Factors Affecting International Business and Global Trade

This report discusses the complex factors affecting international business and global trade, including the impact of the global business environment. It covers topics such as global economy, availability of cheap labor and resources, liberalization and globalization, technological advancement, global consumer trends, and political, economic, environmental, and social factors.

International Business

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
CONCLUSION ...............................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Thanks to the advent of globalization, the boundaries between nations have blurred
considerably when it comes to conducting business and trade as the entire world has become one
large digitally connected hub. International Business refers to the sum total of business
operations that a firm undertakes to promote transfer of it's goods, services, human resource and
technology across national borders (Anthony, 2019).
This report will discuss a number of complex factors which affects international business
and affects the growth in global trade along with the influence that is exerted on international
businesses and trade by factors of the volatile global business environment.
MAIN BODY
International Business is a complex undertaking which comprises of a myriad of
different operations such as manoeuvring of goods across national borders resulting in imports
and exports, legal contracts which permit organizations to use the branding, products and
expertise of other firms from anywhere in the world such as licensing and franchising and
departmentalization of foreign market analysis and research. The here mentioned processes also
form a robust base for the study and analysis of the international business market and trade
which is used to predict the impact of the global business environment on countries, companies,
general public and world governments.
Global Economy is an interwoven network of economic operations and undertakings
between multiple countries across different continents and it has changed a lot over a period of
time thanks to globalization and all the technical advancement mankind makes over time (Baláž,
Zábojník and Harvánek, 2019). Global Economy is very subjective to change due to it's
multidimensional nature and the existence of a wide spectrum of currencies to facilitate trade in a
global market and change in global economy has a direct relation with increment and decrement
in the volume of international trade. Various factors that affect the global economy and
influence the growth in international trade are given below.
Availability of cheap labour and resources is the framework behind international trade's
basic fundamentals have always been driven by the need to get rid of the absurd costs involved
in running and upscaling a business by taking advantage of low cost manpower and resources

available in another region. Businesses enter foreign market for a variety of purposes including
expansion of operations, opening of new branches and capturing a new market however the
underlying thought process behind all of it is to enjoy the abundance of local manpower and
natural resources to obtain economies of scale (Bräuninger, and et.al., 2019). Countries like
China and India have become favourite business hotspots of the world solely due to these
reasons as there is a large pool of manpower, both skilled and unskilled available for extremely
low cost and both countries are self sufficient and rich in resources. UK business giants like
Accenture and Deloitte expanding and finding success in India, Ford motor company shifting
their major call centres to India, Bangalore getting Cisco's R&D development centre and Apple
setting their main Iphone production plant in China are major examples. E-Commerce giants like
Amazon in India also took major advantage of the available manpower to setup huge warehouse
worker and delivery boy networks around the country.
Liberalisation and Globalization are the pillars of international trade and bloodlines of
the world economy as without the countries inviting enterprises around the world to use their
land as a business hub and the boundaries between nations blurring to facilitate trade, the
landscape of global business would have been less than promising. Both these practices have
also brought forward major boost in employment opportunities and has allowed people to travel
seamlessly across borders to earn a better living. Business tycoons like Microsoft and Google
provide loads of employment chances in their offshoot business locations and companies like
Edelman and Boston Consulting Group have started providing exchange programs to their
employees for better growth and profitability (Contractor, and et.al., 2020). Globalization has
also helped businesses establish themselves in foreign markets and take advantage of their
industry expertise and one of the prime examples being the Coca-Cola company which
established itself in more than 200 countries worldwide and is now the beverage market leader
with more than 500 brands under it's belt. These forces of world economy have also had a
distinct impact on the BPO sector and outsourcing as a whole as companies like Wipro and IBM
provide service to clients globally on a extensive scale which was not possible before.
Technological Advancement is a very important driver and stimulant of the world
economy and also holds considerable influence over international trade. Traditionally, trade has
always been dictated and regulated by the existing technologies however with recent
advancements in digital technologies, world economy and trade are both going into uncharted

territory. Artificial Intelligence is shaping world trade in a major way and companies are using it
to varying degrees of success in the international arena. UK's private AI giant BenevolentAI are
changing the science of the human body as we know it as they are building algorithms to predict
complex diseases like Parkinson's and potentially cure them globally. Google also entered the
race by making global tools to combat illegal fishing which was entirely based on machine
learning and artificial learning. Blockchain technology is rapidly gaining speed to revolutionize
and fasten the supply chain network globally like never before, Dubai's chamber of commerce
and industry are already initiating and lobbying for use of blockchain in major internation trade
to alleviate problems of transparency (Coulibaly, Erbao and Mekongcho, 2018). A company that
has used technology to great effect to gain global dominance has been Zoom which took
advantage of it's cheap upscaling technology and novel concept and ended up with massive
growth and profit during the COVID-19 pandemic.
Global Consumer Trend is also a big factor which drives forth international business as
companies spend a fortune on big data analytics and international customer's buying behaviours
and expenditure graphs to gain a broad outlook on how they can create new product lines,
change their marketing messaging and devise techniques to penetrate foreign markets.
Consumers all over the world differ in their product and service opinions and buying taste but
they do follow broad trends which can help dissect and segment them for the sake of
international marketing such as Backup product buyers, self love seekers and climate changers
who aim to buy most things environment friendly. It plays a huge part in driving latest
developments in international trade as companies who take advantages of consumer trends enjoy
tremendous success and profits on a global scale (Crane, and et.al., 2019). Coca-Cola company
identified the growing shift of customers globally towards being physically fit and cutting down
on soft drinks and carbs and launched a new product Diet Coke which was specifically marketed
as being a healthy soft drink and is to this day, one of the company's biggest product offerings.
Gaming companies like Xbox and Playstation are another great example as gaming industry is in
a boom and by offering consoles and great games to people worldwide, Xbox is now a 1 Trillion
dollar company.
Global business environment refers to the environment and business oriented climate
found in sovereign countries which are outside the jurisdiction and geographical boundaries of

