The devastation of World War II led to an understanding that global cooperation is the only way for sustainable prosperity and well-being. The winds of change started with creating the Bretton Woods twins World Bank & IMF and later, GATT’s creation and transformation into WTO. The rapid growth of National Economies that were collaborating through Globalization saw the success of International Co-operation. However, economies that remain protectionist in nature and withdrawn had to reform themselves ultimately.
Thus, every economic downturn results in two stresses. First, the need to expand the economy & the need to protect the domestic economy is paramount. This dichotomy has to be managed by the Governments. This disablement of paradox is only possible when Nations specialize and export and import from Nations specializing in complimenting areas. The genesis is the thought of Adam Smith and other economists who dealt with the idea of Globalization.
If Nations have to specialize, the spirit of Entrepreneurship has to be nurtured. Governments must play the role of facilitators to provide the ecosystem for Entrepreneurial ideas to expand across borders.
The three words Liberalization, Privatization & Globalization become the basis for Governments to augment International Trade. The risk must also be mitigated through structural changes and a gradual process; else, the distortion of the domestic market is the result, which then takes the Nation into the spiral of protectionism. The World Economic Forum does provide a yearly report of ranking, and areas focus can be then derived. The report also provides an insight into areas of opportunity for Entrepreneurs.
Globalization is essentially the augmentation of inter-relationships and interdependence of Nations. This gradual yet accelerated relationship between Nations augments Trade and thus the economy. Globalization is the seamless flow of factors of economics/production amongst the interdependent Nations.
Privatization is the transfer of responsibility for driving the economy to the private sector. National assets may also be opened for the transfer of ownership to private ventures. As ultimately, the job of the Government is to enable the economy.
Liberalization is the loosening and removal of the restriction to facilitate free Trade in the economic and political system. It is an ideology that must become the DNA of globalized Nations. After all, the Internationalization of the economy is not one-way traffic. Balance of Payments has to be managed intelligently.
The advent of Liberalization, Privatization & Globalization creates an opportunity for International business, essentially commercial interactions. For Global Organizations, the motive is economies of scale and, thus, profit. For Governments, it would result in accomplishments of economic, political, and other non-profit reasons.
Organizations of today must evolve to do International Business in this Global Village. The planet is borderless, courtesy of the acceleration of Information and Communication Technologies. Supply chains are globalized, and digitalization is paving the way for all organizations to go global. If an organization is not International, it is not a brand to reckon with anymore. Entrepreneurs must have a global mindset and must be Tech-Savvy to expand businesses in the borderless world. Thus Internationalization of a business entity is a must.
Factors that will ensure the rapid acceleration of Globalization are:
- Technology disruptions
- Borderless economies and mobility of factors of production
- The increasing sophistication of supply chains
- Augmented specialized services for International Trade
- Enhanced awareness of consumers owing to information available on the Internet
- Increased political will and an open mindset towards International Trade
- World Trade Organization’s progressive approach to transparent and free Trade
Yet the process of International Business will not see free growth owing to factors like a threat to national sovereignty, Social dynamics, Business dynamics & Environmental pressures, thus leading to three schools of thought:
- International business will grow across the globe
- Regional economies will align
- Forces against Globalization will increase pressure, thus slowing the process
Yet the Corporations have a lot to gain.
- Expansion of sales revenues
- Acquisition of cost-effective quality resources owing to a country-specific specialization
- Managing the risk of the business cycle of bust & boom and smoothening the curve
As a student of International Business, I have no hesitation in saying Nations will ultimately have to move to Internationalize Trade gradually. Isolated economies and organizations have no place in this new world order. Entrepreneurs & Managers of the 21st Century must have a global mindset else perish in this new world order. Technology and domains will amalgamate and make International Trade & Business easy. After all, consumers must get the best quality at the best price, which can only happen when Nations & Corporations compete in the global arena.
Copyright 2020 Niket Karajagi International Business Blogs Series.