Introduction:

Globalization has attained unfathomable heights in the recent decade with prolific improvements noticed in the domain of communication and technology. Therefore, the overlapping of international borders has been a profound resultant from the promotion of globalization (Baccaro, 2002). The following essay would emphasize on the economic factors that are associated with globalization and determine the extent to which the global economy is interconnected, integrated and interdependent. 

Question –

734N1 Global Business Individual Essay Assignment Sample

The references to the use of FDI as a viable outcome from globalization could be considered as significant highlights of this essay that can be useful to address the concerns pertaining to the existing state of globalization all over the world (Bessette, 1997). It is essential to consider the global business environment and the other external factors that affect the global financial framework. The primary impact of legal and political macro factors on the extent of integration and interconnectivity in the global economy. The references towards the competitive microenvironment, internal environment factors would also provide valid insights into the interconnectivity identified in the factors such as marketing differences, HRM and production based on culture as well as potential highlights towards suppliers, customers, intermediates and competitors (Cavusgil, Knight & Riesenberger, 2017). The emphasis of the following essay would be directed towards understanding the concept of FDI in a comprehensive manner thereby apprehending the necessary details required for understanding the level of integration and interconnectivity in the global economy as a result of globalization. 

International business expansion:

As per Elster (1998), the primary concern of international business has been identified in the form the motivation of organizations to identify and leverage the opportunities in international markets. It is imperative to observe that organizations which prefer international business are more likely to follow the rationale of financial gains (Elster, 1998). The requirements of organizations in international markets should be tailored towards an understanding of the economic systems prevalent in those markets. The prominently noticed classifications of economic systems are observed in three types that include the market economy, mixed economy, and the command economy. 

According to Ghemawat & Altman (2013), the definition of a market economy could be illustrated in the form of the ownership of the goods and services produced by the country by private entities alongside reflecting on the significant highlight of determining production quantities on the basis of the precedents of supply and demand (Ghemawat & Altman, 2013). The market economy is explicitly associated with democracy alongside highlighting the role of the government in monitoring and promoting free and fair competition among the private ownership of production facilities. The particular reflections on the details of the market economy present an effective representation of the significance of consumers and their purchasing behaviour on the identification of supply and demand alongside the quantity of production. 

The command economies are identified with particular highlights towards the role of the government in determining the quantity and nature of the production of goods and services alongside the planning of the prices for selling them. The ownership of all businesses in a command economy is vested in the state thereby they have limited incentives for controlling costs and gaining efficiency (Hill & Hult, 2018). 

As per Hill (2017), the lack of private ownership is also observed as a primary cause for limited incentives for serving consumer needs effectively. A Command economy can also be considered a totalitarian economy. The precedents of a mixed economy are identified in the integration of specific elements from a command economy and market economy (Hill, 2017). The notable highlights of the mixed government are also noticed in the role of governments for taking responsibility for the firms that contribute to the national interests through innovative market mechanisms and state intervention. The aspects of a mixed economy could be identified in the form of socialism. 

Another prominent highlight to be looked for in the initiatives for promoting international business since the impact of totalitarianism in the political systems is observed in command economies. As per Morrison (2011), the command economies indicate profound references towards the dominance of the state over the allocation of resources for production (Morrison, 2011). The significance of the control imposed by the state government on the production aspects can be considered as a major impact on the depreciation of living standards. The ownership controls are not vested in producers thereby leading to limited transparency between the government and the producers. 

The possibilities for foreign firms to enter into these markets are minimal owing to the prevalence of barriers. These political systems are generally reflective of minimal possibilities for the promotion of global economic integration. Market economies and democratic political systems are interrelated in the majority of cases and are characterized by favourable opportunities for economic freedom for businesses, market liberalization, higher transparency between government agencies and financial organizations due to the rule of law and well developed legal system. It is also essential to observe the implementation of the rule of law that validates transparency in a market economy through explicit and publicly disclosed, widely respected and fairly enforced information and legislation (Peng & Meyer, 2016). It is also imperative to observe that there is limited intervention of government in business activities. The democratic political systems could also be characterized by the limited barriers to the entry of international firms. Furthermore, the democratic political systems facilitate higher opportunities for global economic integration. 

Therefore the relation between political, legal and economic systems is identified as a necessary aspect for determining the integration of the global economy. FDI or foreign direct investment can be determined in terms of the total amount of money held by a country in foreign jurisdictions that are known as outflows (Morrison, 2011). Inflows are identified in terms of the total amount of money invested by foreign sources in a country. Another important definition to be noted in the case of illustration of FDI is the stock of FDI which can be defined as the total value of foreign-owned assets at a particular instance of time. The major highlights to be noticed in recent trends in the world economy pertaining to FDI are the drastic increase in the flow as well as the stock of FDI in the last 35 years. 

