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Problems and Opportunities of Global Business

Updated November 3, 2020
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Problems and Opportunities of Global Business essay

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In these recent times, one of the main challenges affecting business entities and governments is Global business. Global business, as we know, is not a novel phenomenon, however, Global investment and trade is rising rapidly in significance. The purpose of this paper is to: a) highlight emerging issues of the Global business, b) Provide a detailed outlook into many recent developments that create both challenges and opportunities in this ever-changing business domain. The key objectives of this paper are: a) to provide an overview of the Global business environment, b) to present, examine, and highlight the benefits of Global business, c) to ascertain vital challenges and opportunities in relation to the Global business horizons. The goal of this research paper is to introduce and describe Global business in a vital emerging light of globalization. The paper concludes that business people and governments around the world will have to be more informed about the Global dimensions of business than in previous times.

Introduction

Countries around the world form part of the global marketplace. As the years go by, many more companies are going Global. As a result, there is an increasing growth of their overall income coming from other countries. One may argue that there has been a significant development of the international business place, which in recent years, worldwide economic and managerial developments have shot up rapidly. These developments create the prospects, challenges, as well as problems for managers in the global arena.

Global Business in India seems profitable and as time passes, it is rising with only more promise. The development in the international business region in India is more than 7% per annum. There is room for expansion if the relations with the neighboring countries are stabilized. The astounding performance of the stock market in India has gathered all the more attention (in comparison to the other international activities). India definitely stands as an opportune place to explore business possibilities, with its high-skilled manpower and promising middle class sector.

With the various cultural structure of India, it is prudent to avoid a uniform business approach in India. Different parts of this country are recognized for its different qualities. The Eastern region is known as the ‘Land of the intellectuals’, while the Southern area is known for its ‘technology acumen’. Furthermore, the Western region is recognized as the ‘commercial center of India’, with the North being the ‘hub of political power’. Noting such diversities in all regions of the country, transnational commercial prospects in India is definitely massive.

Budding Sectors for International business in India

  1. I.T
  2. Pharmaceuticals
  3. Telecommunication
  4. Financial services and Banking
  5. Cultivation and Food manufacturing
  6. Retail
  7. Energy

Overview of Global Business

Worldwide expansions has brought notable adjustments in the commercial undertakings of most states in the world. The main reason for this venture is to increase trade relations and investment opportunities. This has encouraged policy makers among others, to direct their efforts in searching for new opportunities in the international business environment. Currently, more countries are invested in projecting the sale of their goods and services on the global market. Within the last decade, we have seen immense worldwide changes and improvements which give the new proportions to economic development in the political and business arena. Some of the foremost developments are:

  1. The likely United States-Canada-Mexico free trade agreement, through the North American Free Trade Agreement (NAFTA). In 2019, Trump’s economic advisor Larry Kudlow stated that the USMCA would increase the GDP by half a percentage point and job creation by 180,000 per year after ratification. The International Trade Commission analysis found the agreement would increase GDP by 0.35 point and jobs by 176,000 after six years following ratification. On June 20, 2019, the Mexican Senate ratified this agreement.
  2. The creation of the European Union with 28 member countries and around 513 million people. The EU is the leading economy in the world with a GDP per head of €25 000 for its 500 million consumers. India being one of the first States in the world to establish relations with the EU, is its 9th largest trading partner with 2.4% of the EU’s overall trade. The EU is India’s leading trading partner with 12.5% of India’s overall trade between 2015 and 2016. India Bilateral trade (in both goods & services) reached €115 billion in 2017.
  3. Economic efforts to help rebuild Russia and former Soviet Union member States such as the Molotov Plan.
  4. The economic influence of Japan in the Pacific Rim and renewed progress of Chine. The Pacific Rim includes countries neighboring the Pacific Ocean from North and South America to Asia to Oceania. Most of these countries have experienced major economic change and growth to become components of an economically united trade region. Raw materials and finished goods are shipped between Pacific Rim states for manufacture, packaging, and sale.
  5. Four Tigers of Hong Kong, Taiwan, South Korea, and Singapore
  6. Southeast Asian countries of Malaysia, Thailand, Indonesia, and Vietnam.

