Impact of Global Business Environment on International Trade

This report gives a brief about impact of factors of global economy on international trade and influence of global business environment on growth of international businesses.

MAIN BODY

Impact of factors of global economy on international trade

Business environment is basically the mixture of all the internal as well as external factors like employees, needs ad expectations of the customers, clients etc which directly or indirect impacts the operations of business. In view of this, global business environment is predominately the environment within various sovereign countries along with the factors which are exogenous to home environment of organization and thus influences decisions making. Since the emergence of globalization, the global economy has taken a drastic turn and has transformed the large number of organization (Meyer and Peng, 2016). Globalization is basically the process through which products as well as services are traded across the international borders and thus interaction between people occur from different nation. There are various factors which has affected the global economy and these factors have a direct impact on growth of the international trade.

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Political factors

The various political factors like tax rate, country stability, government stability etc affects the growth of Internationale trade in both positive and negative way. The relation between the trading nations are of utmost importance for the development of the international trade (Hamilton and Webster, 2018). For example- the politically stable country or nation having few policies which restricts international trade will eventually expand its trade rapidly. On the other hand, when the nation is politically unstable then this results to the violence and thus this causes a great barrier to the growth and development of international trade.

Economic factors

Economic factors mainly encompasses exchange rate, employment ratio, interest rates etc which impacts the growth as well a development of international trade. The exchange rate tend to fluctuate on the basis of demand for the specific currency. When these currencies fluctuate in term,s of the price then it becomes easier as well as cheaper for the businesses to purchase goods and products in the one country and then sell them into another one. Thus, this has a positive impact on the international trade and thus helps in their growth (Strange and Zucchella, 2017).

Social factors

The attitude, lifestyle, cultures, age of the people also affects the growth of the international trade and forms the major factor which is affecting the global economy. When the people in a country remain conscious of their personality and hence lead a great lifestyle due to high income, education then it becomes easier for the businesses to trade their products in that at high prices. Whereas on the other hand, nations in which culture as well as values are given prime important and people are highly conscious of their culture then it sometimes becomes difficult for businesses to trade their products (Cuervo-Cazurra, 2016).

Technological factors

Technological factors forms the core factor of global economy and thus this impacts the International businesses to great extent. The various technologies mainly facilitates the advanced communication between nations. Thus, this impact the international trade to a high extent. The nation which integrates technology in each of its aspect then this allows the International businesses to easily trade their goods and services. On the other hand, nations in which technological advancements have not developed and are developing at the slow pace then the international businesses finds it difficult to communicate with nations and thus their trading is highly hindered (HOTEL, 2016).

Environmental factors

Various environmental factors like environmental policies, weather, climatic conditions etc poses a high impact on the growth as well as development of international businesses. The nations where environmental policies are strictly followed tend to pose a great tax on the products as well as services which can harms the environment thus due to this high tax, the international businesses incurs a high amount of cost and thus this impacts the overall operations. Besides this, the growing awareness of people for environment and their demand for environment friendly products have accelerated the growth of international businesses and thus have increased the trade between nations (Kolk, 201).

Legal factors

The legal factors such as patents, copyrights, government policies etc is major factor in global economy which somewhere affects international trade. The nations where the legal policies as well as laws continuously changes then every-time remaining aware of these laws sometimes becomes difficult for the international organizations and this overall affects their trade and operations. This poses a great barrier for the international trade. While, when the relation between the nations are good then this affects the international trade in positive way. The positive legislatures enables the organizations to trade freely (Cano-Kollmann and et.al.,2016).

Influence of global business environment on growth of international businesses

The global business environment encompasses various factors which eventually affects global economy like Socio-cultural factors, political, economic, legal factors etc and thus this global business environment consisting of these factors greatly influences the development of international business. It has been analyzed by the researchers that global business environment contributes around 85.4% towards developing the international business and supports more than 7545 billion industries and organization which trades internationally across the world. The global business environment is mainly reflected by the globalization and hence the drivers as well as barriers of the globalization eventually affects the development of the international business. There are range of drivers of the globalization which influences the development of international trade (Cantwell, 2017).

Technological drivers

This is one of the most important driver which eventually has led to the growth of international trade. Since the inception of globalization,it has become easier for the international business to trade freely. For example- the containerization is one of the major driver of globalization through the international organizations are able to communicate with other nations and trade their products (Buckley, 2017).

Political drivers

The liberalized rule of trading as well as deregulated markets have given a boost to the global business environment by lowering tariffs as well as allowing the foreign direct investments. This has ultimately led to the growth of international businesses by enabling international organizations to trade at less cost.

Besides the drivers of the globalization which has impacted the growth of international business in positive way, its various barriers has somehow hindered their operations.

Ethical barriers

This is one of the most important barrier to globalization which has somehow impacted the international businesses. The rise of the globalization has eventually raised importance of the international trade along with political and social effects. But this has also hindered some of the ethical practices which was mainly established for facilitating mutual cooperation between the governments (Meyer and Peng, 2016). This has somehow prevented international businesses to trade freely.

Nontariff barrier

This is the another barrier to globalization which has affected the operations of international business and have impacted to great extent. The Nontariff barrier are generally the trade barriers which restricts the import as well as export of services and goods across boundaries. This barrier is one of the major challenge in globalization due to which most of the countries have now controlled the amount of trade which they conduct together with different countries. This has eventually limit the trading of international businesses (Hamilton and Webster, 2018).

Changing pattern of world economy & international trade

The changing pattern of world economy has somehow affected the growth of the international businesses and hence has transformed the entire world. The changing pattern mainly relates to the way as well as pattern of doing the international business by organizations. There has been the emergence of major changes within global economy from part few years. The most important change has been the advent of trading interventions as well as controls which however has allowed the business to trade freely but simultaneously has erected the barriers for trading with non-members which are not included in the trading blocs (Strange and Zucchella, 2017).

Besides this, the trade in many countries for example in UK has relatively fallen down in terms of commercial as well as financial services which has somehow changed the pattern of international trade. A large number of advanced economies generally have faced deindustrialization along with little national input which is being generated through manufacturing sectors. Various industrialized countries such has US, China have eventually raised their share of the manufacturing export and have also increased the share of the world trade. For example- in the year 206, US mainly captured around 25% of the global trade within hi-tech goods while on the other hand China only had 3%. In the year 2017, the share of US declined to around 15% and on the other hand, share of china subsequently increased to nearly 15%. Thus, with the changing global economy, the pattern of the international trade has also changed (Cuervo-Cazurra, 2016).

CONCLUSION

It has been summarized that globalization has transformed the world to ab great extent and thus have revolutionized the world. The major effects which this globalization has posed is on the international businesses. There are various factors which affects the global economy and these factors directly impacts the growth of the international trade. The numerous factors like political, legal, economical etc influences the international businesses to great extent. Besides this, the changing world economy has eventually affected the development as well as growth of the international businesses.

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