Post for week 9

Post for week 9

 This week we looked at Globalisation and International trade.

Firstly, we have to look at international trade, what is international trade, this is when an organisation trades in more than one country. How do companies trade internationally?

·         Outsourcing – This is when an organisation decides to transfer some of its activities to a place that will do them more cost effectively. For example, the phenomenon of the call centre. Nowadays if you have a problem with your network provider, and you call the free help hotline, it is more likely that you will be answered by a call centre in India, this means that your network provider is outsourcing.

·         Exporting and Importing – One of the longest established ways of dealing with customers that are overseas, this is done by transporting goods across national borders.

·         Foreign Domestic Investment (FDI) – This is when a firm sets up a branch or chain of branches in a foreign country and manages them directly. (This is very popular amongst car companies)

·         Licensing – This occurs when a company allows another company in a foreign country to produce and sell its products for a specific period of time. (This is to be differed for Franchising which is where a firm in one country allows a firm in another country to use its brand name for a fee, however it is not the same product).

·         Joint Ventures – This enables a firm in two or more countries to share the risks and resources required to do business internationally. Most involve a foreign firm linking with a firm in its host country.

·         Wholly Owned Subsidiary – Managers who want to watch their organisations international activities create a subsidiary in another country. It is quite expensive but it ensures all profits stay within the company.

·         E-Commerce – This is the ability to buy and sell products via the internet, the goods are then transported to the customer in another country via an agent.

Before going into international trade a firm should be able use a PESTLE analysis to see what political, economic, technological, legal, environmental and socio-cultural factors are in another country before moving their business there. They should analyse the tax rates, the exchange rates, the cultural diversity (what works in the western part of the world, may not work in a third world country). For example recently Tesco tried to move their business to China, however it did not entirely work out and they may have to close their branches there. http://www.bbc.co.uk/news/business-24374863

 Next we look at Globalisation. What is Globalisation? Globalisation could be referred to as the worldwide movement toward economic, financial, trade, and communications integration. Globalisation implies the opening of local and nationalistic perspectives to a broader outlook of an interconnected and interdependent world with free transfer of capital, goods, and services across national frontiers. However, it does not include unhindered movement of labour and, as suggested by some economists, may hurt smaller or fragile economies if applied indiscriminately.

Globalisation includes the rapid expansion of international trade, developments in internationalisation of products and service by large firms, growing importance of global corporations, globalisation of technology, economic integration, global economic dependence etc.

However not everyone necessarily sees globalisation as a good thing, some argue that globalisation is caused by human greed, it gives less choice as large multinationals put small firms out of business, it leads to technological poverty, that it causes loss of cultural diversity, lack of proper control of manufacturing, intercorrectedness, etc. (https://www.youtube.com/watch?v=QGLseQFTgeM) 

Joseph Stiglitz on Globalisation - http://www.youtube.com/watch?v=sV7bRLtDr3E

Naom Chomzky on Globalisation - https://www.youtube.com/watch?v=AHJPSLgHemM