International Management Report: EY's Adaptation to Global Crisis

This report examines the effects of the 2008 financial crisis on Ernst & Young (EY), a leading global professional services firm. It begins by outlining EY's expansion during the pre-crisis era of globalization, highlighting the firm's growth through mergers and acquisitions, and its expansion across the globe. The report employs a PEST analysis to evaluate the political, economic, social, and technological factors influencing EY's operations before the crisis. It then shifts to EY's response after the crisis, detailing strategic adjustments such as employee programs, brand changes, and new ventures. The analysis covers various external factors, including trade agreements, capital flow, migration patterns, information transfer, and the spread of technology, and their impacts on EY's operations and expansion strategies in the context of economic globalization. The report concludes with a detailed analysis of the company's adaptability and its ability to navigate the changing global landscape, providing a comprehensive overview of EY's international management practices during a period of significant financial instability.

International Management
Practitioner 2

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
Example 1 ...................................................................................................................................3
Example 2....................................................................................................................................6
Final analysis of change in global environment of EY...............................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Globalisation comes from an English word which refers to the internationalisation of
business and its services or products. This report briefly describes and shows the results and
impacts of financial globalisation crisis, which occurred in 2008. Due to increase in excess credit
growth in international markets. Further, described the situation of organizations before and after
the crisis in context with Ernst and Young. EY is one of the leading firm providing services to
other companies across the world like auditing of tax reports, financial accounts, balance sheets,
etc. EY functions as a link between other companies which are also a separate legal entities
registered in their country. The study is conducted by taking two examples in consideration, first
represents the situation of company before crisis and other represents condition or situation after
crisis. Final analysis on change in business environment of businesses is done on the basis of EY
company to show their operations of company and effects of crisis on business after crisis.
Example 1
Before the crisis of 2008 Ernst and Young had a historic development and expansion
around the world in the era of globalization. In 2002 EY over ruled many of the ex- Arthur
Andersen functioning all over the world except in UK, China and Netherlands. From very
starting EY was merging all of its firms from ancestors into one and was continuously expanding
its markets all over the world (Arestis and Singh, 2010). Globalization had a good impact on EY
in terms of expansion, in 2006 EY became the only member of the big four to have two member
firms in United States. These changes in company by expansion and growth lead company to
heights of success. Pest analysis in context of example is as follows:
 Political factors: At that time company has faced many issues in their political
environment before the crisis of 2008. Expansion of company took a great turn in 2002
and 2006 when company took over Arthur Andersen all over the world except some
countries. Laws such as employment laws, consumer protection laws, taxation
regulations, environmental regulations, etc. were affecting company's operations
crucially and organization needs to look over them continuously. Following political
factors are important for the company to implement strategy of growth and expansion:
▪ Government stability is important for the company to provide their services in
that country without any issue. Non stability of government in any country can

make company suffer great losses and loss of business with the firms of that
country. Stable government helps companies to understand norms and regulation
of that company.
▪ Employment and operational law: Company should be aware of the employment
laws of the country where the employee is being employed, to prevent any kind
of judicial proceedings. Company should also have a brief understanding of
operational laws of the country where the office of company is being situated for
smooth functioning of business.
▪ Tax regulations: Regulation act should be analyse thoroughly to enable company
pay right amount of tax to the government of that country. Every country has
different tax regulations act in respect to their law, organization need to follow
them all (Beck, 2018).
 Economic factors: For continuing expansion and growth of company without any
issues in economic environment of the business, some factors were taken care of like
inflation rate, taxes, exchange rates, globalization of other companies, etc. these all
factors were important to consider. Economic areas often indicate areas where more
descriptive information is needed. To be unaffected by economic factors company, need
to consider these following factors:
▪ Inflation: Inflation can result in increased rated of products and services.
Company should keep a sharp eye on chances inflation to avoid loss in business.
As inflation can result in decreased sale of goods and services, to avoid such
situation company need to form some strategies to fight with problem of
inflation.
▪ Taxes and Duties: Tax reforms by government should be studied well of that
country where expansion is going to take place of the company to understand
working practices and reforms.
▪ Cost of living: This could be the important factor for EY for enabling
outsourcing for growth of the company (Fujita and Thisse, 2013).
▪ GDP and GNP: Gross domestic products and gross national products are to be
considered before overtaking any firm by the company.

