11. Globalization

We live in an increasingly global world. According statistics from the World Trade organization, between 1990 and 2000 international trade grew almost twice as fast as the world growth in gross domestic product. In spite of that, the world has become a much smaller place as a result of a revolution in global communications. Both transport and telecommunications have become much cheaper over the last twenty years. For example international phone calls used to be extremely expensive but the cost has gone down dramatically in many countries.

On the one hand, there are many benefits of globalization and the standard of living of many people has gone up.

What this means in practical terms is that we are traveling more and consuming more products from global companies such as Coca Cola, Sony and Siemens. In terms of jobs more and more people are working for multinational companies. Nestle, despite being a Swiss company, does over 94% of its business outside Switzerland.

On the other hand, there are negative aspects of globalization highlighted by the antiglobalization movement. Although the standard of living in developed countries has gone up, the gap between rich and poor countries has widened considerably. More and more people are living in poverty, especially in Africa and parts of Asia.

However, big multinationals now have much more power and influence than ever before and are beyond the control of many governments.

To sum up, globalizations is a process which not only brings many benefits but also many disadvantages.

However, it is important to realize that we cannot stop globalization as such. What we can do, is to give developing countries a fairer deal so that they can compete in the international markets. Developed countries also need to provide much greater long-term aid in areas like agriculture, education and health in order to improve the lives of most of the people on the planet.

Questions:

1. A business or a company is globalized if it operates all around the world, isn't it?

2. What examples of globalized companies do you know?

3. Multinationals now have much more power and influence than ever before, haven't they?

4. The world has become a much smaller place as a result of a revolution in global communications and is called a global village now, isn't it?

5. Are the living standards the same in all countries of the world?

6. What are the benefits of globalization?

7. What are the negative aspects of globalization?

8. Can we stop globalization?

9. Must developing countries be given a fairer attitude so that they can compete in the international markets?

10. Do developed countries need to provide much greater long-term aid in many areas?

12. Forms of Business Organization

There exist the following basic forms of business organization: proprietorships, partnerships, private and public joint stock companies and corporations. The legal procedures for starting a proprietorship are limited to registering the company's name. Starting a partnership is less complex than starting a corporation. Ways of raising capital are different under different forms of business organization. The source of capital for a proprietorship usually is the owner's own savings and loans from banks.

More capital can be raised by bringing in partners or by incorporating. A major difference among organizational forms is the degree to which owners are personally liable for debts of the business. If a proprietorship fails, creditors can claim the owner's property to pay off the debts of the business. For a partnership liabilities can also be a serious problem. The limited liability feature of the corporation is its biggest advantage. A corporation unites a few firms or companies and its main source of capital is public offering of shares or the sales of other securities.

A private joint stock company is not listed at the Stock Exchange and is not entitled to have public offerings of its stock. It distributes the shares among the founders or participators and has no right to raise capital from selling equities. On the contrary, public joint stock company is listed at the Stock Exchange and has public offerings of its stock to raise capital for the company's development.

There are three basic organizational forms which are wide spread in international business: setting up a joint venture is the most popular form of attracting foreign capital, advanced technology and management expertise from abroad; a representation office is not entitled to trade, to produce or to manufacture any product. It only has the right to make and sign contracts; a consortium is a temporary alliance of a few companies to perform a contract or to construct a project.

Questions:

1. What are the basic forms of business organization?

2. What are the legal procedures for starting a proprietorship?

3. What is the source of capital for a proprietorship?

4. How more capital can be raised for a business?

5. What is the major difference among organizational forms?

6. What is the main advantage of a proprietorship?

7. What are the strengths of a corporation?

8. What are the advantages and disadvantages of a private joint stock company?

9. How does a public company raise capital?

10. What is a consortium?

11. Why is a joint venture set up?

12. What is a representation office entitled to do?