Factors Affecting the Global Economy and Their Influence on International Growth

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This essay identifies the factors affecting the global economy and explains how they influence the growth of international trade. It also discusses the global business environment and its contribution to the growth and development of international business. The essay concludes by emphasizing the importance of considering all market situations while planning for a business.

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Global Economy

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Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1. Explaining factors affecting growth of international trade in an economy ............................1
2. Interpreting global business environment contributes to the growth and development of
international business ...............................................................................................................3
CONCLUSION................................................................................................................................5
REFERENCES ...............................................................................................................................6
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INTRODUCTION
International business refers to buying and selling of goods and services across the
borders. It is the process in which free flow of products takes place. There are several stages of
internationalisation starting from domestic to transnational (Alshare and Sewailem, 2018). Free
trade can be possible with the help of globalisation. It is the process of dispersion of
product,technology and services across domestic borders. This essay describes the factors of
economy which affects the growth of international trade. Besides, process of globalisation and its
drivers are explained. It describes the global business environment which contributes in the
growth and development of international business.
MAIN BODY
1. Explaining factors affecting growth of international trade in an economy
Integrating various cultures, beliefs and goals of distinct economies give birth to the
concept of globalisation. It is integrating various thoughts and ideas which is dependent upon
each other economic system. There are several stages of globalisation which are required to be
followed in order to achieve objectives. In the beginning stage of globalisation which starts from
domestic markets (Barmeyer, Mayrhofer and Würfl, 2019). It is the market in which trade takes
place between the boundaries of same country. For examples,Foxes cafe lounge is working at
domestic level in UK. Another step in globalisation process is international market in which it
spread it wings beyond domestic market and approach expansion of businesses. In this it expands
its operations to different countries and some of the forms of international market are
exporting,licensing, franchising and joint venture. Multinational or multi domestic form of
companies are those in which management of these companies get diverse and manufacturing
takes place in host country. It adopts dynamic approach because it frame its operations according
to the respective company. For instance, AstraZeneca, deals in pharmaceuticals spread its
operations in various parts of the world. Another stage is global companies which uses strategy
based on worldwide approach. It produce in home country and markets its offering globally or
vice versa. Final stage of internationalisation is transnational company which operates on the
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glocalisation,”think global and act local”. Its tasks such as research&development and product
formation.
Drivers of globalisation refers to the elements which affect the process of globalisation.
There are several factors which contributes in achievement or hurdles in process of globalisation
(Burgmann, 2020).Technological drivers include the innovations take place in modern
technological society which improves the telecommunication between different countries and
reduces the physical gap between different nations. For instance, Astrazeneca receives the noble
prize for developing Cryo- EM. It is a technology used to inspect the structure of molecules for
proteins identification. This innovation makes it unique in the existing as well as foreign markets.
Cost drivers is an element which helps to gain cost efficiency in terms of reducing per unit cost
of manufacturing. Economies of scale can be obtained by exporting goods and services to
various markets. Political drivers consist of policies, rules and regulations framed by the
government of a particular country. By introducing globalisation free trade can be done which
reduces the rigidity of laws and regulations. Factors related to competition encompasses the
existing rivalries in the market and keeping watch on their tactics. In the global market, two
trading also provokes FDI which increases the flow of capital in the economy.
Globalisation contributes to success and growth of an enterprise in many different ways.
There are several benefits of the same which can be elaborated on the distinct basis. For
accessing new market,it is mandatory for organisations to adopt their culture which includes their
taste and preferences. For example,Costa coffee is a largest coffee shop in UK which is operating
worldwide by delivering its product according to the consumer's demand. Poverty is the problem
which are commonly faced by under developed or developing nations. Globalisation helps to
infuse capital in the economy through various investment techniques such as FDI& FII and
improves living standard of a specific country.
