Global Businese - Payless Shoe - Essay Example

Payless shoe is a global business entity that specializes in retail of family footwear and is a household across all s of U.S. and parts ofLatin America and it is an established global business. However, there have been notable changes currently being witnessed in the global economy that has seen the world stock markets slumping and other changes taking place in the banking sector and the industry as a whole. All these changes have effects on the operations of especially global businesses and this study would focus on Payless Shoe with reference to the changes taking place in the global economy. Basically global businesses operate in different regions as well as nations and these are in most cases well established business entities that often dominate the global markets. These global businesses often compete in a global market where different economies are brought in close contact. Given this scenario, it can be noted that all global businesses are operating within the same sphere hence any change that takes place in the global economy basically affects all of them. Therefore, this piece seeks to investigate some of the global trends in business and would explore Payless shoe in U.S. with regards to its position in the global market against the highlighted issues relating to the structures and functions of global business above. The point of departure here is the general outline of the structure of Payless shoe. According to the information obtained from Payless’ website, this is a discount footwear retailer that was founded in 1956, Topeka. During the years, it has merged with some other companies to reach the stage it is now to occupy a position in the global market where it is considered a formidable force to reckon with in the shoe industry. It is regarded as the largest family footwear retailer according to its website in the western hemisphere where it had more than 4500 retail stores in 2006 across all the U.S states as well as many other Latin American countries and Canada as well. Payless specializes in retailing designer footwear and somehow, this particular industry is also affected in one way or the other by the global changes in the world economy. According to an article by Jeannine Arersa titled, ‘Worries over economy spread: Global markets sink’ posted on (Associated Press website on 16 October 2008), the stock markets are generally slumping on rising fears that the global economy is sinking into a deep recession. According to this article, financial companies have racked up huge losses that have negative impacts on the performance of global business as a whole. The fact that the global economy is going down translates into mean that business also is negatively affected and Payless shoe cannot be spared the burden as well. Obviously sales would also decline in response to the tightening global economy. As fate would have it, a decline in sales means that there would be less flow of cash from the buyers to the businesses. Consumers would have little to spend hence little revenue generated by business. Basically, Payless Shoe’s business is retailing of shoes hence the bulk of its revenue come from sales of the shoes. Simply put, less sales, less money generated by Payless shoes. In this case, it is not only sales that would decline but manufacturing itself would also be affected. It would mean reduced production in the industry that would also mean reduced revenue generated. This scenario where firms would be operating below capacity would ultimately result in the downsizing of the number of employees in response to the reduction of production to minimize costs in paying large numbers of workers. This means unemployment and these unprecedented job losses would trigger negative effects on the social fabric. It would result in more poverty since most workers would end up without jobs which would mean little or no income at all to meet their basic needs and other requirements. This may trigger a social upheaval in the long run which would not be good for the world. Having money to spend especially on shoes may be considered a luxury which may end up affecting cash flows for the companies that specializes in shoe retail business such as Payless Shoe. Whilst a defining feature of global business is largely of international industrial and financial business structures, there are major changes currently taking place in the U.S. economy that cannot be simply ignored given that it is virtually the most powerful nation that has great influence on setting the pace of economic development in the whole world. Jeannine Arersa, in the same article mentioned above states that, “the U.S. economy is suffering from a litany of woes: falling wages, weak consumer spending, tight credit, slumping home prices and rising job loses have had a great impact on the economy.” The article mentions that a Federal Reserve Snapshot showed that Americans are spending less and manufacturing is slowing down around the country and Payless Shoe is not an exception. In the same article, it is stated that retail sales sharply declined in response to these changes taking place in the economy of America which means that there would be less cash flow towards Payless Shoe in this case. Also according to Erin Connelly in his article entitled Economic Development and Trade (Global envision, 12 October 2008), the current world economic status characterized by high food and fuel prices hikes, has negative impacts especially on the developing nations. This would mean that spending especially on goods like shoes would be considered to be ‘luxury’ especially in developing nations as there would be need to meet the demands of other pertinent, pressing issues such as buying food. In this regard, the purchasing power of developing economies is weakened and money flow from these countries would be greatly reduced. The changes taking place in the American economy such as rising food, fuel prices are a topical issue especially in the global economic forum. Erin Connelly also reports that, “at the start of the International Monetary Fund/World Bank annual meeting, World Bank President Robert Zoellick warned that the triple threat is potentially a ‘tipping point’ that would push poor people to the brink of survival.” This combined with the effects of globalization which vests much power and control in developed world, is certainly a cause for concern since weaker nations would remain marginalised due to their incapability to keep the same pace of development with the developed countries. It is against this background that the same article mentioned above reports that world finance and development ministers