Factors Affecting Global Economy and International Trade in the Business Environment

This essay discusses the concept of global economy, factors affecting it, and their influence on international trade. It also defines the business environment and how it affects international business.

International Business
Essay

Table of Contents
INTRODUCTION ..........................................................................................................................2
TASK ..............................................................................................................................................2
CONCLUSION ...............................................................................................................................6
REFERENCES................................................................................................................................8
INTRODUCTION
Past decades have seen growth in the World financial markets. This boom in the global
economy has been accompanied by the structural changes that took places in the policies of the
government worldwide. This shift was seen from prevalence of closed economies to the opening
up of markets giving rise to open economy. International trade markets and the business
environment has benefited due to globalization of economy which has enhanced the cross-border
trade in goods and services and increase in the foreign investments. Thus, a global economic
landscape has been created which has facilitated an influential growth and developments on the
business that happen globally(Bhambra, 2020). Operating any business on the international
platform is not an easy task, it bring challenges as well as opportunities with it. International
business requires fast production and good quality so that it can grow and develop among the
consumers. This essay will cover in detail the concept of global economy, factors that affect the
global economy and the influence of the explained factors on the international trade. It shall also
cover and define the business environment, how global business environment influences the
growth and development of international business.

TASK
The global economy has taken a shift significantly over the past decades with respect to
how it is organized and how different nations govern it. It has changed the dynamics not just
relating to the movement of people but also has affected the flow of goods and services between
the nations. The worldwide interconnection of economic activities which takes place between
multiple countries on the global level is referred to as Global economy. It is also referred to the
world economy that exists among all the human in the world who set up an economic system that
is interdependent(Grybaitė and Stankevičienė, 2018). These economic activities have both
positive and negative effects on the business and international trade of the countries that are
involved. Global economy seems to be in the control of big banks and large multi national
corporations that affect how it functions. It functions based on International transactions.
Globalization has facilitated migration of people between the countries, creation of global
business value chains, opening of joint ventures on international level, growth in the cross-border
competitions, etc.
There are several factors that are affecting the global economy like Market drivers
which comprises the global customers who have similar tastes and needs driving the
international marketing of goods and services, there is global expansion of the markets due to
growing opportunities this is leading to the economic exchange between multiple nations to
address the demands arising in the market (Hanaysha, 2018). Other factor is innovations in
technologies which is shaping the face of modern global economy because of revolutions in the
industry which is helping in getting affordable and powerful technologies that is making the
global communication easier and faster production of goods and services which is improving the
global economies. This is helping the different business organizations and corporations in
effectively carrying out their work and operating for the global marketplace to address the
international customers. Next factor is Competition drivers because they lead the competitors
towards developing effective strategies that can work on the global level. Market competitions
are also affecting the interdependence of the multiple countries on each other for different
products and services which are not available with them and can be bought from other nation
which possesses them. Creation of global markets have also increased the competition among the
different firms internationally due to the fact that there is growing desire to become a brand on

the world wide level which can help in facilitation of two way trades between the countries
through import and exports (Kumar, 2021).
Next factor that affects global economy is policies of government like trade tariffs and
opening of the economies for other nations through reforms. It is also affected through different
trade regulations, foreign aids, etc. These help in defining how the firms in a country will operate
their business and how they can produce goods and services for the international market in
accordance to the regulations of their government (Olarewaju and Msomi, 2021). The
government drivers also includes the subsidies given by the government to the local companies,
the restrictions that are imposed on the ownership of any business, FDI and FPI regimes, market
regulations, etc. Other factor is Cost drivers which affect the decision making of the costs and
prices that vary from country to country which helps the firms on the global level to take
advantage of this and present the goods to the consumers in an efficient manner.
These factors not just affect the global economy but also influence the international
trade. Global trade or international trade refers to the economic activities among the countries or
the cross-border movement of goods and services. It involves the currencies of different
countries that are exchanged before importing or exporting the goods and services. Having
greater specialization of different products helps in improving trading and increasingly taking
benefit of the economies of scale. International trade is influenced by the Market drivers
because it influences the pattern of consumer demands that leads to changes in the nature and
production of goods by the business that is according to the taste of the consumers on the global
level (Priya, 2021) . It influences the making of goods and services so that trade between the
countries is easy. Technological innovations also influence the international trade by creating
market that is based on machinery and machine based products. It helps in increasing the demand
of products that are made newly with new technologies so that they attract the customers who
demand foreign products that eases international trade between the countries also increases it
with time when new technologies are invented. The global market competitions influence the
international trade by creating new substitute or alternative products that can compete with the
domestic products with quality, taste, quantity, etc. that facilitates increase in demand among the
customers who demand international products. This increases the cross-border trade movements
by import and export between the countries with different businesses to meet the demand of their
customers. Government laws and policies are considered the most important factors that

