Global Trade & Its Impact On Strategy
Task: Write an assignment on “Global trade and its impact on strategy” following the structure below:
An introduction to global trade of 15-200 words
1.1 In Context with your own organization, assess how the organizational behavior can be affected by changes in international trade and globalization of business
Introduction and definitions of Organizational Behavior, and Globalization.
List and speak about the effects of factors/elements that have changed in organizational behavior due to changes in International Trade & Globalization.
- Changes in trade such as (Introduction of VAT, Expo 2020 is due in Dubai and a lot of associated activities have commenced due to the Event in 2020, …. Etc.)
1.2 In Context with an Organization or a market region, identify measures and economic groups that aim to restrict trade and evaluate how successful they are
Introduction to general trade parries.
Select two examples about economic groups such as (OPEC, European Union, G20, GCC, …etc.) and speak about:
- Brief about the group.
- The measures they make to control the trade.
- Evaluate these measures.
1.3 Critically evaluate how international trade relations and regulation affects the supply of materials, labor, products, and services in different industries
Short introduction about the supply chain.
Two examples of different industries. Identify critical international trade relations and regulations.
Evaluate how it affects the supply of materials, labor, and products in these industries.
2.1 Discuss how the internet has changed global trade and critique how it has affected different industry sectors and individual companies using case study evidence
Introduction about the relation between internet and business.
Select two companies in different industries as examples. For each one, discuss how Internet has changed global trade. Arrange in a table like below:
Company Internet Effect on the company
2.2 Discuss with examples how global brands and other companies have been affected by the politicisation of issues and ethical considerations
Introduction about Business ethics and politicization.
Cite an example about ethics.
Cite an example about politicization.
2.3 Identify policies and ways of working that companies use to protect themselves against shifts in trade, national or international barriers and policy that restrict trade
Select some possible shifts in trade policies and possible changes in national or international trade barriers, such as:
- Britain’s Exit from EU (Brexit)
- Recent withdrawal of US from the Transpacific Partnership (TPP).
- The G7 summit ends without US commitment on Paris agreement and Canada, France, Germany, Italy, Japan, and the United Kingdom reaffirmed their commitment to the Paris agreement.
- China along with 30 nations agreed to work under the Belt and Road initiative to promote rules-based, non-discriminatory trading system.
Select an organization and list some of the changes that affect the selected organization (s) adversely.
Policies and measures that the selected organization (s) take to protect themselves against these adverse effects.
Integration into the world economy has been beneficial to promote economic growth, job opportunity, diverse cultural relationship, poverty eradication and development. The impact of global trade services around the globalised economy is staggering due to plenty of reasons. Having international trading partners and strategic regional plans can be a best suit to expand the country’s business into new markets around the global marketplace. In theory, international trade can improve the economies more efficiently and leverage competitive aid for the business. The study has explored in-depth insights of global trade and its impact on strategy around the different industrial sectors.
1.1 Organizational behaviour in international trade and globalization
Organizational behaviour and globalization
Organizational behaviour is determined to be the perception of human interface that manages explicit parts of demographic and cultural diversity to work in a corporate setting. The organizational behaviour is measured through different determinants in terms of performance appraisal, training, leadership, job satisfaction and ethical norms (Ninan, 2021). Globalization has a large effect on organizational behaviour as it influences a changed nature in managerial work and increases their judgemental power around the world economies. The growing interdependence of economies, populations and culture is strongly replicated through cross-trade relations and flow of investments around the advanced technologies of globalization.
