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Information and Communications University School of Business Department of Business studies Name: Isabel Kapembwa Chilambwe Program: Bachelor of Business Administration Course : International Business Sin No: 1301230527 Assignment No: 1 one Identify and critically discuss key forces of globalization and their impact on foreign direct investment (FDI), multinational and international business entities resident in Zambia. Globalization is the process of international integration arising from the interchange of world vie, products, ideas, and other aspects of culture Advances transportation, such as the steam locomotive, steamship, jet engines, container ships, and in telecommunications infrastructure, including the rise of the telegraph and its modern offspring, the Internet, and mobile phones, have been major factors in globalization, generating further interdependence of economic and cultural activities. The globalization process is largely credited for helping to create diversified and flexible learning systems as well as improved quality in communication systems that lead to greater efficiency. The critical issue is that globalization imposes values and ethos in the HE system that lead to increased educational inequality impact of globalization on higher education (HE) practices and processes. It specifically explores how issues of access, equity, funding and national culture are constrained by forces of globalization. It is based on a study of local and international literature on globalization. Globalization is a process that has permeated and affected all areas of human life such as the economic, political, cultural, technological and social .While globalization can be conceptualized in terms of the reconfigurations of the economy, the political domain communication and cultural form sit is most popularly associated with the economy. Globalization is considered as a central element of the modernization process that is mainly responsible for the transference and diffusion of modernizing western values, knowledge and technologies to developing countries. Forces of globalization are: 1. Technology: Faster and cheaper technology in the digital global economy of the Internet era has broken the national barrier of time and space, thus, integration of national markets have been facilitated with ease. Technology is expanding, especially in transportation and communications. Governments: are removing international business restrictions. Liberalisation: Strong wave of liberalisation induced by the World Trade Organisation (WTO) as well as unilateral negotiations and decisions undertaken by the countries world over. Trade Flows: Removal of trade barriers time and again has facilitated a rising growth rate of the world trade over the years. New technology under IT revolution has created distribution channel, which is difficult to be blocked under the protectionist trade policy. For example, French government's restriction on American films tends to be futile when these are shown through satellite or Internet (Economist, 1999). Capital Flows: In the Internet Age, capital has become internationally more mobile. Factor Mobility: Mobility of individuals, information and knowledge, as agents of production and countries has smoothened the growth process of globalization. Several complex and sensitive issues are inherent in the process and proliferation of globalization including the role of culture and political/social acceptance and alternation of the required attitudes towards the change and involvement of the people at large in the global arena. The impact of globalization on business can be placed into two broad categories: market globalization and production globalization. Market globalization is the decline in barriers to selling in countries other than the home country. This change will make it easier for your company to begin selling products internationally, since lower tariffs keep consumer prices lower and fewer restrictions when crossing borders makes it easier for a company to enter a foreign market. It also means that companies must consider other cultures when developing their business strategies and potentially adjust the product and marketing messages if they aren't appropriate in the target country. Production globalization is the sourcing of materials and services from other countries to gain advantage from price differences in different nations. For example, you might purchase materials and components for your cameras from multiple countries and then assemble the product in yet another international location to reduce your costs of production. This change should lead to lower prices for consumers, since products cost less to produce. It also impacts jobs, since production may shift from one country to another, usually from more developed countries to less developed countries with lower average wage rates. Globalization has drawn attention to itself on account of its far-reaching consequences on social and economic development in general and social institutions such as universities in particular. This has led to the increased dissemination of information and dialogue. This has been made possible largely through technologies such as internet, computers, DVDs, satellite televisions and cell phones as well as audio and videoconferencing innovations. The use of such communication technologies has made the world more interactive as communications and transactions can emerge between people who may never meet. In this way, globalization is credited for contributing to the development of the network society .The advances in technology have been instrumental in part to the development of market-led decision-making strategies, commonly referred to as neo-liberalism. Globalization has thus led to the liberalization of