the country from which the business originates from and it impacts it's decision making and
strategy formulation at every level (Dima, 2018). This type of environment is extremely volatile
and unpredictable as it is subject to rules, regulations, competitions and policies which are all of
foreign nature to any company engaging in cross border trade or expanding into new markets.
Companies have to be careful and analyse every major component that these environments are
constituted of as they are ripe full of opportunities as well as barriers for all entrants.
International Business is affected by variety of factors of the global business environment
which are stated below.
Political Factors affect international business in a major way as businesses operating in
foreign locations are often at the mercy of the ruling government as policy change at every level,
ranging from local to federal can have lasting impacts for businesses. For a business to succeed,
it has to operate in a politically stable environment as change of governments and administrators
brings change and confusion in rules and policies which affects profitability of a firm. Tax rate
decisions of the political party in charge is also vital for a business to survive as high slabs of
corporate tax can even lead to businesses leaving their foreign operations entirely. This is why
countries like China are once again preferred because of the stable and predictable government
that exists there alongside a strict but fair tax system. Governments also attract businesses to
conduct businesses in their country by offering them political favours such as tax rebates,
discounts and low tax structure.
Economic Factors directly affect the business proceedings in any country in the world as
the basic aim of a firm is to earn as much profit as possible and even if this goal might be simple,
the factors affecting it are numerous such as recession, inflation and demand and supply
dynamics (Gray, 2019). A business has to be cautious of the prevailing economic conditions and
statistics of a country it wishes to enter and expand in. The level of income and employment in
the economy is also necessary for businesses to operate properly as purchasing power of
individuals is an important factor in judging the demand for a particular product or service. A
country having a strong and stable economy with a high level of disposable income leads to great
growth of international business as it can attract big business giants to conduct business on their
grounds.
Environmental Factors although initially overlooked, are recently gaining speed in terms
of relevance and importance because the damage to our ecosystem and surroundings from

business emissions and by-products has been extremely detrimental and we are standing near to
an impending climate crisis. Hostile climate conditions can disrupt human resource and supply
chain networks of a company leading to losses and unpredictable weather can also damage the
farming and agriculture businesses in a bad way (Jaini, Zulkiffli and Ismail, 2020). Businesses
have a moral and ethical responsibility to use the natural resources of their branch country in an
optimum way without wastage or damage to local population and wildlife. Controlling pollution
and harmful emissions and to deliver green and clean products, services and solutions have
become a large driver of international business as more and more consumers are getting
environmentally aware and demanding cleaner products.
Social Factors also play a major part in growth and development of international
business as heeding attention to a country's social structure, dominant religions, societal customs
and beliefs is important for the smooth operations of a business without backlash or failure.
These factors have both a positive and negative impact on the growth of international trade as
countries with a non tolerant outlook towards foreign businesses and excessive nationalistic
sentiments can get easily hurt at the slightest error in the marking message delivered by the
company and this can lead to mass boycotts and public backlash (Reshetnikova, and et.al., 2018)
However showing respect to the customs of a nation and incorporating their religious practices
and lifestyle choices in a tasteful manner can work wonders for company and make them
successful overnight. This can be seen as many non domestic companies in India advertise
heavily during Diwali Season and firms in the UK are all about Santa and presents around
Christmas.
CONCLUSION
This above concluded report discussed the topic of international business in detail and
consisted of a brief outlook on global economy, the factors which impact global economy and
influence the overall growth of international trade along with the detailed description of the
global business environment and the impact it's various factors have on development and growth
of international business. A conclusion was reached that international business is an avenue full
of opportunities for businesses but it is quite a complex process which is subject to many
unpredictable factors. As such businesses should be careful and analyse all available dimensions
for informed global decision making.

REFERENCES
Books and Journals
Anthony, U.E., 2019. The effects of information technology on global economy. ITALIENISCH,
9(1), pp.135-147.
Baláž, P., Zábojník, S. and Harvánek, L., 2019. China's Expansion in International Business: The
Geopolitical Impact on the World Economy. Springer Nature.
Bräuninger, and et.al., 2019. Party competition and government formation in Germany: Business
as usual or new patterns?. German Politics, 28(1), pp.80-100.
Contractor, and et.al., 2020. How do country regulations and business environment impact
foreign direct investment (FDI) inflows?. International Business Review, 29(2),
p.101640.
Coulibaly, S.K., Erbao, C. and Mekongcho, T.M., 2018. Economic globalization,
entrepreneurship, and development. Technological Forecasting and Social Change, 127,
pp.271-280.
Crane, and et.al., 2019. Business ethics: Managing corporate citizenship and sustainability in the
age of globalization. Oxford University Press, USA.
Dima, A.M. ed., 2018. Doing business in Europe: Economic integration Processes, policies, and
the business environment. Springer.
Gray, D.E., 2019. Doing research in the business world. Sage.
Jaini, A., Zulkiffli, W.F.W. and Ismail, M., 2020, November. The Impact of Eco-Friendly
Products and Social Media Toward Environmental Awareness: Moderating Role of
Knowledge. In International Conference on Business and Technology (pp. 491-504).
Springer, Cham.
Reshetnikova, and et.al., 2018, April. The international business cooperation and its influence on
enterprise financial security under globalization. In International Conference Project
“The future of the Global Financial System: Downfall of Harmony” (pp. 294-308).
Springer, Cham.