Challenges in the global business environment
Challenges in the Global Business Environment
Challenges in the Global Business Environment
The growth of international business has led to the expansion of the domestic markets. Most of the businesses in the world today can trade freely due to the globalization process that has brought closer interaction of people across the world. Firms have maximized their profit and explored alternative market ensuring that their goods and services are well suited to trade in the international markets. However, despite the success associated with the global business it has faced limitations that have curtailed its progress and major objective of creating a free global market. Additionally, these challenges have arisen due to the diversity in culture, preferences among consumers as well as the various business environments. This paper, therefore, aims to examine the some of the factors that have affected the global business environment. The main challenges that will be examined include unethical business practices, failure to embrace technology and stiff competition.
Among the challenges facing the global business environment is unethical business practices. In any business environment, ethics plays a vital role in ensuring appropriate business behavior and professionalism (Cavanagh, 2004). However, unethical business practices have impacted negatively to not only the domestic firms operations but also global operations. First, there have been various cases of dumping of goods especially toxins and other harmful products(Acton Institute, 2015).
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It has been witnessed in developing countries where those goods are sold cheaply. Dumping of goods in these markets does not only kill the local infant industries in those countries but also increase the risk of the citizens’ exposure to health diseases. Secondly, the international companies that establish in the developing countries usually exploit most of the workers in those countries. For instance, these international companies pay low wages to their workers; deplete the member country off its natural resources as well as employing children especially in construction and mineral sites. Incidences such as the improper use of Baby Formula manufactured by Nestle in third world countries and the gas leakage from a plant in India clearly illustrate the extent to which unethical practices are portrayed in the global business environment. It is important to note that unethical business practices can derail business professionalism and integrity.
The failure to embrace the advancements in technology is also a challenge facing the global business environment. Technology advancements lead to a better production of goods and services by most firms. It also leads to reduced expenses in the operational cost and efficiency in the production process. However, most of the entities may lack sufficient funds to adopt modern technology in their operations and thus prefer traditional methods. Additionally, technology is embraced at a cost. Global economies are in a dilemma on whether to embrace automation or keep using physical labor. Studies have that firms that have fully embraced automation processes in their production may cut labor cost, but ethical questions have been raised about the use of robotics in business operations. The failure to embrace technology also creates a wide competition gap between companies that are at par with new technology and the traditional firms. Most of the firms in developing nations use traditional forms of production as adopting new technology prove expensive (Chen & Martin, 2001). These firms thus face stiff competition from the modern firms and may become obsolete in the long run. Moreover, standardization of goods as per international standards to allow international trade has seen most of the traditional firms being left out as they fail to meet the minimum requirements.
Furthermore, the failure to embrace technology has affected the global market operations. These failures can be attributed to the emergence of the black economy and illegal trade. Illegal trade occurs where sub-standardized goods may find their way into a foreign country without being detected. Dumping of goods that are sub-standard may thus arise affecting the country that the goods have been dumped. Again, with no proper technology the transfer of information becomes difficult and expensive (Hill, 2008). Companies, therefore, may risk losing customers in the global market if they do not embrace new technology. For instance, the increasing demand for tablets and smartphones put the traditional phones at risk and may soon be wiped out of the market if the parent firms do not embrace the new digital technology.
Another challenge facing the global business environment is stiff competition among firms. The stiff competition in a business environment has both advantages and disadvantages. However, in our case we focus on some of its disadvantages in the global business operations. First, it has led to the establishment of cartels such as the oil cartels in the Middle East that determine oil prices and control the oil market. Additionally, firms that cannot withstand the competition may end up quitting the market and incurring losses. In other cases, stiff competition has seen the establishment of monopolists who exploit the people in the global market. Competition in business is good as it ensures that the best product and services are produced (Hill, 2008). However, when firms join to control the market demand then mostly the consumers will suffer. Moreover, stiff competition has also led to the immature death of small firms as they cannot match the financial status of the bigger firms. It also makes it impossible for small firms to enter the market and establish due to the prevailing market forces. Furthermore, the stiff competition in the global market has led to the slow growth of local firms and industries. The dominant firms will enter a foreign market and due to its large resource base and financial strengths it rolls out strategies meant to affect the local firms’ operations. Finally, these dominant firms may control the whole market leading to cases of monopolies, especially in the developing countries.
The global business environment is an important factor in the world trade and exchange of information among nations. The business environment ought to be well-defined between countries to ensure that they benefit especially in trading activities. Furthermore, from the analysis it quite clearly that the global business environment faces quite some challenges. These challenges include unethical business practices, failure to embrace technology and stiff competition. However, the international actors on trade should come up with measures that will help curb these challenges. It is also vital to note that due to the various market dynamics in different countries solving the global business challenges may take quite some time. Moreover, the disparity in the market dynamics is wide between the developing nations and those that already established. In a nutshell, therefore, new economic policies and measures need to be encouraged as the global business environment faces a threat from the various factors undermining it.
Acton Institute,. (2015). Multinational Corporations in the Third World: Predators or Allies in Economic Development?. Retrieved 30 November 2015, from http://www.acton.org/pub/religion-liberty/volume-2-number-5/multinational-corporations-third-world-predators
Carroll, A. B. (2000). Ethical challenges for business in the new millennium: Corporate social responsibility and models of management morality. Business Ethics Quarterly, 10(01), 33-42.
Cavanagh, G. F. (2004). Global business ethics: Regulation, code, or self-restraint. Business Ethics Quarterly, 14(04), 625-642.
Chen, R., & Martin, M. J. (2001). Foreign expansion of small firms: The impact of domestic alternatives and prior foreign business involvement. Journal of Business Venturing, 16(6), 557- 574
Hill, C. (2008). International business: Competing in the global market place. Strategic Direction, 24(9).
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