International Business: World Economic Forum and Davos - Coursework Example

International Business Table of Contents Introduction 3 Markets 3 World Economic Forum and Davos 5 Critical Assessment 6 Recommendations and Conclusion 7 Conclusion 9 References 10 Bibliography 12 Introduction Globalisation has been one of the most popular as well as debated topics of the present day. It is very clear today that even if one likes it or dislikes it, there is no opportunity to ignore the term. International Monetary Fund has defined globalisation as, “the growing economic interdependence of countries worldwide through increasing volume and variety of cross-border transactions in goods and services, free international capital flows, and more rapid and widespread diffusion of technology” (LSI, n.d.). Globalisation is basically an economic term though is widely used today in almost all segments of life. Experts believe globalisation has seven basic constituents namely markets, production, culture, labour, technology, environment and regulations which are also known as the seven forces of globalisation. Markets There is almost no denial to the fact that the present economy of the world is significantly driven by market. In other words, it is the demand – supply mechanism that is predominantly guiding the economy of today. In this regard, it can be said without much doubt that the concept of ‘invisible hand’ as discussed by Adam Smith still holds good. Globalisation is primarily an economic term and there is no astonishment to the fact that it is also influenced by the market. In fact, it is widely perceived that it is the globalisation that has facilitated the increasing importance of markets in the present day economy. Globalisation has undoubtedly vouched for reduction of controls both in terms of capital controls as well as government controls. It has tried to eliminate tariffs and subsidies along with promotion of free trade zones irrespective of culture, geography or any other factors. It has led in increase of tremendous competition and the survival of fittest. As the world economy gets interconnected with massive improvements in the information technology and communication process, the effects of globalisation has been at its all time high. The world economies of today are coupled with each other and it has both the positives as well as the negatives. Even an internal economic happening has its affect felt into the international market. Therefore, there is almost no doubt that market is the most important factor of the wide concept of globalisation. The recent trends of the market factor of the globalisation undoubtedly focus upon the rise of the Asian economies like that of China and India. Brazil has been another major contender. It is worth mentioning, while discussing about the scope of international business of today’s world, that the economic performances of China and India have been superb at least when many of the so-called developed and matured economies of the world (of the West) are into deep grips of recession and slowdown. Recent economic down turn that resulted from the subprime crisis of in the housing sector of the United States have affected almost all of the major economies of the world including that of the United States, the United Kingdom, Germany, Canada, France and Japan. Either the major economies resulted into negative growth and went into recession or they faced massive slowdown. But at the same time, the economies of China and India not only resulted positive growth, but it almost touched double digits. The economies of China and India basically depend upon outsourcing of the first world nations. Both the two nation have huge population and offers cheap labour. Also, a significant part of the populace is professionally and technically trained for the jobs which posses a major threat for the developed economies. On the other hand, from the perspective of international business, it can be said with much certainty that those nations provide for huge market to the multi - national companies of the first world countries. The purchasing power of those economies is on the rise along with per capita income that provides for greater scope as the markets which definitely is an opportunity. World Economic Forum and Davos 2010 World Economic Forum was established in the year of 1971 by a business professor of the University of Geneva named, Klaus Martin Schwab. In the initial days, the forum was known as European Management Forum and it changed the name to WEF in 1987. The basic idea behind the formation of the forum was to facilitate discussions of business strategies among the chief executive officers of the major companies of the world. Previously, it included the CEOs of Europe only but soon it spread to the entire globe. The World Economic Forum is essentially an independent and not – for – profit foundation with the aim ‘entrepreneurship in the global public interest’. The organisation aims toward world class corporate governance that would inculcate values as the rules and which would facilitate sustainable economic progress guided by social development (World Economic Forum, n.d.). Davos has been the fixed venue for the annual summit of World Economic Forum. The summit that was held in the last week of January of the year of 2010 was quite different from the previous ones. The summit experienced very few delegates from the political fraternity as well as from the glamour world. The various important issues that had been discussed at the summit included that of banking reforms, economic recovery of the west, the changing impacts of technology in society and economy and the humanitarian aids (Weber, 2010). Though it was expected by the concerned quarters that the summit will host important discussions about the splendid economic performance of India and China but it was not the case which left many of the top executives amused as the western chief executives were busy in discussing their own issues (Pilling, 2010). Critical