.” (Czinkota, 2004) When management integrates critical thinking to each decision, international markets can provide growth. Critical thinking like, “how will our idea, good, or service fit into the international market; should we enter the market through trade or through investment, should I obtain my supplies domestically or from abroad, what product adjustments are necessary to be responsive to local conditions, what threats from global competition should be expected and how can these threats be counteracted.” (Czinkota, 2004) I also believe that the capacity of a management team to recognize the trends or factors that will outline our future and the global marketplace will determine the survival of the enterprise, the world keeps updating every day and Windows 95 does not cut it anymore. According to primary types of international business, which are import-export trade and foreign direct investment (FDI), we could identified some “negative” elements into the global business arena, elements like the human time and monetary initial investment that needs to be done by studying and evaluating the business venture, the country, the laws, and if the profitability outweighs the risk.
Another negative effect of global business is the disadvantages that domestic companies have when competing with products that enter X country at a cheaper price and in some cases at a higher quality, these disadvantages affect domestic companies ability to keep product sustainability and in many cases employment stability for its workers. Global business is a tread to job security in the case mention above and in a case when management teams are decide to minimize labor cost and ship unskilled job overseas where they can be perform at a cheaper wage and few to none benefits, and without union strikes worries.
In addition, environmental disadvantages are a huge concern in countries where regulations are none or easy overcome by the mighty dollar; a country without this regulation can experience great amount of disforestation, water contamination, and endless amounts of toxics fuel into the atmosphere. Global business can produce social dislocation in poor countries where governments are weak and groups above the law “guerrillas” takes under their wing the unemployed and the frustrated left from the new comers. As an example, we could consider the poor Colombian farmer that after all work and dedication, he/she is able to sell a pound of grain for five hundred pesos (about $0.40) and the big American farmers are able to produce and sell their product in Colombia for around ten cents. Free Trade Agreement
The next point of view talks about the free trade agreement (FTA) or tratado de libre commercio (TLC) as is known in Latin American countries. The article mentions how bureaucracy and its partial vision should not stop a country from join the biggest market in the world “the global market”. Global business and the TLC could be as beneficial to the host country as to the corporation willing to invest in such ventures. The TLC, open bigger and wider doors for employment and increase by millions the growth opportunities in these countries, these doors are not the exportation of more caramel (dulce de leche) or bananas from Colombia, Chilean wine, etc… These doors refer to the huge potential that Latin American countries could have by welcoming giant corporations like Intel, General Electric, Microsoft, Apple, General Motors, etc… into their labor market and internal revenue “taxation”.
The entrance of these giants into a countries economy could bring a significant increase in the median family household, which is going to have a domino effect into the domestic industries and economy as a whole; these new sources of revenue for a government could increase their ability to build schools and promote higher education scholarships for the less fortunate. Global business in the end is a benefactor to the consumer because it does not just opens the industries to price competition but also to product diversity and higher quality standards; in other words, global business raises the welfare of society. “Why do we pay more for cellular phones, electronics, and vehicle parts than people do in the United States? The answer is simple, there is no competition.” (Tovar, 2006)
The negative side of the free trade venture for a country occurs in the median to lower business class and their small business “moms and pops stores”, which cannot compete with giants like Walmart and business alike. The dislocation of these small businesses causes an increase in unemployment, bankruptcy of limited capital business, and in some cases social degradation when people do what they have too in order to cover their and their families’ basic human needs.
Another negative consequence of this open borders integration is the increase in pollution and the degradation of public zones and urban runways; pollution is going to increase by air, soil, and water because the excess trash and chemical used in these corporations must to end somewhere, and in a country with few environmental regulations, this is a problem. Also the degradation of urban runways occasioned by the transportation of raw materials and final products across airport, ports, highways, trains, etc…
Country deforestation and changes in geographic scene due to river’s caudal loss are a mayor negative factor for countries lacking of regulatory government bodies or laws to guide, and limit the deforestation as well as mandate the reforestation of such zones, otherwise the effects of globalization are going to have a negative review in years to come.
There is not negative aspect in global business that cannot be argue with a positive aspect and vice versa, I believe that businesses are getting more efficient and more competitive each year, and consumers are getting more demanding. Is to each corporate, investor, and government to evaluate and analyze the pros and cons of a venture in order to keep up with the global evolution. Remember, everything has a price, even global business evolution.
Czinkota, M. R. (2004). Fundamentals of International Business. Retrieved January 05, 2012, from University Of Central Arkansas: www.uca.edu Tovar, J. A. (2006, February 28). Portafolio. Retrieved January 06, 2012, from Portafolio: www.portafolio.com.co