Understand the Implications of Operating in the International Economic Environment on Business Organisations (Essay Sample)

THE IMPLICATIONS OF OPERATING IN THE INTERNATIONAL ECONOMIC ENVIRONMENT ON BUSINESS ORGANIZATIONS
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3. Introduction
Having knowledge of the global business environment is of great importance to modern managers since all businesses desire to be globalized. Effective managers should, therefore, have knowledge about the factors of international or global business environment (Doh 2005). The worldwide system that is used to trade internationally among both developing and developed countries is referred to as international economic environment. This concept, as a sub-field of economics, focuses on environmental issues. According to Schmidheiny (1992), environmental economics differs from ecological economics in the sense that the former views the economy as a subsystem of the ecosystem, focusing on preservation of natural capital. The International economic environment on the other hand, refers to the environment in different countries, with same conditions as the home setting, influencing decision making on resource use and capabilities. 3.1 Features of the International Economic Environment
International economics environment is a global sector, having some unique feature that anyone recognizes the weaknesses of their economic system. Economic environment refers to the effect of the working, on the business in the whole world (Cavusgil, et. al. 2014). It deals with trade systems, structure, policies, the level of income, nature of an economy, and income distribution. Moreover, the economic environment provides an explanation of the economic conditions of any country in which the international organization operates. The characteristics of economic environment are correlated with all the economic activity effects (Spar & La Mure 2003). The International economic environment consists of several organizations such as the UN, the World Bank, and the WTO.
The International economic environment is also linked to comparative advantage. Price forms the basis for international trade. Evans & Mavondo (2002) argue that countries engage in trade because they manufacture and export products in which they enjoy a higher comparative advantage. Similarly, they import goods in which they possess a least comparative advantage.
The balance of payment, a feature of the international economic environment, help marketers choose the locations of for international markets and market selection. This implies that this balance of payment is critical in business since all businesses seek a market for their products. The capital account can also show the countries that have various control restrictions and therefore difficult to deal with. In the view of Evans & Mavondo (2002), international economic environment is also characterized by government policies. These are government regulations and measures that have an influence on trade. They include quotas, invisible tariffs, tariffs, and exchange controls. These can result in terrible barriers to marketers.
World institutions are yet another feature of the international economic environment. Institutions such as United Nations Conference on Development and Trade have been on help to many countries (Doh & Teegen 2002). The intentions of these institutions are to create an overall system preference besides negotiating tariffs for the products manufactured my member countries. The international monetary system, a feature of the international economic environment, plays a significant role in global business. The IMF for instance deals with global monetary system. Member countries joined the global business to establish an average value for other countries (Vernon & Wells Jr 1991). However, the system collapsed because large companies were holding more funds compared to banks making a float to set in. Somewhat, the IMF began to fade. Similarly, the World Bank deals with international capital. According to Schmidheiny (1992), this monetary system provides long-term funds to support economic development. Many developing countries need institutional funding to assist them with balance payment problems. Other key leaders include the EU as well as other bilateral donors that have provided monetary resources for developmental projects.
3.2 Economic Implications for Business of Operating in a Global Business Environment
Globalization has been on the rise over the past two decades. Bordo & Eichengreen (1999) argues that increase in foreign investment has been used as a measure of the increasing economic globalization. Organizations are subjected to global forces of supply, demand, international market competition, their significance to international issues, political development, and demographic changes, rather than remaining protected by the local environment. According to Schmidheiny (1992), the interests of stakeholders are therefore affected by the net impact of various global factors. This applies to all the stakeholders including business managers, consumers, investors, government servants, and trade associations. Individuals who are incapable of coping with the global forces lose their relevance, thereby struggling to survive (Low 1992). On the other hand, those who can adjust with the globalization continues to change global opportunities into plans that strengthen them while making them continuously relevant to effectively deal with the threats posed by the external environment.
Globalization also affects the business operations through the emergence of global production markets and greater access to a wider range of foreign products for companies and consumers. Operating in a global business environment also leads to the emergence of international financial markets as well as better exposure to external funding for corporate, sub-national, and national borrowers (Arrow et. al. 1995). Operating in a global business environment leads to realization of international common market, on the basis of the freedom of exchange of capital and goods. Moreover, as a leading concept in international business life, globalization affects businesses through a rise in competition (Evans & Mavondo 2002). This competition can be linked to service and product price and cost, target market, quick response, technological adaptation, and quick production by organizations. When an organization produces with little cost and sells the produce cheaply, it can increase its market share (Doh 2005). With increased competition from foreign companies and brands, industries from every nation are forced to improve their customer satisfaction services and quality standards. This becomes beneficial to both customers and the entire economy and raises the living standards of individuals. For instance, more individuals are subjected to lucrative advantages of moving abroad thereby giving them a chance to grow economically.
The rise in foreign in...