FDN016 - Analyzing Global Issues in Business and Tourism & Solutions

This essay delves into the multifaceted global issues that companies face when expanding into international markets, focusing on economic, socio-cultural, technological, and political-legal factors. It examines the impact of inflation rates, currency fluctuations, demographic shifts, cultural values, technological advancements, and governmental policies on business operations. The essay further explores how these challenges can be overcome through strategic planning, including establishing a proper organizational structure, gaining comprehensive knowledge of local laws and regulations, implementing cost-competitive pricing strategies, monitoring currency fluctuations, developing strong communication skills, and leveraging modern technology for competitive advantage. The analysis provides insights into how companies can navigate the complexities of international business and mitigate potential risks to ensure successful global operations. Desklib provides a platform for students to access this assignment and explore similar resources for their studies.

Contemporary Global
Issues In Business and
Tourism
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Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Global challenges faced by international companies...................................................................3
Suggestions to overcome challenges...........................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8
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INTRODUCTION
International business mainly depends on the economic operations of the world. To
expand the business, company's are looking for new opportunities in the global markets. The
way of running a business differs from nation to nation (Sharma and et.al., 2020). In general
business is enhanced when people from different cultures find new solutions to the old problems
by combining different culture perspectives. The rise of globalization has made the world
dependent on each other.
In this essay, it covers the global issues such as cultural, political and technological issues
that influence the business while entering into international markets. And also, it shows
suggestion to overcome these challenges.
MAIN BODY
Global challenges faced by international companies
Doing international business is appealing. However, it has its own sets of issues and
challenges. There are various issues which affect the international operation of the companies.
Issues related to social, cultural, technological and political issues.
First are the issues which are related to the economy in which the company will be
operating. This is one most important factor that a company should keep in mind while leaping
into new international operation that is it should focus on the economic trend in the segments
which affects the industry there are entering into (Tur-Porcar, 2018). While entering into a new
economy it should also look upon the credit availability and level of disposal income at national
and international level.
Companies should also consider the inflation rate when entering into the global market.
As rate of inflation directly affects the business that is if there is a rise in the inflation rate it will
reduce corporate profits (Krajnakova, 2018). If there is a price inflation, economy will be
destabilized which will lead to higher interests rate and slow economic growth and volatile
fluctuations in the currency. And also with rising inflation, investment planning becomes very
difficult. The currency rate between two countries does not remain constant it keeps on changing.
Fluctuation in currency exchange directly influence the company's product in global market. For
e.g. petroleum and agricultural products were affected by the rise in the dollar against the
currencies of Brazil, Australia and Mexico. A fall or decline in the dollar creates opportunity of
increasing sales and reducing threats from foreign competitors. For e.g. when the Russian rouble
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was devalued in 1998. The Russian companies had fallen behind as they did not have enough
buying power to buy products from foreign market, resulting in decline of sale of foreign
companies. But, it created opportunities for foreign companies to outsource labour and raw
material at cheaper rates. The ups and downs in the economic cycle also affects the company. It
is very difficult to predict ups and downs in the economic cycle. But with the knowledge of such
danger is over the head it would help company to plan their investment accordingly.
The second important issue that the company face while entering into foreign markets are
the social and cultural related issues. It includes demographics, religion, culture, ethnic
conditioning and education (K Waykole, 2019.). These are the factors which change continually.
Demographic related issues such as religious composition, population, inter-state
migration, age distribution, income distribution, family size, occupational status etc. The shift in
the demographics of a country affects a company's strategic planning (Skinner, 2019). Markets
which has high population are growth market. As an increasing population will result in rising
demand of new products. And also with a rapid increase in population it will result in increase in
the labour supply. With the entry of women into labour markets, it has affected companies in two
ways; first the hiring and compensation policies of companies towards their employees have
been changed and also it has increased the need of products which are required in the absence of
women from their homes such as oven, convenience foods etc. Opening new opportunities for
companies. Also, companies will entry the foreign market should keep in mind the age
distribution factor. As it determines the buying patterns for e.g., in today's time it has compelled
producers to produce youth oriented products.
