How Does the World Economy Affect Businesses?

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How Does the World Economy Affect Businesses?
The rise of globalization is influencing the world to become a small community. Therefore, many businesses range from large scale to small scale have been subjected to either opportunities or threats that result from globalization. In many firms, the global forces have influenced and defined how they interact with clients and how they respond to external factors such as competitions. The global forces that influence an organization operation system include business culture, religious fundamentalism and advancement in the technology. Today, almost every nation in the global is affected by what occurs in other countries (Thomas, and Snell, 82). Many factors impact the global economy such as political events and the downfall of powerful popular currencies of the world. However, the most relevant factor that increases the countries interdependence on each other is based on the nature of trade and production of goods or service they have in place.
In the United States, the act of trading with other nations is rapidly changing and growing many sectors of the economy. For instance, the capacity of products and service imported from other countries by various United States businesspeople, consumers or government have increased instantly. Additionally, the level of exports in the United State`s goods such as internet services, machinery products, and motor vehicles have also increased. The concept of international trade has it’s own merit because various countries benefited from the presence of available goods, reduced cost of production, a decrease in commodities price and increased the standard of living (Thomas, and Snell, 82).

In addition to that, international trade influenced specialization in production and service provisions. Howe ever, despite the benefit caused by international trade various economic policies and situations, have contributed to barriers in trade. For instance, various governments may adopt economic policies that are aimed at eliminating or reducing international trade.
In many occasion, quotas and tariffs policies have been used to reduce trade. In quotas law, it is founded on an economic system aimed at decreasing the amount of commodities that can be imported into a particular state in a specific time. In industrial tariffs, it involves the act of setting high taxes on imported items so has to reduce import-related trade. For example, the Russian government reduced the import of frozen chicken that was rapidly being imported from the United States (The United States online.com, 1). They used various health standard policies as a means to limit this trade aspect. Moreover, the United States government has on many occasion impose trade restrictions on Japanese companies hoping to trade in their countrymen. The trade limitation ensures that it is hard for United State firms and banks to sell products or operate a business in Japan.
Even though trade restrictions is a selfish ideology but is based on ensuring local firms and workers are protected from high competition posed by foreign firms. In an economic recession situation, many locals are faced with the threat of increased unemployment rate and increased competition from foreign organizations (Thomas, and Snell, 84). Therefore, the concepts of trade restriction significantly assist the local community in fighting this threat. In the 1930s, the great depression caused the United States government to increase its trade restriction and tariffs policies that made the world experience the effect of the Great Depression because the world trade was negatively impacted.
Consequently, the growth of the trade unions after World War II increased the development of trade within allies’ countries. In 1944, Western countries developed an institution named the International Monetary Fund as an office used to balance the exchange rates across the member nations. The Marshall plan encouraged free trade through reduced trade barriers, and tariffs with Western country after the War and these helped the member nations to rebuild. The General Agreement on Tariffs and Trade (GATT) that was signed in 1947 improved trade system with the United States and its colleagues (The United States online.com, 1). In 1995, the GATT was converted to form the World Trade Organization that is utilized for settling economic disagreement within its state members. Currently, there are numerous trade unions in every continent that are based on influencing trade within its regional members.
Besides, the balance of payment and exchange rate are also a factor that affects business. For example, various currencies from diverse states are exchanged at varying cost in the money market. The value of the United States dollar has mostly fluctuated in price against other currencies with the concept of supply and demand playing a critical duty. For instance, the American tourists may visit attractions in France and they will be forced to trade their dollar currencies to obtain the French franc currencies. In this scenario, the French franc is highly demanded while the provision for American dollars has been generated in the foreign exchange trade.
Additionally, the change in preferences for products and services of specific countries resources can result in a change in the demand and supply for another country`s currency. Many factors affect the foreign exchange rate of a particular currency. For instance, the inflation rate of a country, the price of items or service in a particular state, investment opportunities and the rate offered in loans are facts that impact the strength of many currencies. For instance, for people to invest in the United States they require the United States dollar. Therefore, the demand for the United States dollar will increase while its supply potential will drop. Hence, this causes the price of the United States dollar to rise against other global currencies.
