Global Business, Policy and Strategy
Global Business, Policy and Strategy.
For the year 2007, the United States was held as the top country when it comes to global competitiveness [Time, 2008]. Recent trends show that the United States still is very competitive globally although it is suffering economically these days. There have been a number of businesses and companies that are multi-national corporations in nature. However, according to Hult [2008], being global instead of being branded as multi-national is the current trend in businesses and companies.
Economically, earning and maximizing global profit is the main objective of global businesses. Globalization is already present in countries’ economies, which means that these countries should adjust their economies and adapt to the very complex and competitive global market. For entrepreneurs to do well in managing their global businesses, Hult [2008] stated in his article the significant “Four F’s”. First of the four elements is the environmental forces, which are external factors that can greatly affect the business and its estimation of how competitive they are globally.
With this, businesses should constantly adjust their strategies according to the changes in the environment, which includes economic, government and societal variation. After looking at the environmental forces that surround the business, an entrepreneur should also consider the industry forces. According to Hult [2008], industry forces include determinants such as the power to buy and sell, possibility of having competitor firms, and launch of new and improved products.
With this industrial force, global businesses should constantly have a forecast for their companies, possible changes that they could adopt just in case there will be future problems such as rising intra-industry competition. Strategy factor is also cited in Running a Global Corporation by Tomas Hult [2008]. To be successful in the global market, a company should have the five strategic factors. First is the market involvement of the company to several countries where it caters it product.
Complete analysis of their level of activity in the market is needed to estimate how your business could capture the market and hold a part of the market share. Next is product standardization which is manufactured products or services available globally. There can be alterations and differences in the products depending on the country where it will be launched. Another is the marketing operations which allow the company to use the same marketing strategy in different countries. However, there can be variations when it comes to packaging, advertising and the channels where the products will go through.
Competitive moves are strategies set by the company to estimate how other competitors would react to their changes which can be a start of the global business’ strategy against competitive global companies. It can vary per country and it is also depends on the packaging and bundles the global business offers to consumers. Last is the supply chain management, which is the allocation of activities to its proper location and how it will establish a link that will connect all the countries where the business operates.
Supply chain management would include locating production warehouses and factories to countries where labour is cheap, and putting research and development in a country where most researches are efficient. Last of the four F’s Hult [2008] mentioned in his article is organizational factors. This factor constitutes a big amount in companies’ credibility in the global market. According to Hult [2008], frequent changes in the organizational structure of a company could result in loss of credibility to consumers and loss of position in the global market.
Changes in management might cause difficulties when it comes to the revisions in regulations the new management might impose, hence, adapting to new set of law by the whole company. In order for the economy to work in harmony, a council that regulates the global business sector was formed last 1992. The council aims to provide its global members forecasts and advices that might occur in the economic trend in the future [A. T. Kearney, 2008].
Since globalization is the trend in all countries today, policies and regulations should be set and a commission should be formed to handle problems and issues that are related to global business companies and how they operate internationally. China has been experiencing several problems in the business scene recently. There had been several product recalls which were made in China. According to the news, some products manufactured in China contained harmful chemicals such as lead which can be damaging especially to children. Globally, China serves several markets, from high to low class consumers. Read about Mattel’s Business Strategies
The country manufactures and serves the global market by having 80% share in toy production [CNN, 2007]. Ever since the product recalls, almost all the products made in China are questioned of its safety and usability. According to CNN [2007], 9. 5 millions of toys were recalled in the United States alone and another 11 million toys recalled I other countries around the globe. Since then, almost all the products manufactured from China have been regularly checked and scrutinized by consumer safety commissions as well as the consumers to ensure their safety.
If this trend of rising competitiveness of China continues up to several years more, it would not be surprising if their economy would surpass the United States’ economy by 2020. China relies heavily in the number of exports the country that is why they are named as the world’s factory. Exporting activities that the country is involved in gave the country a large trade surplus of around USD 250 billion in 2007 [China Economic Review, 2008]. In addition to what was stated in China Economic Review [2008], the country had a GDP growth of 11. 5%, 2. 5% of which contributed by the export sector just last year.
It is said that a slowdown in United States economy would not have a big impact ion the China economy because their American market is just a small portion of their global market which they cater their manufactured goods. Since globalization is continuously expanding throughout the world and China is one of the major stakeholders in this game of global business, the rapid growth occurring in their economy would have a big impact in the global market with regard to the trading system and monetary system. The world trading system currently had several revisions from the World Trade Organisations.
Knowing that China holds a big part of the world’s pie of manufacturers, a boom in their economy would have a big impact in the world trading system. As the world’s factory, China plays a big role in the lives of everyone in the whole world. It is a well-known fact that China produces almost every material thing that is present. Without them producing goods for the people, it will be a lot difficult to function in our everyday lives. There are also a lot of changes in trading laws internationally. There are free-trade agreements for various countries around that world.
