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Similarities Between International And Domestic Business Economics Essay

All domestic businesses are concerned with the unemployment rate as a result of it represents a waste of scarce resources. Also increased number of unemployment would lead to a fall in the household disposable income. Therefore this can cause a shift in the demand curve for luxury products to the left which simply represents the poor economic performance. There is an inverse relationship between the unemployment rate and economic growth. This is because fast economic growth would lower the unemployment rate of a particular nation. Also output could be higher if most unemployed people are working within that nation. Below the diagram represents the claimant unemployment rate in the UK among the GDP growth from 1990 to 2006.
This diagram clearly represents the cyclical relationship between the unemployment rate and GDP growth. By looking at this we can say that there is a significant increase in the GDP growth when the unemployment level falls especially in the year of 2004. However, I would say these figures are not accurate because there are unemployed people within the UK who didn¿½t claim the allowance during this period of time.
Inflation can be described as changes in the pricing strategy in an economy. Lower inflation rate would allow consumers to buy large quantity of goods for less price due to the lower pricing strategy. On the other hand, high inflation rates could bring adverse effects to the business. For example, increase in price would lead to value of what savings can buy falls. Also another problem would be if the price changes every month consumers often forgets what reasonable price for a product is when they come to purchase. Therefore this disrupts the consumer knowledge. In UK the highest inflation rate was in 24.2% in 1978 whereas some countries such as Brazil and Argentina experienced hyperinflation in 1980. Inflation focuses on Retail price Index and Consumer Price Index. Below the table represents the current inflation rates in the UK.
Inflation of UK
Aspects within the International Business
International business can be described as commercial trade between two or more nations but it has benefit of joining all countries around the world. International business will come under the globalisation. International trade and investment can be examined under the comparative advantage; this is focusing on the nations factors of production (land, labour and capital)
The two key elements within the study of international business are shown as follows:
Imports and Exports
Any goods and services purchased from one country and transporting it to another country is called imports. The main importing products In the UK are motor cars, crops and fuels. For example, in 2005, 49.3% of goods are imported from euro zone countries, 62.9% came from Western Europe, 9.7% from North America and 20% from developing countries to UK.
Any goods and services has been produced locally and sold it to foreign countries is called Exports. The main exporting products in the UK are medicines and petroleum products. In 2005, 51.1% of goods from the UK exported to euro zone countries, 61.2% to Western Europe, 16.6% to North America and 12.8% to developing country.
Below the graph represents the growth in imports and exports by region in between 1995 ¿½ 2005.
By looking at this graph we can see that China increased its merchandise growth significantly in 2005 when compared with other regions. This therefore explains that most nations are involved with importing and exporting and China will become the most powerful country in ten years time.
Exchange Rates
Exchange rate is a system which allows businesses to exchange one currency for another under the conditions. It is essential for international firms during their imports and exports. For example, if goods have to purchase from Japan, firms have to pay the yen to the supplier. World Bank is controlling the exchange rates; therefore they are constantly changing. Within this aspect of international business we also focus on two types of exchange rates; they are fixed, free-floating exchange rates. Below the demand and supply curve explains the fixed exchange rate system.
Similarities in Domestic and International Business
On the other hand there are few similarities between study of Domestic and International Business.
> The main similarity would be all the firms¿½ shares the same aims and objectives in order to become successful in the market. For example, most domestic and international private firms aim is to maximise the profit.
> Finally, both the international and domestic businesses have same functional departments such as marketing, accounting, human resources, administrative etc. This therefore businesses often combine the aspects of domestic operations with international operations.
In conclusion, I strongly agree with the point that international business is different from Domestic business. I would say the study of international business is more complicated. This is because firms will be affected by the environment changes when they cross the international border which would lead it to invest more time and resources to be familiar with that market. With the domestic firms, they understand the environment quite well. Another reason would be economic environment can also affect the international firms as result of it can be very different from one country to another. For example, developed countries are rich countries, less developed countries are poor and developing nations are moving from poor to rich. If international firms entering in the planned economy will be facing more barrier as the government within that nation has the power to set the prices and control the production. However, in the UK domestic market we have free market economies because government have minimal control over the firms. Altogether, I would say it is necessary for international and domestic business to understand the values and beliefs of countries where they do business.

