Global Forces: A Research into the Global Forces & Modern Day Firms

Global Forces: A Research into the Global Forces that Influence the Competitiveness and Relevance of Modern Day Firm
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Executive Summary
Over the turn of the 21st century, the business environment has been very much dynamic. Firms have experienced a fast-paced environment in such a way that those that fail to adapt to these changes will experience low financial returns or even losses. In the end, some are even compelled to exit the market. Change is the only constant in business, but this change is occurring at a terrifying pace. Different factors account for this change with many of them being predominant at the global stage. Moreover, their effects are felt fast as the unprecedented global network formed as a result of the hyper-connection among billions of people facilitates the instantaneous and frictionless spread of new ideas and innovations. This interconnectedness coupled with exponential advances in technology, growing political uncertainty, shifting values and attitudes, and rapidly changing demographics guarantees that the upcoming decade is bound to be an interesting one in the business world.
Table of Contents TOC \o "1-3" \h \z \u Executive Summary PAGEREF _Toc20622038 \h 21.0 Introduction PAGEREF _Toc20622039 \h 52.0 Global Forces PAGEREF _Toc20622040 \h 72.1 Government Policies and Regulations PAGEREF _Toc20622041 \h 72.1.1 Taxation. PAGEREF _Toc20622042 \h 82.1.2 Interest Rates. PAGEREF _Toc20622043 \h 92.1.3 Mitigation Strategies. PAGEREF _Toc20622044 \h 102.2 Natural Disasters PAGEREF _Toc20622045 \h 112.2.1 Floods. PAGEREF _Toc20622046 \h 112.2.2 Earthquakes. PAGEREF _Toc20622047 \h 112.2.3 Mitigation Strategies. PAGEREF _Toc20622048 \h 122.3 Immigration and Labor PAGEREF _Toc20622049 \h 122.3.1 Quality and Output of Top Management Teams. PAGEREF _Toc20622050 \h 132.3.2 Mitigation Strategies PAGEREF _Toc20622051 \h 133.0 Conclusion PAGEREF _Toc20622052 \h 143.1 Recommendations: Modern Firms and Business Trends PAGEREF _Toc20622053 \h 143. 2 Summary PAGEREF _Toc20622054 \h 144.0 References PAGEREF _Toc20622055 \h 15
Global Forces: A Research into the Global Forces that Influence the Competitiveness and Relevance of Modern Day Firm
1.0 Introduction
The global economy is taking a new shape gradually. A keener observer will not the ongoing shift in global economic activities from the first world to third world economies. Emerging markets are having a tremendous growth in their consumer segment, which is a statistic that most company executives are perceiving as a positive trend for their business if they are to continue making profits over the next decade. Business executives have to fine-tune themselves to the global trends that are shaping the world economy. The preeminent global forces vary in intensity and thus, their influence is given different degrees of attention from business executives.
For instance, in the modern age, technology remains to play a prevalent role than any other force. Moore’s Law, which predicts that the technological capacity is bound to double every two years (Tardi, 2019). Nothing far from the truth as technology is becoming a predominant factor in every industry today. On the other hand, natural disasters form another aspect that corporations have to take into account if they are to formulate successful business strategies. In this regard, one can never disregard the ever-changing climate change and the increasing calls to avert this course. The number of natural disasters has increased significantly. Moreover, the natural establishment is facing pressure from human encroachment into formerly pristine habitats highlighting human contributions.
The role of the government in the business environment is taking shape steadily. The free market allows the private sector to have optimal control over the direction of the marketplace. The government creates a conducive environment for business to take place. However, their role is increasing as each government is in a dire need to improve their economic status as well as prioritize their economic interests. This nature of this event is more evident in the ongoing trade war between China and the United States (U.S.) where each country wants to make the most of economic benefits from another’s products (BBC News, 2019). The level of interest has ensured that taxation and imposition of tariffs remains a relevant issue in these zones.
In the same breath, immigration and labor are other major points for consideration. Globalization has advanced the spread of labor globally. Therefore, companies have more laborers at their disposal. National and international firms get to benefit from this development as they can acquire the necessary labor easily. It is the ability of a firm to attract the best workforce in the marketplace that will determine its level of success. Taking into account the insurmountable level of competition in the marketplace, this is also a daunting task. Either way, firms’ management teams have to figure on how to attain the appropriate workforce that will meet their objectives.
