Modern trends of the world economy and international economic relations development

3.1. Internationalization

Internationalization fixes a tendency of international cooperation and coincidence of business, economic and commercial interests and relations. Internationalization has become more intensive and focused in the late XIX and early XX century. During the industrial revolution it leads to unified world economy, massive flow of industrial and financial capital, extension of international division of labour.

The distinguishing feature of the world economy is more sharpening emulation, competition between economic entities. And the competition strengthens the process of internationalization of its entities. Table 5 shows the most complete reliable definition of «internationalization» [5].

V.O. Kolesov and M.N. Osmova point out that the main feature of today’s world economy is internationalization of economical activity [17]. It is based on international specialization and internationalization of production, capital transnationalization and foundation of multi-national companies. Internationalization is common not only for goods production, its distribution and consumption, but for every kind of international economic relations. Kochetov E.G. defines internationalization as the situation when the reproduction process is divided into several parts in different countries, so it exceeds the limits of one separate state [10].

Modern internationalization is being formed under conditions of the scientific and technical revolution. That’s why it is very mobile and flexible. There are no national borders and customs barriers for new scientific achievements, cutting-edge technologies and new practices in HR management thanks to the development of communications tools and publishing business.

Table 5

Internationalization and its types

Term	Definition
Internationalization	Recognition of something as international, as the matter of international law
Internationalize	To make something international or controlled by two or more countries. International – involving several countries or existing between countries trade, diplomacy, relations; a company or organization that exist, works or has members in more than one countries
Internationalization of economical activity	The fact that national economies of different countries have become closer, they are more dependent on industrial matter of each other, capital and labour force flow.
Internationalization of companies’ activity	The process of drawing the company into international transactions (business, financial, marketing) and development of stable relations with international partners.
Internationalization of manufacture field	The process of dividing production process into several parts. And every part is done in different countries.
Internationalization of research field	The process of combining efforts of different countries in order to conduct some enormous and unordinary research.
Internationalization of capital	New companies are built up abroad and expand the influence of state capital.
Internationalization of property	Foundation of multi-national and transnational joint-stock companies.

But it is the one side of rising internationalization of production. Subsequent development of its process is predetermined by science as productive capacity of our society. Science and production together change the process of internationalization fundamentally. Production infrastructure renovation is based on new cutting-edge technologies and ideas.

Implementation of scientific ideas and achievements is usually connected with new complex of enterprises, construction of new facilities and its equipping, new auxiliary processes and so on. Internationalization is spreading out on the basis of production. So, a new technological idea triggers its implementation in other countries and new production structures arise. Establishing new production structures and enterprises results then in international production. And the pace of its process quickened a lot as we move from industrialism towards post-industrialism.

So, internationalization makes the world economy more tight and interdependent. Internationalization is like a guide when you make a decision in the sphere of foreign countries relations. There is no need to think if we should or should not be included in international division of labour. The questions are: how fast it will be; which are the highest priorities areas; what intersectional proportions should be and so on.

Internationalization of production is the core point of internationalization process. Internationalization of production emerged in the era of industrial capitalism in its machine stage. Computer-aided manufacturing requires large expenditures for front-end investment and researches. The range of industrial products has increased significantly because new production spheres arise. It is impossible to produce the whole range of products within the one even the most developed country. So, international specialization and cooperation are stirring up and make internationalization of production more intense.

It is significant that scientific and technical researches are also internationalized now. Companies from different countries should combine their efforts in order to conduct some complicated and high-cost research. Besides, countries are specialized in some definite kind of researches in close depending on its production specialization. Vending patents and licenses is the common type of exchanging technical information and cutting-edge technologies between different countries and companies.

The more developed international specialization and industrial cooperation the more international production process.

Producers from different countries are forced to make their relations more stable and sustainable. That’s why they complete a long-term specialization and cooperation agreements.

Those agreements are important because they limit the competition between companies and let them derive benefit from specialized large-scale manufacture.

Internationalization of capital also exerts influence over internationalization of production. Companies from different countries should use the latest discoveries and cutting-edge technologies in order to be competitive. That’s why the latest discoveries are diffusing in the world.

In terms of studying activities’ internationalization process some long-term motivations triggering the international activity development have been revealed. Internationalization process motivations is in Appendix 8. Companies’ internationalization theories can be divided into three different groups. They are shown in Appendix 9.