Factors influencing international trade and changing the organizational behaviour
International trade has changed the organizational practices of Sainsbury after the emergence of VAT that have annoyed the retailer industry. As per the report, introducing VAT in terms of emergency budget schemes has reached 10% higher since the last five years (bbc.com, 2019). It has led to the rise in employment up to 2.8% per year, reflecting the ignorance of VAT schemes around the global trade services of the UK. During this intervention, the leaders of Sainsbury's act as a creator of the organizational ethical climate and play a decisive role with the employees. As a result, the employees start to imitate the leadership’s behaviour, preference and style on the note of stressful legal implications caused on the working schedule of the employees. On the contrary, the contribution of USD33 billion of gross value improves the annual forecast of Sainsbury from the Dubai Expo 2020 which has also been due on the mark of Covid-19 crisis. According to the report, Sainsbury’s trade services with Delta in the equity market of Dubai with the bidding acquisition of 10.4 billion pounds ($20.8 billion) is known to improve the proportion of equity in deal which has been also left over due to the pandemic confrontation (arabianbusiness.com, 2020). The ascertaining dues from Dubai Expo 2020 has been concerning Sainsbury as thousands of employees can directly benefit from the Emirates, playing an important role in the GDP of the economy and the retail sector. It has tended the employees to impact on the attrition rate and low productivity rates, discerning the organization chain of international trade services. International trade and global business have also been affected on the mark of Covid-19 pandemic due to which there has been large job cysts around the differential sectors. As per the report, Sainsbury has to close 420 Argos stores on the mark of Covid-19 restrictions and lockdown, disrupting the global supply chain of their international trade activities and forceful job cuts of 3500 employees (bbc.com, 2020). The remaining employees of Sainsbury who were accustomed with the online sales suffered from most distress due to the negative implications on international trade, alarming their job security.
1.2 Identification of economic groups to influence trade services
Importance of trade tariffs
General trade tariffs is regarded to be the legal agreement around the international context where trade barriers are concentrated on tariffs and quotas. According to The General Agreement on Tariffs and Trade (GATT), it is increasingly important to promote economic development through improved standards of living and expansion in the exchange of goods or services. The legal agreement has reduced average tariffs on industrial goods trade from 40% to 35% which was an implicit step towards economic globalization (Majaski, 2020). These trade tariffs have the greatest contribution to the regulation of international trade services around the protective forces of domestic industries.
Role of economic groups
The Organization of Petroleum Exporting Countries (OPEC) in order to stabilise the oil markets through unified policies and secure an efficient, regular and economic supply chain around the petroleum consumers. As per the report, the productivity of Royal Dutch Shell following the OPEC rose to 350,000 barrels a day and raising significantly to 40% as compared to that of the restrictions in international trade services on the mark of Covid-19 pandemic (Smith and Lee, 2021). In order to restrict the trade services, the organization with the 23-nation OPEC+ coalition have taken strict controlling measures with the menace of increasing global demand due to the new virus strain. The OPEC group manipulates the free market prices of crude oil supplied by the Royal Dutch Shell by setting caps on the units of oil production. Because of the implicit actions of OPEC, the organization has been able to reduce the target prices of OPEC production slowly in order to launch a frequent purchasing option on Royal Dutch Shell.
The G20 summit offers an opportunity to the international trade market by coordinating global policies on trade, climate, health and other issues. According to the report, Royal Dutch Shell has been under the adherence of the G20 group and is tackling the high rise of energy prices around the international market that is restricting their trade services with the Emirate industries (energy.economictimes.indiatimes.com, 2021). In order to control the trade services, the organization following the G20 summit aims to manage the liquidity crisis around the oil market and encourage the electronic documentation process to ensure smart applications through the trade tariffs and subsidies system. On the other hand, the Royal Dutch Shell also fosters digital trade as encompassed through the G20 measure in terms of the sustainability issues playing an important role in the Covid-19 pandemic.
1.3 Effect of international trade relations supply of materials and services
Importance of supply chain
Supply chain is determined to be the activities within the organization that can promote sustainable deliverable of the goods and services to the customers. In the supply chain, the raw materials are well converted to the finished products or services in order to involve creation and sales in the materials. Under the consequences of global supply disruptions on the mark of Covid-19 pandemic, suppliers are under great competitive pressure to raise their domestic production, reduce their dependency sources and grow employment to minimise the amount of inventory practices (Shih, 2020). It is crucial to ensure resilient supply chains that can reduce the vulnerabilities of international trade relations.
International trade relations across different industries
The international trade relations in the UK around the retail industry have been the greatest contributor to the country's vast GDP rate. Considering the retail international trade in the UK, it has employed an average of three million people while that of 200 thousand enterprises. As per the report, the retail industry in the UK generated over 92 billion within the economic landscape of the international trade regulatories (statista.com, 2021). The total turnover of international trade regulatories have grown steadily up to 426 billion British pounds since the last two financial years. In addition, the international trade relations of the UK's retail sector have been flexible in terms of seasonal adjusted estimates in index form that have led to the retail sales volume of the retail industry in the UK with an index value of 101.3.
