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International Business

International Business is the trading of products, goods, and services to other countries with an eye toward mutual benefit. This can encompass a full range of cross-border exchanges of goods, services, and resources, such as physical goods, services, people, intellectual property (e.g., patents, copyrights, brand trademarks, and data), and contractual assets or liabilities. The trade of tangibles and intangibles between countries is what creates the economy growth of all countries and permits them to align with each other and make great business and build great relationships.

The entities involved in international business run the gamut, ranging from from large multinational firms with thousands of employees doing business in many countries around the world to a small sole proprietorships, perhaps acting as an importer or exporter.

Globalization

Globalization is the tendency of international trade, investments, information technology, and outsourced manufacturing to weave the economies of diverse countries together. This shift toward a more interdependent and integrated global economy creates greater opportunities for international business. Such globalization can take place in markets, such as where trade barriers fall and buyer preferences change, or in production, such as where a company sources goods and services easily from other countries. Globalization is what has brought us the opportunity to open doors to other countries ideas and the knowledge of different cultures. It has also provided access to ideas, services, goods, and even relationships all over the world, enabling people to come together to hopefully bring opportunities and prosperity to everyone.

Globalization of Markets

Globalization of Production

Globalization and Role of Technology

The effects of technological change on the global economic structure are creating immense transformations in the way companies and nations organize production, trade goods, invest capital, and develop new products and processes. Sophisticated information technologies permit instantaneous communication among the far-flung operations of global enterprises. New materials are revolutionizing sectors as diverse as construction and communications. Advanced manufacturing technologies have altered long-standing patterns of productivity and employment. Improved air and sea transportation has greatly accelerated the worldwide flow of people and goods.

Examples Here in Utah

How globalization in Utah looks like, With more than 95 percent of the world’s population and 80 percent of the world’s purchasing power outside the United States, future economic growth and jobs for Utah and America increasingly depend on expanding U.S. trade and investment opportunities in the global marketplace. Utah has received many accolades recognizing it for its economic success, and part of this success can be attributed to the focus that has been placed on expanding companies internationally. Exports are an important part of Utah’s economy, and the good news is they are growing. In 2015, Utah exported $13.3 billion worth of goods, an 8 percent increase from the previous year. While primary metals make up a large portion of Utah’s exports, the state has been working to diversify and grow exports in other areas as well. Some of Utah’s top export products include computer and electronic products, chemicals, food and kindred products, and transportation equipment.

The private and public sector put international business as a top state priority a decade ago with the creation of World Trade Center Utah—and it has paid off. Utah is one of the few states in the nation with a trade surplus of $4 billion, and it ranks ninth for export growth in the United States. This is an impressive feat for a small, landlocked state.

So what does this all mean for Utah? According to a policy brief produced by the Kem C. Gardner Policy Institute at the University of Utah, the state’s 2014 international goods exports generated $4.1 billion in earnings, supported more than 95,000 jobs and contributed almost $7.6 billion to the state’s gross domestic product. These impacts represented 4.8 percent of total earnings in the state, 5.3 percent of total employment and 5.4 percent of total GDP. It is hard to argue with those economic benefits.

Disadvantages of Globalization

While globalization is often praised for having many positive effects, economists also observe negative impacts. When countries’ economies are intertwined, economic downturns in one country can cross borders and affect the economies of other countries. Critics argue this interdependency threatens to weaken multiple countries and economies through a domino effect when a problem arises. For example, when Greece’s economy nearly collapsed due to its debt crisis in 2009-10, the impact was felt throughout all of Europe, and many countries, such as Germany, scrambled to ensure their own economies would not also suffer.

Loss of Jobs

In 2016 Intel planned to eliminate 12,000 jobs, 11 percent of its total work force, following another quarter of disappointing PC sales. Intel is Oregon’s largest private employer, providing 19,500 Jobs and of the 12,000 perspective layoffs over 2,000 would be Oregon jobs. Investor reaction to Intel’s moves was muted. Shares fell 2 percent in after-hours trading to $30.96. The stock has traded between $24.87 and $35.59 in the past year. Intel said the job cuts will save the company $750 million in 2016 and create savings at an annual rate of $1.4 billion. Since technology is evolving faster and faster, Intel had to find a way not to go bankrupt, so they decided to eliminate 12,000 thousand jobs to save the company.

