January 16th, 2020 | Updated on June 27th, 2022
The mechanism of globalization is the global trade. We can identify globalization as a process of economic, social, political and cultural factors that are intertwined to open communication between the different countries of the globe.
Globalization is exposed to an interdependence between different countries of the world that opens the opportunity for a commercial exchange, which is the end result of the process.
International trade is the main factor in international relations, whether bilateral or in blocks of countries.
The negotiation process does not seek to tie and / or standardize a single culture worldwide, but rather understands different idiosyncrasies to achieve equidistant compensation that leads to the opening of business channels.
International business can be defined as all commercial transactions that include sales, investments, and transportation between two or more countries.
That’s why they depend on many factors like bilateral agreement, LEI news and so on.
An important factor, and openness to global trade is the practice of public and legal policy that a country has.
The political system is accompanied by an economic system, which has to be compatible with the social and cultural system of a state.
It is of the utmost importance before making any business approach to know the political and economic system of a country, since through such management it will be possible to observe how its legal movement is.
Many people wonder if it is possible to do business in countries whose political and economic system are different, the answer to that question is that it is possible.
Different types of existing political systems in the world have supported points, and this compatibility is that companies must adhere to legally do business.
The cultural factor is vital in the development of global trade. The citizens of a state have traditions that are transcendental and have great weight when it comes to expanding a market.
Many products or services are successful in one country and in others they can even result in failure. The truth is that sometimes we think that what is good for a neighboring market could also be for the other market.
It is a mistake to think that way culture is an important indicator because it sheds light on the preferences and beliefs of the prospectus market.
An important indicator of culture are the religious beliefs of a people, because they give us information about what is right for most of the population and what is not acceptable.
The information obtained from the culture gives us a more accurate vision of who we are doing business with.
Economic strength and geographical influence are other factors to consider about global trade, they have an essential and considerable character in decision making.
When analyzing the economy of a prospective country to do business, the four economic principles such as land, labor, capital and resources have to be considered.
These principals are linked to the geographic and demographic influence of a country and gives us an idea of the advantages and disadvantages of that state, and these factors give us a trend of business specialization in the prospective country.
Within these factors we find the balance of payments relationship of the country in question the Gross Domestic Product, the labor force rate, including the level of unemployment and cost and lifestyle.
This does not mean that if the country has a problem with its balance of payments or is included in the list of developing countries, it will not be considered for business, but that the final decision is whether the target market and / or the target supplier for business purposes.
The geographical location is essential in the movement of products, whether imported or exported, depending on the type of transport used.