As per Ghemawat & Altman (2013), the noticeable increase in preferences of business organizations towards free-market economies and the democratic political institution is responsible for the promotion of FDI. The examples of specific leading destinations of FDI include advanced economies, as well as emerging economies, are identified as prominent sources for promoting FDI (Ghemawat & Altman, 2013). The advanced economies observed in examples of Japan, Britain, European Markets and Japan are perceived as highly appealing markets for FDI that strengthens the prospects for international business. The recent improvement in the appeal of developing economies and emerging markets as prominent FDI destinations could be considered as a major source of proliferating opportunities for international business as well as global economic integration. 

The emerging economies such as Mexico, India, Eastern Europe and China could be considered for easy access to the associated regional markets thereby allowing for limited economic barriers for international businesses. Therefore, these factors can be considered as valid opportunities for the promotion of FDI. The majority of business investments complemented through FDI are observed in the form of mergers and acquisitions which are also considered as a significant international market entry method (Peng & Meyer, 2016). The advantages of acquisition can be considered as the primary reason for their increasing prevalence on the grounds of quicker execution periods and ease of execution and minimal risks pertaining to the acquisition of required assets for international business. Acquisitions are also preferred on the grounds of the motivation of organizations towards increasing their efficiency through information exchange and effective training and development in terms of capital transformation, management skills, cultural integration and technological capabilities. 

Conclusion:

The reflection presented in the essay was derived from major research study literature that was also responsible for presenting a feasible insight into the relationship between political, legal and economic systems. The relationship is particularly considered as a major factor that has played a notable role in the promotion of international business since it has also led to the increase in the flow of FDI. The prominent inferences that can be drawn from the reflection on research study literature suggest the comparison between the costs and benefits associated with the host country and home country. 

The benefits of FDI for the host country are identified in the form of the employment effect, the balance of payments effect, impact on competition and economic growth and the resource transfer effect. On the other hand, the host country has to bear costs that can be associated with the possible adverse effects of FDI on competition within the host nation as well balance of payments. Restrictions could also be identified with respect to the host country’s perceived loss of autonomy and sovereignty. 

The critical reflection on the implementation of mergers and acquisitions could facilitate insights into the fact that firms in the host nation could perceive a drastic loss in control over firm activities and financial integration. Therefore, the role of external factors in promoting international business should also be supported by notable interventions in an internal organizational environment that could lead to prolific opportunities for improving FDI flow. Another formidable cost to the home country is observed as a result of outward FDI in the employment aspects. 

The export of jobs is profoundly associated with a home country’s cost with an outflow of FDI and is identified in cases where the home country has higher levels of unemployment. The implications of legal factors are also observed in the case of international business in the form of certain aspects of the legal environment of the host country in the form of differences in contract law. From a personal perspective, it can be stated that the emerging and developing economies are more likely to adopt mixed economic systems that would be directed towards the objectives of maintaining control as well as acquire suitable opportunities for promoting international business. This can be critically reflected upon to find that the opportunities for global economic integration could be validated in the emerging and developed economies albeit with the concerns of government intervention in planning and production of goods and services for goods and services.           

References    

Baccaro, L. (2002). The civil society meets the state: A model of associational democracy.

Bessette, J. M. (1997). The mild voice of reason: Deliberative democracy and American national government. University of Chicago Press.

Cavusgil, S.T., Knight, G, and Riesenberger, J. (2017) International Business: The New Realities, 4th Edition, Global Edition, Upper Saddle River, NJ: Prentice-Hall (Chapter 2)

Elster, J. (Ed.). (1998). Deliberative democracy (Vol. 1). Cambridge University Press.

Ghemawat, P., & Altman, S. (2013). Depth index of globalization 2013: and the big shift to emerging economies. IESE Business School, University of Navarra. https://www.ghemawat.com/wordpress/wp-content/uploads/2016/07/Depth-Index-of-Globalization_2013-1.pdf

Hill, C. W. and Hult, T. (2018) “Global Business Today”, 10th Ed, McGraw-Hill Irwin: Singapore (Chapter 1)

Hill, C. W. (2017) “International Business: Competing in the Global Marketplace”, 11th Ed, McGraw-Hill Irwin: New York (Chapter 1)

Morrison, J. (2011) “The Global Business Environment: Meeting the Challenges”. 3rd ed. Palgrave: Basingstoke. (Chapter 1)

Peng, M. and Meyer, K. (2016) “International Business”, 2nd Ed, Cengage Learning: London (Chapter 1)