 Social factors: Expansion can only be done to any country by considering its social
values. Before taking any decisions like setting of price of goods and services by
calculating and analysing employment levels, income statistics, religious beliefs, age
distributions, etc. of that country is important to overcome social factors of external
environment of the business. EY overcome all the social factors to enable and continue
their expansion and growth. Some social factors are:
▪ Attitudes and Beliefs: This factors play a vital role in the life's of people of that
country where company is going to build new offices in order to grow and expand
their business (Giddens, 2018). So company will have to follow those beliefs to
survive their and has to follow the attitude of locals living their.
▪ Education: Company should implement plans for expansion and growth only
where education level is high or workers with good potential are available to
employee individuals on a cheap cost in order to control the cost of services given
by company.
 Technological Factors: These are to be focused about very seriously by any company
before starting proving their services to that country. It is possible that the country in
which expansion is focused on has lack of latest technologies which in turn will increase
the price of services rendered by EY or any other organization. EY focused on such
factors for better efficiency and quality and pricing. Many activities can result in great
opportunities in market such activities are: Automation, improved quality of services,
cost saving, outsourcing to control costs, etc. Technological advances also allowed EY
much freedom to make choice of selecting the best management techniques. Those
organizations who get fail to keep up with technologies leaves the opportunity for their
expansion and growth. Factors involved in technological environment are as follows:
▪ Use of outsourcing: Company should use technology of outsourcing to outsource
their services in order to get employees with great potential and cheap services
to clients.
▪ Quality and pricing: Company should also focus on quality of services offered to
clients as well as also have to maintain its prices by the usage of latest
technology of pricing. Better quality results in retention of clients increasing
opportunities for business (Hirst, Thompson and Bromley, 2015).

▪ Eliminate Bottlenecks: Company should avoid technologies resulting in bottle
necks for long run in the market.
For better expansion all over the world Ernst and Young focused on the Pest analysis that
is presented above. This analysis of different factors of external environment of business helped
company to give fruit full results of the expansion and provides further opportunities of
development and growth. Before crisis of financial globalisation in 2008, company's growth
prospectus was good and firm was developing its offices all over the world. As Ernst and Young
was merging itself with organizations formed by its ancestors, it enables company to cover their
business across world (Hitt, Ireland and Hoskisson, 2012). This company also took over on ex-
Arthur Andersen, which was functioning all over the world except in China, UK and
Netherlands. In 2006 EY became the first ever big four to have two member firm in the whole
United States. Pest analysis is done for the company to show all of their external factors of
environment.
Example 2
After the crises of 2008, Ernst and Young changed their direction of expansion and
focused about employees encouragement due to economy drop down in China in 2009. EY
launched a program for workers in China to take 40 days of low pay leave between the month of
July 2009 and June 2010. The participants got 20% of regular salaries plus advantages of regular
full-time employee. This program was applied on employees in Hong Kong, Macau, and
mainland China, where total number of employees were 8,500. In 2013 EY had to agree upon the
federal rules to settle criminal tax avoidance charges of $23 billion into $123 million. In 2013
Ernst and Young changed its brand name to EY (Lane, 2013). In 2013 EY was hired by Pope of
the Roman Catholic Church to help in reviewing the financial condition of people living in
Vatican city and to consult about the institutions inclusive of museums, post offices, etc. In 2015
EY opened its first ever global security operations in India at Thiruvananthapuram, Kerala and
invested $20 million over 5 years to fight with the increasing threat of cybercrimes.
2016 was the golden year for EY in their history, as they completed auditing 947 public
companies which are registered with US SEC. It was the first time in the history of firms
providing auditing services to reach that number. Finally, in 2017 Ernst and young opened an
executive support system in Tucson, Arizona, creating over 125 new jobs for freshers. External

