Internationalization In The International Economy

The rapid growth of economic exchanges between countries in the last 50 years has made the world economy much more open than in the past .

One of the major consequences of the opening of the world economy is that economics and politics are much more closely related. The impact of the internal policies of a country, for example, affects more directly on the world economy .

In the two decades after the Second World War, the measures of openness of world markets have been extraordinary. Most of the volume of business is relative to that of multinationals. For example, during the early years of 1980, 40% of imports of the USA, 30% of imports of Japan and 30% in imports of UK have taken place "intrafirm", that is between the companies belonging

One of the factors that have most influenced the last years has been the explosion of access to information, technology development and systems of transportation and logistics management.

Consequently, the physical distance between the consumer and the producer stops being a key factor in the competition between the companies.

Nowadays, internationalization can be seen as an extension of the success in the domestic market and a necessity to remain competitive . Until a few years ago, many companies, especially MNCs, treated the domestic market and the international market as if they were not in the least related .

We can identify three theories to approach to the transatlantic investments.

These three theories are the theory of the International Market, the theory of Foreign Direct Investment (FDI) and the theory of the Life Cycle of the product.

1. Meier suggests, through the theory of the International Market , that nations derive income from the international market by importing and exporting activities. The gains derived from a comparative advantage that comes from exporting those higher value goods that the country

2. The second theory is that of the Foreign Direct Investment (FDI) . This theory focuses on the MNCs who decide to expand into a foreign market and it is focused on three main factors: the change of geographical horizons, the possession of a specific competitive advantage and the benefits derived from the location of the new host country.

a) For change of geographical horizons is meant when a MNC is growing and expanding abroad, and in this process they realize other opportunities that stimulate even the widening of their horizons related to lack of knowledge of the political, economic, legal and social development of the host country, the risks associated with exchange rate of the currency or language barriers.

b) When a company decides to project on an international market there must be some strategic advantages that allow canceling the disadvantages listed above. The strategic advantages may be different such as a technology protected by intellectual property, a differentiated product, an economy of scale, a particular bunks, possession of a particular market knowledge,