Managing Business in the Global Environment

Managing Business in the Global Environment

The global economic environment affects the management of business by influencing the decision making. Managers ought to be aware of the unique nature of the global economic factors that are in play when conducting business. The global economic factors that have impact on the management of individual business include the market tastes, social cultural, legal provisions, business competition in the market, political stability, technological advancement and distinct economies by themselves (Johnson et al p. 134-137). These factors are dynamic and therefore they keep on changing over time and from one region to another.
Impact on Managers’ Decision

When a firm has comparative advantage in accessing a wide international market due to general preference of its products, there will be high demand of their products. The firm will supply more of their products in the international market and therefore the major decisions will be towards producing more in the market. In such a period that a firm has vast market for its product, less attention will be given to advertising and more resources will be allocated to production process in order to meet the demand.

When such comparative advantage are no more due to either changes in consumer tastes and preferences or the entry into the market of a superior product, less of the product will be demanded and therefore the management will make decision to allocate more resources in improving their products, advertising and marketing (Mulcaster p. 68).

The global economic boom that results to financial crisis of major international firms affects the management of these firms or companies. Slywotzky (p.89, 134) argues that these companies go for bail-out and rescue packages from the government especially for the large banks and financial institutions. This financial crisis spill over to affects small firms which may not access the bail-out and the rescue packages from the government.

This adversely affects the business of the affected firms or companies with some forced to close doors until the financial crisis is over. Economic recession causes many companies to retrench its employees in an attempt to reduce the cost of doing business. Other companies make decisions to cut down the investment portfolio as profits decreases. The capacity utilization of companies goes down and they are forced to supply or produce below their capacity while other firms are declared bankrupt forcing the management to place their firms under receivership (Cullen et al p.246, 267).

When the political stability of a region is in question, characterized by lack of political good will, violence and corruption in the government, the economic environment created is unfavorable for business. Companies operating in such environment normally cuts down their level of operation and investment and at same time, transferring investment allocation to environment with stable environment. Most companies are made to close down their branches as conducting business in such political volatile regions becomes increasingly not conducive to carry business transactions.

Lack of good political will to create an investment climate where investors are guaranteed security for their business causes many of the firms to conduct business only on areas that do not require huge capital investments (Pine p. 45, 78, 80)

Mintzberg (p 67, 89) says that the technological advancement has affected the management of companies especially where many are made to employ experts to train them on the application of the new technology. The shifting to more advanced ways of conducting business requires management to make decisions to invest huge sum of capital on setting up the necessary facilities to support the new technological advancement.

At times when new innovation entre the market, like newly invented products consumers tent to demand more of such products. a firm that was initially thriving well in the market is affected greatly and the management is forced to make decisions to spend resources to improve their product or come up with completely a new products.
Global market competition and structure of the market affects the management of many firms. The level of competitiveness of market determines the returns by individual company as it influences how much of their commodity will be demanded in the market.

Where a company experiences high demand of its product in a highly competitive market, brings high profits to the firm. In such a case the management will invest more in promoting the quality of their produce and ensuring their more stock in store to match the high demands. On the contrary, a company that faces reduced demand in a highly competitive market fides it difficulty to conduct business in such a market. Some of the businesses are forced to close down their business or otherwise invest highly in advertising and improving the quality of their product. In a monopolistic market small firms may be absorbed by those enjoying the monopoly power (Mintzberg et al 68-70).

The legislation set by different economies in the world to regulate the conduct of those participating in the business environment plays a big role in influencing the management of a company in decision making. A business entity is expected to deal with the kind of business they are licensed. Managers are limited to make investment decisions in line with their business license despite the existence of an investment venture (Mulcaster p. 84).

Where price controls have been established by an act of parliament every player is obliged to adhere to such control and therefore, the management should ensure their production costs per unit are adjusted to enable each unit product to bring returns to the company. The governments may require same products be state provided due to public interest attached to them. For instance, the government decision to be providing health care services to its citizen will affect the firms that are dealing with provision of health care services and products such as medication (Slywotzky et al p. 245, 247).