The Challenges and Opportunities of the International Business Environment - Coursework Example

International Business Environment in the Next Decade Introduction International business refers to the operation of enterprises in major parts of the world. For most firms, operating at the international level is not just for purposes of increasing revenues by accessing new markets, it is a matter of survival. That means that some businesses engage in international business as a way to secure their interests in the local market. International business has become an interest in many quarters because it has a fundamental impact on so many issues. To begin, institutional business has a fundamental impact on global economy and therefore this is a topic of interest for government, leaders an even business owners (Bamford, 2011). While international business has been there for a long time, it has never been as intense as it is today. Yet, it has not reached its peak. In the future, conditions are going to make it easier, an also necessary for businesses to look at global opportunities. International business is therefore going to be more intensified as time goes on. Although more and more opportunities continue to increase, there are also some challenges that continue to show up in the international business environment. In this appear both challenges and the opportunities that will grace the international business environment have been identified. Globalization Of course, globalization is the biggest factor that has to be considered with regard to international business. Globalization is the unification of the global community made of nations, countries and regions, as they share various aspects of culture such as goods and services, language, ideas, education and even world views. Globalization has been made possible by the introduction of better communication and transport infrastructure which makes these things to be easily moved from one region to the other. Other factors also make globalization a necessity in the long run. The world is getting flatter With globalization, the world continues to be flatter with every technology that that comes up. The flatness of the world refers to the fact that things can be done around the globe in much more efficient and flexible way than they were done in the past. As the world gets flatter, it will mean that the market will respond equally to all types, sizes and even sources of competition. In a fact, world, all competitors have the same opportunity and some traditional factors that used to be the factors determining who dominates the market will cease to be important. Although this has been achieved in a number of ways, it is going to be even more so in the next decade. The coming ten years are going to make the international business environment to be flatter with regard to how businesses operate. This will mean that smaller upcoming firms will be competing with the older bigger industry players. This will have two fundamental impacts in the international business environment. One, the rules of competition will change and this will meant that size will no longer be the major determining factor to decide who the market leader is. What this will mean is that bigger firms will find it increasingly hard to be successful in the market if they don’t seek to have other competitive advantage apart from their size. Secondly, it will mean that younger firms will emerge in the next one decade, in response to opportunities that were not available in the past. Emerging markets in Asia, Brazil and some parts of Africa Emerging markets such as the BRICS will also have a fundamental impact on the international business environment. These emerging markets have led to new and unanticipated market conditions that were not there in the past. In the past, international business has been dominated by big corporation from the West, which is, the USA and the west Europe. These firms operate under some rules which govern corporate management and success (Jones, 2009). However, with globalization and the rise of the emerging markets, the rules of engagement are changing with time and this will mean that the market environment is changing. Emerging markets will have to fundamental impacts in the international market environment. New regulatory approaches due to unavailability of institutions As Ahlstrom (2009) unlike in the western hemisphere, the eastern hemisphere where the emerging markets are sprouting has no parallel institutions that act as the informal regulatory systems in industries. This institutional void is going to have a fundamental impact on the international business environment. In the past, international business environment was to some aspect by institutions such as the Forbes that publishers various performance indicators. As the emerging markets continue to be the main drivers of global economy, the institutional void will impact majorly on international business environment. How institutions affect the business environment Intuitions, although they don’t have the power to regulate the market, they do this by creating an opinion. Institutions in this case refer to industry market researchers and credit card systems, credit bureaus. These institutions are very important in the process of connecting buyers to the sellers and play a major role in not only the connection of buyers to the sellers but also in the ranking of market players. However, in the emerging markets, there is avoid caused by the fact that these institutions are not in existence. This will have a main impact on firms, especially as many multinationals that are failing in Europe are finding a place of refuge in the Asian market. As these firms flee the stagnated European and American markets, they enter into the Asian markets, such as china and India where institutions are not available and this will definitely affect the way they operate. This will mean is that multinational business is now going to be operated in a completely new kind of environment. Plastic money Non currency money will play and increasing role in the future of the international business environment. Although this may seem like not a very big issue, it will have a big impact for the multinationals. Over the past, firms have had to deal with the issue of having to worry about the exchange rates because these exchange rates can have a very big adverse effect on their financial status. With plastic money, this is gradually