International Business: Globalization and Culture

Globalization

What is the role of Globalization in international trade?

Globalization is a process of managing cross-border economic and social flows leading to economic interdependence within trading economies. Capital flows across borders and organizational structures are created in such a way that companies can respond quickly to the changing environment. In the past two decades, technology has significantly become sophisticated making it easier and economical for people to carry out business across the world (Krishnan, 2010).

The driving forces have broken down many physical barriers to worldwide communication which used to limited connectivity between businesses over long distances. Globalization is a multifaceted recognizable reality, encompassing a wider variety of dimensions (economic as well as social); where almost every measure of the world market and commerce-including flow of foreign direct investment and traditional business culture-has been restructuring with remarkable openness of the economy and global views towards a barrier-free global village (Idrus, 2011, p. 4).

The propelling factors for the increasing interconnectivity and independence of the world’s markets and businesses are the availability of low-cost highly skilled human resources, especially in less developed countries. Also, increased innovations and development in telecommunications and microprocessor field has significantly reduced the transaction cost of carrying out businesses where the Information technology is a catalyst (Audretsch and Thurik, 2000, p. 5).

Martens and Raza (2010) pointed out the significance of globalization as a free movement of foreign traded goods and services, capital, technology, and labor across borders. Other than the economic gains, there have been benefits in the areas of culture and governance (Charles, 2011). Further, public awareness of issues such as human rights, democracy, and gender have increased significantly due to greater access to newspapers, radio, television, telephone, computer, and internet. These developments have led to improved efficiency, growth, and human development (Manpower Inc 2006).

Foreign Direct Investment (FDI) is usually a commonly used driving force by the less developed countries to attract globalization. This is for the knowledge that FDI contributes to the creation of employment opportunities and infrastructural development (Chudnovsky and López, 1999). The most common strategy used by developing countries to attract FDI into their country is to establish a special export processing zones or free trade zones (Mehta, 2006).

Most of the LIDCs are continuously inviting FDI without any study or research thus creating threats to the sustainable development and growth of local industries (Webb, 2004). Reflectively, globalization has influenced the dramatic increase of FDI inflow in the Low-Income Developing Countries (LIDC) and accelerated the role of the economic growth of those countries. The allocation of FDI is not always smooth among the counties as such FDI brings hypothetical development rather than a real-life scenario (Lim & Moorthy 2010).

Cultural Difference

What are the Classifications of Culture in international trade?

Ethical management thus is the practice(s) set by a business organization in an attempt to incorporate a sense of honesty, integrity, and truthfulness in duty performance and embracing culture. In business management, culture encompasses the aspects of national culture, professional culture, personal culture, and corporate culture (Smith, Peterson, & Schwartz, 2002). Cultural values and conventional strategies facilitate the creation of an imperative environment for interactive business despite differences in personal variation and divergent insight.

Besides, Narver (2009) asserts that “Cultures with high individualism (IDV) ranking tend to reward and punish based on individual behaviors and performance. Whereas cultures with a low IDV ranking tend to reward and punish based on group behavior and performance and can expect the group to look after each other” (p. 4). Thus, the need for an ethical connection between such cultures and management is important.

National culture

National culture reviews the specific market behavior associated with a location. Basically, in national culture, pragmatic competence is achievable when parties involved in the business process appreciate deep-rooted cultural symbolism for expression of satisfaction, dissatisfaction, preference, and loyalty to minimize misunderstanding. Therefore, the aspects of status, age, sex, roles, authority, and functions determine success and perception of these expressions as a function of appropriateness and pragmatic business management (World Business Culture, 2012).

It is important to study the aspects of logics, prospects, natural, and normal in use of culture especially when either of the parties involved in interactive business processes across the different cultural divide (Safaria, Othman, & Wahab 2011).

Professional culture

Professional culture involves the use of local talent, language, and labor in production and distribution channels. It establishes ethics and practices and offers alternative prescription advice through streamlining operations that fit with appropriate set standards (What Is International Trade, 2012). There, professional culture is a closely monitored channel via which businesses address their concerns on corporate compliance to value ethics.

As a matter of fact, one culture’s definition of professionalism may be the opposite of another culture’s definition especially when the interactive symbols display contextual misunderstanding (Ponnu & Tennakoon 2009). Therefore, the issue of misunderstanding between two cultures is what inspired great scholars to come up with a theoretical explanation on the concept of cultural differences and their applications on trade at the global level.

Personal culture

Personal culture encompasses shared beliefs, values, and ethics in management. Reflectively, this consists of an internalized set of beliefs inappropriate conduct alongside enforcement structures that are vocatively institutionalized to include the social issues (Mishra, Das, & Pattnaik 2010). It pays attention to the concerns of the market and employees and offers suitable solutions to address these concerns formulated and presented for further debate (Safaria, Othman, & Wahab 2011).

Personal culture shares the success of turning around a misfortune into a fortune and reversing dismal performance through the application of insight leadership rather than following prescriptions from books that might not be very appropriate. Among the outstanding features of personal culture include an aspect of embracing diversity, affirming position, and re-energizing operations through efficient and satisfying use of labor and other factors of production (Cultural Differences and International Business Communication, 2010).

To embrace cultural specific business expression, that is considered polite and within the domains of trade, it is vital to factor in aspects of cultural differences, geographical variation, variances in symbolic interaction, and competence level to understand market segmentation (Mohamed, Ahmad, & Ismail 2001).

Corporate culture

Ethics and practice are entrusted by a company to offer the latest researched mechanisms of maintaining acceptable performance through the inclusion of the company’s culture of market leadership (Tsoukatos 2007). Corporate culture empowers businesses to closely follow up all the work-related procedures within their departments and suggest an alternative review by the flexible management culture. In summary, the aspect of culture as described above enable a business to successfully acquire and establish a strong leadership position through personal attention to a target market and use professional ethics in management (Cultural Differences in Business, 2011).

International Trade Theory

Explain the aspect of the theoretical aspect of foresight in international trade?

Internationalization is vital in business management and operations especially when a company intends to localize production tools such as labor, distribution, language, ethics, and culture in order to fulfill the ‘absolute advantage’ (OECD 2010). Often, in the contemporary business environment, managers face challenges in the line of duty especially when the survival of a company is directly affected by unfavorable market swings.

In response, several strategies are put in places such as internalization, merger, and other analytical skills to understand the situation and work on modalities that aim at reversing the same (Hong & Waheed 2011). The aspects of internalization, stereotyping, cultural classification, acculturation of a company, and how culture affects behavior and responsiveness in the market for products are incorporate in various international trade theories (Narver 2009).

The components of international trade include foresight (Lim & Moorthy 2010). Foresight is very crucial since it gives a business rough perspective and overview of the future concerning the expected and unexpected changes and challenges in the product life cycle (International Trade Theories 2011). Therefore, businesses have to carefully examine and evaluate their past and endeavor to adopt relevant skills that will be relevant for future challenges and responsibilities (Alt & Lieberman 2010).

Besides, it embraces the need for the creation of an integrated structure to absorb business goals and those that favor the market niche (SERI 2011). In turn, international trade theory provides an overview of the literature of various meanings in relation to their prospective or viewpoints of different market segments (What Is International Trade, 2012). Besides, it authenticates the ability to look forward into the future in an effort to predict and anticipate various developments before they actually take (Cheng, 2010, p. 14). In addressing the theory of factors endowment, foresight facilitates feasibility in production among international quarters engaged in the trade since it focuses on balanced production factors (Abdullah, Rose, & Kumar 2007).

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