Steady Shifts in the World Economy - Essay Example

There is no gainsaying the fact that within the last thirty years, there have been gradual but steady shifts in the world economy. The key words havebeen globalization and convergence. Economies are no longer dependent on their own governments' macro and micro policies, but are now influenced to a large extent by the economies of the outside world. These major shifts have obviously been facilitated by global connectivity. Radical transformations in the way businesses are carried out have become possible with Internet and other technological developments. The globe has shrunk and businesses are competing on larger platforms. Certain pressures are being exerted on nation- specific factors by this global phenomenon, and left in its trail are transformations in the economy. Any organization that wishes to compete globally and maintain its relevance in the international scene must necessarily be involved in strategic planning. It is also a truism that there has been a rise in the importance of worldwide relations both in quantitative and qualitative terms. These global factors have led to an increase in the flow of information, knowledge, commodities and capital among nations. Liberalisation is another way of defining these shifts in the global economy, many economies of the world today have opened up their economic space rather than being conservative, as was the practice in the pre-globalization years. Governments are reviewing their economic system in line with today's global realities. In a bid to be relevant in today's world, alignments and re-alignments have taken place and continue to take place globally. The evolution of the European Union is one major reference point in this regard. It is important to note that in a capitalist economy, also known as a free-market economy; where the means of production belongs to private individuals or firms; there has been a dramatic change in the mode of operation of these firms. This is particularly true within EU nations that operate a common currency. In addition to their own societies, there is an increasing demand from economies in neighbouring EU countries. Ordinarily within a domestic economy, organisations may be concerned with just one national government, one currency, one accounting system, and one politico-legal system usually, with a similar culture. Within a domestic economy, the kind of questions business organizations face are usually of the kinds listed below: 1.What products or services does the organization intend to sell 2.Where and how will the organization manufacture these products or services 3. Where and how will the organization sell these products and services 4. Where and how will the organization acquire the resources 5. How does the organization expect to outperform its competitors These fundamental questions have usually helped organizations in the management of a business. The process of answering these questions however becomes more complex when considered in the light of the realities of globalization. Many other factors must of necessity be put into consideration, factors such as varying languages, cultural diversities, differences in economic systems, financial market situations, fluctuations in foreign exchange, legal restrictions, low literacy levels etc. Despite these odds, more and more firms have adopted international management principles to properly position them in the global market place engendered by the ever-increasing trade liberalisation sweeping across the globe. Consequently, businesses are being developed to meet specific needs. Businesses today tend to centralize the authority and responsibility under one key individual thus providing a central point of control for the total flow. Under this arrangement, it is easier to look up to one central point for answers and action. This eliminates buck-passing. Furthermore, organizations today have imbibed personnel development. This is because it helps the personnel involved to gain familiarity of the global market place thereby increasing their opportunity for growth and development. Another shift in global economy within this period has been the decline in socialist tendencies by major left-wing governments and organizations. They are ready to capitalize on these trends of global openings. Take the case of the Asian states. China's economic growth has been around nine percent per annum. Not to be left behind, India has recorded nearly eight percent growth annually in the past few years. Companies from these countries are now being listed on the NASDAQ, an unimaginable feat thirty years ago! According to James F. Hoge, Jr in "A Global Power Shift in the Making" From Foreign Affairs, July/August 2004 "China's economy is expected to be double the size of Germany's by 2010 and to overtake Japan's, currently the world's second largest, by 2020. If India sustains a six percent growth rate for 50 years, as some financial analysts think possible, it will equal or overtake China in that time." There has been a tremendous increase in the number of entrepreneurs, software developers, knowledge workers and skilled workers, in the past three decades in Asian countries. Hitherto dormant industries like travel and tourism, entertainment, business processing units, knowledge processing units and similar industries have come around and opened up new vistas for entrepreneurs. The implications of these shifts for international businesses based in the UK is that the global market place has gotten more competitive with trade liberalisation as a result of the pressures of globalization. Therefore, to remain relevant in the scheme of things globally, there is a need to be involved in strategic management planning. This will help to ensure that resources are used more effectively in taking advantage of opportunities emerging globally. Speaking at an event organized by UK Trade and Investment, the government department that supports British companies seeking to develop export business, to mark International Business Day, Dolby Jones, former director-general of the Confederation of British Industry (CBI), said that "As other countries became more competitive, British would lose out, unless employers ensured that their staff had the right skills. Brazil, India, China, Russia and South Africa represent a huge threat to Europe. It may not be evident today, but three or five years down the line, companies which are busy now will find that, when a competitor abroad does things for half the price, they will lose out." The chances of an economic meltdown would not be too remote if lessons are not learnt early. Unless Britain is able to tackle the shortage of skilled labor, it would have to face a growing threat of large-scale unemployment in the coming years. Takeovers, mergers, amalgamations and lower profits would be the order of the day in the near future. International business houses would be willing to relocate to nations where input costs are lower: lower cost of land and labor and lower rates of taxation and transportation. Investment friendly policies from the state to encourage foreign institutional investors are common in the developing nations. Britain has to wake up to these facts and arm itself with the right approach and methodology. Everyone from decision makers to housewives to employers and employees have a role to play in the transformation of the society to a knowledge based one. Britain has to increase its skilled workforce manifold in the coming years if it is to maintain an edge over the rising strength of the other nations. SMEs (Small and medium enterprises) today have a pivotal role to play in the growth and development of any economy. SMEs grow at a much faster pace as compared to large business companies. Government policies also encourage the growth of SMEs in the form of lower taxes, higher sops and the like. In contrast, larger business houses are today plagued by higher taxes, reduced profit margins and budget outlays, need for layoffs and employee dissatisfaction. When resources are limited and needs unlimited, industries such as Bioinformatics, alternate fuel manufacturers, component manufacturers for various industries etc. have the potential to grow at a fast rate. This would in turn help the economy achieve a fast and steady growth rate. So, let us take care of the pennies, the pounds will take care of themselves! Let us encourage the growth and development of SMEs, the larger multinationals will take care of themselves. To conclude, I would like to assert that whether we like it or not, whether we have acknowledged it or not, global shifts in economy have been taking place since times immemorial. One nation's gain has been another nation's pain. There will be swings in the economy: cyclical, periodical and also politically induced. But we have to make sure we are prepared to cushion off the negative impacts of these shifts. Everyone responsible, the political system, the economy, and the society, has to be forewarned and forearmed. References 1. 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Cantwell ,J.A1987 the re-organisation of European industries after integration:select evidence on the role of multi-national enterprise activities,journal of common market studies. 11.Dunning J.H 1992.The Globalization of Business.London Routle 12.Peace R.d and Singh, s 1992 globalising research and development,London Macmillian 13. James F. Hoge, Jr in "A Global Power Shift in the Making" From Foreign Affairs, July/August 2004 14. Dolby Jones, former director-general of the Confederation of British Industry (CBI), http://mangalorean.com/news.phpnewstype=local&newsid=40636 Read More