The effects of Globalization on International Trade and Commerce, Papers of Trade and Commerce

Download The effects of Globalization on International Trade and Commerce and more Papers Trade and Commerce in PDF only on Docsity! (Alternative economics, 2014) Fatima Ezzahra MORJANI Pr. Achraf TRIBAK 2023-2024 The effects of Globalization on International Trade and Commerce ABSTRACT The present research will be about one of the most important topics in our field of study, “The effects of Globalization on International Trade and Commerce”. Whether those effects come positively or negatively, they will be highlighted into this research using real life examples (IBM, Toys “R” Us). This research has covered multiple aspects starting from the basic definitions and history of each term concerning this topic, to the why and how they are affecting each other’s. To conclude in the end that for international commerce and trade, globalization can be a double ended sword that should be treated with caution and getting hold of the right way in order to improve international relationships and knowledge for companies, and reach successful results instead of the opposite. RÉSUMÉ La présente recherche portera sur l’un des sujets les plus importants dans notre domaine d’études, « Les effets de la mondialisation sur le commerce international ». Que ces effets soient positifs ou négatifs, On va les discuter dans cette recherche à l’aide d’exemples concrets (IBM, Toys « R » Us). Cette recherche a couvert plusieurs aspects commençant par des définitions de base et de l’histoire de chaque terme concernant ce sujet, au pourquoi et comment ils affectent les uns les autres. Pour conclure en fin de compte que pour le commerce international, la mondialisation peut être une épée à double tranchant qui doit être traitée avec prudence et mettre la main sur la bonne voie afin d’améliorer les relations internationales et les connaissances pour les entreprises, et obtenir des résultats positifs au lieu du contraire. Key words: International trade, Commerce, Globalization, SupplyChain, Economic opportunities, Offshoring, Market expansion • Globalization: “Some world historians attach globalization 'big bang' significance to 1498. Such scholars are on the side of Adam Smith2 who believed these were the two most important events in recorded history. Other world historians insist that globalization stretches back even earlier.” (O’Rourke & Williamson, 2002) II. Importance and role of international trade and commerce International trade is a key driver of economic growth, innovation, and development, and it plays a crucial role in improving living conditions globally, its importance is generally put as the following aspects: • Wider range of goods: As it allows different markets to access a variety of products, and countries rely on other countries for the import of goods that cannot be readily found domestically, it also allows consumers accessibility to a wider range of offers at competitive prices and qualities; • Economic opportunities: It leads to an expansion in markets in areas that were not economically active before, promoting specialization, facilitating access to resources, and enabling the transfer of technology and knowledge; • Decreasing the unemployment rate: By expanding market access, international trade can lead to the creation of jobs in industries involved in exporting goods and services, as well as opening new job opportunities; • Offshoring3: Help companies reduce labor and production costs, which may lead to lower prices for consumers and improved profitability for businesses. • Access to talents: It allows companies to access a broader talent pool and specialized skills; 2 Adam Smith was the 'forefather' of capitalist thinking. His assumption was that humans were self-serving by nature but that as long as every individual were to seek the fulfillment of her/his own self-interest, the material needs of the whole society would be met. (Adam Smith, The Wealth of Nations, 1776) 3 Offshoring is the transferring activities or ownership of a complete business process to a different country from the country (or countries) where the company receiving the services is located. (TTEC, 2023) • Wider knowledge and technology: facilitating the transfer of knowledge, skills, and technologies between countries, which can promote innovation and technological progress. Now moving on to the role: “Trade contributes to global efficiency4. When a country opens up to trade, capital and labor shift toward industries in which they are used more efficiently. That movement provides society a higher level of economic welfare5.” (McDonald, 2021) From the citation above, we can conclude that when a country opens up to international trade, it encourages the movement of capital and labor towards industries where they can be used more efficiently. This leads to a more effective allocation of resources, ultimately benefiting society with a higher level of economic welfare. Therefore, trade promotes specialization, efficient resource allocation, and the mobility of capital and labor, all of which contribute to an enhanced economic well-being on a global scale. III. Positive effects of globalization on international trade and commerce Globalization has an important role in expanding markets and improving international commerce as a whole, which is by connecting businesses and consumers from all over the world, allowing companies to reach new customers and tap into new markets. With globalization, businesses can access a larger pool of potential buyers, which can lead to increased sales and growth. It also promotes competition, innovation, and specialization, as companies strive to offer unique products and services to stand out in the global market. 