QUESTION 1: Describe the shifts in the world economy over the last 30 years. What are the implications of these shifts for international businesses based in Great Britain? North America? Hong Kong?
There are various aspects that have affected the world economy over the past three decades. Although the question is talking about the past 30 years, however, since the end of World War II (WWII), global trade has grown faster than global income. Hill defines globalization as, “The shift toward a more integrated and interdependent world economy” (2009, p.7). Before WWII, national economies covered by barriers to trade and investment. There were differences in government regulation, business systems, cultures and lack of telecommunication and information transition (including World Wide Web).
But after WWII, we have seen huge changes, such as, different cultures are coming closer together, reduced barriers to trade and investment and national economies are merging into an integrated and interdependent global economic system. In addition, information transition has been developed rapidly in the past years. In 1994, web based transactions was virtually zero but by 2007 the figure comes to $250 billion in the U.S. alone. On the other hand, internet usage is fewer than 1 million users in 1990 and by 2007 it was 1.3 billion users. These upgrades have made many countries firms to go globalization.
Software industry from India and most importantly emergence of China plays a vital role in the global trade. India generates revenues of approximately $40 billion and exports $31.3 billion, where twenty five years before the software industry started with nothing. On the other hand, we can notice that, majority of the products we use displayed “Made in China” on it. Lately, China becomes a major contributor to the economy. Because of China’s booming economy market, they are able to do things like charge the world’s first export tariff, a tax exacted from their own businesses that ship out certain goods such as, bamboo chopsticks to Japan which is a new solution to the problem of limited resources. These situations have affected thousands of jobs of other countries around the world. For example, in China, workers are paid less money for their job than any other country. China has since become a major exporter. Thus, the United States and Western European companies’ dominance has declined.
United States and United Kingdom has always been the major players in the economy. But the recent recession affected them so bad that both countries were force to cut jobs and unemployment rate has reached the pick. The value of the U.S. dollar and British pound has also dropped. British companies are forced to look beyond Europe and America for investment and opportunities. Only developing countries are able to grow consumer spending power rapidly. As a result, British companies had to captivate Asian firms as an opportunity (and threat) for the European market. For North American firms, the growth and market reforms in Latin America.
It also represents new opportunities both as markets and sources of materials and production. China’s overpowering economy market also affected Hong Kong’s market freedom. As a result, Hong Kong firms are also moving their labour activities to mainland China to get benefited by cheaper labour and material. In addition, Hong Kong ranked second in the global economy because of the globalization.
In the early 1960’s, U.S. accounted for about 40.3% of world manufacturing output. The figure falls down to 20.7% by 2007. Other developed nations experienced similar decline. Also there has been a rise in non-U.S. multinational enterprises (MNEs). Forecast predicts a steady rise in the share of world output, foreign direct investment (FDI) and MNEs by developing countries such as China, India, and Thailand and reduce share, FDI and MNEs by industrialized nations such as U.S., UK and Japan.
In conclusion, firms may find both new markets and competitors in the developing countries as well as political and economic disruption may cause harm to the business.
Hill, C. W. L. (2009). Global business today (6th ed.). Boston: McGraw-Hill Irwin.
Wilson & Thorne. (2013). Globalisation, Global issues for Accounting (3rd Edition). McGraw Hill.
John, G. (2005). International trade and investment. McGraw-Hill Higher Education
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The Development, Influence, and Regulation of Globalization. June 2009 [cited at 19 July 2014]. Available at http://www.unicommons.com/node/7774, Internet