the world’s economy with the concomitant effect that products have flooded the global market put it, globalization is characterized by the emergence of new global cultural forms, media, and technologies of communication, which shape the relations of affiliation, identity and interaction within and across local cultural settings. Economic Globalization The economic factor is often construed as the main driver of globalization. This gives rise to the “economic primacy” model of globalization. Globalization is accredited for having created economic opportunities that led to the success in the reduction of poverty in such countries. In terms of this perspective, the global economy assumes the status of the capitalist global economy that is organized on the basis of market principles and production for profit. Economic globalization is facilitated by the activities of multinational corporations. This process has been enhanced by the globalized migration of labour as national economies get deeply enmeshed in global systems of production and exchange that lead to an international division of labour and economic integration which is marked by new exchange relations and arrangements. Component is largely responsible for the wide, deep and fast interconnectedness among people and countries. The Positive Impact of Globalization on Higher Education HE At the outset, it is important to point out that the universities as part of society cannot immune themselves against the global forces that prevail in society. While the effect of globalisation on HE remains polemic, advocates of globalization argue that due to technological globalisation, world nations have become highly interconnected to the extent of becoming a boundary-less global village. This has the critical implication that universities will cease to operate as isolated institutions in particular cities, or countries but rather as global higher education institutions connected to the global world that transcend their countries of origin. The advent of global technology and communication systems has helped education become a lifelong and training process that develops transferable skills and knowledge that can be applied to competitive markets. It is critical to point out that the boundary less knowledge economy has made it possible for universities to collaborate easily with other universities across the globe. A multinational corporation (MNC) or multinational enterprise is an organization that owns or controls production of goods or services in one or more countries other than their home country. This is a company that has a worldwide approach to markets and production or one with operations in several countries. It can also be referred as an international corporation, a "transnational corporation", or a stateless corporation. A multinational corporation is usually a large corporation which produces or sells goods or services in various countries. Importing and exporting goods and services Making significant investments in a foreign country Buying and selling licenses in foreign markets Engaging in contract manufacturing—permitting a local manufacturer in a foreign country to produce their products Opening manufacturing facilities or assembly operations in foreign countries .Multinational corporations are agents of globalization. At the same time, many multinational corporations are also affected by globalization in ways they may or may not like. This reality stems from the fact that multinational corporations have many subsidiaries, some of which benefit from globalization and others that do not. The effects of globalization on a multinational corporation can be good or bad, depending on the nature of the corporation in question access to Markets. Globalization gives businesses access to markets that would have been difficult to reach in the past. Because of the Internet, customers from anywhere in the world can order products from companies anywhere else in the world, and have those products delivered by airplane in just a few weeks. This is naturally a tremendous advantage to businesses, which stand to increase their potential customer base by millions by reaching out to foreign buyers. Labour Factors Globalization allows businesses to access labor at cheap prices. Outsourcing and off-shoring allow businesses to hire employees in foreign countries, where labor and real estate costs may be lower than in the business' home country. While these practices can have negative effects on workers looking for full-time jobs, there is no doubt that they decrease costs (and therefore increase profits) for businesses. Partnership Globalization allows corporations to form partnerships with companies all around the world. Many American, European, and Asian companies have corporate partnerships that stretch across continents. For example, Sony-Ericsson MP3 players are the result of a partnership between the Japanese Sony company and the European Ericsson company. These kinds of partnerships minimize costs and maximize quality by playing to the strengths of teams all around the world. Tax Effects Globalization gives multinational corporations the ability to seek out foreign countries for their investments when their current country adopts a tax policy they find to be unfavorable. Countries with low corporate tax rates are sometimes called "tax havens," as they allow corporations and individuals to lower their tax rates by moving assets offshore. These counties include Bermuda, Belize and Switzerland. The international financial structure, comprised of encrypted information systems and private documents, makes all this possible. Coordination Challenges Multinational corporations may have a difficult time coordinating activities in a globalized economy. A company that operates in America, Japan and Europe will need to hire employees who