International Business and the Balance of Payment Essay

International Business and the oddment of Payment - Essay ExampleAccording to the research conclusions, it can, therefore, be said that the outward movement of a firms international operations is considered as internationalization, not only in terms of the number of markets served but alike in the operation methods utilized. Johanson and Vahlne define internationalization as a process in which the enterprise bit by bit increases its international involvement. This process develops the relationship between the development of knowledge about foreign markets and operations on one hand and escalating commitment of resources to foreign markets on the other. Many critics view international corporations as a negative factor in the development efforts of Third World Countries Hymer Hopkins Mullier found that the multinationals are perceived as a principal source of the underdevelopment of Third World Countries. Moreover, Frank supports this statement by saying that multinational corpora tions create net capital outflows, contribute to problems in balance of payment, distort the domestic consumption patterns, trade unsuitable technology, and products at excessive prices and, most emphatically, do not solve the unemployment problems. In addition, they aggravate economic and social inequalities in the host countries through the formation or the intensification of a small group of endemical elites who collaborate with and benefit from the multinationals. The balance of payments is an important factor that greatly influences the internationalization process of many firms. A deficit in the balance of payments of a host country might force the government to enjoyment artificial barriers (i.e. tariffs and quotas) to limit and control imports. Managers can utilize the evaluation of the level of GNP in a host country in making important decisions not only by providing them with an indication of a potential consumer base in the market and average income per capita but also by helping the managers to prognosticate the future trends in a foreign countrys economy. Rigorous crises in the balance of payments and currency take ramble with some occurrence in emerging-market economies--more than 51 crisis episodes over the past 25 years, demonstrating that about 8 percent of the time an emerging-market economy was facing serious turbulence in currency markets. Likewise, this frequency of currency crises appears to be a reoccurring phenomenon, persistent over time and across regions of the world. In terms of the other variables of the model, study of Glick & Hutchinson cogitate that actual exchange rate overvaluation is a significant factor slowing output growth. This finding is discussed comprehensively in Moreno. In view of the fact that authentic overvaluation also takes part in an essential role in generating currency and balance of payments crises in the first instance, the undesirable effects come out of the closet to work through two channels - t he direct and the indirect channel. The direct channel is to reduce real output by weakening in export competitiveness. The indirect channel is by contributing to a currency crisis, which in turn is associated with a disruption in financial markets and a downturn in output growth.