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Introduction To International Business

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Question:

Write about the Introduction to International Business.

 

Answer:

Introduction:

Globalization represents a process by which national economies become interdependent and integrated with one another. It is transforming the conventional way of conducting business across globe. Current globalization wave has also created impact on the way different industries are focusing on conducting business in Australian market. The globalization concept was started from the human civilization process. Adam Smith has argued against the mercantilist theory and advocated trade practices so that countries can able to produce their best product at cheaper price. In the current business structure, globalization has allowed businesses to reach beyond the geographical boundaries for achieving continues success (Papastergiadis, 2013). However, it has also increased the challenges for businesses related to the differences in culture, linguistic, education, values, oral and ethics among the people living in different geographical region. In 1980, Australia has opened up its economy as it was suffering with high unemployment rate and declining economy. Introduction of globalization in Australia has allowed foreign business entities to enter into the market, which has created positive impact on the GDP growth rate (Lingard & Sellar, 2013). Moreover, inclusion of foreign businesses has provided more job opportunity for the Australia people. Globalization has primarily influenced for prime Australian business sector including service, manufacturing, mining and agriculture. 

 

End of Protectionism:

“Zero sum game” concept of trade was very much in practice in Australian economy from the beginning. Historically, the management of Australia has believed on the mercantilist concept of selling more and purchasing less from other economies. Moreover, Australian government has maintained restriction on foreign direct investment (FDI) as well (Glatzer, 2012). In fact, it has focused on trading its vast gold reserve and other natural resources. However, it has increased the rate of inflation and unemployment rate in Australian market significantly. In order to boost up the economical enhancement procedure, Australian government has no other option than utilize globalization phenomenon. As a result, the economy has withdrawn all the rules and restriction regarding the entering of foreign businesses within the economy. It has directly increased the standard of life of Australia domestic people. On the other hand, globalization has allowed foreign investors to invest more on Australia for grabbing the major section of potential market. It has also created positive impact on the employment opportunity for the domestic people of Australia, as companies do not have to face too much restriction in including different advance process or technologies within countries. Thus, end of protectionism has allowed Australia to improve present condition of the economy in an effective manner.

 

Shift in the Manufacturing Sector:

As per the article by Dwyer et al. (2013), globalization has allowed economies to create labor-intensive jobs in the manufacturing process. Moreover, it has induced organizations to follow minimum pay guidelines in the manufacturing units, which reduced the adverse impact of low wage manufacturing processes. Over the past two decades, conventional labor-intensive sectors have undergone massive changes that displaced different industrialized economies gradually. Hence, it is reducing the advantage level of industrialized countries. Globalization has provided businesses the opportunity to transfer their production units in different countries where the cost of labor and other raw materials is relatively low. Therefore, most of the prime Australian organization has outsourced the production activities in different countries. The Australian organizations have used contract with low wage counties and FDI for retaining their competitive advantage in the global platform. As per Heckscher-Ohlin factor endowment theory, globalization has provided Australian economy the opportunity to import more labor-intensive products like footwear, textiles and paper from the countries like India, China, Indonesia, Thailand and Malaysia. This outsourcing practice has allowed Australian economy to minimize their human resources for more productive activities.   

As illustrated by Papastergiadis (2013) globalization has increased the popularity of high technology based manufacturing sector in Australian market. As a result, it has induced Australian people to focus on enhancing present level of knowledge and skills. Comparative advantage theory has described that international trade compel an economy to focus on specific production of products so that it can allow import of required amount of goods in an effective manner. Now, Australia has focused on developing knowledge based economy by producing and designing specific high tech products, which is likely to create positive impact on the manufacturing sector. For instance, outside USA, Australia has the largest Boeing operation and it is growing at a rapid rate in both sales and R&D sector (Dwyer et al., 2013). Globalization has also allowed businesses to perform decentralized manufacturing activities for achieving success in the market. For instance, decentralization has allowed General Motors Holden to utilize Australian economy as a center of excellence for producing and designing Rear Wheel Drive (RWD) cars. According to QIU, YE & SUN (2012) globalization has also provided the opportunity of using flexible accumulation technique in their production procedure. Now, flexible accumulation reflects subcontracting, downsizing, increasing use of temporary workers, decreasing weight of industrial sector that is minimizing the power of trade union and government regulations. Introduction of globalization has induced Australian economy to become more lean and flexible. As a result, it has allowed businesses more opportunity to reach to its niche market with the appropriate fulfillment of customers’ needs and wants. Therefore, it has allowed Australia to achieve continues growth in the production volume, which has eventually increased the rate of growth of the economy. 