speak many different languages, and it may be difficult for that company to make sure all employees are on the same page when only a few of them speak the same language. Translators may be called upon to assist in information coordination where language barriers exist. Other coordination problems may come from differences in cultural norms (e.g., marketing in the Muslim world) and business norms (e.g., logistics management in countries with low-quality infrastructure). The problem of moral and legal constraints upon the behavior of multinational corporations, given that they are effectively "stateless" actors, is one of several urgent global socioeconomic problems that emerged during the late twentieth century An enterprise operating in several countries but managed from one (home) country. Generally, any company or group that derives a quarter of its revenue from operations outside of its home country is considered a multinational corporation. There are four categories of multinational corporations: a multinational, decentralized corporation with strong home country presence, a global, centralized corporation that acquires cost advantage through centralized production wherever cheaper resources are available, and an international company that builds on the parent corporation's technology or R&D, or a transnational enterprise that combines the previous three approaches. Foreign direct investment (FDI) is a controlling ownership in a business enterprise in one country by an entity based in another country. The inflow of foreign direct investment is one of the key indicators of competitiveness of the national economy and regions of Zambia. In the case of transitive economies (such as the Zambian economy), globalization is deeply associated with the inflow of foreign direct investment that is able to integrate the national economy to global markets and global production chains. Investors bring modern technologies into the country and support technological progress, increase production efficiency and promote the restructuring of enterprises. At the same time, in terms of human resources management, they allow knowledge, skills and experience sharing in the affiliate companies in the host country, especially in the fields of research and development, know-how, production organization and sales and in the field of management skills. FDI also contributes to the development of domestic companies because increased investment by supranational companies can help local companies through subcontracting relationships. Supranational companies can open access to foreign markets that would otherwise be difficult to enter for local companies, resulting in new export opportunities. Generally speaking, they contribute to a change in the institutional environment, help to improve the efficiency and competitiveness of the host country, and increase the pressure to improve adherence, protection and enforceability of intellectual property rights. These supranational corporations are given preferential treatment and unemployment can rise significantly in those regions with a small inflow of FDI. However, foreign direct investment can also indicate some negative effects. Foreign investors can displace local competing enterprises, particularly when focusing on the local market. In practice, hostile acquisitions of companies can take place in order to decrease competition so that the foreign investor could flood the market with its products. This inflow of the foreign investors can also be reflected in the increased unemployment level in the case of the development of capital-demanding production at the expense of work-demanding production. In association with the re structuralization of production, streamlining of operations and the introduction of new technologies, the number of jobs is reduced in many industries. The increased unemployment level especially applies to acquisitions (i.e. purchase of ownership interest in local companies) while on the contrary, FDI in the form of green field investment increases the employment level. In the interest of winning new foreign investors, the state administration may either limit or neglect support for local companies that are associated with excessive optimistic expectations and concessions to foreign investors. All comparisons of the business performance confirm that companies with FDI are much more technically developed and outperform local companies. After all, it is true that in each country and industry, exporters are more productive than other companies and companies investing abroad are more productive than exporters without foreign investment. This is the origin of the usual argument in support of FDI from public resources - it is expected that exceptionally productive foreign companies will positively influence the operation of local companies after their arrival and that these local companies will learn better technologies through subcontracting relationships. However, the consequences can also be negative; the arrival of a developed company at an industrial area can result in the decline or termination of local competitors. Another negative phenomenon also is transfer pricing or price handling in supranational companies that try to elude high taxes and reduce tax revenues by transferring otherwise taxable amounts between countries with different taxation levels. In addition, the system of investment incentives distorts the economic environment and disadvantages domestic companies compared to foreign companies. Governments in different countries approach investment support in different ways and with different levels of intensity. Supranational companies play a prominent role in research and development in transitive economics. Due to globalization, markets and international business relations are less determined by the national borders. At