International Business Challenges in a Globalised World

International Business Challenges in a Globalised World

Introduction

The globalisation of business and commerce has become an increasingly significant reality worldwide: in 2000, the global trade in goods and services reached 25% of world GDP (Govidarajan & Gupta 2000), while in terms of manufactured goods, international trade has multiplied by more than 100 times since 1955 (Schifferes 2007). The rise of globalisation posits a number of important challenges to a business seeking international presence. Numerous strategic aspects must be taken into account prior to commitment at an international level, and afterwards. Constant flexibility is required to adapt to changing patterns at local, regional and international levels. This research paper seeks to identify the main issues affecting international businesses, including accounting practices, cultural issues, strategic choices and political risk.

1. Globalisation in the International Business Environment

Definitions of globalisation refer to it as “growing economic interdependence among countries as reflected in increasing cross-border flows of three types of commodities: goods and services, capital, and knowhow” (Govidarajan & Gupta 2000, p.275), or as

“the closer integration of the countries and peoples of the world …brought about by the enormous reduction of costs of transportation and communication, and the breaking down of artificial barriers to the flows of goods, services, capital, knowledge, and people across borders" (Stiglitz 2002, p. 9).

Globalisation is usually divided into globalisation of markets and globalisation of production (Hill 2005). According to Levitt (1983), market globalisation implies a standardisation of products across the world as national barriers become less and less relevant. Nevertheless, this type of globalisation appears less of a reality as national markets still present significant differences, marketing strategies continue to have country-specific traits and customer...