Being able to trade with powerhouse countries such as China and the United States could mean that those countries are rich and powerful enough to have the chance to trade with such economically big countries. With countries such as the two, the world trading system would be more liberalized and smaller countries could have the chance to trade with big countries in time. Due to several trade liberalization acts, goods and services will be more available to consumers around the world which is a good thing since scarcity will be eliminated and poverty will be reduced.
When it comes to the country’s monetary system, China’s currency, Yuan or renminbi, appreciated against the US dollar by 11% by December of 2007 [China Economic Review, 2008]. China has been regulating their currency very well to protect the exporters and the competitiveness of their products against goods that are manufactured somewhere else. Appreciating the currency would cause the country a great impact especially with the United States’ economy slowdown. In the international scene, the world monetary system, for me, cannot be easily predicted since that there are fluctuations and changes everyday.
If there will be appreciation or depreciation in currencies such as the US dollar or Chinese Yuan, some countries might be easily affected by these changes especially if their economy has a very close relation to these big economies. Currently, the depreciation of the US dollar favoured some countries around the world and helped their currencies appreciate and be more competitive against foreign currencies. Due to globalisation, global businesses have changes their strategies when it comes to manufacturing.
In the global value chain, United States and Europe based companies changed tactic from producing their goods in their country and moved their factories to countries where labour is cheap. Cost-cutting is a major element in order for these companies to maximize their global profit. The cost of labour in third world countries has a significant difference compared to the wage paid to labourers in first world countries. Companies could save more if they transfer their technology to third world countries and have many and efficient employees than paying the same amount to a lower number of workers in first world countries.
The only department that is located in the country of origin of a company is the research and development team of the company. This department is very essential for the company since that they are the ones who calculate the blueprint of the product that they will be manufacturing and launching throughout the world. Although wage is expensive, these researchers get higher pay since they develop the ideas for new line of products and consumer goods that will soon be available in the global market.
Most of the companies that are located in the first world countries have chosen to put their factories and labour force in the Asian region for labour is cheap and the workers are as efficient as the workers in first world countries. In today’s world of global markets, style and innovation is important. Companies’ strategies are very crucial in playing the game of competitiveness against other countries and the products they offer. According to recent news, the United States economy is experiencing a slowdown from its glorious and prosperous years of leading in the world market.
According to Cook [2007], the United States might imply fiscal contraction which is increasing people’s tax and reducing government spending. Together with the plan of fiscal contraction, the trade and fiscal deficits the country has is increasing as well, which will be a big problem for the country as long as they do not reduce these deficits. With this slowdown US is experiencing, other countries that are tightly connected to the United States will greatly suffer especially if they are being helped by the country.
Most likely, they will have difficulties in asking for help from the country, physically and financially since that the country could opt not to help and fix the problems they are having first. As of the current status of the United States in the world, they might lose their prominence against other countries and their competitiveness might decline due to the rising problems the country is facing. In addition, the emerging economy of China can hinder attempts from the US of reviving their economy.
If the economy of United States will plunge further, it might cause them difficulties in rising back from their prominence. To sum everything up, changes in the world trading and monetary system has brought a lot of changes in the international economy which greatly affects a lot of countries’ economies around the world. Globalisation is one of the key instruments why these changes are occurring nowadays. It is very essential for a country to adjust and be able to adapt in the rapid changes in the global economy.
It will be very hard for countries that are not that open in the idea of globalisation and allowing the concept of a more liberalized trading among countries in the world. In addition, now that the United States is experiencing a decline in their economy, dependent countries in the United States should learn how to deal with globalisation and the continuous changes of strategy in the global business companies. Such companies should be able to adapt quickly against the rapid changes of neighbouring countries.
References
A. T. Kearney Inc. [2008].Leading thinkers look at the world’s business issues. Retrieved on January 13, 2008 from http://www. atkearney. com/main. taf? p=3,3.
China Economic review. [2008]. Currency capers: where next for the RMB? Retrieved on January 13, 2008 from http://www. chinaeconomicreview. com/cer/2008_01/Currency_capers:_Where_next_for_the_RMB. html
China Economic Review. [2008]. The ship won’t sink. Retrieved on January 13, 2008 from http://www. chinaeconomicreview. com/cer/2008_01/The_ship_won%E2%80%99t_sink. html. CNN. [2007].
Mattel CEO: ‘rigorous standards’ after massive toy recall. Retrieved on January 13, 2008 from http://edition. cnn. com/2007/US/08/14/recall/index. html
Cook, R. [2007]. It’s official: the crash of the US economy has begun. Retrieved on January 13, 2008 from http://www. globalresearch. ca/index. php? context=va&aid=5964.
Hult, T. [2008]. Running a global corporation. Global Edge Business Review. Vol. 2. No. 1. Retrieved on January 13, 2008 from http://globaledge. msu. edu/newsAndViews/businessReviews/gBR2-1. pdf
Time. [2008]. Global competitiveness report 2007-2006. Retrieved on January 13, 2008 from http://www. time. com/time/global_business.