In 2015, Kennecott announced layoffs amid a slump in metals prices. Kennecott is laying off 65 workers 40 employees will be moved into alternate roles and 74 open positions will not be filled. Company spokesperson Kyle Bennett says there are lingering impacts from the massive landslide that occurred in 2013 at the Bingham Canyon Mine. Rio Tinto let go of 100 workers shortly after the slide. In March 2016, Kennecott announced a reduction in headcount and stated the layoffs are due to ongoing cost reductions amid a continued commodity market decline. About 200 employees, including both hourly and salaried positions, are affected by the move, and in a press release the company said they are providing severance packages and employee assistance to those who had their roles eliminated.

Lack of Regulations

In a world where companies depend on supply chains that extend deep into other continents, child labor can be out of sight. Amnesty International, for one, says it shouldn’t be. It’s accusing Apple and other electronics makers of failing to check the children aren’t involved in mining a key mineral used in lithium-ion batteries, the batteries in your smartphone and in hybrid cars, that mineral is cobalt. Multinational corporations are accused of social injustice, unfair working conditions, as well as a lack of concern for the environment, mismanagement of natural resources and ecological damage. Globalization has led to the exploitation of labor. Prisoners and child workers are used to work in inhumane conditions. Safety standards are ignored to produce cheap goods. There is also an increase in human trafficking.

Globalization and supranational organizational policies

Unelected bureaucrats at supranational organizations such as the World Trade Organization can impose policy on domestic issues.

Richard North, a policy analyst for the Utah Public Utilities and Technology Interim Committee, said Wednesday that international trade rules appear to conflict with state energy policy.

Utah, like many other states, has renewable energy tax incentives and standards in place that could be viewed as having a discriminatory effect on foreign investment, thereby violating international trade agreements.

“Currently it is the United States — and not the states — that is negotiating these treaties,” North said. “They’re negotiating things like transmission, distribution, the ability to control the voltage load on a line, all the things that are typically handled at the state level now.”

North added that World Trade Organization members view the 50 states as a burdensome hurdle.
“They would rather negotiate one treaty at the federal level rather than having to go through 50 states,” he said. “And so the least-burdensome barrier is designed to do that.”

And while trade rules do not directly nullify domestic law, North said, the WTO can use “economic shock” as a means to get what it wants.

“An example of that was back during the steel tariffs that President Bush imposed,” he said. “What happened is the WTO imposed economic penalties against the U.S. One of the providers they proposed was against Harley-Davidson Wisconsin, not related at all to the steel producers, but that was just one example of the kind of economic shock.”

For Utah, tax incentives offered to energy producers that violated trade rules could ultimately result in agricultural sanctions imposed against Utah.

“The sanctions against countries that do not follow trade rules can be sanctions in other areas,” Allen said. “It’s something that we need to take very seriously.” Other concerns are WTO tribunals, which can take the rule of law out of the state courts. State attorneys general and local and state officials are petitioning U.S. trade representatives for a more active role in the trade process.(4)

Wage Gap

Another common criticism of globalization is that it has disproportionately benefited corporations in the Western world, enhancing wealth disparity: the rich getting richer while the poor continue to get poorer. Certainly, the free trade trend means there a higher risk of failure for smaller, privately or family-owned companies that cannot compete in a global market. Then there is digital divide, between those with computer and internet access and those without, which critics charge has resulted in the concentration of information, and therefore power, in the hands of a small elite. Thanks to globalization, opponents say, certain groups have acquired resources and power that exceed those of any single nation, which allows them to pose new threats to human rights on an international scale.

Examples Here in Utah

Globalization has made a huge impact in Utah. With the advance in technology and prices of products dropping, a lot to people have lost their jobs over the years, somewhat making our economy in Utah better, but still having some people struggling to survive and having to adapt to the new changes due to globalization.

