Business in Global Content - Coursework Example

Business in Global Content Q1. A common way to conceptualise the business environment is to use what we call PESTEL analysis. PESTEL stands for Political, Economic, Social, Technological, Environmental, and Legal. In small groups we would like you to construct a mind map identifying the kind of factors that might fall into these various dimensions. Attempt to identify those criteria that might be located within more than one dimension, and consider how you might illustrate these clearly within your map. PESTEL analysis is commonly used when having to evaluate the environment in which a business operates. PESTEL analysis refers to factors that are can impact business environment. More specifically, the PESTEL analysis shows those factors that can influence ‘the structure or the future of an industry’ (Zanoni 2011, p.41). Each of these factors could be analyzed as follows: a) Political; it denotes the local political environment as it is periodically changed under the influence of economic and social pressures (Beamish and Ashford 2006). The political environment refers to issues such as: the decisions of the government in regard to various fields, including ‘education, environment and business’ (Beamish and Ashford 2006, p.333); the legislation of a country, in general, can be considered as part of the country’s political environment as this environment can affect the operations of local businesses (Barrows and Neely 2011). Moreover, texts that have been verified by the government and which are bounded for specific trade activities are also included in the political environment. Reference can be made, for example, to ‘trade agreements or tax levies’ (Zylla-Woelnner 2013, p.2); b) Economic; the particular category includes economic practices or trends that characterize a particular market (Barrows and Neely 2011); the prices of basic goods or houses, the interests applied in daily economic transactions but also in the banking sector, the average income, the GDP, the prices of commodities, such as oil, natural gas and so on, are the most common factors of this type (Barrows and Neely 2011); c) Social; conditions in societies worldwide are not stable. In fact, from year to year changes are likely to appear in social structure and trends in all countries (Dransfield 2004). In the context of PESTEL analysis emphasis is given to specific changes of such kind: the changes which can affect business activities (Dransfield 2004, p.445). For example, reference can be made to the changes related to demographics, as these figures are related to local population, to the changes related to buying behaviour/ preferences, to the changes referring to employment trends and those referring to other social sectors, such as ‘education, health or the household income’ (Dransfield 2004, p.445); d) Technological; the technological advances, as achieved worldwide on a continuous basis, have a critical impact on businesses of all types (Dransfield 2001, Dransfield 2004). In this context, the technological changes that affect the business environment are the following: the IT software/ hardware as developed through relevant research, the new modes of e-commerce and the funds/ infrastructure provided by the government in regard to technology research (Dransfield 2004, p.445); e) Environmental; the particular factor is related to the environmental issues that each business has to take into consideration when planning/ developing its operations (Barrows and Neely 2011). Examples of such factors can be the following: the control over the level of energy employed in daily business operations, the use of alternative sources of energy, the waste management, the control over the CO2 emissions according to local and international standards and so on (Beamish and Ashford 2006); f) Legal; the legal framework related to business, both at local and at international level, can highly impact all aspects of business operations (Beamish and Ashford 2006). Examples of legal factors that can influence the business environment can be the following: the laws related to various aspects of employment, such as health and safety or compensation, the laws referring to tariffs/ prohibitions on specific products such as ‘oil, alcohol or tobacco’ (Beamish and Ashford 2006, p.333), the laws referring to the documents/ process required for the establishment of new businesses (Dransfield 2004) and so on. The elements of the PESTEL analysis, as analyzed above, are presented below using a Mind Map. Mind Map on PESTEL model Q2. Over the past few years the Indian economy has fallen on hard times. Running a business in Indian has become no easy matter. Watch this short video clip and consider the difficulties business might come across operating within such a business environment. Can you identify any advantages that Indian business might benefit from in this situation? To what extent is it suggested that India’s economic position might be the result of global forces? How far do you feel this might be true? Businesses are expected to face a series of challenges to face when operating in India. According to the video clip the country’s currency tends to be continuously decreased, compared to US dollar. This trend has been related to high interest rates, high inflation and high import costs. This means that a business operating in India would have to deal with continuously increasing operating costs, a fact that could threaten its viability. Moreover, due to the unstable economic environment foreign investors have started to pull out their funds from India, being afraid for severe financial losses. Indian bankers have tried to control the problem but with no