Importance of understanding current global tensions for executing international business strategy
Why is an understanding of current global tensions over the international trading system essential to understanding twenty-first century international business strategy and execution?
In the current global scenario, international politics is one of the major areas for concerns for the global business organizations. This is due to the reason that in the current time, there are various instances where it is seen that international political issues are affecting the business scenario in the global market. Thus, in order to effectively execute international business strategy in the twenty first century, it is important for the global business organizations to have the understanding about the current global tensions (Altbach & De Wit, 2015). This will enable them to initiate and design their business strategies in accordance to the emerged global issues.
This report will discuss about the importance of understanding of current global tensions in executing the international business strategy in the twenty first century. In addition, this report will also discuss about some of the notable incidents emerged in the current time in the international political scenario.
In the recent time, one of the major global political issues being emerged in the recent time is the trade war between the United States and China. According to the reports, President of the United States Donald Trump announced huge tariffs on the import of items from China especially in the aluminum and steel (Handley & Limao, 2013). However, on the other hand, China is one of the major suppliers and producers of steel in the world. Putting of tariff barriers by Trump caused starting of trade war between China and the United States (Brunnstorm, Spetalnick & Blanchard, 2018). This will not only affect the business potentiality of the United States and China but also it is affecting the business scenario in other countries also. Thus, in relation to this factor, it is more important for the business organizations operating in this sector to have the idea and understanding about the current scenario.
For instance, an organization manufacturing and selling steels will have to look for new potential countries if their existing exporting country is the United States. This is due to the reason that putting the tariff barriers in importing goods in the United States will increase the cost of the items and thus the rate of exporting will get reduced. It is also to be noted that business organizations without having the understanding of the current market of the global steel market and regulations, they will not be able to operate effectively in this market and eventually they will lose out in the competition (Bown & Crowley, 2013). On the other hand, it is also important for the importing business organizations of steel in the United States to have this understanding due to the fact that they are entirely depended on the import and without having the clear understanding they will not be able to initiate their alternative strategies.
Notable incidents In the current international political scenario
Political issue should be fatal in different ways for the investing business organizations. This is due to the reason that political issues will not limited among trade wars and tariffs and regulations, but also it can lead to negative political relationship between the countries and military confrontation. Moreover, in the current time, this issue is much more relevant due to the ongoing conflict between different countries. One of the major conflicts that got aroused between China and the United States regarding the possession of the South China Sea will affect the industries in both countries mainly for the American industries (Smith, 2018). This is due to the reason that majority of the American companies get their job outsourced in China due to the low cost of operation. Thus, military confrontation between the two countries will lead to economic sanctions and thus the industries will get affected.
On the other hand, another major case in the recent time that is being emerged is the dispute regarding the marketing of the processed sugar products between the Australia and Singapore. This dispute emerged even through Singapore and Australia is having free trade agreement. The issue emerged when Australian government implemented the code of conduct for the foreign sugar millers and gave the right to the farmers of choosing the seller through whom they want to sell their products (Coorey, 2018). However, it affected the sugar industry of Singapore due to the reason that Wilmar the agri giant in Singapore has their sugar fields and investment in this sector in Queensland, Australia. Thus, it caused challenges for them as the risk regarding the sourcing of the sugar materials will be difficult.
Thus, in the case of the execution of the business strategy in the current scenario, it is important for the business organizations to have the understanding of the current political scenario along with determining the political and diplomatic relationships between the host and home countries. This is due to the reason that investing in the foreign countries should be taken only after the determining the possibility of potential political issues as discussed earlier. Moreover, it is also to be noted that it is important for the contemporary business organizations to also analyze the trade agreements between their home and host countries (Aggarwal, 2013). This is due to the fact that Singapore and Australia are having free trade agreement and thus their government level negotiations to identify the middle path. However, in case of not having any such agreements, it will become more risky for the business organizations to invest and operate in their host country.
Trade war between the United States and China
Thus for the contemporary business organizations, it is important to have the understanding about the current global issues prior to the implementation of the business strategies. One of the major business strategies being initiated by the contemporary business organizations is the decision of outsourcing and off shoring. This is being done by the business organizations in order to reduce their cost of operation (Brewer, Ashenbaum & Ogden, 2013). However, coming to the twenty first century, business organizations should have the understanding about the political scenario in the international trade and business and in accordance to that; they should select their outsourcing operation.
Apart from the political factors, there are other factors such as economic factors that should also determined by the contemporary business organizations. This is due to the reason that in the twenty first era of globalization, global economic scenario and situation will determine the impact on the global trade. For instance, the imbalance of global economy due to the higher saving in Germany and over consumption in the United States is posing challenges for the business organizations (Fairless, 2018). This is due to the reason that business organizations prior to investing in any countries should have the knowledge and understanding about the economic viability and condition of the particular country along with the impact of globalization on the national economy. Investing in the countries such as Germany will have less profitability due to fewer trends of consumption and higher savings.
Conclusion
Moreover, initiation of trade barriers and tariffs by the emergent of populist culture is also posing challenge for the business organizations. Imposing of tariffs on importing by Donald Trump caused challenges for the import oriented American retail organizations (Maley, 2018). This is causing an increase of price in the retail goods. In addition, there are barriers being faced by different government due to different reasons. It can be concluded that business organizations should have the idea about the current global business scenario along with effectively determining the political, social, economic and other factors. The clearer will be their understanding regarding the twenty first century global trends and scenario, the more effectively they can initiate their business strategies. Consideration of these factors will ensure that contemporary business organizations will be more immune to the current global fluctuations.
Reference
Aggarwal, V. K. (2013). Bilateral trade agreements in the Asia-Pacific. In Bilateral trade agreements in the Asia-Pacific (pp. 19-42). Routledge.
Altbach, P. G., & De Wit, H. (2015). Internationalization and global tension: Lessons from history. Journal of studies in international education, 19(1), 4-10.
Bown, C. P., & Crowley, M. A. (2013). Import protection, business cycles, and exchange rates: Evidence from the Great Recession. Journal of International Economics, 90(1), 50-64.
Brewer, B., Ashenbaum, B., & Ogden, J. A. (2013). Connecting Strategy-linked outsourcing approaches and expected performance. International Journal of Physical Distribution & Logistics Management, 43(3), 176-204.
Brunnstorm, D., Spetalnick, M., & Blanchard, B. (2018). ‘Not natural friends’: Trump, Xi will be ‘odd couple’ at first summit. Retrieved from https://www.reuters.com/article/us-usa-china-summit-analysis-idUSKBN1752FT
Coorey, P. (2018). Singapore warns sugar deal could breach free trade pact. Retrieved from https://www.afr.com/news/politics/singapore-warns-sugar-deal-could-breach-free-trade-pact-20170330-gv9thb
Fairless, T. (2018). The Australian. Retrieved from https://www.theaustralian.com.au/
Handley, K., & Limão, N. (2013). Policy uncertainty, trade and welfare: theory and evidence for China and the US (No. w19376). National Bureau of Economic Research.
Maley, K. (2018). Trump address sparks worries for US retailers, emerging markets. Retrieved from https://www.afr.com/markets/trump-address-sparks-worries-for-us-retailers-emerging-markets-20170301-guo2mw
Smith, S. (2018). East Asia Forum. Retrieved from https://www.eastasiaforum.org/
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