Economic Factor and Impact on the Business Management Activities - Annotated Bibliography Example

Name Class Unit Table of Contents Table of Contents 2 Introduction 2 News: The global economy is slowing down. But is it recession - or protectionism? (Nov. 14th 2015) 3 Economic factor and impact on the business management activities 4 News: BP proposal to drill exploration wells in Great Australian Bight rejected (Nov. 17th 2015) 4 Regulatory factors and impacts on the business management activities 5 News: McDonald's China heritage outlet criticised (Nov. 18th 2015) 5 Social cultural factors and impacts on business management activities 6 News: Don't Hide From the Reality of How Terrorism Affects the Economy (Nov.16th 2015) 7 Terrorism (social-political) impact on business management activities 7 News: Fresh class action suit against Volkswagen in Australia 8 Legal factors and impacts on the business management activities (Nov.19 2015) 8 Conclusion 9 References 10 Introduction Understanding the business environment is very important for the business to operate successfully in the global environment. Environmental factors affect business operations in all aspects. The components of global business environment include economic, demographic, social-cultural, politics, legal, international and technological. The task environment includes, labour, regulators, suppliers, clients and competitors. Internal business environment includes employees, culture, management, processes values and work ethics. The international business environment is filled with opportunities and threats and hence requires constant monitoring. International business managers are expected to address the market differences between home country and foreign market for the business to succeed. This requires deep understanding of the business environment in the home country as well as the foreign country (Morrison, 2002). This essay discusses international business environment components. This is through five news items from online media which relates to internal or external business environment in a period of two weeks (Nov 9 to Nov 22, 2015). News: The global economy is slowing down. But is it recession - or protectionism? (Nov. 14th 2015) This is an article found on the guardian online news. The post claims that exporters are having an impact of global economic slowdown. According to the analyst, a surreptitious retreat from globalisation may be the main cause of the decline. According to the article, Chinese company that depends on the global trade claims that the world economy is bleak. The purchasing power is low overseas and exporters are being affected a lot. Despite these official figures of Chinese economy showing that it is expanding at 6.9%, analysts points out that it could be much weaker. There are claims that Chinese economy may be growing at 3% or less. China feels that the low demand from the Eurozone is the main factor for deteriorating economy. Global trade which was growing at a slow rate appears to have stagnated. Economists feel that the world can avoid recession but there will be a lot of damage especially to countries which has been dependent on China economy. US plan to raise federal interests which may have a negative impact on countries struggling with plunging currencies and high borrowing costs (Stewart & Ryan, 2015). Web link: http://www.theguardian.com/business/2015/nov/14/global-economy-slowing-down-recession-or-protectionism Economic factor and impact on the business management activities The environmental factor explained through the news is economic. The global economic environment affects global business management in a great way (Morrison, 2002). The economic health determines the success of the global business. In this case, China economy is on decline which has affected businesses which relies on exports. China has remained as one of the world top destination for foreign direct investments. Most of the western multinationals operates in China to produce for the global market. When the Chinese economy goes into recession, all markets that depend on China are affected. Companies affected by the economic slowdown in China include Rolls Royce, jaguar and Burberry. Cisco management already has seen the impact of the weakening Chinese economy with their low sales (Stewart & Ryan, 2015). Also, when the global demand for goods and services slows down, Chinese market suffers. A collapse of Chinese economy would lead to negative consequences on their trading partners and companies. This would also signal global recession. News: BP proposal to drill exploration wells in Great Australian Bight rejected (Nov. 17th 2015) The article asserts that the proposal by BP to drill in the great Australia Bight has been rejected by the country’s oil and gas regulator. BP had wanted to drill deep water exploration wells from 2016. The reason for rejection is given that the company has to demonstrate that it can manage the risk of oil spill; and community concerns on environmental impact. The BP environmental plan was rejected by the authority since it failed to meet the regulatory requirements (ABC News, 2015). Web link: http://www.abc.net.au/news/2015-11-17/bp-proposal-to-drill-in-the-great-australian-bight-rejected/6947068 Regulatory factors and impacts on the business management activities The environmental regulations have a great impact on the international business as seen in this case. Companies’ management are expected to comply and meet the regulations in their country of operation. BP had been under a lot of pressure after the gulf oil spill which led to a lot of damage to the environment. The company is still being sued by different parties and has already settled some of the legal issues. Failure of management to observe regulations may lead to legal actions and losses (Morrison, 2002). Companies can also be denied the licences to operate if they violate the environmental laws. This is seen in case of BP whose management are denied the licence to drill oil wells in Great Australia Bight (ABC News, 2015). News: McDonald's China heritage outlet criticised (Nov. 18th 2015) The news explains the criticism behind the opening of McDonald’s outlet in the home of a former Taiwan leader Chiang Ching-kuo in Hangzhou, China. The site where McDonalds wants to open an outlet is a village seen by the conservationists as a cultural heritage which is to be converted into a museum. There are group of people including Chiang grandson who are against commercialisation of the site. McDonalds opened a 100 seat outlet in the lower storey of the villa. The upper storey is already occupied by Starbucks. Chiang Ching-Kuo was a Taiwanese leader in 1978 and the building was declared a cultural heritage site in 2003 by Hangzhou officials (BBC News, 2015). Link: http://www.bbc.com/news/world-asia-china-34853848 Social cultural factors and impacts on business management activities The environmental factors displayed by the case