Introduction
International management involves the process of monitoring business activities in different parts of the world where the business operates. It consists of studying and understanding the business environment of various countries and understanding the culture and currencies of the country where the company is operating. Business representatives in multiple states should familiarize themselves with the local market and competitive conditions, the legal and financial environment, the political atmosphere, and the social activities of the local people in the country of operation. Therefore, the paper analyses the current trends that affect the international business environment to predict the future of global business relations.
Operating a business internationally can offer companies thrilling openings for development and profit. Nonetheless, conducting commerce globally is not stress-free since there are significant challenges and risks associated with it; hence, it is not favorable for everyone (Charter 2017). The business owners will be compelled to employ trustworthy people to supervise the global operations of the business if the business has to succeed in the international arena. Numerous factors that are involved in expanding one’s operations worldwide are referred to as the international business environment. Examples of issues that may be associated with the business during global operations include legal issues, language issues, political challenges, cultural barriers, and supervisory oversight.
Future international business will follow the laws of various countries as different countries have different rules. However, due to globalization, businesses will achieve much simpler international trade terms due to the creation of multinational alliances that promote free trade. Political pressures are felt in the states despite the time of different political temperatures. Therefore, the international business environment will thrive in countries with less or no interference in business.
The Effect of Globalization
The trends in globalization will certainly shape the future international business environment. According to the world-systems theory, the world functions as a unit, where individual countries are not as important. Therefore, the countries are categorized by their economic and political development level. Countries in Western Europe and Australia and North American countries belong to the group of core countries. They are characterized by a strong central government and rely on a complex taxation system that supports it. Due to industrialization, their economies are diversified, making them independent of external factors.
On the contrary, periphery countries in most of Africa, Latin America, and Eastern Europe tend to have relatively weaker economic rely which rely mostly on resource extraction and makes them dependent on world market trends. Socially, periphery countries have higher rates of poverty and lower rates of education. Core countries, as well as transnational corporations, are highly influential in this category.
The skeptical perspective, on the contrary, is more determined in its approach to globalization. According to it, the international processes of the present day are not global but regional. Borders remain to be relevant and important, as poorer countries are not accepted into unions of core countries (Baylis, 2020). In addition, periphery countries do not enjoy the same number of benefits from the global economy as first-world countries do. Hence, this supports the notion expressed in the dependency theory. Periphery countries that rely on exporting resources to richer countries are integrated into the world system as undeveloped ones. The economic dependency deepens the cultural and political factors that hinder the development of such countries; therefore, the theory claims that periphery countries will not develop further. The future international business environment will be determined by core countries that dominate global markets and, therefore, can dictate how resource-dependent countries function.
The Effects of Technology
The future international business environment will also be largely affected by the development of technologies. This will provide businesses with new marketing solutions, supply-chain management decisions, and distribution strategies. In addition, technology provides the world with new industries that will shape global markets. For instance, artificial intelligence and the internet of things will not only force future international businesses to be more dynamic but will create new technologically-dependent environments to which businesses and consumers will have to adapt. Innovation-driven corporations will have a competitive advantage over companies that just follow trends.
In addition, the future international business environment will be characterized by the growth of emerging markets. Technological development will play a major role in shaping those markets. New markets will benefit international businesses in two major ways. Firstly, the growth of emerging markets will provide companies with better opportunities to expand their consumer base. Secondly, new markets will create a need for the creation of new companies that would be more flexible and adaptable to the world’s issues.
The Environmental Impact
Other factors that determine the future of international business are environmental issues. Climate change ranges from the shifting of weather patterns that undermine food production to the rise of sea levels that raises the risk of catastrophic flooding. It is a global challenge without borders, meaning that combat requires coordination by all the countries globally. This planet is facing droughts, storms, catastrophic floods, and wildfires, which are happening almost regularly. Considering the current projections, there is a high possibility that the social, economic, and environmental impacts of climate change will rise to catastrophic levels (Lamperti et al., 2018). The current scientific estimates assert that if temperatures rise to degrees Celsius above preindustrial levels in the next few decades, then there would be global economic losses of about $ 23 trillion per year (Matikainen, Campiglio & Zenghelis, 2017). This would surpass the damage experienced in the 2007-2008 financial crisis.
