International Economic Environment Samples †MyAssignmenthelp.com

Question: Discuss about the International Economic Environment. Answer: Introduction: The 21st century is the era of globalization, it has been observed that countries are indulging in international business in order to achieve mutual sustainable growth (Donato and Massey 2016). The last two decades have shown50% growth in international trade as compared to the trade situation of the nineteen eighties (Dunford et al. 2016). In recent challenging times, countries found that international trade is an effective way to deal with the recession and thus they are now involved in a reciprocal partnership which allows foreign firms to operate in their region. However, according to Wild, Wild and Han (2014), enhanced international business has caused severe risks to the international business houses. This brief paper will examine details regarding the various features and risks for the business organizations operating in the international environment. In addition to this, it will provide various implications for practice and conclude with a summary overview of the findings. Features of the international economic environment related to business: The economic environment represents external factors related to a business market. This concept also indicates a broader economy that can influence a business. The microeconomic environment, a part of the total economic environment, can influence the decision-making process of a business. This could be individual actions of firms along with consumers (Camagni 2017). On the other side, macroeconomic environment can influence entire business economy along with its entire participants. Some economic factors perform as external constraints on the business. However, the owner has very negligible access on them. Macroeconomic factors are considered as broad economic factors that have both direct and indirect impact on the entire economy and the business (Hamilton and Webster 2015). These factors are interest rates, inflation, taxes, unemployment rate, income of consumer and consumer confidence levels. Some other factors are recession, depression and savings rates. On other side, microecono mic factors include market size, supply and demand, competitors and suppliers. Based on these factors, a business organization takes business decisions accordingly. This international economy plays the chief role to determine success and failure of a business. In addition to this, type of international trade also plays significant role. This means, a country can trade with others based on absolute advantage or comparative advantage. For instance, Australia exports agricultural foods as it experiences comparative advantage to produce this. Moreover, government policies and trade agreement also have vital implication on a countrys economy. Free trade agreement among some countries can lead companies to exports and imports more goods and services without any legal restrictions. Exchange rate fluctuation between two countries also stimulates business. For instance, decrease in exchange rate can lead the country to exports more. Balance of payment, on the other side, states that how much an economy can purchase products from other countries. If the balance remains in deficit, then the country cannot import more products. Assess the implications for business operating in the international economic environment: Implications of international economic environment for business are vast. However, to provide context it is necessary to mention that international economic environment provides organizations opportunity to grow beyond their domestic boundary. In addition to this, it promotes diversification and aids economic uplift. Picciotto (2017) argues that such an environment provides power to the monetary policies of foreign countries which allows more control of the trade flow by maintaining balance in the output and price objectives. From the business houses perspective, it can be stated that the international economic environment aids firms to generate a higher amount of profit and create scope for increased employment for the economy. It enhances living standards in addition to improving mass consumption as stated by Rostow (Shenkar, Luo, and Chi 2014). Economic environment means the aggregate o all economic system within a country. These include economic policies of the government as well as organization related to capital market, business cycle and other socio-economic infrastructure across the world. Government policies of other countries have significant influence on the activity of an organization, as this can influence its international business. In addition to this, the rate of central bank also plays vital role to determine foreign direct investment that a country could receive from others (Kolk 2016). The per capita income also has huge significance on business sector as it can change consumer behavior accordingly. Higher per capita income of a country implies that the aggregate demand over there is comparatively high. Some other factors are dumping, transport charges, privatization policies and other factors that can control business activities of an organization significantly in international market. International busines s can help less developed countries to improve its economic condition through exporting goods and services. Through using purchasing power parities, the economy can measure its income with other country. International risk assessment companies follow a systematic way to assess bribery risks and control it through implementing anti-bribery laws. There are many companies to deal with this. Assess the risks involved for business organizations in operating in the international economic environment. International trade increases on a daily basis in order to achieve mutually sustainable growth. However, due to the difference in various factors such as culture, economy and politics to name but a few, international business operation has become a complex scenario. Details regarding various risks associated with an organization under international economic environment are as follows: Economic difference: Regardless of the organization, risk is ever present in business. Depending upon the region one is operating in, the risk fluctuates accordingly. Economic deference helps developed countries to enjoy comparative advantage in terms of trade and exchange rate while developing countries do not