1. How does globalization affect the strategies of multinational companies?
Globalization has greatly influenced how multinational companies operate. It allows them to
enter new markets, access cheaper labor, and source materials globally, which helps them
lower costs and increase profits. However, globalization also brings challenges, such as
increased competition, currency risks, and the need to understand and adapt to different
cultures and regulations. As a result, global companies must develop flexible strategies that
allow them to compete worldwide while staying responsive to local needs.
2. What role do international trade agreements play in global business?
International trade agreements like ASEAN, WTO, and USMCA help reduce or eliminate tariffs,
simplify customs procedures, and create fairer rules for global trade. These agreements make it
easier for businesses to enter foreign markets, form partnerships, and operate internationally
with lower costs and less legal risk. However, they also expose local industries to foreign
competition. For businesses, understanding and leveraging trade agreements can be a key
competitive advantage.
3. Compare the effects of protectionism and free trade.
Protectionism aims to protect local industries by setting tariffs and import restrictions. While this
can help local jobs and businesses survive, it often leads to higher prices for consumers and
less product variety. Free trade, on the other hand, allows goods and services to move freely
between countries. It encourages innovation, lowers prices, and benefits consumers, but it can
hurt domestic industries that cannot compete globally. Both approaches have strengths and
weaknesses, and governments must find the right balance.
4. Why is supply chain diversification important in international trade?
Diversifying the supply chain means spreading production and sourcing across multiple
countries or regions. This strategy reduces dependence on one country and protects
businesses from unexpected problems like tariffs, political conflicts, or natural disasters. For
example, when the U.S.–China trade war began, many companies moved some of their
production to Vietnam or India. Diversification ensures business continuity, reduces risk, and
makes supply chains more resilient.
5. How do exchange rate changes affect international business?
Exchange rates directly affect the cost of doing business internationally. If a company’s home
currency becomes stronger, its exports become more expensive, possibly reducing sales
abroad. If the currency weakens, imports become costlier, increasing expenses. Companies
must monitor exchange rates and may use financial tools like hedging to manage this risk.
Understanding currency fluctuations helps businesses protect profits and make better decisions
in foreign markets.
6. To what extent should multinational companies adapt to local markets?
Multinational companies must find the right balance between standardizing their global
products and adapting to local preferences. Adapting to local markets—through changes in
product design, marketing, or pricing—can increase customer satisfaction and brand loyalty.
However, too much adaptation can increase costs and weaken the global brand identity. The
most successful firms, like McDonald’s or Coca-Cola, combine global consistency with smart
local customization to meet consumer needs effectively.
7. What are the ethical challenges of operating in multiple countries?
Companies that operate internationally often face ethical challenges related to labor practices,
environmental standards, and legal compliance. In some countries, weak regulations may allow
for child labor, poor working conditions, or environmental harm. Although following local laws
may be legal, it may not be ethical. Companies need to decide whether to follow higher global
standards even if it costs more. Ethical business practices help protect a company’s reputation
and build long-term success.
8. How has technology transformed international business?
Technology has made international business faster, cheaper, and more efficient. It enables
companies to communicate instantly, manage global supply chains in real time, and reach
customers through e-commerce platforms. Tools like AI, blockchain, and digital payments have
also made trade more secure and transparent. Technology reduces barriers for smaller
businesses to enter global markets and allows larger firms to operate with greater speed and
flexibility.
9. What risks do companies face in emerging markets, and how can they manage them?
Emerging markets offer great opportunities, such as fast-growing populations and untapped
demand. However, they also carry risks like political instability, corruption, poor infrastructure,
and unpredictable currency changes. To manage these risks, companies must conduct thorough
market research, form partnerships with local firms, and create flexible business models.
Insurance, legal safeguards, and close government relations are also helpful in protecting
investments and operations.
10. How does foreign direct investment (FDI) affect host countries?
FDI can benefit host countries by creating jobs, boosting economic growth, transferring
technology, and improving infrastructure. It helps local businesses learn from global firms and
can raise living standards. However, there are risks such as profit repatriation (money leaving
the country), environmental damage, or local industries being overshadowed. To maximize
benefits, host governments must create strong policies that encourage investment while
protecting national interests.
Downturns of International Business and Trade
International business and trade have many benefits, but they also come with disadvantages.
One major issue is increased competition, which can hurt small local businesses. There’s also
job loss when companies move operations to countries with cheaper labor. Countries may
become too dependent on foreign trade or investment, making them vulnerable during global
crises. Environmental damage is another concern, as trade can lead to overuse of resources
and pollution. Lastly, ethical problems may arise when companies take advantage of weak
labor or environmental laws in some countries.