are social cultural. The site which McDonalds wants to open an outlet is preserved as a cultural heritage site by the locals. McDonalds is a global firm which is expected to adhere to the local cultural and social aspects. The business management is expected to adhere to the correct usage of cultural sites. When a multinational fail to observe the culture of foreign countries controversies arise which are not healthy for the business (Morrison, 2002). Starbucks has also faced the same challenge when they opened an outlet in China Forbidden City in 2000. The company management was forced to merge and reduce the number of shops in the site over the protests of commercialisation. Social and cultural factors are strongly held by the society. In this case, 90% of residents are against commercialisation of the site (BBC News, 2015). The social cultural values in most cases outstrip the commercial values. The business management is expected to learn the cultural factors of the foreign country they are doing business with. China has a deep culture which is well preserved. Failure of management to observe the Chinese cultural values and aspects may make it hard for global firms such as Starbucks and McDonalds to conduct business in the country. News: Don't Hide From the Reality of How Terrorism Affects the Economy (Nov.16th 2015) Global terrorism leads to political destabilisation hence a social political phenomenon. This is article that appears on Investopedia that analysis how terrorism affects the economy and business environment. The article claims that the occurrence of terrorism has impacts globally irrespective of where it occurs. Terrorism leads to uncertainty as an aftermath as investigations are carried out. The article refers to Paris attacks which occurred in 13th November 2015 as well as Mumbai attacks of November 2008. According to the article, market detests uncertainty. The article analyses the costs of terrorism to the economy both direct and indirect (Picardo, 2015). Web link: http://www.investopedia.com/articles/investing/030215/how-terrorism-affects-markets-and-economy.asp?layout=infini&v=1B Terrorism (social-political) impact on business management activities Countries with high terror threats become hard to carry out international business. The global business is exposed to terrorism in their areas of operation (Shengelia, 2015). Once a terror activity occurs, the economy is affected which impacts the business. Markets are exposed to uncertainty as explained in the article leading to loss. Despite the fact that the market recovers after the attack, the costs are high. The economy is affected directly and indirectly. The direct costs in most cases are short term which includes loss of life and properties, damage to infrastructure, and provision of assistance. The indirect costs to the economy are higher as they undermine the investors’ confidence and affect the economy in medium term. An increase in the security measures leads to a reduction in productivity. For example, after the terrorist attack in US (9/11), OECD estimated direct costs of $27.2 billion (Picardo, 2015). Management of business operating in a country affected by terrorism operates in unstable environment with strict security measures and reduced investors’ confidence. The impact on social and political environment may lead to reduced profits for the firms (Shengelia, 2015). News: Fresh class action suit against Volkswagen in Australia Volkswagen is a global car maker from Germany. The company has operations in different countries globally. The case points out to the current legal issues facing Volkswagen due to emission cheating scandal. Owners of more than 90,000 Volkswagen, Skoda and Audi vehicles with manipulated emission gadgets have filed case against the company in Australia federal court. The owners claim that their vehicles have lost values due to emission scandal. In US, the company has offered to give $500 gift cards and $500 to pay for repairs (Mark, 2015). News link: http://www.abc.net.au/pm/content/2015/s4355637.htm Legal factors and impacts on the business management activities (Nov.19 2015) This case shows the impact of the legal factors on the global business. Volkswagen being a global firm is exposed to different legal systems. After the cheating scandal, Volkswagen has been exposed to lawsuits in different countries (Mark, 2015). This implies that global business faces a threat from legal systems and must ensure that they avoid them. Legal environment regulates the business in the global market. The business is not only bound by laws of home country but also by those of the host country. It is therefore vital for management to know the laws of the host country (Morrison, 2002). In this case, Volkswagen faces legal challenges in a global market environment. Conclusion The global organisation environment includes all elements outside the organisation boundaries that have a potential to impact the business. External environment has a great influence on the business performance. Through analysing the five news items, it is possible to identity several factors affecting the business in the global environment. The identified factors are economic, social-cultural, political, legal and environment regulations. The business management has to ensure that they are capable of addressing these factors to gain success in their business. This will ensure that they take opportunities presented by the global business environment and eliminate the threats. References ABC News, (2015), BP proposal to drill exploration wells in Great Australian Bight rejected, 17th November 2015, ABC News.com, Retrieved 22nd November 2015 from, http://www.abc.net.au/news/2015-11-17/bp-proposal-to-drill-in-the-great-australian- bight-rejected/6947068 BBC News (2015), McDonald's China heritage outlet criticised, BBC.com, 18th November 2015, Retrieved 22nd November 2015 from, http://www.bbc.com/news/world-asia-china- 34853848 Mark, D. (2015), Fresh class action suit against Volkswagen in Australia, ABC.net, 19th November 2015, Retrieved 22nd November 2015 from, http://www.abc.net.au/pm/content/2015/s4355637.htm Morrison, J. (2002). The international business environment: diversity and the global economy. Palgrave Macmillan. Picardo, E. (2015). Don't Hide From the Reality of How Terrorism Affects the Economy, 16th November 2015, Investopedia, Retrieved 22nd November 2015 from, http://www.investopedia.com/articles/investing/030215/how-terrorism-affects-markets- and-economy.asp?layout=infini&v=1B Shengelia, T. (2015). Terrorism, as Socio-Political Phenomenon and Impeding Factor for Global Business. International Journal of Social Sciences, 4(2):1-38. Stewart, H. & Ryan, F. (2015), The global economy is slowing down. But is it recession-or protectionism? 14th November 2015, Guardian.com, Retrieved 22nd November 2015 from, http://www.theguardian.com/business/2015/nov/14/global-economy-slowing- down-recession-or-protectionism Read More