urged wealthier governments not to ignore aid commitments in the midst of their own economic woes. Failure to assist the developing nations especially in aid would further widen the rift while the developed countries would be enjoying the full benefits of globalization which has given aided the rise of global businesses. One of the notable effects of changes in the U.S. economy is the failure by smaller industries in developing countries to export to the U.S. thereby limiting revenue generated which may translate into limited spending on goods like designer shoes. Some of the global businesses in other countries especially in Latin America in case of Payless would also suffer the consequences as a result of the scenario of limited finance on spending. Mike Lamore, in his article entitled, (Migration, Economic development 12 October 2008), argues that the changes taking place in U.S. have a global effect. “As Americans are grappling with plunging retirement savings, declining home values and rising gas prices, our neighbors from the South are suffering too,” he observes. He implies that smaller nations like Mexico in particular would suffer the consequences as it would mean less exports resulting in retrenchment as a result of limited revenue that would be generated to cover the wages. This would result in migration of especially Mexican citizens in search for work in the U.S. which would in turn negatively affect the social fabric of the then affected families. On the other hand, global business units like Payless by virtue of already being established, would want to continue dominating in the markets taking advantage of the availability of cheap labour as most citizens of the poor world would have already been left vulnerable owing to the instability of the world economy at large. Thus, according to Hennessey & Jeannet (1998), a global company that faces a high degree of both customer based and industry based approach in establishing itself on the global market stands better chances of entrenching itself on the more coherent market position. Though such a company might be affected by global economic changes currently taking place, it would still be able to remain viable owing to its deep seated roots within the global economy such that it would not easily collapse compared to other national companies in developing nations. In most cases, it is the developing world that would especially be greatly affected both socially and economically by changes in the global economy as they are at the receiving end with reference to the operations of global businesses which are in most cases financed by powerful nations that have ultimately taken the advantage of dominating the global markets. The citizens from these developing nations would rather be forced to migrate to these developed countries with an excellent network of dominant global business entities to provide labor. Socially, this would cause problems for families in the developing world as their families would be disintegrated as a result of migration to developed countries to search for work. The element of labor is very significant in that Payless Shoe for instance would want to position itself where it can readily get labour. Another alternative of minimizing the movement of labour would be relocation to densely populated countries such as China where the bulk of raw materials come from ( Lavelor Kirch, September 2008). This would also provide a source of cheap labour which would be to the advantage of Payless Shoe, an American company by origin. Thus, according to the Global Policy Forum (2008), the globalised businesses always have the advantage of international financial institutions and regional trade agreements that compel developing nations to integrate by reducing tariffs as well as privatization of other state enterprises that would be to their advantage. Given this scenario, the globalised companies would reap huge profits at the expense of the developing countries which would not be able to realise the same benefits. For instance trade agreements such as CAFTA, (Global Policy Forum, 2008), facilitate free international trade thereby negatively impacting on the welfare of the people in less developed countries as the developed nations would take advantage of freely exporting their goods to all other nations at the expense of the developing nations. Given that most, if not all of the globalised companies are well established, Payless Shoe included, they enjoy the unlimited benefit of exporting their products wherever they want as they are already the dominant gurus in the global market. This has negative effects on the growth of the economies of developing countries as they would continue to lag behind the economies of developed nations. This is one of the major challenges facing the developing world as they would not have equal opportunities with the global businesses that would have greater influence on the economy at large. In cconclusion, it can be noted that the notion of global business basically entails the internationalization of trade among different nations where established global businesses seek to penetrate the whole global market at large. However, due to some changes taking place in the global economy, most of the global businesses are somehow affected by these changes which have seen a decline in business. Whilst some of these global businesses would end up dominating the markets, there would still be a major shake up as a result of changes in the global economy thus, the poor, developing nations would be tightly squeezed while the global businesses would also witness a decline in business somehow as there would be limited sales especially in retail of shoes which would not be considered a basic need in the event of a tight economy. So basically the global changes in the economy are a cause for concern as they affect business in different ways as outlined above. References 1. Jeannette &Hennessey (1998), Global Marketing Strategies, 4TH Edition, Houghton Mifflin Company, Boston, New York. 2. http://wwwpaylessinfo.com 3. Eric Conelly, Economic Development, Trade, 12 October (2008:15) http://www.globalenvision.org 4. Monitoring Policy making at the UN nations (10 October 2008) http://www.globalpolicy.org 5. Global policy Forum (10 October 2008) http://www.globalpolicy.org 6. Mike Lamore, Migration, Economic Development ( 12 October 2008) http://www.globalenvision.org 7. http://wwwnewyork.citysearch.co/profile 8. Jeannine Aversa, Worries over economy spread: Global markets sink, (16 October 2008) Associated Press 9. Lavelor Kirch, Rubbermaid moves vice grip to China, (September 2008) http://www.maidentheusabyamericans.blogspot Read More