Even though internationalisation offer various advantages,it also carries drawbacks at the
same point of time. Economic growth must be equal for each nation but due to unequal
distribution of wealth, many rich countries are becoming more prosperous whereas poor nations
are facing more difficulties of economic resources (Duque-Grisales and Aguilera-
Caracuel,2021). Exploitation of cheap labour resources or countries work on labour intensive
technology is using benefits of low labour cost which sometimes creates the issue of ill treating
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labours. While integrating various ethics and culture it may become tough to hold its own culture
and loose identity of one's beliefs.
Competitive advantage is the benefit an enterprise enjoys over other firms. Advantage
can be in any form either cost, quality, brand price or customer support services (Efanodor-
Obeten Omokiniovo, 2020). Basically, it comprises sum of elements which make an organisation
unique from its competitors. There are many strategies which can be adopted by an organisation
to gain advantage over its competitors by discontinuing the production of those goods in which
rivalries are getting comparative advantage. For instance, Tesco discontinued Halloumi and light
cheddar cheese products because its competitors are delivering same product at low cost so there
was no sense in putting expense in producing the same. Companies fails to anticipate the
demand of its competitors and its dynamic needs which reduces the turnover of an enterprise. An
enterprise must frame its plans to meet the changing needs of the society which aids in attaining
organisational objectives.
2. Interpreting global business environment contributes to the growth and development of
international business
Global business environment refers to the environment which is effected by the several
factors which are extraneous. There are some variables which are not under the control of an
environment. Business environment is categorised into two major types- internal environment
and external environment. External environment is also divided into two types: micro factors and
macro factors. Detailed explanation of the external factors comprises opportunities and threats.
Opportunities are the positive traits which are required to be tapped from external
environment (Kumar and et.al., 2020). These are the favourable factors which are considered for
increasing the profitability and revenue of an enterprise. In context of Tesco, it is taking benefit
of global pandemic by providing online grocery items and introducing new artificial intelligence
and machine learning techniques to take orders from its customers. By taking online and remote
based orders from its clients it can reach its large target market easily and also reduce the cost of
retaining more employees in an organisation. Another opportunity it is grabbing is that it
diversifies its product range by providing alternatives of meat based products. By adopting this
slight change it can capture good market share and enjoy competitive advantage.
Threats are the negative factors which impacts the business profitability and revenues.
This element can be eliminated from an enterprise because it is uncontrollable factor of
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environment. For instance, Tesco was involved in a Christmas scandal in which it represents an
advertisement which seems to be humorous but it hurts the sentiments of the Christian religion
and damages the reputation in front of the general public. Another threat Tesco was facing is
Brexit deal because its major operation are spread in the European countries and British was
escaping from Europe. It adversely impacts the working of this company. Rivalries of Tesco such
as Walmart, Carrefour and Aldi are biggest competitors of this firm which negatives effects the
profitability of an enterprise.
Macro factors of environment are those things which affect the complete population
rather than few individuals (Lundgren, Castro and Woodin, 2019). Examples of macroeconomic
factors such as inflation, economic output and unemployment rates. Macroeconomic factors
include political, economic,social, technological and legal environment. Political environment
refers to the actions taken by government and higher authorities of a specific country. This
factor includes various laws,rules,regulations, policies, tax structure, tariff or non tariff policies
and trade related restrictions or liberations. These have power to change the financial system of
an organisation. With respect to Tesco, to carry out trade stability among countries is a major
challenge in which it gained its competency. Tax structure formed by the government framed in
favour of Tesco ease the work of the respective company. Whereas Local council imposed a tax
named “Tesco Tax” on supermarkets but government of UK deny to levy this tax which
adversely impacts respective company.
Economic element of macro factors consists interest rate, exchange, economic growth
and availability of credit ( Mukherjee, Banerjee and Kar, 2019). This impacts the purchasing
power of customer and varies the amount of demand and supply accordingly. For example, At
the time of Pandemic (COVID-19) grocery sales showed a positive impact,demand for household
products also went up of Tesco.