changing and most of these firms may not have to worry about the issue of exchange rates. The use of mobile and plastic money is going to increase in the next ten years and this will be a deal changer for most multinationals. Plastic money has many advantages that will help in improving the international business environment. First, there is the issue of money handling that will be made easier. With plastic money, the business is able to complete a transaction between itself and the customer while the money remains where it is. The money will remain at the bank in almost any location and this solves a number of monetary issues. First, the exchange rate may no longer be an issue. Secondly, the cost of handling money, such as transferring money from the business premises to the ban will also be diminished. This will make it much easier for multinational businesses to be able to have easier, faster and safer transactions. Changing role of Foreign Direct Investments Foreign Direct Investments have always played a role in the international business. However, this has never been so much as with the changing environment in which international business is conducted. In the future, the ways Foreign Direct Investments are done are going to gradually change. Firms are moving from the western hemisphere to the eastern hemisphere to take advantage of the opportunities provided by the emerging markets such as China and India. This has increased Foreign Direct Investments into an already fast-growing economies and this will mean that these economies will only continue to grow even faster. However, it is not just this that is going to be witnessed, it is also the fact that even firms in the emerging markets are also investing in the traditional markets such as Europe and United States of America. This movement of Foreign Direct Investments in a counter-current manner will have a fundamental impact on the way international markets are going to be managed. New trade agreements Bilateral trade associations will not only change, but will also increase in the near future. Already, there are signs that these trade agreements are taking new shape to fit the new shape of the global economy that is characterized with new emerging markets such as China, Brazil and India. For instance, the new and emerging markets are taking over some traditional trade relationships. This has been witnessed in China where it is taking over the market is Africa which has been traditionally a market for western trade partners such case UK. Increasing terrorism Terrorism will also have a fundamental impact on the international business environment. Terrorism is increasing with time and the fact that terrorist acts are usually directed towards certain racial groups, this will have a fundamental impact on how businesses are able to operate. Multinationals have to identify which are the best ways to operate in the international markets, without having to put to risk their assets, and most importantly their employees. Terrorists are realizing that it is harder to hit their targets at home and so their desperation leads to them hitting at smaller groups away from home. Terrorism will therefore continue to have an increased impact on the way people are able to do business in the international arena and this will introduce a new competitiveness factor. In the past, business, and international business for that matter have always had to deal with only five major competitive issues. These issues were as described by Michael Porter (1980) in his book about the five forces of competitiveness. With international business and especially because this happening mostly in the East where it is either the home of terrorism or very close to home of terrorism, there will be another item added to the list and this will be terrorism, those firms that will be able to handle this issue will have a better chance of succeeding than those that will not have a solid strategy on how to deal with this issue. Environmental issues The environment is becoming an ever increasing factor with regard to how businesses operate. With regard to the international business environment, this will have an important contribution. One issue that has been identified lately is that the regulatory environment in the emerging market is not as strict s the western regulatory environment. How this will affect the way multinationals who enter the new markets operate is one thing that remains to be seen (Aswathappa, 2009). Mega competition As has been explained already, globalization is making the international business environment to be a level ground. This has affected the way business operation in the international business environment is done. The competition will increase in terms of intensity as the environment is supportive of any new entrants, both small and big. As a result, only firms that will be able to handle high intensity competition, by either specializing in a focused market niche, or any other strategy will have the best chance of succeeding. Unlike in earlier days when only a few big firms were able to operate in the global arena and therefore completion was not a big problem. However, with globalization happening at such a high rate and making it easier for smaller firms to all be competitive in the world market, completion is going to be raised a few notches high and this will lead to a mega completion. This will lead to globally integrated production and distribution systems as firms try to be competitive and manage costs and efficiency. Downturns, crisis and panic as economic realignment is achieved The next one decade may also lead to numerous economic downturns and economic panics as the global economy tries to adjust itself. As this happens the global economy will try to readjust itself to the new structure and this is likely to cause some upheavals. However, these upheavals may be short lived, albeit numerous. Reference list: Ahlstrom, D. (2009). International Management: Strategy and Culture in the Emerging World. London, UK: Cengage Learning. Aswathappa, P. (2009). International Business. London, UK: Tata McGraw-Hill Education. Bamford, C. (2010). Strategic Management : value creation, sustaínability, and performance. London, UK: South-Western Cengage Learning. Jones, G. (2009). Strategic Management Theory: An Integrated Approach. London, UK: Cengage Learning. Porter, M. (1980). Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York, NY: Free Press. Read More