As for experience of foreign companies in internationalization let’s consider Volkswagen Group. (Volkswagen AG). Volkswagen (abbreviated VW) is one of the world’s largest automobile manufacturers. The company is headquarted in Wolfsburg, Germany. Volkswagen is the original marquee within the Volkswagen Group, which includes the car marquees Audi, Bentley Motors, Bugatti Automobiles, Automobili Lamborghini, SEAT, Skoda Auto and has goods vehicle manufacturer Scania. The group operates 61 production plants in fifteen European countries and a further six countries in the Americas, Asia and Africa. Around the world, nearly 370,000 employees produce more than 26,000 vehicles or are involved in vehicle related services each working day. The Volkswagen Group sells its vehicles in more than 153 countries [42]. Company removes its production abroad. Volkswagen Group has its own production facilities all over the world (Table 6). The whole table is in appendix 10. So, internationalization more and more clearly fits the modern world economy. Despite the unstable economic situation companies do not decline the adopted expansion strategy.

Table 6

Foreign business units of Volkswagen Group (fragment)

Region	Country	VW Group unit	Branches	Production
Africa	South Africa	Volkswagen of South Africa (Pty) Ltd.		Volkswagen cars
Asia	China	Shanghai- Volkswagen Automotive Company Ltd.	Anting, Nanjing, Loutang, Changchun, Chengdu, Jiading	Skoda, Volkswagen cars, engines, gear boxes
Europe	Czech Republic	Skoda Auto a.s.	Kvasiny, Mlada Boleslav, Vrschlabi	Skoda cars, engines, gearboxes, foundry

3.2. Globalization

At the beginning of XXI century the world economy entered its most high-quality stage of the development which is defined as globalization [14, p.82]. Firstly the term «globalization» was introduced by the American economist T. Levitt. It meant market merging which actively appeared in early 1980s [11]. There are many opinions of scientists about the essence and the phenomenon of globalization. One group of them considers that the world will be the global if all countries are involved into the world economic processes (the «scale» criteria). Another group uses such criteria as «the level of the influence». In the modern world of science and politics the single universally accepted definition of globalization does not exist. So, for example, Joseph Stiglitz (the winner of Nobel prize for Economics in 2001) to his own question «What is this phenomenon of globalization?» answers: «Fundamentally it is the closer integration of the countries and peoples of the world which has been brought about by the enormous reduction of costs of transportation and communication, and the breaking down of artificial barriers to the flows of goods, services, capital, knowledge, and (to a lesser extent) people across borders…. Globalization has been accompanied by the creation of new institutions that have joined with existing ones to work across borders» [24, p 9]. According to this notion the keyword is «integration». So we have to decide how to estimate the level of the state integration into the world economic system.

Robert J.Carbaugh asks the same question, «What does this term mean?». And then he answers, «Globalization is the process of greater interdependence among countries and their citizens. It consists of the increased interaction of product and resource markets across nations via trade, immigration, and foreign investment—that is, via international flows of goods and services, of people, and of investments in equipment, factories, stocks, and bonds. It also includes non-economic elements such as culture and the environment» [1]. Simply put, globalization is political, technological.

Some scientists believe that the definition of globalization should refer to the process in its current state (the example of update definitions is given in Table 7).

Table 7

Actualization (conceptualization) of the definition of «globalization»

Initial version, 2003[2]	Conceptualized version, 2006[2]
«The intensification of cross-national interactions that promote the establishment of trans-national structures and the global integration of cultural, economic, environmental, political, technological and social processes on global, supra-national, national, regional and local levels»	«The process of creating networks among actors at multi-continental distances, mediated through a variety of flows including people, information and ideas, capital and goods. It is process that erodes national boundaries, integrates national economies, cultures, technologies and governance, and produces complex relations of mutual interdependence»

Summing up these definitions, we can conclude that all points of view are united in understanding that globalization is the process of the formation and subsequent development of a united, worldwide financial and economic space based on new, mainly information technologies. The idea is that the world is developing a united economy and culture as a result of improved technology and communications and the influence of very large TNCs. It releases the objective and subjective aspects of globalization.

Taking into account that the problems of globalization are often linked to negative disruptive effect, it is necessary to distinguish between the concept of «globalization», «globalism» (that is associated with anti-globalization) and «global hegemony», «TNK expansionism».

3.3. Measuring of Transnationalization, Internationalization, Globalization

Objective assessment, measurement of globalization (integration, internationalization) is an essential agenda for the contemporary epoch. Existing indexes are employed in various ways. Usually we use the traditional indices: Index of internationalization, Index of transnationalization, Index of globalization.