Due to COVID-19 many people switch to the cheap brands which eventually reduces the
sales of high quality products. Due to this revenue of it goes down. Social factors of macro
environment entails the lifestyle, demographics of a country, changing taste and preferences,
standard of living, cultural trend and attitude of people level in a nation. With respect to marks
and Spencer, deals in clothing and accessories in UK. It is still working on the traditional or
ethnic wear approach which target the elder section of the society. Through this approach it hold
good share in the market. It provides the credit card system for the payment to its customers.
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People got ease in doing payments and their satisfaction is one of the major contributor in the
success of an enterprise.
While conducting a business it is crucial to carry tasks within the prescribed protocols
and follow all the legislations framed by the government of a respective economy(Sandhu,
Shamsuzzoha and Helo, 2018). Laws such as consumer protection, health and safety of labours
is vital to be followed by an organisation. Marks and Spencer is continuously conducting session
for drawing attention on the current amendments in the laws and regulations of a country.
However, they recently got charged for breaking the protocols of health and safety act 1974.
Country attractiveness is a practice of keeping track of each variable either quantitative or
qualitative which helps investors to plough funds in a respective country (Tung and Stahl,2018).
There are key areas which are considered for measuring country attractiveness are market size ,
GDP, transportation cost and access to different markets. Organisation for economic cooperation
and development is a institution helps to collect data of several countries regarding their
economic performances. Investors uses country attractiveness as a measuring tool to know about
the economic performance of a nation. Evaluation of data consists various parameters which are
considered while taking decisions related to invest in assets of a specific country.
CONCLUSION
From the above essay, it can be concluded that integrating several economies by adopting
cultures, thoughts, idea and information helps to remove the trade related barriers. Ease in doing
trade and spreading wings to another nation contributes in formation of capital and increasing the
level of employment in a nation. Besides, above mentioned points globalisation aids in gaining
advantage related to cost also. Global business environment is a framework which consist several
factors that are not under the control of a business. However, certain steps can be taken in regard
to correct the dynamic situations. Planning must be done by considering all the situations of
market which is constantly changing.
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REFERENCES
Books and Journals
Alshare, K. and Sewailem, M.F., 2018. A GAP ANALYSIS OF BUSINESS
STUDENTS'SKILLS IN THE 21st CENTURY: A CASE STUDY OF
QATAR. Academy of Educational Leadership Journal, 22(1). pp.1-22.
Barmeyer, C., Mayrhofer, U. and Würfl, K., 2019. Informal information flows in organizations:
The role of the Italian coffee break. International Business Review, 28(4). pp.796-801.
Burgmann, V., 2020. Power, profit and protest: Australian social movements and globalisation.
Routledge.
Duque-Grisales, E. and Aguilera-Caracuel, J., 2021. Environmental, social and governance
(ESG) scores and financial performance of multilatinas: Moderating effects of
geographic international diversification and financial slack. Journal of Business
Ethics. 168(2).pp.315-334.
Efanodor-Obeten Omokiniovo, H., 2020. THE DIFFERENTIAL IMPACT OF
CONTEMPORARY GLOBALISATION POLICIES ON WOMEN IN RURAL
COMMUNITIES OF DELTA, KANO AND KWARA STATES, NIGERIA. Cogito
(2066-7094), 12(1).
Kumar, B and et.al., 2020. Digital mediation in business-to-business marketing: A bibliometric
analysis. Industrial Marketing Management. 85. pp.126-140.
Lundgren, U., Castro, P. and Woodin, J. eds., 2019. Educational Approaches to
Internationalization Through Intercultural Dialogue: Reflections on Theory and
Practice. Routledge.
Mukherjee, P.K., Banerjee, S. and Kar, A., 2019. Globalisation of Traditional Medicine under
the Modern Medicine Portfolio. In Natural Medicines (pp. 517-536). CRC Press.
Sandhu, M.A., Shamsuzzoha, A. and Helo, P., 2018. Does outsourcing always work? A critical
evaluation for project business success. Benchmarking: An International Journal.
Tung, R.L. and Stahl, G.K., 2018. The tortuous evolution of the role of culture in IB research:
What we know, what we don’t know, and where we are headed. Journal of International
Business Studies. 49(9). pp.1167-1189.
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