Benefits of Global Commercial Activities

  1. Increased revenues
    One of the main benefits of global business is the ability to increase the potential number of consumers. Each country added opens up a new path to business growth and increased revenues.
  2. Decreased competition
    Locally, products and services may be forced to compete in an already saturated market, but the widening of the scope of the reach of such products will most likely eliminate the chance of competition.
  3. Longer product lifespan
    Sales can dip for certain products domestically as consumers discontinue purchasing them or move to upgraded versions over time.
    Selling a product to markets abroad will most likely extend the life of an existing product.
  4. Easier cash-flow organization
    The cash-and-carry system may be one of the hidden rewards of Global business.
    When trading transnationally, it is generally the practice to demand payment upfront before delivering the goods or services, while locally, business owners may have to be inventive and resourceful in managing the cash flow of the business, while waiting for payment from the consumers.
  5. Enhanced risk management
    One major benefit of expanding globally is the diversification of the market pool. Concentrating only on the inland marketplace may possess a higher risk from slumps in the economy, political dynamics, environmental happenings and others.
  6. Currency exchange
    Businesses which expand globally may also profit from currency fluctuations.
    Currency conversion is another benefit from global trading.
  7. Opportunity to specialize Being exposed to the realities of the world outside your home base may even spark innovations, upgrades and efficiencies for your products and services.

Emerging Trends and Challenges

Definitions of globalization refer to it as “growing economic interdependence among nations as reflected in increasing cross-border flows of three kinds of commodities: goods and services, capital, and knowhow” (Govidarajan & Gupta 2000, p.275), or as “the closer integration of the countries and peoples of the world …brought about by the enormous reduction of costs of transportation and communication, and the breaking down of artificial barriers to the flows of goods, services, capital, knowledge, and people across borders” (Stiglitz 2002, p. 9).

Trade Barriers

Trade barriers and the insurgence of Bilateral Free Trade Agreements (BAFTA) may be a cause of a strong threat for smaller or developing countries. Globalization of trade can pose a threat to developing nations or economies because they are forced to contend in the same market as stronger economies or nations. This challenge can stifle established indigenous industries or result in the failure of newly developed businesses there.

Political Risk

Saying that the world is hyper connected is an understatement. A political election abroad, a fluctuation in a country’s currency or a data breach may have the potential to disrupt a business. An example is in the US, no one knows if the 2020 presidential election will result in a second term for Donald Trump or a new Democratic administration. The range of possible policy scenarios – from antitrust actions against major digital platforms to universal health-care schemes and major changes in the tax system– is more expansive than it has been in decades. The situation is the same with UK and Brexit.

Emerging Markets

India, United Arab Emirates and Chile are some of the fastest-growing economies in the world. As the middle class population is growing, there is increased demand for quality goods and services.
India is making huge investments in infrastructure. With an ever-growing population, India is focusing on Canada’s agriculture and food sector as a vital provider of such goods.

More Informed Buyers

More accessible and faster communication avenues allow consumers anywhere to purchase goods and services around the world and to easily access information about what to buy. Social networks have a feature called live video stream, which new businesses love to use since it is engaging. This allows companies to advertise in a way that gives the customers the so-called in-the-moment experience, which makes them feel more included. Also, the Q&A feature allows viewers to participate in the stream and help brand ambassadors bond with the potential client base, which in turn creates better brand loyalty. As pricing and quality information is available, businesses would most likely lose pricing power, especially the power to set different prices in different market places, since such information is easily accessible.

Upsurge in the Use of Clean Technology

Environmental factors are already a main influence in the West and will become more so worldwide. Climate change is a huge determining factor these days. It projects extensive and growing devastation as temperatures and sea levels rise with worsening wildfires and more powerful storms with damaging effects to our ecosystems, infrastructure and society. Businesses must take into account the environmental impact of their day-to-day operations. They can try to market environmentally friendly technologies internationally. The advantage of this market is that it is expected to grow more rapidly than the overall economy.

