Page 10 - DMGT545_INTERNATIONAL_BUSINESS

Unit 1: International Business: An Overview

Political Stability vs. Political Instability: Political stability does not simply mean that notes
continuation of the same party in power, but it does mean that continuation of the same policies
of the Government for a quite longer period. It is viewed that USA is a politically stable country.
Similarly, UK, France, Germany, Italy and Japan are also politically stable countries. Most of the
African countries and some of the Asian countries like Malaysia, Indonesia, Pakistan and India
are politically instable countries. In fact, business firms shift their operations from politically
instable countries into politically stable countries.
Availability of Technology and Managerial Competence: Availability of advanced technology
and managerial competence in some countries act as pulling factors business firms from home
country. Companies from the developing world are attracted by the developed countries due to
these reasons. In fact, American Companies, in recent years, depend on Japanese companies for
technology and management expertise.
The drivers of globalization can be classified into.
1. Market Drivers:

(a) Per capita income converging among industrialized nations
(b) Convergence of lifestyles and tastes
(c) Organizations beginning to behave as global consumers
(d) Increasing travel create global consumers

(e) Growth of global and regional channels
(f) Establishment of world brands
(g) Push to develop global advertising
2. Cost Drivers:
(a) Continuing push for economies of scale
(b) Accelerating technological innovation

(c) Advances in transportation
(d) Emergence of newly industrialized countries with productive capability and low
labour costs

(e) Increasing cost of product development relative to market life
3. Government Drivers:
(a) Reduction of tariff barriers
(b) Reduction of non-tariff barriers

(c) Creation of blocs
(d) Decline in role of governments as producers and consumers
(e) Privatization in previously state-dominated economies
(f) Shift to open market economies from closed communist systems in eastern Europe
4. Competitive Drivers:
(a) Continuing increases in the level of world trade

(b) Increased ownership of corporations by foreign acquirers
(c) Rise of new competitors’ intent upon becoming global competitors

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