success; in fact, in the banking sector also interest rates are at high levels. As a result, businesses in India face difficulties in regard to borrowing, a problem that could threaten their existence. In addition to the above, due to continuous decrease of rupee’s exchange price the cost of imports in India has been radically increased. This phenomenon has led to the increase of prices in products/ services within all sectors. Therefore, businesses cannot keep prices at low levels, a fact that has make consumer unwilling to buy products/ services at the same level as in the past, as noted in the video clip. On the other hand, despite the adverse economic conditions, Indian businesses could possibly achieve certain benefits: as the access to borrowing is made more difficult only those businesses which are not too exposed to borrowing will survive. In other words, firms that are too depended on borrowing would have to leave the Indian market, a fact that would leave space for those businesses that are healthier, in regard to their exposure/ dependency on debt. Also, due to the economic pressures firms that are able to promote innovation without increasing prices would become quite popular; in other words, the crisis in the Indian market could result to the appearance and growth of highly innovative firms, a fact that would lead to the enhancement of the Indian economy, even in the long term. Finally, the increase of price of products/ services based on imports would lead Indian consumers to prefer products that are developed/ produced locally. Through this trend the local products, agricultural or manufacturing, would become more popular, a fact that would lead to the decrease of the imports and the following decrease of amounts spent on imports. According to the video clip the current condition of Indian economy is highly related to global forces: for example, reference is made to the practice of the Federal Reserve Bank to keep US dollar at high levels by buying bonds. Also, remittances in India are at quite high level: in 2012 remittances reached the $70 billion while in 2013 an increase of 30% has been reported in the first half of the year. This trend has led to the limitation of the country’s income as significant amount of money is transferred out of the country. Moreover, foreign investors feel important concerns from the decrease of India’s growth at 5%, compared to the 8%-9% of the previous years. As a result, FDI in India has been decreased, a fact that has affected the performance of the country’s economy. The review of the literature published on this subject verifies the critical role of global forces in the downturn of the Indian economy. For example, the highly development of technology worldwide is considered as having influenced the Indian economy both positively and negatively: even if manufacturing processes have been improved ‘a mismatch between education and skills has appeared’ (Ramakrishnan 2013, par.10). In addition, the recent ‘changes on the US Immigration law’ (Prasad 2013, par.8) has made the employment of foreign workers in US firms more difficult. This trend could severely threaten the income of all Indian companies which offer outsourcing services (Prasad 2013). According to a report published in the Economist the turbulences that the Indian economy faces are mostly related to ‘the global forces that are beyond its control’ (The Economist 2013, par.5). Emphasis is given to the concerns of foreign investors for the continuous decrease of rupee’s value as combined with the lack of appropriate measures of reform by the Indian government (The Economist 2013). In the report of Sharma (2013) particular reference is made to the change of strategy of US Federal Reserve bank from 2011 onwards: during this period the US Federal Bank has alternated its past practices and has started to emphasize on the increase of interest rates and the return of US dollars from abroad (Sharma 2013). In the context of this practice, millions of dollars invested on emerging economies have returned in US, a fact that caused severe economic turbulences in emerging countries worldwide, including India. In this context, the view that the economic crisis in India is closely related to global forces can be considered as fully verified. References Barrows, E. And Neely, A. (2011) Managing Performance in Turbulent Times: Analytics and Insight. Hoboken: John Wiley & Sons. Beamish, K. And Ashford, R. (2006) Marketing Planning 2006-2007. London: Routledge. Dransfield, R. (2004) Business for Foundation Degrees and Higher Awards. Oxford: Heinemann. Dransfield, R. (2001) Corporate Strategy. Oxford: Heinemann. Prasad, S. (2013) “Global forces changing rules of Indias outsourcing game.” April 24, 2013. ZD Net. Available at http://www.zdnet.com/in/global-forces-changing-rules-of-indias-outsourcing-game-7000014415/ Ramakrishnan, G. (2013) “India 2050: A Global Manpower Hub.” Aug 9, 2013. Stanford Social Innovation Review. Available at http://www.ssireview.org/blog/entry/india_2050_a_global_manpower_hub Sharma, R. (2013) “The ironies of India’s economic crisis.” Aug 25, 2013. Financial Times. Available at http://www.ft.com/cms/s/0/ea302db4-0b4a-11e3-bffc-00144feabdc0.html#axzz30xkc6Qjr The Economist (2013) “How India got its funk.” Aug 24, 2013. The Economist. Available at http://www.economist.com/news/leaders/21583994-indias-economy-its-tightest-spot-1991-now-then-answer-be-bold-how Video clip on Indian economy. Available at http://www.youtube.com/watch?v=0wKxwlJGuB4 Zanoni, A. (2011) Strategic Analysis: Processes and Tools. London: Routledge. Zylla-Woellner, J. (2013) Global economic Development within the Scope of Apple Inc. Norderstedt: GRIN Verlag. Read More