the macro-regional level, the world trade growth dynamics is reflected in the restructuralization of the transition economies in Zambia which have undergone a profound transformation over the past years and have become a new investment opportunity for many foreign companies. Foreign investors transform these economies by means of the foreign direct investment, support of corporate research and development, as well as development of new sub-contractor relationships. It is impossible to draw any conclusions regarding the success of the economic transformation based on regional differences in the inflow of FDI. The uneven deployment of (FDI) for higher investment demand and higher quality (e.g. research and development investment) further supports the regional differences and highlights the markedly successful "adaption" of the regions to new global economic conditions. It can be assumed that the differences will further deepen. Conclusion It can be said that the mechanisms which integrate regional and local economies into global production chains are still strengthening and, therefore, the globalization processes actively influence all territorial levels. New forms of economic organization of individual regions are created within the regional economies and their arrangement due to globalization. Regarding development of the economy of Zambia, globalization is closely associated with the process of economic transformation with differentiated impacts on regions. When closely looking at the districts of the Zambia, it is obvious that the investments are located highly unevenly. The differences in deployment of the foreign direct investment are associated with the size of towns when the regional centres compared to remaining parts of the regions, show higher attraction for foreign investors. Other differences in the inflow of foreign direct investment are related to the region's geographical position within Zambia. Generally speaking, the higher the regional differences in the inflow of foreign direct investment, the more obvious are the globalization processes in the regional development process. Dependence of the regional economies on the world market grows via the sub-contractor relations. Therefore, the inflow of foreign direct investment is also an indicator of success of economic development and competitiveness of the region because successful export proves the ability of a region to succeed in the international competition that continuously increases due to globalization. International business Comprise all commercial transactions (private and governments, logistics, and transportation) that take place between two or more regions, countries and nations beyond their political boundaries. Usually, private companies undertake such transactions for profit; governments undertake them for profit and political reasons. The term ‘international business ‘refers to all those businesses activities which involve cross-border transactions of goods, services, resources between two or more nations. Transactions of economic resources include capital, skills, people for international production of physical goods and services such as finance, banking, insurance and construction. A considerable advantage in international business is gained through the knowledge and use of language. The Impact of Globalization on International Business Fundamentally, globalization is the closer integration of countries and peoples of the world which has been brought about by the enormous reductions of costs of transport and communications and the breaking down of artificial barriers to the flow of goods, services, capital, knowledge and to a lesser extent, people across borders .Globalization is an umbrella term for a complex series of economic, social, technological, cultural and political changes seen as increasing interdependence, integration and interaction between people and companies in disparate locations. International business involves all commercial transactions private and governmental between parties of two or more countries. Global events and competition affect almost all firms large or small. An international business has many options for doing business, it includes, Exporting goods and services. Giving license to produce goods in the host country, Starting a joint venture with a company, Opening a branch for producing & distributing goods in the host country, Providing managerial services to companies in the host country, Features of International Business Large scale operations: In international business, all the operations are conducted on a very huge scale. Production and marketing activities are conducted on a large scale. It first sells its goods in the local market. Then the surplus goods are exported. Integration of economies: International business integrates (combines) the economies of many countries. This is because it uses finance from one country, labour from another country, and infrastructure from another. It designs the product in one country, produces its parts in many different countries and assembles the product in another country. Dominated by developed countries and MNCs: At present, MNCs from USA, Europe and Japan dominate (fully control) foreign trade. This is because they have large financial and other resources. They also have the best technology and research and development (R & D). They have highly skilled employees and managers because they give very high salaries and other benefits. Therefore, they produce good quality goods and services at low prices. This helps them to capture and dominate the world market. Benefits to participating countries: International business gives benefits to all participating countries. However, the developed (rich) countries get the maximum benefits. The developing (poor) countries also get benefits. They get foreign capital and