More ever, any nation is required to record down any international transaction they have made. These records include trade transactions made by the government, companies and citizens over a duration of one year. The annual balance of payment account is a book record used to record both the nations import and export yearly transactions of a particular country (The United States online.com, 1). The current account is used to record transactions such as the purchase or import and sale that are also called export of product and service, net transfers paid to other countries and interest payment received and paid to other countries.
On the other hand, the capital account is used to record investment made be citizens and firm from other nations and the various investments the local citizens have established in other countries. In the final calculations, the both the current and capital account must balance, and if deficits are experienced then, its means import is more than exports, and this should always be prevented at all cost (The United States online.com, 1). Therefore, the government applies harsh trade restriction policies on imports system in the hope of creating a balance in the balance of annual payment account.
Simultaneously, technological advancement has foreseen the success of many companies. The adoption of technology has substantially caused the generation of unique items, provided perfect systems of leadership, manufacturing and communication strategy (Thomas, and Snell, 85). Additionally, improved technology also permits firms to enter new a market that was unavailable to them. For example, cable television firms and software provision companies adapted their technology to compete with the internet services. The various policies in technological items such as internet services and electronic devices have impacted the entry of new business into the market. In addition to that, companies have expanded as a result of imported technological equipment (Thomas, and Snell, 85). For instance, technological equipment influence innovation in many firms while telecommunications allow businesspeople to conduct teleconferences with global colleagues without incurring the traveling cost. Lastly, computerized management information systems assist in the strategic development of the firm`s performance, and this assists them to defeat the competition.
Contrarily, the concept of workforce demographic is a significant aspect in human resource strategic development (Thomas, and Snell, 83). Many firms prefer to employ international staffs with disregard to local employees. Some factors may influence various firms to prefer hiring foreign worker than local employees. These factors include education level, age component of the society and the ability to handle complex technologies. The government in many occasions has dedicated the number of foreign workers who are allowed to operate in the country. Additionally, the government is required to put up measures that will prevent their local employees from being imported to other countries (Thomas, and Snell, 83). Brain drain is a concept utilized by rich countries to import bright and experienced staffs to assist them to improve the standard of services in their country. They attract employees from other countries through offering them a better payment and royalties. However, the developing countries are always left with employees’ shortages, and they are left destabilized with threats of low-quality services that affect the local businesses.
The methods used by various firms to respond to social issues that affect the global society will determine their success in the global market. For instance, health and environmental issues such as the fight against obesity and climate change are currently trending within the global society (Thomas, and Snell, 82). Therefore, industries and various soft drinks companies have to put in place measures that will improve the quality of the environment and also produce healthy products that do not contribute to diabetes, obesity or pollute the environment. This means companies with a clear system aimed at contributing to the sustainable environment and health care will succeed more than firms that are operating freely. Furthermore, political instability like regional war can significantly affect the productivity of businesses. In a war scenario, airports, seaport, and transport systems are closed, and these negatively affect local businesses that are in place. More ever, the tourism sector is completely damaged in such situation while foreign investors are forced to leave the country.
In conclusion, various economic policies and situation impact many businesses. Global issues such as the political event and the downfall of powerful popular currencies of the world affect the international economy. However, the most relevant factor that increases the countries interdependence on each other is based on the nature of trade and production of goods or service they have in place. Additionally, quotas and tariffs policies have been used to reduce trade. Today, there are numerous trade unions in every continent that are based on influencing trade within its regional members. Therefore, these significantly improve local business through offering them the availability of raw material, availability of ready market, access to human resource and availability of technological equipment.
Work Cited
The United States online.com. Economy: Impact of the World Economy. The United States online Website, 2016. http://www.theusaonline.com/economy/world-economy.htm
Thomas, Bateman S., and Snell A. Scott. “Management: Leading and Collaboration in Competitive World.” Inc Mc Graw-Hill Books, New York, USA (2007).