enjoy such advantage. Therefore, economic differences sometimes lead developing countries to experience risks related to business. Cultural difference: Cultural difference is essential risk factor to be considered. Depending upon geographical region, cultures vary significantly and can present a new set of complexities to an organization. If the product or service is carefully aligned with the cultural values of the locals, then it will be beneficial for the firm otherwise, the effects of misalignment can be detrimental resulting in irreparable reputational damage. Thus, cross cultural environment can negatively influence working environment. Political difference: Political factors represent significant risk for organizations as operating in foreign marketplaces exposing a firm to a plethora of foreign policy and regulation which can be difficult to navigate. Often large firms operating in foreign nations face legal issues whicharise in the form of political turmoil. In addition to this political risk like war, riots, strikes and evolving political decisions can provide substantial amount of risk to the business operation (O'Brien, 2018). Conversely, in some cases, close connection with political groups has considerably aided the international organization to curtail the legal environment on behalf of the international players. Trading law difference: Increased internationalization presents another perspective, developing countries have faced discrimination from the developed nations, thus various countries operate under different rules to control the international trade. On account of this scenario, it has become difficult for the international business houses to deal with the complex trade laws implemented by the multiple regions (Picciotto and Mayne 2016). Marketing infrastructure difference: Representing the ultimate risk for international businesses., marketing infrastructure differences are a key consideration for firms. Having entered the market, and managed to align itself with the local laws and environmental laws, an organization can fail in its aim if there are no customers to whom the firm can sell. Presence of substitute product and monopoly market will possess high risk for the international business(Mathai, 2018). In addition, if the market is monopoly in nature, then it will not allow new firms to enter into the market that has high potential to grow. Recommend, with justifications, actions a business organization can take to minimize the risks of operating in an international economic environment. As previously outlined, there are multiple issues which pose a certain amount of risk to the business organization. However, there are also counter strategies, which can assist organizations to operate effectively under international economic environment. The above mentioned risks can adversely affect any business organization to conduct its international business freely. Thus, to omit economic, cultural, political and other differences, the company needs to proper recommendations. Recommendations for the business organization to gauge the probable risks are as follows: Opportunities for enhanced returns, lower costs and benefits from divarication are some of the main reasons leading to risk for the international business. Those mitigating the diversity while bringing in parity among the different regions can be beneficial. Purchasing Power Parity (PPP) model can be tried in order to have better long-term risk mitigation. Influencing the governments to make central banks independent in order to promote better inflow of capital in the form of international business. Enhancing government expenditure through raising the tax bracket can aid the economy to provide much needed boost as well as allowingforeign firms to operate in the country thus creating mutually beneficial conditions for the firm as well as domestic government. Conclusion: From the above analysis it can be determined thatinternational economic environment is becoming increasingly complex. One main concern arising from the analysis is thatthere is a rising risk quotient for international firms which could lead the economy toward vulnerability. This brief paper has examined various features and risks for business organizationsoperating in the international environment and identified potential counter strategies from an outside viewpoint. Present complex scenarios within the international market are vast and the risks and threats presented to organizational success factors are far-reaching. In summary, the economic environment in which an organization can optimize its opportunity for success, depends upon how cohesively they incorporate the recommendations discussed into the strategy and align itself with the required criteria set out by each country in which they intend to operate. References: Camagni, R., 2017. Regional competitiveness: towards a concept of territorial capital. InSeminal Studies in Regional and Urban Economics(pp. 115-131). Springer, Cham. Donato, K.M. and Massey, D.S., 2016. Twenty-first-century globalization and illegal migration.The ANNALS of the American Academy of Political and Social Science,666(1), pp.7-26. Dunford, M., Dunford, R., Barbu, M. and Liu, W., 2016. Globalisation, cost competitiveness and international trade: The evolution of the Italian textile and clothing industries and the growth of trade with China.European Urban and Regional Studies,23(2), pp.111-135. Hamilton, L. and Webster, P., 2015.The international business environment. Oxford University Press, USA. Kolk, A., 2016. The social responsibility of international business: From ethics and the environment to CSR and sustainable development.Journal of World Business,51(1), pp.23-34. Mathai, K. (2018).Finance Development. [online] Finance Development | FD. Available at: https://www.imf.org/external/pubs/ft/fandd/basics/monpol.htm [Accessed 4 Apr. 2018].. O'Brien (2018).Dan O'Brien (@danobrien20) | Twitter. [online] Twitter.com. Available at: https://twitter.com/@danobrien20 [Accessed 4 Apr. 2018]. Picciotto, S. and Mayne, R. eds., 2016.Regulating international business: beyond liberalization. Springer. Picciotto, S., 2017. Rights, responsibilities and regulation of international business. InGlobalization and International Investment(pp. 177-198). Routledge. Shenkar, O., Luo, Y. and Chi, T., 2014.International business. Routledge. Wild, J.J., Wild, K.L. and Han, J.C., 2014.International business. Pearson Education Limited.