In the 21s century era, international business has been the backbone of international and global economy. As we can see that various companies throughout the world exist and providing diverse form of goods and services, starting from banking, finance, insurance, transportation, IT provider, hotel, and other countless form of business , creating lots of differentiated products. We are seeing the nature of international business has turned into fast-paced, organized, cross-border, and efficient as the time evolves.
Business culture has become diverse as the actor comes from various sets of culture. For example, we can see European companies have offices in China and producing goods that shipped to various place around the globe. We can also see goods that are produced miles away from where we are becoming essential to our very life, such as phones, computers, and automobiles. International business has becoming massive and efficient. Mostly we do not even recognize where this certain products of finance or goods are originated from because it no longer important, what matters is the cost and quality that it offers.
Why do this strings of phenomenon happened in our very eyes? What actually shaped this fast-paced, efficient, and massive international business as it is now? This essay would provide insights on how the present international business culture is shaped, through principal and historical view that can give explanation on how international business culture profoundly shaped in the present condition.
Freedom as Starting Point
What basis that shaped the international business culture in the present days is the existence of individual’s freedom. The first principle of freedom is that each person owns himself that enables them to react and act according to his freedom-will.[1] As Friedrich Hayes emphasized that “freedom can be preserved only if it is treated as a supreme principle which must not be sacrificed for any particular advantage”[2]. This underlined how important the freedom is as it gives full liberty to individual to expand their wealth and well being by doing economy transactions. This “liberty” becomes the main basis of liberalism; a perspective that mostly dominates the world’s economic view nowadays.
Sense of individual freedom in economy did not fully recognize until the 18th century. Before the 18th century, individual freedom is hardly to be achieved as state and kingdoms fully controlled the growth and transfer of capital among the society. Based on this limitation, great thinkers of libertarian, such as Adam Smith, David Ricardo, and John Locke started to pour ideas about individual rights of freedom. They believe that individual should be free to act, away from the control of state which, as they perceived, tends to manipulate and abusing power and in result limit the rights for individuals to achieve their well-being and maximum capabilities.[3]
Based on individual freedom, many liberals believe in the nature of the market as laissez-faire, or “let be”, where individual set their economic transaction without strong intervention from the state. The market will act on its own and acquire its own mechanism; acting as an “invincible hand” solve markets problem and guaranteeing its continuity. This happened because there is demand-supply mechanism where individuals would concentrate to fulfill the demand of the market by offering goods and services and acquire profits in return.
Liberal also believe in competitiveness as a key to enhance economy activities of society to becoming quality-oriented, and eliminating the risk of absolute power among society. Competitiveness pushes the producers to sacrifice some of their power in order to stay in tuned with market’s demands. Keynesian liberalism (which developed in 1960’s) added up the role of government or state in ensuring the ongoing market process. Government or state in this case, has a role to make sure that basic need of society is fulfilled and facilitate individuals to do their economy activity.
Entering the 19th centuries, individuals start to create enterprises and allegiance among other to consolidate capital. This marking the birth of modern companies and corporation that produces with certain production of goods and services. Companies has freedom to assess their capital and produce any goods and services that market needed, not just local but also international.
Globalization and Interdependence
The existence of freedom does give a basis line to bolster business among society as the form of economic activity in order to generate wealth. Mutual cooperation and benefits between producers and consumers drives economic relations among individual to increase. But it does not explain why it becomes “international” and “cross-border” in a larger picture where there are world-wide connections in the business world with various forms. There are two main aspects that are very essential in shaping international business and its culture to become more trans-national.
First, international businesses exist and bolstered by the growing interdependence among state and its society around the world. The concept of interdependence began to be examined in the 1970s, and scholars believe that there are two major changes in the global economy. First, states and its society become more interdependent across variety of issue and areas, starting from consumer goods and security. Second, decision-making by state on its own economy becomes weaken as there are various rising of strong multinational corporation that can contribute in economy policy making. State no longer can adopt certain policy without viewing the condition of its own private sector. This causes increases the flow of transnational capital.[4]
Interdependence make a state cannot operate its own economy without other support that offer goods, services, and capital it needed. Theoretically, this was supported by David Ricardo’s law of “comparative advantage”, where a state provides the goods and services that others need while other provides the same in return, this applied in terms of value-added production or natural recourses. Growing scarcity of certain resources also increased the interdependence. Therefore international economy interaction is based on specialization of production because a state will have to find its own economy advantage among other states in order to gain profit and benefit. For example, we would know where to find quality form of textile imports that is also cheap from China, or quality services of information technology from India with their high-skill human resources. This form of interdependence increase awareness of private sector to develop their specialization, thus create diversity of production in the international business sphere.
The second factor is globalization. The fall of Soviet Union in 1991, marked the official start of modern globalization. An ideological boundary that has divide the world for more than forty years has no longer limits the flow of capital and shrouded the world with fear. Francis Fukuyama, an international relations scholar, define globalization not so far related to TV sets and McDonalds, which also marked “the end of history” as the world comes fully integrated in democracy and freedom in applying businesses around the globe. Information technology changes the business culture deeply and dramatically from local to global, changing how business is done. Especially the existence of internet pushes international business to become fast-paced, limitless, and efficient.
States and governments also gives response to the globalization by deregulate obstacles that limits trade and businesses. Governments of various states agreed upon the existence of World Trade Organizations (WTO) that provides institutional facilitations to decrease theses limitations, such as tariff, quota, and other regulation that may troubled the process of trade and international business. Various free-trade agreement across continents as well as regional agreement are prove how states begun to acknowledge the importance of international trade, because it gives opportunities for society and national private sector in achieving various goods as well as expanding economy condition to the bigger extent.
Financial and Technical Development
Globalization has given space for businesses to expand through wide extent of networks, but what also matter is the tool to assess this world-wide range connections of businesses. What writer perceived as the main supporting factor as tools for international business is the development of financial sector and technical development of goods transfer, such as shipping lines, packaging.
Conclusion
As we can see that the existence of individual freedom, globalization, and the increase of interdependence shaped international business culture. But as writer see it, in the future time, competitiveness and creativity also become one of the outcome of the conditions that brought by globalizations. The world will become more and more competitive, therefore international business culture will be fully based on efficiency, quality-oriented, and fast-paced. When there are so many diverse form of same productions, producers would have to become unique in order to gain market’s interest and gain profits. Changes in the market can happened by second, as the rush of information can happened very fast that changes market behavior in very fast time.
[1] Dennis O’Keeffe, Economy and Virtue: Essays on the Theme of Markets and Morality, (Westminster: The Institute of Economic Affairs, 2004), p.
[2] Friedrich Hayek, “Principles and Expediency”, in Chaiki Nishiyama and Kurt R. Leube (eds), The Essence of Hayek, (Stanford: Hoover Institute Press, 1984), p. 301.
[3] Balaam, Vesseth, Introduction to Political Economy 3rd Edition, (New Jersey: Pearson Education, 2005), p.46-67
[4] Griffiths, O’Callaghan, International Relations: The Key Concepts, (London: Routledge, 2002) p. 157-158.
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