One Utah company that had to make changes to adapt with the advance of technology and globalization was Intel, (an American multinational corporation and technology company), since technology was and still is evolving faster and faster, Intel had to find a way not to go bankrupt, so they decided to eliminate 12,000 thousand jobs in order to improve their way to manufacture their products and save the company.(2)

Another local company that had to make changes in order to stay in business, was Kennecott. Rio Tinto Kennecott is a fully integrated mining operation located just outside Salt Lake City, Utah, US. Kennecott is a wholly owned subsidiary of Rio Tinto. For more than 110 years, Kennecott has been mining and processing minerals from the rich orebody of the Bingham Canyon Mine. In 1989, Rio Tinto acquired the Bingham Canyon Mine and other facilities in the Salt Lake Valley. Kennecott is a strong economic driver and strives to be a valuable community partner through strategic partnerships, charitable giving and sustainable development practices.(1)

In November 5, 2015, Kennecott announced layoffs amid slump in metals prices. Kennecott is laying off 65 salaried workers from support services. 40 employees will be moved into alternate roles and 74 open positions will not be filled. Company spokesperson Kyle Bennett says there are lingering impacts from the massive landslide that occurred in 2013 at the Bingham Canyon Mine. Two years later, workers are still removing debris from the site. Rio Tinto let go of 100 workers shortly after the slide. But Bennett says the major reason for this round of layoffs are the current low market prices for metals that they mine, including copper, silver, and gold.(3)

In March 3, 2016, Kennecott announced a reduction in headcount and stated the layoffs are due to ongoing cost reductions amid a continued commodity market decline. About 200 employees, including both hourly and salaried positions, are affected by the move, and in a press release the company said they are providing severance packages and employee assistance to those who had their roles eliminated. “We know these decisions have personal consequences for the people involved and their families, and the employees who remain, and we are committed to helping everyone manage through this difficult transition,” stated Nigel Steward, managing director at Rio Tinto Kennecott. “These changes are necessary to ensure our business stays strong, to preserve our future and to continue contributing to the state’s economy during this challenging time in our industry.”(3)

References

Read “Globalization of Technology: International Perspectives” at NAP.edu. (n.d.). Retrieved April 16, 2018, from https://www.nap.edu/read/1101/chapter/2

Global Connections: A snapshot of international business in Utah. (2016, July 08). Retrieved April 16, 2018, from https://utahbusiness.com/global-connections-a-snapshot-of-international-business-in-utah/

Williams, L., & Learning, L. (n.d.). International Business. Retrieved April 16, 2018, from https://courses.lumenlearning.com/suny-internationalbusiness/

Vanessa Matos –Disadvantages of Globalization

Globalization. (2018, January 29). Retrieved April 04, 2018, from https://www.investopedia.com/terms/g/globalization.asp#ixzz54yILTZtt

Rogoway, M. (2016, April 20). Intel, cutting 12,000 jobs, tries to bend the company without breaking it. Retrieved April 05, 2018, from http://www.oregonlive.com/silicon-forest/index.ssf/2016/04/intel_quarterly_results.html

Smardon, A. (n.d.). Kennecott Announces Layoffs amid Slump in Metals Prices. Retrieved April 05, 2018, from http://kuer.org/post/kennecott-announces-layoffs-amid-slump-metals-prices#stream/0

Tampa Bay news, weather forecast, radar, and sports from WTVT-TV – FOX 13 News | FOX 13 Tampa Bay. (n.d.). Retrieved April 05, 2018, from http://www.fox13news.com/

Collins, M. The Pros And Cons Of Globalization. (2015, December 17). manufacturing.net. Retrieved April 05, 2018, from https://www.manufacturing.net/article/2010/06/pros-and-cons-globalization

Anderton, D. (2004, June 17). Do global trade agreements strip away states’ powers? Deseret News. Retrieved April 05, 2018, from https://www.deseretnews.com/article/595070902/Do-global-trade-agreements-strip-away-states-powers.html

LICENSES AND ATTRIBUTIONS

“What is International Business?” by Lumen Learning is licensed under CC BY-NC-SA 4.0 / A derivative from the original work