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Reasons For Recent International Business Growth
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It is generally believed that international trade has been growing recently at a faster pace than it did in earlier years and also at a faster pace than domestic business has been recently. For instance, in the early 1980s, less than 5 percent of U. S. production was sold abroad and approximately the same amount of U. S. total purchases was of imported goods and services. Two decades later, these figures had more than doubled, to little more than 10 percent each.
It seems the reasons companies pursue international trade â€” to expand sales, to acquire resources, and to diversify sources of sales and supplies â€” would have applied in earlier periods as well. So what has happened in recent years to bring about the increased growth in international trade? The answer can be found by examining the following four, sometimes interrelated, and factors:
â€¢ rapid increase in and expansion of technology;
â€¢ liberalization of governmental policies regarding cross-border movement of trade and resources;
â€¢ development of the institutions needed to support and facilitate international trade;
â€¢ increased global competition.
Expansion of Technology. Much of what we take for granted today results from technology that has been developed only within the last century. Before then, change occurred slowly. In 1620, the Mayflower trip from Plymouth, England, to Massachusetts took over three Hublot Replica Watches months. Another two and a half centuries passed before Jules Verne fantasized that people might go around the world in only eighty days. In recent years, however, the pace of technological advances has accelerated at a dizzying rate, while knowledge of products and services is available more widely and quickly because of tremendous strides in communications and transportation technology. As recently as 1970, there was no commercial transatlantic supersonic travel, faxing, or overseas direct-dial telephone service. Today, the situation is radically different. Traveler can fly from New York to London by Concorde in only three and a half hours, and fax, E-mail and telephone transmissions are almost instantaneous.
By increasing the demand for new products and services, technology has tremendous impact on international trade. As the demand increases, so do the number of international trade transactions. But conducting business on an international level usually involves greater distances than does conducting domestic business, and greater distances increase operating costs and make control of a company's foreign operations more difficult. Improved communications, such as telephone transmission via satellites, speed up interactions and improve managers' ability to control foreign operations.
Liberalization of Cross-Border Movements. Every country restricts the movement across its borders of goods and services and the resources, such as workers and capital, to produce both. Such restrictions make international business more expensive to undertake. Because the regulations may change at any time, international business also is riskier. Generally, governments today impose fewer restrictions on cross-border movements than they did a decade or two ago. Although the decrease in restrictions has been erratic, governments have lowered them for the following reasons:
â€¢ Their citizens have expressed the desire for better access to a greater variety of goods and services at lower prices.
â€¢ They reason that their domestic producers will become more efficient as a result of foreign competition.
â€¢ They hope to induce other countries to reduce their barriers to international movements.
â€¢ Fewer restrictions enable companies to take better advantage of international opportunities.
Development of Supporting Institutional Arrangements. Much of what we now take for granted has resulted not only from expanding technology but also from the development by businesses and governments of institutions that enable us to effectively apply that technology. Although barter still occurs, it is less common because it can be cumbersome, time-consuming, risky, and expensive. Increasingly, business relies on the institutions that facilitate international trade, among them banks, postal services, and insurance Replica Watches Breitling companies. Today, most producers can be paid relatively easily for goods and services sold abroad because of, for example, bank credit agreements, clearing arrangements that convert one country' currency into another's, and insurance that covers damage en route and nonpayment by the buyer.Consider, for example, the transport of mail internationally. Until the sixteenth century, when the first international postal agreement was enacted (between France and part of what is now Germany), there was no postal system as we know it today; separate arrangements had to be made for payment and shipment of each piece for each country through which it would pass. Today you can mail a letter to any place in the world using only stamps from the country where you mail it, regardless of how many countries the letter must pass through to get to its destination and regardless of the nationality of the company carrying it.
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