Factors Affecting Global Economy and Influence on International Trade

This essay examines the factors influencing the global economy and their effects on the growth of international trade, using Tesco plc as an example. It identifies political, economic, technological, social, and environmental factors, as well as globalization, as key determinants. Political factors inc...Read More

International Business
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Table of Contents
INTRODUCTION...........................................................................................................................3
Factor affecting global economy and its influence on growth of international trade......................3
CONCLUSION................................................................................................................................6
References:.......................................................................................................................................7
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INTRODUCTION
The practise of trading goods and services across national borders is known as international
business. International trade is defined as the exchange of monetary value, goods, and services
between two or more countries. International trade aids countries in growing their economies and
GDP. In order to undertake worldwide business, organisations must have the necessary expertise,
resources, and a strong business with the capacity to expand into new markets. To pursue
international business, one must do adequate R&D, which will aid business stakeholders in
forecasting the scope of success a company would have in a new market. Globalisation is another
term for international business in today's times (Di Benedetto and Lindgreen, 2018). This
technique is vital in order to facilitate the connection of different economies, cultures, traditions,
and, most significantly, to facilitate the connection of different economies, cultures, and
traditions.
Multinational corporations are organisations that engage in international trading or business.
Technological and economic advancements have resulted in the removal of barriers to
international trade, as well as the creation of new opportunities for global firms. The forces that
shape the international business environment will be examined in this essay on international
trade. With particular examples, the article identifies the elements that affect the global economy
and their impact on the rise of international trade. Tesco plc, a global corporation, was used as an
example to support the essay's facts. Tesco plc is the third largest retailer in the United Kingdom
and a British multinational corporation. Welwyn Garden City, England, is the company's
headquarters.
Factor affecting global economy and its influence on growth of international
trade
Every company must examine the factors that influence their international expansion. For
international expansion, companies must also pay attention to trade hurdles and constraints. Most
countries have very rigorous rules and restrictions for international trade, to the point where
foreign companies are not allowed to grow their operations in their country. The external
business environment, for example One of the most important aspects that might affect a
company's growth in international trade is the political component (Donthu, Kumar and Pattnaik,
2020). Political influences include government limitations, trading regulations, interest rates, and
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many others. Countries with more stable political factors will have more growth chances. In the
case of the United Kingdom, Brexit has an impact on international commerce since when the EU
broke from the UK, the UK government implemented a variety of new trade regulations. Tax
policy is also one of the most important political variables that encourages businesses to relocate
to a new country. For example, a country with a lower interest rate on loans will be appealing to
enterprises that rely on banking finance to run their operations. Trade limitations, on the other
hand, are one of the most critical elements affecting a country's international growth (Cooper and
Nguyen, 2020). For example, the United Kingdom has few restrictions on imports and exports
for companies based there. As a result, most foreign corporations prefer to invest in the United
Kingdom, which will aid in the development of international commercial activities. Another
factor that can influence international business growth is the economic environment. Cost of raw
materials, inflation rate, fiscal policy, employment rate, and many other economic factors can all
have an impact on international business growth.
Due to their economic factor, Tesco earns the majority of their revenue in the United
Kingdom. Any change in the economy has an impact on the company's sales. Because of the
high rate of inflation, the cost of raw materials rises, which has a direct impact on the cost of
finished goods. As a result, the cost of finished goods rises, further reducing customers'
purchasing power (Benito, Petersen and Welch, 2019). As a result, it is critical for Tesco to keep
their product costs low even as inflation rises, in order to attract more customers to their brand
and assist the company grow its sales. The cost of raw materials is also important for the
expansion of international trade. Low-cost raw-materials-producing countries attract more
corporations to invest in other countries. Low raw material costs will enable businesses to make
their products at a cheaper cost, allowing them to provide their finished goods at lower prices to
their target customers, resulting in increased customer loyalty and satisfaction.
Further, Tesco has facing several factors of retail businesses and also tends to achieve
appropriate amount of success. For this, Tesco has launched PayQwip payment app, by this
customer can pay as they will. The online shopping, payment app and social media promotion
are the effective part for attracting the customers towards them. Hence, these changes will help
the company to attract large range of customer base (Evers and Andersson, 2021). The
technological environment also put positive impact on the international business as the internet
makes the communication process more effective and smooth. For this, companies in UK and
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other countries face environmental issues from the government by which Tesco take several
measures to overcome from this pressure like paper bags in place of plastic bags.
The value of a currency, on the other hand, has an impact on international trade. Nations
generally avoid trading their products in countries with low currency values because low
currency values have a negative influence on their profits ratio. Technological elements also
contribute to the expansion of international trade and business (Bai, Johanson and Martín Martín,
2019). Companies can improve the quality of their products by using high-quality tools and
equipment during the manufacturing process. This will also assist organisations in generating a
high degree of demand in the international market, as most buyers currently choose to use high-
quality products. On the other side, internet payment solutions for businesses will make it easier
for customers to pay their bills. Only a technological factor allows a company to analyse their
product's demand on an international level and attempt to invest in countries where their products
are in higher demand.
The Global Positioning System (GPS) is a tool for tracking the location of products and
analysing travel routes. This will assist businesses in determining the position of their vehicles,
which convey the majority of their items by road from one country to another (Popp, 2020).
Various companies, on the other hand, use social media platforms to promote their products and
generate international demand. Tesco, for example, uses Instagram, Facebook, and a variety of
other social media platforms to increase demand because the corporation has a large number of
global followers. At the worldwide level, competition is also one of the most important elements
for corporate growth. More competition for a business will help it achieve its goal of worldwide
expansion and earn a competitive advantage.