Index of globalization (globalizing indicator) assesses the degree of involvement into the international environment. As we know it aggregates the conditions of new technologies, communications and the level of development of the institutional organizations. For example, composite Maastricht Globalization Index [2] includes such components as: Global Politics (the number of foreign embassies and high commissions, membership in international organizations etc.); Organized Violence (this indicator measures the involvement of a country’s military-industrial complex with the rest of the world); Global Trade – reflects economic globalization (export, import, trade in services etc.); Global Finance (FDI – foreign direct investment); People on the Move (migrant stocks and flows); Technology (the share of a country’s population that uses the internet); Environment reflects ecological aspects (trade of goods that have a strong environmental impact). Others are in the table 8.

Table 8

Index of internationalization, transnationalization, globalization

Index	Essence	Example
Index of internationalization. It is calculated as a percentage ratio of the number of the foreign branches to the total number of the branches of the company.   Фз –he number of the foreign branches; Фо – the total number of the branches of the company	It accesses the degree of internationalization of the Reproduction Cycle of the company	Among the biggest TNCs the biggest Index has Belgian corporation Inbev SA with 98.3 points and Netherlands’ metallurgical corporation Mittal Steel with 97.1 points

Continued, table 8

The concentration index. It is calculated as a percentage of the sum of the squares of the number of foreign branches to the square of the total number of branches.   Xik – the squares of the number of foreign branches Xi – the square of the total number of branches	It takes into account the number of branches in the country where the TNC is situated. It assesses the level and depth of penetration of the reproduction process of the company into the global reproduction process	The lower the level of concentration, the more uniform is the diffusion of companies into the world community as a whole and vice versa, i.e. the higher the value of this index, the greater the specific country or regional preference for the company
Index of transnationalization. The calculation is simple. It includes the arithmetic meaning of three components: a share of the foreign assets in the total asset of a TNC, a share of foreign sales in the total sales of the company, a share of the foreign employment in the total employment of the company       Аз – a share of the foreign assets Ао – the total asset of a TNC Пз – a share of foreign sales По – the total sales of the company Чз – a share of the foreign employment Чо – the total employment of the company	This index quantitatively assesses the depth of the world economy interrelation. But it is not necessary that activities of subsidiaries always bring positive results for the country of its location. The index accesses the place and role of foreign operations in the total number of operations made by the company.	According to this approach the highest index has Canadian corporation Thomson with 97.2 points and American telecommunication corporation Liberty Global with 96.5 points

The end of the table 8

The concentration index. It is calculated as a percentage of the sum of the squares of the number of foreign branches to the square of the total number of branches.   Xik – the squares of the number of foreign branches Xi – the square of the total number of branches	It takes into account the number of branches in the country where the TNC is situated. It assesses the level and depth of penetration of the reproduction process of the company into the global reproduction process	The lower the level of concentration, the more uniform is the diffusion of companies into the world community as a whole and vice versa, i.e. the higher the value of this index, the greater the specific country or regional preference for the company
Index of network spread (INS). It is calculated as a ratio of the number of the countries where the company is operating to the total number of the potential countries. n – the number of countries where the TNC operates n* – the possible number of countries where the TNC could have a branch network	The index indicates whether a company operates to a large or a small number of states and thus assesses the prevalence of its internationalizated activity in world economy. This index indicates only the number of countries where the TNC operates but does not take into account the number of branches presenting in each of these countries	First in the list is German logistical corporation Deutche Post World Net with the index = 49.7 and the American car corporation Ford Motors index = 47.2

Composite according to: [12, 14, 16, 18, 21, 22].

Also there is the complex index of transnationalization (Ictn):

(3)

the first three indicators are identical to the index of transnationalization;

Pf – the value of foreign production;

Pt – the value of total production;

If – the value of foreign investments;

It – the value of total investments.

Globalization has set a problem of searching for new basic origins of comprehension of the modern world [7, 10, 23]:

• It is essential that national economies and their structure under the circumstances of globalizations have developed new orienting points to be included into the world economic sphere.

• Strategic operation in the geoeconomic space is not already only ‘coming’ to the international market: global internationalized reproduction cores (cycles) are being developed going through various national economies.

The course serves as a basis for learning how a country can be accessed to the formation and redistribution of the world income. We use the geoeconomic approach.

For estimation of the level of the state integration into the world economic system we propose the new index – geoeconomic integration index (Igi):

Igi = (I ₁ + I ₂ + I ₃) / 3, (4)

I ₁ – it reflects the type of the international economic relations;

I ₂ – it reflects the kind of the local system in the context of the region («region-system» overthrowing inside or outside);

I ₃ – it reflects the level of the technological development.

All components are determined by means of indicators from table in appendix 11.

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