factors that can also affect Ernst and Young during globalisation in respect of elements of
economic globalization are:
Trade Agreements: Globalisation is a long and a lengthy process, to trade in such kind of
expanded markets of the world where all types of businesses are involved. Trade agreements
play an important role in establishing business with any of the company to trade with. It is very
much difficult to sign trade agreements with another company having its origin far away from
here, to remove that hurdle bilateral and regional or multilateral economic arrangements are
designed. So that trading can be done freely with any of the business clients.
Capital flow: As globalisation involves lots of exchange of local and foreign products,
currency, assets, services, etc. Measurement need to be done to identify increase or decrease in a
nations domestic or foreign assets (Thompson, 2010). This element of globalisation measures the
net flow of all the capitals from country to country. Every country to wants to have a deposit of
foreign assets so that cost of trading could be reduced. Every company has a detailed record of
net capital flow of country in the assessment year. It is one of the major aspect of globalisation.
Migration Patterns: Migration is obvious in today's world, every individual wants to work
with big companies or MNC's to enhance their skills and to achieve their personal goals.
Companies has also started outsourcing their services from other countries from where they can
find cheap or workers with speciality in particular skills to reduce cost of product and services.
This resulted in formation of migration patterns during globalisation. Globalisation can also lead
to loss of workers having good potential and sharp skills, for any country. As dominating
countries provide workers with good salary packages or wages allowing them to earn in foreign
currency, can also lead to migration of employees from country to another. This has also reduced
the cost of labour markets and workers with high potential and good skills can only survive in
such type of markets.
Information transfer: In this world of technologies, transferring of information and
communication has become easier. It helps to strengthen the pillars of asymmetric functioning of
markets. Economies can also be developed well symmetrical markets for better functioning of it.
Spread of Technology: Globalisation has boosts the use of latest technologies, as it easy
for companies developing new technologies for producing goods and services more effectively
and efficiently. Use of advanced technologies is one of the basic need for any business entity to

survive in such competing markets. It encouraged the process of spreading technologies between
different countries and companies as well (The crisis of globalisation, 2018).
Pest analysis of EY after the crisis of 2008 is as follows:
 Political factors: The formation of global bodies such as European Union Legislation
allowed companies to operate their businesses in more than 27 countries. Policy change
by government can result in changes in government priorities, which in turn can result in
new initiatives being introduced. Changes like employment laws, consumer protection
laws, environmental regulations, trade restrictions or reforms, etc. Program that was
launched in 2009 for employees due to economy drop in china was also done due to
impacts of political factors on business and market economies.
 Economic factors: Increased efficiency of workers resulted in the investment in
development of cybercrimes prevention units. After crisis of 2008 during globalization
Ernst and Young experienced various economic factors in their organization external
environment. Some of them are; inflation, cost of living, working practices, globalization,
unemployment, availability of expertise, labour cost trends, etc.
 Social factors: After crisis in 2013, EY had to agree upon the settlement of criminal tax
charges in $123 million. Such factors of external environment affected business of EY
internally. Company hurted the cultural and social conventions of people and was found
guilty by the government. Compensation of huge amount was given by company at that
time.
 Technological Factors: Technological factors brought a revolution in the era of Ernst
and Young. After crisis technologies where all there in the market, so to prevent cyber
crimes company opened its first ever global security operations office in India by
investing $20 millions over 5 years.
Elements of globalization and pest analysis of Ernst and Young after the crisis of 2008
clearly shows merits and demerits of crisis on business and operations of company. Moreover,
factors that can effect organization in future on the business of EY are also explained briefly
(Positive and negative effects of Globalization. 2015.). This analysis also gives a brief study of
changed direction of growth and expansion affected from the crisis of 2008.