Positive Effects Of Globalization Economics Essay

To date, the concept of globalization still sparks mixed reactions in the public domain. Skeptics of globalization believe that globalization is bad for economies, and that should be controlled. However, others maintain that it is a great thing to have happened to the world’s nations as thus should be seen as a positive move in the right direction. This essay acknowledges that although there are costs associated with globalization, the resultant benefits clearly outweigh the costs to society. Therefore, this paper contends that efforts to increase globalization should be promoted.
Globalization, according to Schmidt and Weitzel, results from increased international integration (Schmidt and and Weitzel). According to them, globalization results from a host of factors, amongst them technological advancement, political changes, and choice of economic policies. Technological advancement makes production, communication, and logistics and transport much cheaper and faster than before. Economic policies encouraging liberalization and open economies to FDI’s also encourages globalization (Schmidt and and Weitzel). Political changes expose economies that were previously isolated into the international market, promote regional blocs, and support reforms that support the rule of law thus, encouraging investments in infrastructural sector. Globalization brings with it both positive and negative effects.
Positive effects of globalization The gains from globalization are as a result of its effect on the flow of ideas, information, technologies, capital, finances, goods, services and people. The gains are normally triggered by cross border integrations resulting from globalization, which have several dimensions-economic, social, cultural and political (Nistor). Thus, in the analysis of the benefits from globalization, there are three channels through which the benefits accrue. The channels include (a) movement of capital; (b) trade in goods and services and (c) financial flows. Besides, there is also a channel through movement of people.
Movement of capital Technological advancement and the resultant infrastructural development, globalization has opened up nations to carry out international trade. The net effect of the economic integration and liberalization has enhanced capital flows between different nations. The capital flows across these countries has served the important role of enhancing the capital base. This was very much evident in the 19th and the 20th centuries. With capital flows, it is possible to distribute the total world savings among countries with high investment potential. The ease of capital flows ensures that growth and development of a country is not constrained by its own domestic savings. For instance, most of the East Asian countries are beneficiaries of foreign capital inflow. Capital flow can take either the form of foreign direct investments (FDI) or portfolio investments. For developing countries, they benefit more from the FDI’s than from portfolio investments and thus, most of them will place restriction to portfolio investments due to their volatile nature. Capital flows increases the rate of growth of countries beyond their domestic potential, a condition that would not otherwise be achieved, except with globalization.
Increased trade in goods and services Globalization opens up economies to international trade in goods and services, which results in the allocation of resources consistent with their respective comparative advantages. Globalization therefore, promotes specialization thus, enhancing the countries’ productivity. Globalization facilitates the removal of restrictive trade that impedes growth. Technological advancements from globalization allows countries to produce what they are best endowed, in terms of resources, technology and labor. In turn, these countries will benefit from what they cannot produce from elsewhere. Specialization enhances productivity, efficiency and promotes good relations across borders.
Financial flows One of the major characteristics of the globalization process is a rapidly growing capital market. The growth in both foreign exchange and capital market facilitates the transfer of resources across countries. The most significant outcome of the growth in the flows of capital and foreign exchange markets is the gross turnover in the foreign exchange markets. According to Frankel, the gross turnover is estimated to be about $ 1.5 trillion worldwide, per day (Frankel). The turnover is in the order of 100 times greater than the volume of goods and services traded. Therefore, currency trade has become an end in itself. However, an expansion of the capital markets and foreign exchange markets is a vital prerequisite for effective capital transfer.
Negative effects of globalization Concerning the impacts of globalization, two major concerns arise on the mention of the phenomena (Nistor). This are often described as fears of globalization. The first and major concern of globalization is that it leads to unequal distribution of income and other resources amongst countries. Secondly, is that globalization infringes on the sovereignty. That globalization makes it difficult for countries to follow their domestic policies (Centre for Economic Policy Research). Most of the explanations given for these concerns are genuine while others are farfetched.
Iniquitous income distribution This argument is premised on the fact that since globalization places more emphasis on efficiency, the phenomena will in most cases benefit countries that are favorably endowed. Skeptics, though justified to some extent, globalization benefits, as much as they accrue on the most endowed countries as claimed, these countries have had their own fair share of benefits. Developed countries have a head start in terms of technological base, natural as well human resources as compared with the developing nations. The skewed advantage relatively eats away the benefits of developing countries from trade, capital flows, and financial flows as well as specialization benefits. While the benefits from trade benefits all countries, much of the gains accrue to the advanced economies. This is perhaps one of the reasons while provisions for preferential treatment are catered for in today’s trade agreements.
The loss of state autonomy in pursuit of economic policies is another concern raised in regard to globalization. With the increased degree of economic integration, it is true that one country cannot pursue autonomously, policies which are not in consonance with the general worldwide trends. With globalization, some level of sacrifice with regards to national sovereignty becomes inevitable. Hus, with regard to globalization issues, constraints to pursuing domestic policies should be acknowledged.
Further concerns over increased globalization, involve the fear of deteriorating national and international security, cultural erosion, drug trafficking, and other social evils. There is loss of craftsmanship as a result of increased use of technology. Globalization has served to increase dependence of states on other states over essential products that enhancing the economic vulnerability.
Conclusion The contributions of globalization to the developments witnessed today cannot be ignored. Globalization has led to increased development of the world economies, diffused technological advancements and improved people lives. Its role, in enhancing production, productivity and efficiency as well lowering production costs of economies is well clear. These developments, besides having greater benefits, they have their own negatives. However, a succinct review of the benefits against the costs, it is without a doubt that globalization has made the world a better place. With the relevant measures being put in place to mitigate the costs arising from globalization, this essay concludes that, although there are costs to Globalization, the benefits clearly outweigh the Costs to Society. Therefore, efforts to increase Globalization should be promoted.