Economics for Business (Term Paper Sample)

Economics for Business
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Table of Contents
3.1 Features of the International Economic Environment………………………………………..2
3.2 Economic Implications for Business of Operating in a Global Business Environment……..6
Conclusion……………………………………………………………………………………..7
References……………………………………………………………………………………..8
3.1 Features of the International Economic Environment
In recent times the international market environment has seen tremendous growth with many firms venturing into international trade in order to grow their portfolio using the overseas affiliated companies and outlets (Terpstra 2011). This has stimulated the growth of the international economic environment because trade plays a major role in promoting analogous growth of foreign markets, increased investments and technological exchange leading to increased innovations for growth (Thompson et al 2007). The international economic environment is made up of the following features:
Urbanization: In the international economies there are major economic disparities existing amongst the consumers whereby the city dwellers are highly informed of the products on offer as compared to those living in the country side. This has been due to the latest developments in IT which has bridged the gap in the communication process hence the people from large distances apart can exchange ideas on an online platform and also the community is able to access any of the new products released by the manufacturers leading to consumer knowledge and awareness (Kuznets 2011). This is a major challenge in the international markets especially in the developing nations because a large portion of the community has low income and others are poor to consume a commodity without being aided to do so (Chenery et al 2006). Research shows that higher rates of urbanization should not be used as the basis for entering a foreign economy because it doesn’t guarantee stability and viability as the investors would have hoped leading to mega losses (Thompson et al 2007).
Infrastructure: The international economies are defined by the level of infrastructure put in place to facilitate intra-firm trade and also international trade. The developing nations have a major stabling block in the bid to compete effectively in the international trade due to poor infrastructure especially the road connection systems for easy movement of people and goods in the economy (Kuznets 2011). They are also faced with the challenge of communication systems which is a major drawback because the growth of the international trade has been facilitated by the latest developments in communication systems including the social media and online teleconferencing which enable the people from all parts of the world to host a meeting from the comfort of their offices no matter the distance (Brander et al 2012). Commercial firms being part of the infrastructure plays a major role in promoting exports and imports for example banks provides credit facilities to farmers who engage in their agribusiness activities resulting to increased international trade (Thompson et al 2007).
Nature of the Economy: The international market is comprised of various components of the economy’s economic environment including the natural resources endowed to a nation and the money which is used as the chief unit exchange in the world business today. The oil rich nations of the middle east have a well-developed economy due to the higher foreign income received from engaging in international trade (Kuznets 2011). These economies are stable and the firms operating in the international market must be able to identify a market niche and analyze its potential in order not to be driven out of business by the competing firms in such economies. Demography has its full share of impacts on the nature of the economy whereby the slum dwellers have different needs from the well up people especially in the emerging markets leading to creation of different submarkets within a single economic environment (Terpstra 2011). The international economic environment is also affected by the various changes in weather patterns especially in the developing countries where food security is not guaranteed (Chenery et al 2006). Draughts have severe effects on the economy because the products for exports are reduced and consumed locally hence derailing the rates of economic growth of the regions involved hence not advisable for investments.
Regionalism: This is a major development in the international market whereby countries have formed trading blocks in order to gain competitive edge over others in the international markets leading to growth of their economies (Kuznets 2011). The EU prides itself of a strong bargaining power for products bought into the region and also products exported to the region at the same time setting the required quality of the products to be imported into the region (Braithwaite et al 2009). For example, for the vegetables and animal products sourced from majority of the African nations into the EU requires that the individual countries must eradicate some diseases in the country before exporting their products to the EU zone. This regionalism can also be discriminative making the developing markets less disadvantaged because they can only import from and not export to the EU leading to imbalanced payments of trade (Terpstra 2011).
World Trade: International economies are interlinked with the world trade whereby trade correction strategies are used in promoting and inducing economic growth in the traditional markets (Terpstra 2011). The conservative economies like Russia have been on stagnant situation for a long time due to their failure to take industrialization seriously and allocate proper resources to drive this economy (Chenery et al 2006). International strategies have been developed to stimulate economic growth in these types of markets through the adoption of well-focused strategies geared towards economic growth and efficient utilization of the nation’s resources in creating value for its citizens (Kuznets 2011).
Economic transformation: The international economic growth has seen tremendous changes over times which have resulted to economic rivalry amongst the development economies such as the US and the Japanese competition for the developing markets (Kuznets 2011). Due to the high rates of inflation in the world exchange prices today, the oil rich nations are experiencing an economic boom due to the imbalanced nature of the flow of the finances into their economies at the same time the emerging markets are faced with a great difficulty in trying to cope with the economic recession and arising from the high levels of inflations rates. In the past years, the international economy was concerned with interdependence amongst countries to ensure efficiency in production and exchange of ideas (Terpstra 2011). This has so far changed and resulted to unhealthy competition amongst the economies in bid to control the major raw materials for production and also to control the pollution levels through policies designed to reduce the rates of carbon emissions by firms into the atmosphere (Keegan 2009). Also the developed economies are also required to pay for the pollution they cause in order to encourage ...