Final analysis of change in global environment of EY
Era before the global financial crisis in 2008 was marked by very rapid growth in cross-
border financial positions. Most advanced economies were able to embrace the financial
globalisation model. Global economy during crisis was relatively very clam, which means full
implications of financial globalisation can not be measured. Some properties of financial
globalisation may have affects of crisis shocks whereas other properties may have provided
buffer to give support to the impact of crisis. Sources of financial crisis can b identified by two
main channels through which financial conditions of the economy were contributed by financial
globalisation crisis and gave rise to the crisis.
1. Participation of foreign investors specially banks which triggered the increasing
growth of asset-backed securities market in The United States. That was the centre point of
original market panic in 2008, where European banks were the major purchasers of asset-backed
securities.
2. This allowed rapid growth in the final accounts of many banks, which took place at
two levels. Firstly, the size and complexity of these banks grew rapidly making it difficult for
nationalised banks to police risk profiles. Secondly, expansion in lending by local banks in order
to tap international markets which fuelled credit growth in many countries.
3. Emerging markets in the world financial economy also have contributed to the built of
credit markets.
After the crisis of financial globalisation, the policies were reformed. Global crisis of
2008 enforced the significance of re-formation of policies at national and international levels.
Reforms that to be made were in context of two categories, first is "reforms that can reduce the
chances of future crises" and other one is "reforms that can help in improvement of
macroeconomic environment of any organization". As the reform agenda was well known in the
global markets, it was very difficult to improve the regulations of global financial system in
international markets. Construction of international safety nets was other main element in the re-
formation of policies. Crises had led to drop down of economies of almost every country dealing
in international financial markets (Asongu and De Moor, 2017).
Ernst and young a multinational company providing its professional services across the
world and is one of the largest professional services company and is among the big four
accounting firms of the world. EY functions as a link between different firms which are also

separate legal entities situated in their own individual countries. Company has workforce of over
2,50,000 employees working in their 700 offices all over the world in around 150 countries. EY
deals with financial audit, tax, advisory services, and consulting services to any registered firm
and provides assurance for the same. EY is the outcome of a long series of merges of its
ancestors organizations. EY sets global standards and oversees global policies with client and
crisis of 2008 also affected company badly in terms of development of new offices, growth
prospectus and threat. Before the crisis company had a historic development around the world in
the era of globalization.
But after crisis of financial globalisation, company faced the impact of economic drop
down of China in 2009. To face those challenges in economy drop down of the country,
company launched the initiative for workforce working with EY to take 40 days low pay leave so
that company can prevent loss in business. And company changed the direction of growth to
survive in the markets with low economy and new policies that were reformed.
CONCLUSION
The concluded project report shows a brief scenario of impacts of financial globalization
crisis in 2008 on business operations of Ernst and Young company. The results are concluded by
deep study of pest analysis of company in context with two examples, expansion and growth of
company before crisis and change in direction of expansion and growth of EY after crisis. And at
the final part of project analysation, change in company's global environment before and after
crisis is stated briefly. Outcome came from this research project of globalisation and its impact
on organisations was, due to financial globalisation crisis in 2008 international policies were
reformed to prevent such condition in future. Crisis results in the drop down of many economies
which affected crucially to EY. Company was affected from the drop down of economy in
China. These consequences hurdled the path of company's growth and expansion.

REFERENCES
Books and Journals
Arestis, P. and Singh, A., 2010. Financial globalisation and crisis, institutional transformation
and equity. Cambridge Journal of Economics. 34(2). pp.225-238.
Asongu, S. A. and De Moor, L., 2017. Financial globalisation dynamic thresholds for financial
development: evidence from Africa. The European Journal of Development
Research. 29(1). pp.192-212.
Beck, U., 2018. What is globalization?. John Wiley & Sons.
Fujita, M. and Thisse, J. F., 2013. Economics of agglomeration: cities, industrial location, and
globalization. Cambridge university press.
Giddens, A., 2018. Globalization. In Sociology of Globalization(pp. 19-26). Routledge
Hirst, P., Thompson, G. and Bromley, S., 2015. Globalization in question. John Wiley & Sons.
Hitt, M. A., Ireland, R. D. and Hoskisson, R. E., 2012. Strategic management cases:
competitiveness and globalization. Cengage Learning.
Lane, P. R., 2013. Financial globalisation and the crisis. Open Economies Review, 24(3),
pp.555-580.
Thompson, G. F., 2010. ‘Financial Globalisation’and the ‘Crisis’: A Critical Assessment and
‘What is to be Done’?. New Political Economy, 15(1), pp.127-145.
Online
The crisis of globalisation. 2018. [online] Available Through
<https://www.thehindu.com/opinion/op-ed/the-crisis-of-globalisation/
article21827611.ece>
Positive and negative effects of Globalization. 2015. [online] Available Through
<https://www.ukessays.com/essays/economics/positive-and-negative-effects-of-
globalisation-for-business-economics-essay.php>