 

Growth in the Service Sector:

Globalization has also revolutionized the way service sector conducted their business activities. Presently, Australia represents one of the biggest mixed market economies across the globe. Service sector represents around 50% of the total Australian GDP, which is accounted close to 80 billion (Chan, He & Wang, 2012). Australian service sector includes financial institutes, trade, wholesale, education, tourism and healthcare. Globalization has allowed Australian economy to achieve consistent growth that has also created positive impact on the businesses of the financial institution. Forbes has mentioned that 6 out of 10 biggest organizations in Australia are financial service providers or banks. Increasing use of financial services has allowed strong showing of the economy, which eventually created boom in the property market, strengthen consumer confidence and investment over the past two decades. Geographical position of Australia along with highly advanced financial sector has allowed Australian firms to focus on different other Asian and European market for business purposes.  

Globalization has induced majority of the economies to relax most of the regulations related to international businesses. As a result, it has increased the mobility of capital across the countries in an effective manner. It has enhanced the growth rate of Australian financial institutions in a major way. For instance, Australian GDP has increased on an average of around 7% per year during the time 1970 to 1997. On the other hand, FDI increased by 31% and international trade increase by around 12% per year (Graves & Shan, 2014). Global investment opportunity has enlarged the potential market for Australian financial institutions. In addition, it also reduces the risk associated with fluctuation in market rates and exchange rates. Globalization has allowed financial services to segregate the risk into different markets for achieving success in the market. In addition, globalization has allowed organizations to focus on enhancing their present IT infrastructure for providing higher quality of services (McDonald, Mayes & Pini, 2012). Australian economy is very advanced and maintains close proximity with higher growth markets in Europe and Asia. Therefore, it has allowed Australian economy to include different advance tools in medical and healthcare facilities, which has created direct positive impact on the quality of living in the Australian market. Globalization has increased the growth of tourism sector significantly. Globalization has allowed foreign visitors to come in the country freely. It has allowed Australia to emerge as one of the biggest tourist destination of the entire world. Presently, estimated value of tourism industry is around 63.3 billion, which represent around 3% of total Australian GDP. Moreover, it has provided job to around 580,000 Australian people that reflects 5% of the total workforce (Jungmittag, Reger & Reiss, 2013). 

 

Impact on Agricultural Sector:

Traditionally, agriculture represents a prime major export element of Australia, as it endowed with favorable climate and large land area. Australian tariffs and subsidies have also contributed to the enhancement of agricultural sector. Now, increasing workforce in the knowledge and skill based sector has induced farmers to focus on developing more efficient agricultural for fulfilling the needs of the economy. As a result, it increases the demand for high quality seeds and other supplementary products associated with agricultural sector. Now, farming often requires bigger labor force, which has induced different developed countries to focus on import products for fulfilling their food needs. Globalization has provided Australia the opportunity to target those economies for conducting their export activities effectively. Moreover, it has allowed Australian government to invest more on R&D of agricultural, which is necessary for maintaining competitive advantage in the market. Australian government also has not protected the agricultural activities like Europe or UK market, as it can create challenges in exporting products consistently. Therefore, globalization has enhances the demand of Australian firms product significantly. Presently, Australian agricultural industry value is around $155 billion, which is close to 12% of the entire GDP (Schandl & West, 2012). For that reason, several research institute and organizations has been formulated in Australia for achieving production efficiency even further.  Therefore, the agricultural sector in Australia is likely to achieve consistent growth due constant increase in the production efficiencies.    

Improvement of Mining Sector:

As per the article by Simas et al. (2014), globalization has also created massive impact on the business activities associated with the mining sector. The present usage of energy is not likely to slow down in near future. In fact, US Energy Information Administrator (EIA) has projected around 35% increase in the energy consumption by 2035 (McIntosh, 2012). Now, Australia’s global mineral resources possess relatively high supply concentration due to the favorable location. It is increasing the present level of prices for the mineral products. It has increased the needs of Australian mineral resources, which eventually increases the market potential significantly. However, mineral resources also create major environmental issues that Australian economy has accounted for achieving success in the global market. Moreover, the world is moving towards the coal-generated electricity. Therefore, it has increased the demand for Australian coal in the global market. Globalization has allowed Australian Coal Association to target different foreign market for enhancing the revenue level of the industry (Alexeeva & Anger, 2016). Presently, Australia is the biggest coal exporting country that has its presence in almost all across the globe. Now, increasing reach in the global market has induced Australian energy or mining sector to become technology dependent and high capital intensive (Ridoutt et al., 2014). Moreover, globalization has also allowed Australia to emerge as the major exporter of liquefied natural gas in the entire Asia Pacific region.  Globalization has allowed this sector to achieve consistent growth in the global market activities. It has allowed all the prime energy organizations of Australia to operate all across the globe for enhancing the revenue level even further. For instance, globalization has allowed energy organizations like BHP Billiton to establish its presence in all parts of the globe (Reeson, Measham & Hosking, 2012).