As the global economy is shaping up gradually, African countries are no longer indifferent to these changes and trends. In fact, the African continent is becoming the center of attraction as it is the greatest potential for economic development as well as the least exploited. The global forces discussed above continue to have a direct impact on the contemporary African firms, promoting the level of competitiveness and relevance (Sarokin, 2019). In the same breath, these forces are also working in some way, against many of the modern African business enterprise (Desjardins, 2018). The degree of the effect these forces have on the business depends on the presence of the business across various countries on the continent. For instance, each country is subject to its taxation laws and more so, the corporate tax which in turn affects an enterprise’s profits. This research provides more insight into the role of these global forces in shaping the economic environment upon which business enterprises are involved.
2.0 Global Forces
2.1 Government Policies and Regulations
The different global political and legal systems around the world are cause for concern for businesses. Over the years cross-border transactions have been liberalized progressively, technology and information services have advanced astronomically, and transport logistics and services have improved dramatically. The subsequent achievement in these means has not only provided room for greater incentives to companies, but also the ability to geographically delocalize production processes. Several countries including the developing ones are becoming subject to the effects of global supply or production chains (Nicita, Ognivtsev, & Shirotori, 2013). These consequences are as a result of companies making efforts to incorporate cost reduction strategies. This procedure is articulated in many organizations as a means of acquiring comparative advantages. Such advantages arise for production processes such as distribution and retailing, marketing, packaging, manufacturing, design, concept, and research and development. Multinational firms perceive this as an opportunity to attain the most competent resources worldwide as they make relentless efforts to maintain competitiveness through optimal production and mitigation of costs.
Involvement in international business is an avenue through which companies learn the demand patterns of this marketplace. Consequently, they attain information on consumer preferences and more so, strategies to exploit the high-income markets. These benefits are central sources for economy-wide externalities for other nations and more so, the third world African states. This is achieved through export diversification, productive capacity upgrading, improvement in technology and skills, and employment. When these countries enjoy such externalities, they are bound to attract foreign direct investment.
On the other hand, the developing nations will feel shortchanged as capital begins to flow from their countries. The potentiality that lies in this category of business explains the increased involvement of policymakers in many countries including the developing ones in creating policies that favor their economic interests. A great example relates to the US-based firm Google. Their expansion to the Asian market was curtailed when China compelled them to adhere to their political and legal guidelines. Most of these were based on restrictions placed on the freedom of speech. Taxation and interest rates are some of the methods, which governments will use to control the international market in their regional boundaries.
2.1.1 Taxation.
Taxes are one of the primary methods through which countries will seek to attain more revenues. Taxation is a procedure levied on many entities including citizens, companies, and investors. Taxes refer to the collections from the government that enable them to provide social amenities and still finance themselves (Bofah, 2003). The theory of tax competition asserts that governments will be ready to lower their tax demands, particularly on the mobile asset when they perceive globalization as a cause for economic growth. However, this rule does not apply in every case. A country like the U.S., for instance, is an excellent example because it is a great beneficiary of the globalization. Most studies conducted on this country indicated that a mere increase of 0.2% to 0.3% in long-term growth from an average and marginal tax rate reduction of 2.5% and 5% respectively (Hakim & Bujang, 2012). Since the post-World War II, these metrics have changed significantly as a tax increase of 1% is sufficient to guarantee a 2% to 3% gross domestic product (GDP) reduction in the same country (Romer, C. & Romer, D., 2010). Therefore, the tax structure of a country matters greatly.
The case for the developing countries comes forth. These ones are in a disadvantaged situation as an increase in total tax revenue translates to a reduction in the economic growth of the nation (Mahdavi, 2008). These countries have faced a severe financial crisis over the past couple of decades compelling them to tweak the level of taxes. In the 1960s, studies to ascertain the connection between the ratio of tax revenue to GDP (TAX/GDP) in developing countries were conducted. Two studies, which were the primary ones back then, indicated that the ratio thereof was relatively low (Mahdavi, 2008). An extended study done on African countries from 1973 to 1981 to ascertain the effect of TAX/GDP found profound results. Most of these countries are predominantly reliant on agriculture and thus, proved to be the sector that was quite influential in the tax system. Any tax levied on this sector affected the total tax revenue.
2.1.2 Interest Rates.
Interest rates are a monetary policy that can ...