4 The optimal allocation of resources on a worldwide scale 5 Utility gained through the achievement of material goods and services Globalization has faced criticism for certain negative impacts, which will be mentioned later on this paper, but it has undeniably brought about significant positive effects on international trade and commerce: • Economic Growth: By spreading technologies, productivity and efficiency improvements in various industries, globalization has contributed to overall economic growth by promoting trade liberalization and creating new opportunities for investment and innovation. • Access to new cultures: Allowing companies to open to new cultures, which leads to a better understanding of the environment in which a company will need business relations with. • Lowering costs: Globalization enables businesses to discover more cost-effective methods for manufacturing their goods. Additionally, it fosters heightened global competition, leading to reduced prices and a wider array of options for consumers. • Access to new markets: Globalization made it easier for goods, services, and capital to move across borders, expanding trade prospects for businesses of all scales. Overall, “Globalization has resulted in greater interconnectedness among markets around the world and increased communication and awareness of business opportunities in the far corners of the globe. More investors can access new investment opportunities and study new markets at a greater distance than before. Potential risks and profit opportunities are within easier reach thanks to improved communications technology.” (ModulTrade, 2018) With technology facilitating international commerce and boosting globalization was a game changer. It has made communication faster and more efficient, allowing businesses to connect with partners and customers around the world in an instant. E- commerce platforms and online marketplaces have made it easier for businesses to sell their products globally, reaching a wider audience. Additionally, advancements in transportation and logistics have made it faster and more cost-effective to ship goods computing. IBM has a global presence and has been a major player in the technology industry for many decades. This company is a great example of how globalization can impact an international business positively, as a leader on its field, IBM was able to successfully get globalization to its side, the benefits are included in: • Innovation and R&D10: Globalization has provided IBM with access to diverse markets and technological ecosystems, fostering innovation and research and development (R&D) collaborations, which have contributed to the company's technological advancements. • Strategic partnerships: IBM has been able to form strategic partnerships and alliances with international organizations, governments, and businesses, fostering collaboration and mutual growth opportunities. • Market expansion: Globalization has allowed IBM to access and expand into new markets around the world, reaching a broader customer base and diversifying its revenue streams. • Talent acquisition: IBM has been able to utilize the benefits of globalization to acquire talent from all around the world. This has allowed them to attract highly skilled individuals from various backgrounds and fields of expertise, ultimately improving their innovation and giving them a competitive edge. “The company describes its globalization strategy as being based around "3 Golden Pillars". These are "cloud, data, and engagement." One example of these pillars in action is IBM's approach to emerging markets, such as those in Africa. They are prioritizing a mobile-first strategy as most people in these markets don't have a computer or bank account.” (Owen-Hill, 2022) Overall, IBM is a great example on how to use globalization to benefit one’s 10 a series of activities that companies undertake to innovate and introduce new products and services company, globalization has allowed IBM to capitalize on international opportunities, optimize its operations, and strengthen its position as a global technology and services provider. b. Negative Impact (Toys “R” Us) Toys “R” Us was a well-known international toy and juvenile-products retailer. It was established in 1948 and grew to become a prominent destination for toys, games, and children's products. The company operated numerous stores globally, offering a wide range of toys and related merchandise for children of all ages. With its iconic branding and extensive product selection. The negative impact of globalization on Toys "R" Us, ultimately leading to its inability to compete effectively in the evolving global retail landscape, lead to this company’s downfall, so let’s explore the reasons: • Debt and Financial Struggles: The company's global expansion and debt burden also contributed to its challenges. Toys "R" Us faced financial struggles, including high levels of debt, which ultimately led to its bankruptcy and the closure of its stores. • Supply Chain Pressures: Globalization led to increased pressure on supply chains, as companies sought to optimize sourcing and manufacturing from around the world. Toys "R" Us, like many retailers, faced challenges in managing its supply chain to stay competitive and meet customer demand. • Competition from Global E-commerce: International e-commerce companies like Amazon, increased competitivity for Toys “R” Us, these digital merchants provided a vast array of toys, competitive prices, and the ease of online shopping, creating a major obstacle for traditional physical retailers • Consumer Behavior: Globalization also influenced consumer behavior, with a shift towards online shopping and a preference for diverse and innovative products. Toys "R" Us struggled to adapt to these changing consumer preferences and the shift towards digital retail experiences. Toys "R" Us closed its stores in the United States and several other countries after filing for bankruptcy in 2017. The company struggled with financial challenges, including debt and intense competition from online retailers, ultimately leading to the decision to liquidate its assets and close its stores.