Climate change hurts the financial system, leading to financial instability. The change is likely to have severe effects on financial stability in the future if reliable and effective management strategies are not implemented. Climate change has destroyed the capital of many companies and reduced their liquidity and profitability, thus raising the risk of default. Defaulting of firms can deteriorate the stability of financial institutions such as banks due to losses. Climate change can lead to financial instability that can end up affecting credit expansion, and this might adversely affect economic growth. Additionally, countries normally experience portfolio reallocation as a result of climate change-related damages, something that leads to a decrease in the price of corporate bonds. Therefore, the future international business environment will be characterized by the increased consolidation of companies and countries to tackle climate change. On the negative side, businesses will experience losses and instability due to the effects of environmental issues.
The Future of Trade
Global trade, also known as international trade, can be defined as the movement or exchange of goods from one country to another globally. Foreign exchange enables buyers worldwide to buy French wines, Colombian espresso, Korean TVs, and German cars. The global exchange between countries makes the world economy where costs are affected by various factors, such as global opportunities, trade rates, legislative issues, and protectionism. However, the repercussion of the present Russian war against Ukraine will have an impact on global trade as the world changes its international trade contracts. As such, many countries issue an embargo against Russian goods and resources, which increases the cost of resources such as coal and gas globally.
Therefore, new global trade routes will be developed to sustain the demand for goods. This will entail an increase in the global production of goods and resources from alternative sources and manufacturers. Although the resolution of the Russian war against Ukraine is uncertain, the West is certain about its consolidation and cooperation in ensuring global safety and the sustainable development of international business.
Growing Impact of Consumerism
Consumerism has become an important belief of present capitalism, where individuals have been encouraged to consider themselves as primary consumers rather than citizens. The combination of a growing population has had a great impact on consumerism as the spread of mass consumption into rapidly developing nations such as India, and China is presenting humanity with a crisis of unsustainable consumption. Therefore, the international business environment will focus on increasing production and logistic routes to match the growing demand boosted by the consumerism culture.
The global era of hyper-consumption used to be characterized by previous geographical and time constraints is declining. For instance, there are several societies where people no longer rest on Sunday, and the activities they are involved in suggest consumerism at all hours of the day (Gordon-Farleigh, 2018). The culture of consumerism in Europe and other continents is known to involve people from all lifestyles getting into the supermarkets, the museums, or at religious festivals on days that they should be resting. Hyper-consumption can therefore be noted to be the third level of consumer capitalism. In addition to this, it is worth noting that the current technologized and multi-equipped number of homes is also playing a major role in influencing consumerism. There is a gradual change in the quantity and quality of consumption, as people in developed countries tend to diversify their consumption to achieve a unique identity through their consumption. This process will lead to an increase in local business, which will increase competition among big international businesses.
Conclusion
Many factors are impacting the international business environment in the present day. Most of those trends will shape the future of global business relations. As such, factors such as the development of globalism will contribute to the decrease in limitations associated with borders and countries’ laws that hinder free trade. Other factors that affect the social, political, and economic environment include climate change and technological development. Further consolidation of economies, as well as the growth of emerging markets, will create new opportunities for international business expansion. Finally, the socio-economic and cultural aspects of consumerism will provide constant growth of demand associated with an increasing population and diversification of consumption. Therefore, the future international business environment cannot be viewed separately from the global economic trends as external factors will, directly and indirectly, shape the way business is conducted.
References
Baylis, J. (2020). The globalization of world politics: An introduction to international relations. Oxford University Press, USA.
Charter, M. (2017). Greener marketing: A responsible approach to business. Routledge.
Gordon-Farleigh, J. (2018): Interview with Ruth Potts. STIR, the Magazine for the New Economy. Spring 2018 p. 25-28.
Lamperti F, G. Dosi, M. Napoletano, A. Roventini, & A. Sapio. (2018). Faraway, so close: coupled climate and economic dynamics in an agent-based integrated assessment model; Ecol. Econ., 150, 315-339.
Matikainen S., Campiglio, E. & Zenghelis, D. (2017). The climate impact of quantitative easing. Policy Paper, Grantham Research Institute on Climate Change and the Environment; London School of Economics and Political Science.