International business is a process of conducting business several countries. It creates opportunity as well as challenges. To support the challenges faced by international business certain support systems are established and you will learn about support systems for international business.
Introduction to Support Systems
International business is the process of conducting business in multiple countries. Multinational corporations (MNCs) and international business companies (IBCs) engage in business between multiple countries. After World War II, the Western leaders did not want to repeat economic isolationism that played a major part in leading to the war. The leaders wanted to create new international political and economic institutions to promote and maintain peaceful international relations and decided to form an international trade organisation.
A number of factors about international system are connected to country’s trade policy choices. In trade area, a nuber of institutions provide support for an open, multilateral trading system. The presence of institutions like GATT (General Agreement of Tariffs and Trade) and IMF (International Monetary Fund) influence trade liberalization. The influence of these international institutions depends on economic conditions of the debtors or on changing domestic preferences about trade.
The support system institutions for international business include WTO (World Tae Organisation), World Bank, and International Monetary Fund (IMF). Regional trad institutions have ambiguous effect on the multilateral system whereas some institutions such as NAFTA (North American Free Trade Agreement) and ASEAN (Association of Southeast Asian Nations) have a positive effect on lowering trade barriers. These institutions have different effects on countries trade policies. The major support systems for international business are:
1. The IMF is an international organisation of 187 countries. It ensures the stability of the international monetary and financial system.
2. The World Trade Organization (WTO) is an international organisation with 153 members which deals with the rules of trade between countries.
3. World Bank is an international financial institution that provides leveraged loans to developing countries for major projects.
4. United Nations Conference on Trade and Development (UNCTAD) was established in 1964. It is the permanent body of the United nations General Assembly that deals with trade and development issues.
The institutions provide information about other countries’ behavior, forum for dispute resolution and a common framework for sustaining trade flows. A strong international financial system is required to support growing international trade. It helps to reduce the risk of payment imbalances and financial crisis. The international institutions work together to provide a strong system for international trade which is open to all countries. This kind of system is essential for supporting economic growth, reducing poverty and raising the standard of living around the globe.
The main objective of IMF is to facilitate the expansion and balanced growth of international trade and provide exchange stability.
The WTO helps in the smooth flow of international trade and provides countries with a constructive platform for dealing with dispute over trade issues.
The main objective of UNCTAD is to formulate policies regarding trade, finance and technology. It is a specialised agency that performs three main functions:
1. Provides forum for intergovernmental discussions.
2. Undertakes research, data collection and policy analysis for debates of government representatives and experts.
3. Provides technical assistance to the specific requirements of developing countries.