changes in happens in all over the world as part global business is also in the way of great changes.Examples of some of the major changes in the international business environment in recent years include the following:
1. The growth of whole new trading blocs and major changes to existing ones, e.g. the expansion of the European Union (EU), the formation of the Association of South East Asian Nations (ASEAN) and the Andean Common Market (ANCOM).
2. Newly emerging markets with significant growth potential, e.g. the Chinese Economic Area, Indonesia, India, South Korea and Mexico.
3. Fundamental changes to the economic systems in some countries/regions of the world,for example the collapse of the former Eastern European Communist Bloc.
4. Diminishing barriers to international trade and consequent significantly increased competition across national boundaries and often, as we shall see later, on a global basis.
5. The growth of the multinational and transnational organisation.
6. The development and impact of communications technology including the Internet These, and other changes, are in fact considered in more depth in this and later study units, but at this stage it is sufficient to note that it is the particularly dynamic nature of the international environment that provides the source of major business opportunities. The following list describes some of the key factors effecting growth.
The continued liberalisation of international trade
This particular aspect of the international environment is of particular importance when considering the growth of international business. As already indicated, there has been a continuing trend towards the liberalisation of international trade. Starting after the Second World War, under the auspices of GATT (latterly the World Trade Organisation) agreements have been reached to gradually remove trade barriers such as tariffs and quotas. Imperfect though these agreements have sometimes been, there is no doubt that these have helped the growth of world trade and the rising importance of international business. Patterns of world trade and understanding the world trading environment are so important to international business that we consider them in more depth again in Study Unit 3, together with the social, legal, economic, political, technological and competitive forces which underpin them and which are considered in
Cosmopolitan customers
A second factor in the growth in importance of international business is the changing nature of customers and demand, and in particular, the increasingly cosmopolitan nature of today’s customers. Today’s consumer is much more widely travelled compared to even a decade ago. Combined with an increasingly global media network, today’s consumer is exposed to global lifestyles, products and brands. Increased affluence and education on the part of customers have also served to reinforce much more cosmopolitan attitudes and lifestyles. At the turn of the twentieth century, our grandparents were mainly exposed to domestic products and services. Furthermore, they weren’t particularly interested in buying ‘foreign’ products. Today’s consumer, however, travels widely and wants to purchase the best value and most innovatory products and services, regardless of their country of origin. Clearly, consumers and their needs change, together with their buying habits and the influences on these. Understanding the consumer and their needs lies at the heart of business strategy and planning. This is no different in international business – indeed, if anything, one might argue that the need to understand or at least analyse customer behaviour is heightened when considering consumers across international frontiers. For this reason, therefore, we consider the importance of understanding customer behaviour in
Improved communications
Helping to facilitate the emergence of the more cosmopolitan international consumer have been the huge improvements in international communication. Indeed, the increase in international travel just referred to has partly come about because of these. So, for example, it now costs considerably less than 25% in real terms of what it did some 20 years ago to fly the Atlantic. Of particular importance in this area, of course, has been the growth of new communication technologies such as satellite TV and more recently the growth of the Internet, which is rapidly becoming ubiquitous and is giving ready access to consumers to international trends and markets.
Strategic networking and the international supply chain
It is not only final consumers that have become more cosmopolitan in their lifestyles and purchasing habits, but so too have organisational customers formed from:
(i) Strategic networking is the formation of alliances and agreements between companies. Such alliances and agreements may involve, for example, licensing, franchising and even mergers and acquisitions. Strategic networking is an attempt to combine two or more companies’ skills and resources so as to be able to compete better.
(ii) International supply chains refers to the increasingly international nature of supply in as much as companies often purchase components, raw materials , services, etc. from very diverse parts of the world Increasingly, organisational buyers, whether in manufacturing, services or retailing, have turned towards non-domestic suppliers to provide their raw materials, components and finished products. A good example is that of the United Kingdom retailer, Marks & Spencer.
Growth of global companies – multinationals and transnationals
Factors already discussed which have served to underpin the growth of importance of international business have in turn led to the emergence of the global company. The global company thinks, plans and operates on a truly global basis; in other words, it transcends international boundaries.
Global brands
A combination of increasingly cosmopolitan consumers and lifestyles, together with the growth of global companies, has led to the growth of the global brand. Global brands transcend international boundaries and include brands such as Coca Cola, Ford,Mercedes, IBM and Rolex, to name just a few examples.
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