Assessment As discussed earlier, Davos meeting of the political and the corporate leaders specifically discussed four issues namely: Banking reforms – The leading banks of the world that includes Standard Chartered and Barclays among many others accepted the need of long term reforms by the banking sector so that if there is any requirement for bail – outs in the future, banks could sponsor those and not the tax payers. The banks, especially Standard Chartered voiced for free trades all over the globe as it thought free trade to be instrumental for all round growth. Economic recovery – Economic recovery attracted significant portion of the meeting. The experts agreed that the recovery from the economic recession can be through a model that is LUV - shaped. In the words of BBC, “L-shaped long-term low growth recovery is applicable for Europe; a U-shaped slow growth recovery is for the United States; and a sharp upturn in emerging economies like India, Brazil and China” (Weber, 2010). Changing technology – The technology change has been gaining tremendous importance. There is no denial of the fact that the emerging economies like China and India has been largely dependent upon modern means of technology as they both relies upon outsourcing as the major economic activity, especially India which is already a software giant of the world. Humanitarian aids – Bill Gates, the Microsoft chief, promised to spend $ 10 billion over the period of ten years on research and development so that all children from poorer countries get the benefit of vaccination. It is presumed that the absence of political and glamour icons at the summits had been a blessing in disguise as it facilitated more serious discussions of business and strategy. Still, there has been the criticism of not having enough discussions on the success of China and India. Experts felt, more importance should have been provided to the successful strategies of those economies. Recommendations and Conclusion The globalisation has tremendous impact on international business and trade. As the world has become a small place to live in, the power in the hands of the end – customers have increased considerably. Consumers are the king and market is the price maker. With deregulations all around, the market has become considerably open and companies from other countries can easily get into a foreign country to operate and business. Some of the emerging economies are even advertising for higher foreign direct investments (FDIs) and foreign institutional investments (FIIs). Yet, if one thinks that today, the governments of the nations have no more roles to play, he is far away from being correct. In fact, the governments have a crucial role though it has changed much. From being facilitators, governments should now be the catalysts for the ultimate success of international businesses. They should keep close watch on the international happenings and should be always alert to safeguard their economies even if not through direct measures. The governments should essentially strengthen the regulatory norms and the regulatory bodies so that the external threats of international business do not shake the entire roots of the economy. In this respect, one can take note of the economy of India. The country is one of the highest beneficiaries of globalisation and is yet almost unhurt in the recent financial turmoil. Though coupled with the developed economies of the world, the success of India is highly accredited to its strong regulatory norms that have saved it from foreign threats that come with international business. The companies that are participating in the international business must be aware of the challenges of the global economy and the risks to which they are exposed to. They should follow the regulatory norms by letter and spirit for their own benefits at least after the fall of so many too – big – to – fail (TBTF) companies. The bypass of laws along with initiation of extensive credit risk by financial re-engineering of complex derivatives has not worked in the United States. For the companies, it is prudent to be within the purview of the prevailing laws of the land. Conclusion The almost free trade and globalisation have opened up huge opportunities in front of the international players. It is for the companies now to take the benefits of international trade and finance. The meeting of WEF at Davos has initiated certain frameworks for the economic recovery. It is believed that the recovery can be best achieved if the governments and the corporates work together with shared goal and vision. References Legal Service India, No Date. What is Globalisation? International Monetary Fund. [Online] Available at: http://www.legalserviceindia.com/articles/glob_is.htm [Accessed March 12, 2010]. Pilling, D., 2010. The looming influence of the east. The Financial Times. [Online] Available at: http://www.ft.com/cms/s/0/b167bcfe-0dc4-11df-ae52-00144feabdc0,dwp_uuid=91d7b52e-0527-11df-a85e-00144feabdc0.html [Accessed March 12, 2010]. World Economic Forum, No Date. Our Organisation. About Us. [Online] Available at: http://www.weforum.org/en/about/Our%20Organization/index.htm [Accessed March 12, 2010]. Weber, T., 2010. Davos 2010: No glitz, no politics, but down to business. BBC News. [Online] Available at: http://news.bbc.co.uk/2/hi/business/8490278.stm [Accessed March 12, 2010]. Weber, T., 2010. Davos 2010 ends with bankers on the defensive. BBC. [Online] Available at: http://news.bbc.co.uk/2/hi/business/8489946.stm [Accessed March 12, 2010]. Bibliography London Business School, 2010. Davos 2010. News and Events. [Online] Available at: http://www.london.edu/newsandevents/news/2010/02/Davos_2010_1069.html [Accessed March 12, 2010]. Schwab, K, Et Al. The Global Competitiveness Report 2009–2010. The World Economic Forum, 2010. Times Online, 2010. World Economic Forum in Davos. Business. [Online] Available at: http://business.timesonline.co.uk/tol/business/economics/wef/ [Accessed March 12, 2010]. Read More