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Understanding the global business environment

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The global business environment is a complex one. When businesses operate across national borders to buy, sell, produce or manufacture goods and services in different countries, they are obligated to consider a number of important variables. This includes different:

  • tax systems and tariffs
  • legal requirements
  • regulatory and compliance frameworks
  • social and cultural norms
  • political climates
  • technologies
  • economic and market factors
  • shipping and transport processes

In addition to these considerations, international business management requires organisations to have a solid understanding of the current conversations, trends, issues and challenges that can impact businesses operating in the global market.  

Current topics and challenges in global business

Inflation

Inflation – the term used to describe rising prices – is one of the biggest issues facing businesses today. As of March 2023, the UK inflation rate had reached 10.4%, a significant rise on the target rate of 2%.

According to the Office for National Statistics (ONS), consumer price inflation in the UK has reached highs not seen in around 40 years.

“Higher tradable goods prices reflect the global recovery from the coronavirus (COVID-19) pandemic, including the effects of imbalances in product and labour markets,” the ONS states. “Food and energy prices have also increased markedly this year, particularly gas prices, largely in response to the conflict in Ukraine.”

The challenge isn’t confined to the UK, though, with the global inflation rate hitting 8.8% in 2022, according to the International Monetary Fund (IMF). 

For businesses, high inflation rates can have a number of consequences. For example, they can increase the cost of business operations and reduce purchasing power. However, it’s worth noting that the IMF predicts global inflation will fall to 6.6% during 2023, and then to 4.3% in 2024. 

Global supply chain issues

Many businesses are currently grappling with global supply chain issues, with the supply and shipments of goods unable to keep up with demand, causing global shortages. The supply chain crisis is another challenge exacerbated by the coronavirus pandemic, but other culprits include changes in international trade – Brexit as one example – in addition to shifts in demand and labour shortages.

International business research by J.P. Morgan found that in addition to these problems, there are a number of challenges and risk factors stemming from the Russia-Ukraine conflict and recent COVID-19 lockdowns in China.

  • Air-freight transportation limitations – particularly impacts on use of the Asia-Europe lane where planes would typically travel through Russian airspace.
  • Rail freight disruptions – issues connected to the overland rail link from China to Europe which passes through Russia.
  • Northern European port congestion – another spillover impact from the Russia-Ukraine conflict. Ships have had to be rerouted causing congestion and leading to delays in cargo flows
  • Manufacturing delays – reduced manufacturing, a truck driver shortage, and other consequences as a result of the recent lifting of COVID-19 lockdowns in China. 

According to KPMG, however, businesses have a number of options to help navigate their way through supply chain issues. These include adopting a flexible business strategy that can adapt by using technology to reduce operating costs and diversify the way customer needs are met, and through implementing responsive fleet management and supply chain networks.

Human resource management

Human resources in an international context is known as global human resources management, and it is a necessity for multinational corporations (MNCs) or any other businesses employing workforces across multiple countries.

Through global human resource management systems, organisations can manage and support their staff by adapting their policies as necessary for different laws and legislation. 

International marketing

As businesses expand into the global environment or other emerging markets, they will need to consider their international marketing strategy.

International marketing enables businesses to effectively promote their goods and services to audiences outside their domestic market. They can adapt to different cultures and languages when building brand awareness in a new territory, and consider outsourcing for cultural expertise in specific regions where needed.

Corporate social responsibility

It has become common practice for a business strategy to include an element of corporate social responsibility (CSR). Corporate social responsibility offers businesses models of how to operate and conduct entrepreneurship in a socially responsible way.

According to Harvard Business School, there are four types of CSR.

  1. Environmental responsibility, which aims to reduce environmentally harmful practices, regulate energy consumption and offset negative environmental impacts.
  2. Ethical responsibility, which focuses on fair practice and business ethics.
  3. Philanthropic responsibility, which aims to make the world and society a better place.
  4. Economic responsibility, which aims to commit to environmental, ethical and philanthropic responsibilities while also maximising profits.

Sustainability

An increasing number of enterprises around the world are introducing sustainability into their business processes and policies to the benefit of both the environment and the business itself. For example, IBM suggests that 80% of consumers say sustainability is important to them and are willing to pay a premium for goods from brands that are environmentally responsible.

There are various metrics businesses can use to assess their sustainability. The World Bank suggests 10 sustainability principles:

  1. Be climate resilient.
  2. Be energy smart.
  3. Be water efficient.
  4. Ensure resource efficiency.
  5. Reduce waste.
  6. Promote sustainable land management.
  7. Eliminate corruption.
  8. Enhance diversity and inclusion.
  9. Ensure staff wellbeing.
  10. Engage and preserve the community.

Mergers and acquisitions

Global mergers and acquisitions are expected to remain strong in 2023. Despite economic uncertainty created by challenges such as the conflict in Ukraine and ongoing supply chain bottlenecks, accounting firms such as PwC suggest there are opportunities for businesses to create new partnerships and take advantage of attractive valuations, lessened competition and new assets coming to market.

Why is it important to understand the global business environment?

Businesses that have a solid understanding of the global economy and international business environment are better positioned to manage challenges and take advantage of new opportunities. A prepared business can: 

  • gain a competitive advantage in the global marketplace
  • secure new avenues for foreign direct investment
  • use evidence to support strong business decision-making
  • implement appropriate risk management measures.

Take an in-depth look at the contemporary topics in global business

Advance your career with the University of York’s flexible Master of Business Administration (MBA). This distance learning degree is taught part-time and 100% online, which means you can learn around your current professional commitments and apply your studies to your existing career. It includes a key module in contemporary topics in global business, focusing on new, relevant, and up-to-date macro and micro business topics. You will also explore how people and processes interact to shape the global business environment while considering the political and economic factors that affect organisations.