technology. They get rapid industrial development. They get more employment opportunities. Therefore, developing countries open up their economies through liberal economic policies. Keen competition: International business has to face keen (too much) competition in the world market. The competition is between unequal partners i.e. developed and developing countries. In this keen competition, developed countries and their MNCs are in a favorable position because they produce superior quality goods and services at very low prices, Special role of science and technology: International business gives a lot of importance to science and technology. Science and Technology (S & T) help the business to have large-scale production. Developed countries use high technologies. Therefore, they dominate global business. International business helps them to transfer such top high-end technologies to the developing countries. International restrictions: International business faces many restrictions on the inflow and outflow of capital, technology and goods. Many governments do not allow international businesses to enter their countries. They have many trade blocks, tariff barriers, foreign exchange restrictions, etc. All this is harmful to international business. Sensitive nature: The international business is very sensitive in nature. Any changes in the economic policies, technology, political environment, etc. have a huge impact on it. The impact of globalization on international business International business refers to a wide range of business activities undertaken across national borders. Along with rapidly increasing globalization, international business has become a popular topic and has drawn the attention of business executives, government officials and academics. International business is different from domestic business. At the international level, the globalization of the world economy and the differences between countries present both opportunities and challenges to international businesses. Increasing foreign investment can be used as one measure of growing economic globalization. Foreign direct investment (FDI) is a measure of foreign ownership of productive assets, such as factories, mines and land. The largest flows of foreign investment occur between the industrialized countries. Organizations are exposed to global forces of demand, supply, international market competition, their relevance to global issues global concerns, demographic changes and political developments instead of remaining protected by local environment. Stakeholders' interests are accordingly affected also by the net impact of the same set of factors instead of being mere subject to local situations and trends. This applies to all stakeholders investors, business managers, labour, suppliers, farmers, consumers, politicians and administrative bureaucrats, govt. servants, the young, and the old, men and women as also all types of organizations - business firms, trade associations, govt.s, civic authorities, NGOs, civil societies, social and cultural organizations, religious establishments, scientific bodies, education and research institutions, political parties, the military organizations, multi-lateral organizations and the terrorist outfits. Those who cannot adapt to the global forces sooner or later lose their relevance and struggle to survive. Those who adjust and change as the globalization proceeds convert global opportunities into strategies that strengthen them and make them continuously relevant and deal with the threats from the environment more effectively. Globalization has various aspects which affect the world in several different ways such as: Industrial (alias trans nationalization) - emergence of worldwide production markets and broader access to a range of foreign products for consumers and companies .The ongoing globalization increases the overall need for knowledge of cultural differences between not only countries but also corporate cultures. More and more employers start transferring their experts from country to country to help build new subsidiaries or to support existing ones in certain projects. Their success is closely linked to not only the obvious need for language skills but also the understanding of sub cultural influences, different communication styles and social behaviours of each society. But in many companies these challenges have not been addressed yet. In a lot of cases experts/employees are transferred to foreign subsidiaries with almost no cultural training based on the erroneous assumption that the subsidiary cannot be too different from the home countries and its headquarters culture. Globalization is happening and it is happening very fast due to the improvement of technology, the faster communication as well as the fast travel possibilities via cars, ships and aircrafts. The actual status of globalization can be Global Awareness Society International described by three major changes. The search for multilingual personnel increases, people moving from country to country for jobs or travelling all over the world for their businesses. Also the internet business seem to have a major effect on competition and market developments as the actual location of a company does not really matter anymore. Looking at the increased international travel and moving activities it seems that traditional cultures move more and more into the background. People adapt to world habits. Looking around in our societies the entertainment industry seems to conglomerate to an international mix of music and movies which is available everywhere, international food choices are available in almost every town or city. Also most of the larger cities have multilingual habitants and a variety of different religions. Furthermore we see developments of subcultures within countries or even