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Most businesses participate in the global economy, which encompasses the international
trade of goods and services, movement of labor, and flows of capital
and information.4 The world has essentially become smaller through improved technology
and communication abilities as well as trade agreements that promote the
international movement of goods and services among countries. Exhibit 1–4 provides
the results of a survey of Fortune 1000 executives about the primary factors
that encourage the globalization of business. Currently, the evolution of Web-based
technology is dramatically affecting international business.
E-Commerce
Electronic commerce (e-commerce) is any business activity that uses the Internet
and World Wide Web to engage in financial transactions. But e-commerce had
its beginnings in two important events that occurred before a computer was even
developed: (1) the introduction of wireless money transfers in 1871 by Western
Union and (2) the introduction in 1914 of the first consumer charge card. These
inventions



Web sites of manufacturers and retailers worldwide can be accessed by potential
customers 24 hours a day. Businesses and consumers can view products
and the way they work or fit together on computer or television screens. Customers
can access product information and order and pay for their choices without
picking up the phone or leaving home or the office. In the world of banking
and financial services, bills can be paid, balances accessed, loans and insurance
obtained, and stocks traded.
Some of the numerous positives and negatives of having e-commerce capability
are provided in Exhibit 1–5. In some cases, a seller’s positive may be a buyer’s
negative: the ability to accumulate, use, reuse, and instantaneously transmit customer
information “can, if not managed carefully, diminish personal privacy.”5
But the current drawbacks to e-commerce will not stop the ever-increasing usage
of this sales and purchasing medium. More and more merchants will develop
sites that are easy and safe to use by customers but that inhibit hackers from causing
internal problems. The rapid expansion of e-commerce illustrates the success
of its positives and necessitates the correction of its negatives.
Trade Agreements
Encouragement of a global economy has been fostered not only by e-commerce
but also by government and business leaders worldwide who have made economic
integration a paramount concern. Economic integration refers to creating multicountry
markets by developing transnational rules that reduce the fiscal and physical
barriers to trade as well as encourage greater economic cooperation among
countries. Most economic integration occurs through the institution of trade agreements
allowing consumers the opportunity to choose from a significantly larger selection
of goods than that previously available. Many of these agreements encompass
a limited number of countries in close geographic proximity, but the General
Agreement on Tariffs and Trade (GATT) involves over 100 nations worldwide.
Trade agreements have created access to more markets with vast numbers of
new customers, new vendor sources for materials and labor, and opportunities for
new production operations. In turn, competitive pressures from the need to meet
or beat prices and quality of international competitors force organizations to focus
on cost control, quality improvements, rapid time-to-market, and dedicated customer
service. The accompanying News Note on page 12 reveals an interesting
outcome from the North American Free Trade Agreement. As companies become
more globally competitive, consumers’ choices are often made on the bases of
price, quality, access (time of availability), and design rather than on whether the
goods were made domestically or in another country.