Conclusion:

The above illustration has highlighted the fact that globalization has completely transformed the way entire business activities are conducted in the market. It has created impact across sectors that allowed Australia to achieve continues economic growth in the market. Before introduction of globalization, Australian economy was struggling to provide desired life to all the citizens. However, globalization has allowed Australia to emerge itself as one of the strong economy in the entire market. It has allowed manufacturing sector to enhance their quality of production, which has reduced the requirements of energy sources. On the other hand, it has revolutionized the tourism and medical services in a massive way. In addition, it has also helped energy and mining sector of Australia to grow consistently. To conclude, it can be mentioned that globalization phenomenon has completely transformed the economical condition of Australia.

 

References:

Alexeeva, V., & Anger, N. 2016. The globalization of the carbon market: Welfare and competitiveness effects of linking emissions trading schemes. Mitigation and Adaptation Strategies for Global Change, 21(6), 905-930.

Chan, H. K., He, H., & Wang, W. Y. 2012. Green marketing and its impact on supply chain management in industrial markets. Industrial Marketing Management, 41(4), 557-562.

Dwyer, L., Forsyth, P., Spurr, R., & Hoque, S. 2013. Economic impacts of a carbon tax on the Australian tourism industry. Journal of travel research, 52(2), 143-155.

Dwyer, L., Forsyth, P., Spurr, R., & Hoque, S. 2013. Economic impacts of a carbon tax on the Australian tourism industry. Journal of travel research, 52(2), 143-155.

Glatzer, W. 2012. Cross-national comparisons of quality of life in developed nations, including the impact of globalization. In Handbook of social indicators and quality of life research (pp. 381-398). Springer Netherlands.

Graves, C., & Shan, Y. G. 2014. An empirical analysis of the effect of internationalization on the performance of unlisted family and nonfamily firms in Australia. Family Business Review, 27(2), 142-160.

Jungmittag, A., Reger, G., & Reiss, T. (Eds.). 2013. Changing innovation in the pharmaceutical industry: globalization and new ways of drug development. Springer Science & Business Media.

Lingard, B., & Sellar, S. 2013. Globalization, edu-business and network governance: the policy sociology of Stephen J. Ball and rethinking education policy analysis. London Review of Education, 11(3), 265-280.

McDonald, P., Mayes, R., & Pini, B. 2012. Mining work, family and community: A spatially-oriented approach to the impact of the Ravensthorpe nickel mine closure in remote Australia. Journal of Industrial Relations, 54(1), 22-40.

McIntosh, A. 2012. Thinking space: Ten truths about Australia's rush to mine and the mining workforce. Australian Geographer, 43(4), 331-337.

Papastergiadis, N., 2013. The turbulence of migration: globalization, deterritorialization and hybridity. John Wiley & Sons.

QIU, B., YE, L. F., & SUN, S. Q. 2012. An Empirical Study on the Impact of GPNs on China's Manufacturing Industries' Upgrading in Global Value Chains——An Analysis from the Perspective of ESI [J]. China Industrial Economics, 1, 008.

Reeson, A. F., Measham, T. G., & Hosking, K. 2012. Mining activity, income inequality and gender in regional Australia. Australian Journal of Agricultural and Resource Economics, 56(2), 302-313.

Ridoutt, B. G., Page, G., Opie, K., Huang, J., & Bellotti, W. 2014. Carbon, water and land use footprints of beef cattle production systems in southern Australia. Journal of Cleaner Production, 73, 24-30.

Schandl, H., & West, J. 2012. Material flows and material productivity in China, Australia, and Japan. Journal of Industrial Ecology, 16(3), 352-364.

Simas, M. S., Golsteijn, L., Huijbregts, M. A., Wood, R., & Hertwich, E. G. 2014. The “Bad Labor” footprint: quantifying the social impacts of globalization. Sustainability, 6(11), 7514-7540. 

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