cities. Subcultures meaning that there are places in a country or a city which keep holding on to their original culture and get not touched by the change of their environment. A perfect example for this would be the Amish people in Pennsylvania, while you have everybody else around them changing and adopting to the global habits the Amish keep their culture and do not let the developments around them influence their believes, ways of living and values. Financial - emergence of worldwide financial markets and better access to external financing for corporate, national and sub national borrowers. Political - political globalization is the creation of a world government which regulates the relationships among nations and guarantees the rights arising from social and economic globalization. Informational - increase in information flows between geographically remote locations. Cultural - growth of cross-cultural contacts; advent of new categories of consciousness and identities such as Globalism - which embodies cultural diffusion, the desire to consume and enjoy foreign products and ideas, adopt new technology and practices, and participate in a "world culture". Globalization is a leading concept which has become the main factor in international business. Globalization leads to increased competition, this competition can be related to product and service cost and price, target market, technological adaptation, quick response, quick production by companies etc. When a company produces with less cost and sells cheaper, it is able to increase its market share. With enhanced competition from foreign brands and companies, industries of every nation are compelled to improve their standards and quality and customer satisfaction services. This benefits the customers and the economy as a whole, and raises the standard of living of everybody. Rise in Technology and Know How the rise in knowledge levels of countries as newer cultures and technologies are opened to a particular area are clear, their knowledge base also grows and expands simultaneously. As a result, they are better able to handle their primary and secondary industries, and this ultimately affects their tertiary sectors in a positive manner as well. Rise in Opportunities With a larger number of industries and resources available, the opportunities for people grow exponentially too. There are many more jobs available to people, and more and more people are also exposed to the lucrative benefits of moving abroad. This increases immigration rates as well, thus giving people the chance to grow economically and socially. It has opened up masses of opportunities to millions of people who would otherwise have not seen any improvements .The rise in foreign investment in countries helps industries and native cities grow at a rapid pace, and this is something that every nation should be open to since it is a highly beneficial venture for them. There is so much that they can gain in the process as well. Every country now imports more than ever before, so that global growth has shared resources and abilities in a way that we could never have imagined even. Meeting consumer expectations and tastes generally, consumers all over the world are better informed, have higher incomes and therefore higher and more exacting expectations. This forces businesses to meet higher standards. Economies of scale Selling into a global market allows for enormous economies of scale, although not all industries benefit from these. Choice of location Businesses are now much freer to choose where they operate from, and can move to a cheaper and more efficient location. The increased movement of businesses and jobs has, to some extent, forced governments to compete with each other in providing an attractive and low-cost location. Businesses now have more freedom of movement in moving to get hold of those cheaper inputs e.g. Labor in developing countries. One limitation on this is that managers won’t always move to some countries if living conditions are unpleasant or even dangerous. 8. Information transfer Information is a most expensive and valuable production factor in the current environment. Information can be easily transferred and exchanged from one country to another. If a company has a chance to use knowledge and information then it means that it can adapt to this global changing. This issue is similar with the technology transfer issue in global markets. The rapid changing of the market requires also quick transfer of knowledge and efficient using of that knowledge and information. 9. Increased mergers and joint ventures the globalization allows the businesses access to bigger markets and associated cost advantages. Economic Development Globalization provides new opportunities to underdeveloped nations by allowing them access to new markets around the world. Even tribal groups in nations, can ride the wave of globalization, selling locally-makes products around the world via the Internet to raise their standard of living. A higher level strategizing as a result of globalization, there are used powerful strategies for marketing and promotion events in many organizations by using electronic tools and equipment’s such as computer networks, iPod and mobiles are used with the help of internet. Globalization is the key factor for international business. This new era of globalization brings with it opportunities and also new considerations and challenges with the dynamics of a free market. Globalization grant access to benefit from the international division of labor, technologies, international specialization, inter-cultural exchange and the consumers enjoy a wider variety of products at lower prices. With globalization, there comes a higher level of thinking and strategizing. Business evolves in new ways. 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