In 2019, it’s hard to avoid these positions as consumers are urging businesses to take responsibility. Unilever reports that a third of consumers are now buying from brands based on their social and eco-friendly impact, and more than one in five will actively choose brands that are transparent about sustainability efforts in their packaging and marketing. With these statistics, it’s not surprising that brands are modeling their marketing campaigns around conservationism, sustainability and corporate societal responsibility. Lacoste, for example, in 2019, teamed up with the International Union for Conservation of Nature to raise the awareness about extinct wildlife by replacing the iconic crocodile logo on their polo shirts with the prints of some 10 endangered wildlife species.

The Need to Innovate to Compete

Modern consumers are global, tech savy and search for goods and services easily on the internet, looking for the best price and goods that are customized to their needs, regardless of their country of origin. As of 2018, 91% of the 21 million residents living in Scandinavia are projected to be using the internet on a daily basis. Western European neighbors such as the UK, Netherlands and Finland have similar high usage. The internet has been one of the most transformative innovations of the modern era, with widespread access driving generational shifts in how consumers live, work, shop, play and travel. Also based on further statistics as at 2018, 98% of the population will have access to a mobile network globally with three-fourths having access to the fastest network commercially available today – the fourth-generation wireless networks built on LTE. This illustrates how important it is for a business to adapt to the changing eras in order to effectively compete in recent times.

One of the major trends in international business is, of course, crowd funding. Today, there are more online platforms you can use for this purpose and this creates fierce competition among existing businesses to match up to these new businesses, such as Kickstarter, Indiegogo, Crowdfunder, amongst others. For example, the German company, Sono Motors, whose untimate goal was to become a global mobility and energy service provider and support the improvement of the global CO2 footprint, effectively raised over €6 million on Seedrs (a crowd funding platform) in October 2018. Another example is the crowd-funding campaign for Popsocket (phone accessory) which was launched on Kickstarter in 2012, later making it one of the best crowd-funded projects. Popsocket is still one of the best-selling products on Amazon in 2019.

Therefore, innovation may at first seem unnecessary, but companies are recognizing the need to constantly evolve to respond to demands of customers to produce, improve and adjust products and services that satisfy changing needs and remain competitive against newer brands.

The Rise of e-Commerce and China

China is home to the largest e-commerce market in the world, with sales growing more than 30% in 2019 to reach $1.989 trillion. That means 35.3% of China’s retail sales occur online, by far the highest rate in the world. The US with ecommerce on track to represent 10.9% of its retail sales. By the end of this year, China will have 55.8% of all online retail sales globally, with that figure expected to exceed 63% by 2022. The US’s share of the global ecommerce market is expected to drop to 15% by 2022. Alibaba will lead ecommerce sales in China with a 53.3% share.

This signifies budding potential for foreign businesses seeking consumers. But the rise of China also raises challenges. Ecommerce is a major driver of China’s retail economy, As China becomes a growing global force regulators there are considering how to better regulate things like intellectual property protections to encourage more foreign investment there. However these regulations are not yet in draft form. Lester Ross, a Beijing-based law firm partner in an interview, said that it’s unclear how much of an impact the law will have on foreign businesses. Foreign businesses are uncertain how they can be legally compliant in both China and their home nations under this proposed law. Data privacy and security are instances in which such uncertainty resides.

The government of China mandates all foreign companies operational in China to store their data in their country. For example, in 2018, Apple, in compliance with this directive, transferred all its Chinese iCloud operations and management to a Chinese firm. Business would have to consider the cost in complying with these laws, or the cost in avoiding transacting business in China.

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Problems and Opportunities of Global Business. (2020, Nov 03). Retrieved from https://samploon.com/problems-and-opportunities-of-global-business/