Social culture, values, beliefs, customs, attitudes, rituals affects the companies in a major
way (Liang and et.al., 2020). For e.g., Christmas opens financial opportunities for various
companies like tor retailers, card companies and many other businesses. Values refers to the way
of thinking about what is right and wrong. On the other hand beliefs, are social and physical
phenomena. It has a very significant effect on how and what customers buy. For e.g., people
believe, chocolate causes grey hairs.
In a global market it is important that companies design business strategies keeping in
mind the social and cultural differences that varies from country to country. Every country has its
own tradition and culture. For e.g., McDonald's in India do not serve beef burgers because in
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India cows are considered as a sacred animal. So, if the company serves beef it will be again the
culture and norms of Hindu religion in India.
The third global issue that affects the international business is the technology related
issues that is advancement in technologies. It can drastically affect the businesses. The pace of
technological improvements is running at an increasingly high rate. These are the major
opportunities and threats that must be taken into consideration while entering into foreign
markets (Xue and et.al., 2019). It influences companies products, manufacturing process,
services, suppliers, competitors and distributors.
Companies should consider the latest technologies while entering into foreign markets.
With the advancement in technology it opens new markets with improved products, relative cost
position of an industry is changed and also helps to eliminate the products and services which
have become obsolete. Technological changes also helps to reduce the cost barriers and develop
new products creating shorter production run. Which leads in increasing competition, that is
with new technologies cost of production can be reduced, therefore products can be sold at a
cheaper rate by the competitors which will result in decrease in sales of the company. Hence, the
company's market valued will be affected. For e.g., in the case of Procter & Gamble, is company
making diapers, it had a dominant positioning the U.S. market but with the technological
advancement in the absorbency power of diaper made by japan it lost its position in the US
markets.
Thus, it can create or deciminate any business or industry, as demand shifts from one
product to another product. For e.g., changes from fountain pens to ball point pens, steam
locomotives to electrical engines, from propeller planes to jet and from typewriters to computers.
The fourth Global issue that affects the international operations of a business is the
political and legal factors. These are issues which are related to the changes in government and
policies and regulations formulated by government, its ideology, political stability of the country
and the nature of bureaucracy (Kabakova, 2018). If the country has a policy that restricts the
growth of MNC's in the country it will automatically limit the growth of the company. But if a
country having a liberal policy that allows foreign capital inflow, imports and exports, it will
affect the business operation of the company. Hence, will result in growth of the company. For
e.g., Burberry launched its first foreign outlets in Paris and USA because of the government
liberalized globalization policy.
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In countries like UK and USA, there are various laws that govern the conduct of the
business. Matters related to standards of products, packaging and promotion, etc. It specifies
certain standards that needs to be followed for packaging of the products and even prohibits
promotion of certain products. For e.g., in number of countries in Europe advertisement for
alcoholic beverages are prohibited. So, while entering into foreign markets companies should see
that they are following the rules and regulation of that country for smooth running of their
business. Also, changes in the tariff policy, fiscal policy etc., influence the business that is some
create opportunists and some creates threat to the business (Madina, 2021). In the case of
industrial policy of liberalization in Nigeria in the mid-1980's created new opportunities for large
companies to diversify but it increased competition as well.
The politics of a country plays a very crucial part in performance of the company. It
directly has an impact on the cost of the company (Buckley, 2018). For e.g. If Chinese
government have a new policy of giving subsidy to local auto makers, this will directly affect the
foreign auto makers as there will be a price fluctuation.
Suggestions to overcome challenges.
With the expansion of businesses overseas it has made global markets more accessible,
and they have become interconnected. Which has lead to various challenges that have to be faced
by the companies. These challenges can be overcomed with a proper company structure. That is
a proper team can be put together. The company should consider its organization structure and
location from where the team can operate. It should decide the headquarters and the structure of
working before. That's whether they want to have a centralized or a decentralized headquarters.