The majority of the company's main goal is to obtain more customers and compete with their
competitors by providing high-quality products at lower prices. As a result, this will also aid in
the expansion of international trade. Companies seeking a competitive advantage should import
raw materials from countries where they can get high-quality raw materials at a reduced cost, and
export their finished products to nations where they expect their product's sales to grow (Christa
and Kristinae, 2021). A corporation like Tesco, which has a large number of clients in their own
nation, will seek to extend their business in other countries with the goal of acquiring a
competitive advantage there as well. As a result, a competitive atmosphere will aid a company's
foreign expansion and boost international trade.
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The social environment, which includes customer demand, perception, and many other
factors, has an impact on a company's international expansion. Customers' high demand for a
product will also help a country expand its international business activities. Customers' great
demand will persuade the government of the country to lift restrictions on their trading activity,
allowing them to import high-quality products for its residents (Williams, Du and Zhang, 2020).
Customers with a high income, on the other hand, will have a high purchase power in that
country. It is critical for a business to pay attention to social elements like language, regulatory
constraints on promotional efforts, and so on. A country's social elements can also function as a
barrier to a company's expansion into other countries.
Due to legislative restrictions, door-to-door selling is forbidden in China and France, for
example. As a result, businesses must avoid selling door-to-door in these areas. The rise of
international trade for an international corporation was also influenced by environmental
variables. Companies will seek to expand their operations in regions where natural resources are
abundant. Companies must also focus on the long-term utilisation of resources sourced from a
specific country (Gölgeci and et. al., 2019). Companies that use immoral methods of creating
goods and products and destroy the environment are not permitted to grow their operations in
most countries. As a result, businesses must concentrate on their manufacturing processes and
ensure that they will build their business through sustainable activities.
As a result, environmental factors will have an impact on international trade. Relationships
between two or more nations are also necessary for a business to develop international trade.
Two countries with a solid relationship will simply agree to exchange their goods and services.
On the other side, nations with tense relations, such as North Korea and South Korea, India and
Pakistan, and a slew of others, will limit their commerce with one another. They also forbade
them from investing in a hostile country (Giang and Luu, 2021). As a result, it is critical for
countries to maintain positive relationships with one another in order to boost international trade.
One of the most important reasons in the development of international trade is globalisation.
Globalisation is the process by which countries become more interconnected in order to
interchange their imports and products. Because of globalisation, most countries are now able to
start new businesses in other countries and conduct their operations properly. In this case,
countries reduce barriers to foreign corporations investing in a certain region. The trading
operations of a country increase as a result of globalisation, and they also develop strong
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relationships with one another as a result of globalisation (Nowell, 2019). Not only will
globalisation allow for the transfer of products and services from one country to another, but it
will also allow for the movement of human resources from one country to another for a specific
reason. As a result of globalisation, a company can acquire qualified individuals from other
countries, and with the support of foreign personnel, they can successfully expand their business.
CONCLUSION
Based on the above discussed information, it can be stated that a variety of factors can aid in
the expansion of international trade. Political issues, technological considerations, environmental
factors, social aspects, economic factors, and a variety of other elements are among them. If two
or more countries have good relations with one another, they can readily trade their goods and
services with one another, allowing a corporation to expand its international trading activity.
Globalisation, on the other hand, is an important factor in the development of international trade
for multinational corporations. One of the most appealing advantages for corporations to expand
their business in a country with more natural resources and lower raw material costs is the
availability of natural resources.
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REFERENCES
Books and Journals
Bai, W., Johanson, M. and Martín Martín, O., 2019. Dual business relationships, opportunity
knowledge, and new product development: A study on returnee young
ventures. Journal of international marketing, 27(3), pp.26-42.
Benito, G.R., Petersen, B. and Welch, L.S., 2019. The global value chain and internalization
theory. Journal of International Business Studies, 50(8), pp.1414-1423.
Christa, U. and Kristinae, V., 2021. The effect of product innovation on business performance
during COVID 19 pandemic. Uncertain Supply Chain Management, 9(1), pp.151-158.
Cooper, M. and Nguyen, Q.T., 2020. Multinational enterprises and corporate tax planning: A
review of literature and suggestions for a future research agenda. International Business
Review, 29(3), p.101692.
Di Benedetto, C.A. and Lindgreen, A., 2018. The emergence of Industrial Marketing
Management as the leading academic journal in business-to-business
marketing. Industrial Marketing Management, 69, pp.5-12.
Donthu, N., Kumar, S. and Pattnaik, D., 2020. Forty-five years of journal of business research: a
bibliometric analysis. Journal of Business Research, 109, pp.1-14.
Evers, N. and Andersson, S., 2021. Predictive and effectual decision-making in high-tech
international new ventures–A matter of sequential ambidexterity. International Business
Review, 30(1), p.101655.
Giang, H.T.T. and Luu, D.T., 2021. Transformational leadership dimensions and job-based
psychological ownership as facilitators in international intrapreneurship of family
firms. The South East Asian Journal of Management, 15(2), p.4.
Gölgeci, I and et. al., 2019. Emerging-market firms’ dynamic capabilities and international
performance: The moderating role of institutional development and
distance. International Business Review, 28(6), p.101593.
Nowell, G.P., 2019. International Relations theories: Approaches to business and the state.
In Business and the State in International Relations (pp. 181-197). Routledge.
Williams, C., Du, J. and Zhang, H., 2020. International orientation of Chinese internet SMEs:
Direct and indirect effects of foreign and indigenous social networking site use. Journal
of world business, 55(3), p.101051.
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