Political Influences in Global Commerce - Essay Example

Political Influences in Global Commerce In the modern world, it is a fact that those companies which are involved in international business also have to contend with the political issues that are prevalent in the countries that they operate in. the changing political atmosphere, especially in the Middle East has surprised even those companies that have had decades of experience in the region. Politics play an important role in the formulation of those policies which will either make the business environment either positive or negative and it is the responsibility of those companies involved to ensure that they are alert towards any changes in policy that might affect them. The Middle East in recent years has been characterized by a situation where it is not known which political group will gain the upper hand at a particular time. The fact that there is widespread political unrest in the region has made many businesses, especially the multinational ones, to become extremely wary because they do not know if their operations will be directly affected by any changes in government or not. The emergence of globalization as a dominant force has intensified the economic competition between the various nations of the Middle East and to increase this competitiveness, these nations have come to adopt liberal trade policies, similar to the ones in the West, to ensure that their exports remain at the top of the global market (Naji and Jayum 231). Thus, to ensure their survival within these states, many businesses have opted to intensify the management of the political risk towards their operations since most of them believe that what they have done so far is not enough to secure them. The companies which have operations in the Middle East have come to the realization that the management of the political risk pertaining to their operations can go a great deal in the protection of their interests. It has been found that effective political risk management can help not only in the protection of their investments, but it can also help them to take advantage of new opportunities that develop from government policies, and this will enable them to improve their overall performance. Because of the latter, many of these companies have chosen to include political risk management into their daily activities, leaving behind the fear of political uncertainty in a bid to increase their profits. Since most of the companies involved in the Middle East region are often more than willing to take big risks, they have come to include a comprehensive study of the political environment into their operations, because the need for information is a pertinent aspect of their operations (Dalacoura 79). In this way, they have been able to continue their operations in a regular manner, despite the changing political climate around them, as government policies change in a bid to protect national interests. These new policies have had an impact on some businesses in very negative ways because one of their key parts are the legal restrictions which have been placed on the rights of these companies to conduct their operations for the sake of a higher efficiency of the economy. Some of these measures, whose aim are to safeguard the economy, have led to some companies shifting their goals so that they may be in line with the new government policies. The management of the political risk by companies in the Middle East has helped them to secure themselves in various ways. One of these is that it has helped these businesses ensure that their investments are secured through the anticipation of any changes in the politics of a state or in case of any instability that might occur suddenly. In addition, because of the adequate preparations that a company may have put in place in case of any form of political instability, the said company can be able to swiftly move its operations from the country where this situation is taking place. In a situation where the instability only occurs for a short time, the company involved can be able to go ahead with its long-term investment plan, having put enough operational oversight in place to ensure that any risks coming towards it can be absorbed by the company without any major repercussions to its investment (Dodge 454). Moreover, the ability of the companies operating in the Middle East to monitor the political developments in the various nations within it ensure that they are able to foretell if there might be a decrease in economic activity that might have a direct impact on them, or if there might be an economic boom which will greatly increase their profit; thus, they will be able to have an advantage over their competitors. As a result of globalization, corporate businesses with operations in the Middle East have been over time getting bigger and bigger and this has led to an intense competition between those companies that are in the same line of business. This competition has led to many of these companies to look for every means possible to reduce their cost of production while at the same time also making a profit (Zambelis 89). One of the consequences of the need to reduce costs is that companies from outside if the Middle East have been drawn into the region in a bid find lower costs of productions, as well a new investment opportunities and as a way of accessing the rich resources of the region. While this has been the case, however, many of the companies that have come into the Middle East have found that the politics of the region have brought about some complexity in the way in which they perform. It is the reality that the politics of any nation tends to have an effect on its business environment and it is because of this that multinational companies with operations in the Middle East have found it necessary increases the management of the political risk (Kinninmont 161). Many of these companies have discovered that their current actions in the management of political risk have not been adequate to protect their investments. The need to monitor the political environment by businesses in the Middle East has become a necessity because without such activities, then their operations are likely to fail in case of any cases of instability. Among the biggest gainers through political influences on global commerce has been the construction industry in the Middle East which, despite some political instability has continued to thrive. Over the past decade, the construction sector of the Middle East has gone through many shifts and these have come about mainly through the structural alteration agenda that has been part of this region’s economic development program (Olimat 308). In addition to this, various economic activities such as globalization, the merger and acquisitions taking place within this sector as well as the development of new technologies have contributed significantly to the tough competition and pressures on productivity. In such a competitive business environment, the task of bringing in customers who can create a profit  has become a priority for those who manage road construction companies in the region because there has developed the realization that such institutions must provide acceptable returns to shareholders or go out of business. But while this is the case, it has been realized that in order for these companies to continue working effectively in this environment, and in order to maximize their profits, they have to adopt appropriate political risk management strategies. This has meant that many companies that deal with road construction have had to take prudent measures so that they can better be able to apply sound construction practices to make sure that they provide the best services available (Awad 1222). This has created a situation where these companies in the region have had to ensure that they are protected against any losses in case of there being any problems in the political scene. The fact that the Middle Eastern economies are among the fastest growing in the world has been accompanied by the swift development of their infrastructure by their governments to make them more accessible to foreign investment. The construction industry, for example, has become one of the most lucrative areas of investment in Indonesia and this has been partly due to the fact that government has made it imperative for roads to be developed in the rural areas, which have for the most part been isolated since the independence of the Middle East from colonial involvement. For this reason, the Middle Eastern governments have worked towards the development of incentives to encourage investments in its economy and it is a fact that many companies, both domestic and international have striven to take advantage of the opportunities being provided. The fact that the government pays very well for any of the contracts it gives has ensured that many of those companies which would otherwise not have chosen to invest in the country have chosen to do so and this has brought these companies enormous returns. It has therefore become essential for companies to invest in the growing Middle Eastern economies because they promise to bring in enormous returns if they do. There are numerous opportunities in this fast growing economy and the fact that the Middle East is swiftly developing economically should serve as an incentive for those companies that wish to invest in it since the handsome returns are more than worth it Works Cited Awad, Samir. "The Political Economy of Oil." Third World Quarterly 20.6 (1999): 1221-5. Dalacoura, Katerina. "The Arab Uprisings Two Years on: Ideology, Sectarianism and the Changing Balance of Power in the Middle East." Insight Turkey 15.1 (2013): 75-89. Dodge, Toby. "The Sardinian, the Texan and the Tikriti: Gramsci, the Comparative Autonomy of the Middle Eastern State and Regime Change in Iraq." International Politics 43.4 (2006): 453-73. Kinninmont, Jane. "The Politics of Chaos in the Middle East." Middle East Policy 15.4 (2008): 161-5. Naji, Saeid, and Jayum Anak Jawan. "The US Geopolitical Codes and its Influences on the US-Iran Relations: The Case of George W. Bushs Presidency." Journal of Politics and Law 4.1 (2011): 231-41. Olimat, Muhamad S. "The Political Economy of the Sino-Middle Eastern Relations." Journal of Chinese Political Science 15.3 (2010): 307-35. Zambelis, Chris. "The Strategic Implications of Political Liberalization and Democratization in the Middle East." Parameters 35.3 (2005): 87-102. Read More