After determination of proper structure, they should have a complete knowledge of laws
and regulations that are prevailing in the country where they want to operate. With a proper team
of experts having knowledge and experience about the laws and regulation of that country so that
there are no penalties which are being imposed on the company or any violation of law is not
there. For e.g. Airbnb, had to face a penalty of 30000 as a fine, because it breaches the tourism
law of Barcelona because of lack of knowledge of laws.
One of the things the company can keep in mind is the pricing of the product they are
doing business with in the foreign markets. That is company should keep a cost-competitive
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prices ensuring the profits for the company. It should take into consideration the labour
expenses, shipping cost, marketing expense with keeping a viable margin of the company.
Fluctuation in currency is one of the challenges that is faced by the companies in foreign
markets. So, companies should monitor major fluctuation that can affect the profits and expenses
of the business. If a company is paying its production and supplier cost in Kuwaiti Dinar and
selling its product in weaker currency say for Iranian Rial the company will end up in loss or
very small profit margins.
Also, cultural difference is the major challenged that is faced by the companies. So,
companies should focus on developing communication skills and a core culture. Effective
communication is the key to successful international operations.
Due to the technological advancement competition in the global market has also
increased which is a major challenge faced by the companies. So to run the business in a
competitive market companies should also use the modern technology and gain competitive
advantage. For eg. With the advancement in internet and world wide web companies can select
new modes of distribution channel with faster respond. Huge volume of information can be
securely stored and shared by databases enabling cost reduction and enhancement in services.
CONCLUSION
It can be concluded from the above essay that global issues affects the business positively
as well as negatively. If a company wants to trade in international markets it very essential to
understand the economy of the country in which it wants to operate. It should keep in mind the
inflation rates and currency fluctuations which will influence the working of their business. Also
there are various social and culture related issues like the demographics, values and beliefs of
society as it influences the buying power of the customer which will affect the company's sales.
Technological issues related to advancement in technology should also be monitored as it
provides a competitive advantage to the company. At the end, it can summarised that there are
various challenges that are faced by the company. With the help of a proper team of expertise
and proper monitoring of the rules and regulation these challenge can be overcomed.
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REFERENCES
Books and journals
Buckley, P.J., Enderwick, P. and Cross, A.R. eds., 2018. International business. Oxford
University Press.
K Waykole, M., Ahuja, A. and B Pawar, U., 2019. A Survey On: Understand The Factors
Affecting Business Using Natural Language Processing. Pawar, Umesh, A Survey On:
Understand The Factors Affecting Business Using Natural Language Processing
(November 6, 2019). IJRAR-International Journal of Research and Analytical Reviews
(IJRAR), E-ISSN. pp.2348-1269.
Kabakova, O. and Plaksenkov, E., 2018. Analysis of factors affecting financial inclusion:
Ecosystem view. Journal of business Research. 89. pp.198-205.
Krajnakova, E., Navickas, V. and Kontautienė, R., 2018. Effect of macroeconomic business
environment on the development of corporate social responsibility in Baltic Countries
and Slovakia. Oeconomia Copernicana. 9(3). pp.477-492.
Liang and et.al., 2020. Calibrating the dynamic huff model for business analysis using location
big data. Transactions in GIS. 24(3). pp.681-703.
Madina, E., 2021. FACTORS AFFECTING THE LEVEL OF ECONOMIC RISK. ResearchJet
Journal of Analysis and Inventions. 2(04). pp.131-141.
Sharma and et.al., 2020. Managing uncertainty during a global pandemic: An international
business perspective. Journal of business research. 116. pp.188-192.
Skinner, H., 2019. The impact of cultural values and economic constraints on tourism businesses’
ethical practices. International journal of tourism cities.
Tur-Porcar, A., Roig-Tierno, N. and Llorca Mestre, A., 2018. Factors affecting entrepreneurship
and business sustainability. Sustainability. 10(2). p.452.
Xue and et.al., 2019. Factors affecting the business model innovation employed by small and
micro travel agencies in the Internet+ era. Sustainability. 11(19). p.5322.
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