Increase Of International Business
These companies, through ever increasing flows of trade investments and labor, are laying the foundations of a more interconnected world and are responsible for the rise of the phenomenon of globalization. Globalization can be described as the "increasing interdependence of the national economies of both advanced and developing countries". Multinational companies (MNCs) have been in the forefront of this process of globalization, which in their quest of producing goods/ services at the most economical costs choose locations across the world for maximizing the comparative advantages.
Though some will like us to believe that the globalization is part of a design imposed by rich countries and international organizations over the rest of the world, the truth is much simpler.
The drive for greater economic integration across the world, particularly, during the past two decades has been facilitated and promoted by two important factors. Firstly, the end of cold war and the change in development policies in the developing world created an environment favorable for the MNCs to expand globally. Developing countries were aggressively seeking foreign capital to modernize their economies and spur their growth. The change was led by China and followed by other developing countries of Asia and Latin America. The end of cold war accelerated this process in the 1980s and growth of multilateral rules at the WTO (World Trade Organization) forum set a seal of irreversibility on the changed environment.
Second factor facilitating the globalization process is the technological revolution represented particularly the developments in the field of information technology (IT) and telecommunication. Developments in satellite, optical fiber, and wireless technologies, and now the Internet and the www have revolutionized global communications. These changes have enabled companies to reduce costs and manage their operations from a global perspective. Thus there is surge in foreign direct investment across the world.
A related issue driving companies to do business globally is the increase in competition because of technological developments. Now, sellers in every corner of the world can look for business anywhere. Thus competitive pressure is forcing companies to try to have the lowest possible costs and prices.
Adjustments at the national level to changes in movement of capital and technology and to a certain level labor cause problems. Consequently, from time to time we see voices raised against growth of international business and globalization.
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