Forces that increased global integrationThesignificant growth of the world economy over the last few decades has changedwith dynamic interaction between different driving forces. In the last decades,companies across the globe in various industries have achieved significantsuccess by following international, multinational or global strategies.
Regionaleconomic agreements, converging market needs and wants, technology advances,the pressure to cut costs, the pressure to improve quality, improvements incommunication and transportation technology, global economic growth, andopportunities for leverage all represent important driving forces; any industrysubject to these forces is a candidate for globalization. Multilateral trade agreementsMultilateral,regional and bilateral trade agreements are all agreements between two or morecountries for the mutual exchange of goods and services for the mutual benefitof all countries. In accordance with these trade agreements; agreements havebeen exchanged in trade relations, trade promotion, financial investment, etc.So trade between countries facilitates simple import and export procedures, andreduced limitation of foreign trade exchange, eased and reduced transportationcosts, and also reduced taxes rates. The ultimate goal of any trade agreement betweencountries is to improve the economic situation. Some of the world and regionaltrade agreements are: SAARC(South Asian Association for Regional Cooperation), NAFTA (North American FreeTrade Agreement), Common Market for Eastern and Southern Africa (COMESA),Economic Community of West Africa States (ECOWAS), and Southern AfricaDevelopment Community (SADC) etc.Technological advancementTheeffects of technological development on the global economic structure areundergoing dramatic transformations in the way companies and countries regulateproduction, commercial goods, capital investment and the development of newproducts and processes. Advanced information technologies allow for instantcommunication between remote operations of global institutions.
This caused theexpansion of transnational companies to be closely tied to technologicaladvancement.Therate of fast innovation and the technological flows dynamics mean comparativeadvantage. All this have led to design greater interdependence betweencompanies and nations. So technology is one of the most influencers toglobalization.CommunicationTheproliferation and technological revolution in many aspects, such as moderncommunications technology; has enabled companies and their employees transformthe ways they interact with customers and colleagues in distant locations.Regardless of the physical distance, instant communication and access torelevant information have become readily available and have encouraged greatercollaboration across borders. Therefore, technology is one of the drivingforces for globalization.Global economic growthTheglobal economic situation is changing rapidly.
There is a big difference in thegrowth rates of economies in the developing and developed countries. Developedcountries economies have become inactive and stationery, because of thesaturation of the market, on the other hand, developing countries areexperiencing a huge growth rate in various business sectors. Technologyimprovements, cheap skilled labor, highly invested in (R&D) research anddevelopment, are some of the factors that have motivated on developingcountries to achieve a high rate of business growth. It is therefore veryimportant for developing countries to have strong international trade linkswith developed countries. Product development effortsTheimmediate effect of technological growth is the growth of new products.
Fasttechnology accelerates obsolesce of product. Manycompanies were encouraged to invest in research and development withcross-border partners. These companies need to continue to operate and overcomecompetition. Many companies have crossed their borders and need to update theirproducts through research and development with foreign companies. Thisleads to globalization.
Leverage Theleverage is simply the kind of business that a company enjoys when it comes tobusiness in more than one country. The most three important types of leverage.a. Experience transfer: The experiencethat an enterprise gains from doing business in one country can be effectivelytransferred to another country. This is called the transfer of experienceb. Large-scale economy: The art ofreducing production costs is known as a large-scale economy.
One of the mainreasons for a large-scale economy is technological advancement. Many companiesare now actively investing in R & D in an effort to reduce productioncosts. They are trying to produce cheaper and more reliable products.c. Resource Utilization: Strength of global company is its resourceutilization. It can now successfully outsource its resources globally therebymaking better utilization of resources.
Pressure cost reductionTheproduction of goods and services involves the transformation of resources -such as labor, natural resources, technology and logistics to finishedproducts. All factors having a significant effect on production costs can beexpected to affect a company’s competitive position in world markets, so thiscaused to Global Companies to reorganize their manufacturing and distributionoperations to be more efficient and productive. In order to increaseproductivity, companies should invest in the transfer of new and efficienttechnology and TQM systems. This increases investment costs first, butResulting in a clear improvement in quality, reduces rework, human errors,rejection, customer complaints, compensation, etc. (Beaumont & Schroeder,1997). Advanced TransportationsTransporthas become a very powerful organ for international trade; companies are alwaysshipping goods long distances using different transportation modes, successdepends on safety and fast delivery. This depends largely on the quality oftransport and infrastructure.
That is why international trade development hasbeen affected by transport, and the development of transport and infrastructureis largely influenced by the demand for international delivery of commodities.