International Business in the 21st century
Numerous elements comprising the global economic environment influence managers’ decision-making processes in the 21st century. A few of these factors include the number of firms engaged in competition within a given market, the proportional size of said firms, cost implications, market demand, and the simplicity of market entry and exit. These factors are influenced by the globalization process. There is a trend toward increased integration of labor, capital, and goods; consequently, these factors impact managerial decisions.
International business examines managerial decisions based on a cost-benefit analysis in the global economic environment, whereas international economics investigates the interactions within the global economic environment. Therefore, understanding public policy, business, and international finance necessitates a foundational understanding of international economics. Managers must thus have an understanding of the factors that affect international trade and business in the 21st century.
Factors that affect international trade and business in the 21st century
Demographic factors
Are considerations of population distribution, age profile, demographic trends, and projected developments significant for administrators of international firms? Indeed, they are. Corporations diligently scrutinize these trends to forecast the probable ramifications they may impose on their operations and business strategies.
Economic globalization
Different people have different understandings of the concept of “economic globalization”. However, it centers on the decline of national markets and the rise of global markets as a company’s focal point of business. Globalization applies to the production and sale of goods and services or the procurement of materials. The global market is dynamic in many ways- thus, the rules of competition in the global market are constantly changing, and businesses have to adapt. In the same manner, disruptive events like the COVID-19 pandemic or wars have forced logistics managers to reconsider the importance of short supply chains.
Sustainability and social dimensions of business
The main aim of any business is to make money. However, in the 21st century, managers of respectable companies give a high priority to corporate social and environmental responsibility. While pollution and waste control were the main concerns of companies in the 1970s and 80s, nowadays sustainability and social dimensions of business are of equal importance. Furthermore, shareholders and public opinion expect to do business without engaging in corrupt practices, even if bribes are common in many countries. Examples of corporate social and environmental responsibility are not to do business with companies that engage in discriminatory practices, child labor, or cosmetic animal testing.
Environmental responsibility
Increasing environmental degradation and continued natural resource depletion have led to stricter environmental regulations across the world, particularly in Europe. Furthermore, there has been a dramatic increase in the public’s environmental awareness. This awareness is beginning to affect buyers’ behaviors. One example of this phenomenon is that more customers prefer to purchase environmentally friendly and fair trade products. Companies engaging in international trade must thus pay attention to the sustainability and social dimensions of business.
Knowledge of international business law
The United Nations Convention on Contracts for the International Sale of Goods (CISG) of 1980 is the law that governs the sale of goods between parties. As of 2023, 97 states had ratified the CISG. However, one important exception is the United States of America. In the USA, the Uniform Commercial Code (UCC) Article 2 is the law that governs all contracts for the sale of goods, both domestic and international. This means that, if one of the parties conducting business is located in the USA, the contract has to specify which law is to be applied in case of a dispute.