influence the international trade because the firms and business organizations among the
countries worldwide operate based on the policies that are formed by their own countries for
carrying out trade internationally(Radieva, 2018). To carry out the trade activities they have to
abide by the trade regulations, the tariff barriers, the regulations and rules formed to govern the
market. The businesses should comply with these to have easy movement for international trade.
International trade is also influenced by the different costs of the products and services
because when a customer can get a product at a better price in a foreign country, then the
demand for that product increases internationally for which there is requirement of carrying out
international trade so that global supply chain can work efficiently.
These factors initiate the functioning of the trade and commerce on the global level while
also benefiting the economy on the international scale both in business terms and monetary
terms. Global economy thus benefits in Free trade, labour movements, increasing investments,
etc.
The analyses of the above factors helps to understand a business environment. It can be
defined as the components that affect a firm or company's ability to build products and services
and also to maintain successful relationships with the customers. Formation of a business
environment depends on the collection of all the factors that can be internal and external. These
factors are employees, supply and demand, owners of the business, the needs and demands of
customers, technological innovations, market trends, competitors, etc. these influence how a
business functions and operates in a direct or indirect manner (Sajjachayaphan, 2021) .
Global Business is affected by various factors of international or global environment. In
global business environment, exchange of capitals, products, services and innovativeness helps
the nations to operate in unity. Factors of political, economical, technological and cultural
environment influence the operations of global business. It facilitates the expansion of business
across different nations through exchange of products and services and helps in developing
customer base globally. It helps businesses by contributing innovative technology and in
realising capital from foreign countries by way of export of products that in turn enhance the
productivity level of businesses . By operating globally, businesses enjoy price stability equally.
It facilitates availability of goods and services to every nation operating globally through imports
and exports. Imported products offer alternative to the customers and gives rise to inflation that

ultimately increase the profitability of domestic firms. Through Technology Advancement, it
ensures sustainable growth of domestic firms in the global environment.
Global forces of the business environment affect the international business with
availability of raw materials, reliability of supply chains, labour movements, etc. Global business
environment has facilitated increase in the access to the mass markets due to which the
business who operate on the international level can cater to the demands and needs of the
customers who demand products and services from the foreign markets giving rise to business
expansions so that they trade between countries by opening up branches worldwide(Weiss, 2020)
. International business also grows with respect to reduced cost of the materials which help in
manufacturing of the products and services that are offered to the customers on the international
scale. Global business environment also helps in increasing the access to resources that are
available in different countries. All the firms and businesses that are operational in di9fferemnt
nations can use these available resources to their benefit and advantage so that they grow among
the international market and the prevalent competitors. It also increases healthy competitions
among the market which builds a competitive spirit among the businesses so that they work
towards producing the best quality goods and services at cheaper rates so that they are preferred
among the consumers. Global business environment also includes different technologies that
different nations invent which can help a business is fast production while also improving their
quality that can help in international business.
Thus, it is necessary that the global market operates in a manner to give rise to economic
growth and development while also facilitating the international business operations(Wiedmann
and Lenzen, 2018).
CONCLUSION
It can be summarized from this essay that Global economy and international trade has the
potential to support worldwide development and growth by providing opportunities that can
generate high incomes and can improve the standard of living by enhancing the cross border
movements and economic integration of countries. The different factors that affect global
economy are Market drivers, new technologies, competitions in the market, government rules
and regulations that forms policies for trade and the costs of different product and services.
Citizen and consumer welfare has been the primary motivation behind increasing international
trade. This globalization has also helped in development of a global business environment which

is facilitating development of international business which is benefiting corporations and firms to
meet their consumer demands. Global business environment influence the growth and
development of international business by the way of providing access to the mass international
markets, availability of raw materials with reduced costs, enhancing positive market
competitions and access to large number of resources which are prevalent among different
countries.

REFERENCES
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