The significance of the global factors that shape national business activities - Essay Example

?The significance of the global factors that shape national business activities Introduction Market studies clearly indicate that national business activities are significantly affected by a range of global factors including oil price, technological innovations, international trade, foreign exchange rate, and market competitiveness. Hence, organizations must obtain knowledge of these global factors in order to make timely strategic business changes that can ensure long term business sustainability. International trade would assist a country to attract foreign investments and to improve its unemployment rate. This paper will discuss the impact of international trade and other key global factors (both positive and negative) on UK businesses. In addition, this will give an overview of EU and its various policies influencing UK businesses. International trade and UK businesses As the Penguin Dictionary define, “the exchange of goods and services between one country and another is called international trade” (as cited in Jain 2009. p.110). In most countries, international trade accounts for a significant percent of the gross domestic product. International trade is greatly assist countries to find out cheaper and potential markets for their goods and services. While analysing the impact of international trade on UK businesses, it seems that global trade helps the nation to grow its business sector. To illustrate, as per the DFID statistical data (n.d.), UK’s goods exports increased by 72% to $468 billion whereas services exports increased by 156% to $288 billion over the decade 1998-2008. Evidently, exports in UK have notably increased over the last decade and this situation in turn assisted UK business sector to gain more potential clients and suppliers. In addition, increasing exports indicate more revenues and profits for UK businesses and this growing inflow of money can aid UK business sector to promote its growth. Similarly, imports in UK have also dramatically improved during the 1998-2008 period. Over this decade, the country’s imports grew by 111.5% (Ibid). The significant rise in imports and exports promoted the development of other related business industries in UK. Market analysts opine that better international trade has greatly benefited UK business sector to spread risk during the global financial crisis 2008-09 and to maintain market stability to some extent. Finally, the international trade aid UK businesses to explore new potential expansion opportunities and to dominate the global business regime. Global factors influencing UK business Oil price is one of the major global factors influencing UK businesses. Recent reports indicate that oil prices are falling in UK due to fall in crude oil prices in the global market. This situation will certainly benefit UK business sector because falling oil prices would assist businesses to improve their production costs and thereby profitability. The value of the Pound Sterling has been relatively stable for many years in spite of the recent global recession that dreadfully shook Europe. A stable currency encourages potential foreign marketers to establish trade relationship with UK businesses as it would allow them (foreign marketers) to enjoy high level of business certainty. In addition, the stable value of the currency contributes to maintaining stable oil prices, which in turn are helpful for the nation’s business sector. Similarly, a series of recent technological innovations positively influence UK businesses because the country’s technological landscape has highly developed and hence it is able to bear changes easily. Recently developed computer related technologies and automation of production lines have notably contributed to the expansion of UK businesses (Chaston 2009, p.100). At the same time, some negative global factors impede the growth of UK businesses. Many of the world’s leading economies including the United States are yet to recover from the impacts of the global financial crisis 2008-09. As US is one of the major trade partner of UK, this unfavourable market situation raises some potential challenges to the growth of UK businesses. The European debt crisis has adversely affected UK businesses and many of them have been eliminated from the market over the last few years. In addition, the emergence of economies like China and India has made a shift in the global power and this change also greatly impacts UK businesses. Global investors are hugely investing in those newly emerging economies in order to take advantages of potential market opportunities such as availability of cheap labour and materials. As a result, UK loses huge foreign investments to countries including China, India, and Brazil and this situation in turn negatively influences the growth expectations of UK businesses. EU policies affecting UK business The European Union (EU) is an association of 27 European countries founded on 1st November 1993 with intent to promote internal free trade and to save member countries from extreme market competition. The EU has 27 member states and they are Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and United Kingdom. As described in the EU history (n.d.), After the World War II, there were some moves for European integration; however, they failed due to many reasons. The collapse of communism in the early 1990s made Europeans closer neighbours. During this period, there was a common need for the promotion of trade and common external tariffs and which ended up in the formation of EU. As The independent reports, UK is one of the major member states of EU and hence most of the EU policies better serve the interests of UK. Despite UK’s strong influence on EU, it seems that some social laws recently passed by the EU are likely to affect many British companies. In addition, some other trade policies of EU, which are in the common interests of the member states, can limit the business growth of many UK corporations (Ibid). Conclusion From the above discussion, it is clear that international trade and a number of other global factors including oil price and exchange rates have great influence on UK businesses. When falling oil prices and a stable currency promote the long term objectives of UK businesses, some other global factors like European debt crisis and emergence of new economies raise challenges to the UK business sector. Finally, EU policies also promote the growth of UK businesses even though some policies may limit the growth opportunities for UK business sector. References Chaston, I. (2009) Entrepreneurial Management in Small Firms. Sage. Jain, T. R & Kaur, S. J. (2009) Public Finance and International Trade. FK Publications. DFID. UK trade performance over the past decades. [online] available at [accessed 5 June 2013]. EU. The history of European Union. [online] available at [accessed 5 June 2013]. The independent. EU social laws to affect 100 UK companies. 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