On the contrary, the international trade regulations with the oil and gas industry of the UK is friendly and has contributed widely for the economic growth. As per the report, Norway has produced 1.4 million metric tons of natural gas and 11.7 million metric tons of crude oil in the UK (statista.com, 2021). It has been significantly higher than any other international business environment compared to that of the United States, Canada and Russia. The oil and gas industry in the UK share unrestricted trade services as it is greatly dependent on the foreign trade and it has even generated 46.8 million metric tons of natural gas and crude oil. While engaging in international trade relations, the oil and gas industry accords with the implementation of EU directives and regulations as per the maintenance of the UK government.
Effect on supply chain
International trade relations in the retail industry depend greatly upon the supply chain where the raw materials and labour are considered the greatest forces of investment around the international context. It allows the country to strategically use the resources in terms of lower cost in order to produce more (Heakal, 2021). On the contrary, the UK trade around the oil and gas industry opens a new market for the foreign producers that greatly raises the supply of materials and products, due to the increase in demand of the consumers. Thus, addressing the supply implications has also ensured plentiful competitive advantage for the UK organizations while promoting their international trade relations.
Evolution in technology has improved the function of business operation management and encouraged multinational organizations to adopt the internet technology that allows them to form international connections with potential customers and include changes as per the global demand of the market. Due to the involvement of internet service, organizations have successfully reduced their dependence on the local customers and provided opportunities to engage with the global consumers by enhancing their level of communication with the important stakeholders.
Analysing the performance of 2 different companies
Internet effect on the company
Alibaba is a multinational e-commerce business that has utilized the internet and involved it thoroughly in their business activity. Alibaa in Chinese multinational organisation that has a present market value of $231 billion and it is the 31st largest organisation according to the Forbes list of 2020. Under the guidance of Jack Ma, the organisation has developed a unique business model that enables them to involve technological advancement along with internet interventions. Involvement of the internet has not only enhanced their communication process but also strengthened their relationship with the international customers that ultimately add value to their business model. Incorporation of internet technology has encouraged the organization to expand its business in different domains such as advertising services, logistic network, financial service and mobile terminal services. Despite the outbreak of Covid-19, the organisation has gathered 109.480 billion. However, the organisation has faced recent allegations as China has imposed a penalty of $2.8 billion as they are accused of breaking the anti-monopoly law and also facing antitrust issues due to misuse of confidential information of customers (nytimes.com, 2021).
Uber technology Inc. also known as Uber is another organisation that has been benefited with the involvement of internet technology. The organisation has revolutionized the transportation industry by introducing Uber apps that allow them to connect with their potential customers. Presently the organisation has acquired 69% of the US market share and currently they have more than 100 million monthly users that continually contribute to the growth of the organization (Uber.com, 2021). Uber has successfully used the IoT and gathered large amounts of data that help in securing the safety of the customers and keep track of the movement of the vehicles by using the GPS system. Effective use of the internet has enabled the organisation to enhance the maintenance of the vehicles and help in avoiding any type of inconvenience in time of riding. On the other hand, the technology has improved the communication between customers and organization and gathered their feedback to improve their business performance. In addition to that, they also provide assurance to their drivers by exchanging information with their global service providers by using registration services like identity registration, cashless service to avoid any type of unwanted incidents.
Ethics is an integral part of business performance and it is important for the corporation to make moral decisions that can improve the present position of the organisation in the international market. In order to achieve the long-term goal in business, it is crucial for business to develop strategic thinking that enables them to consider the various aspects of business and perform activities with moral and ethics. On the other hand, politics and business are connected with each other and customers are associated with businesses that have taken relevant political stances. Connection with social and political issues can influence the performance of business and contribute to their business growth. However, businesses who do not feel obliged to take any necessary stance regarding political issues are lacking behind the competition and it is important for them to focus on creating strategies that can enhance their political relevance (Dailyrecordnews.com, 2018).
Performing business ethically can make a huge impact on the business performance and ignoring ethical practices can cause negative influence on organisational growth. For instance, Facebook is one the renowned IT organizations in the world that offer customers to form connections with others. The organisation has revolutionized the performance of social media and introduced new features that have gained the attention of their customers. However, the organization has failed to maintain privacy in their service and they have been accused of using the private information of their users for the organisational purpose. The organisation has to pay a $5 billion fine to the Federal Trade Commission of US (FTC) to settle the privacy concern. The FTC has accused the organisation of improperly obtaining data of more than 87 million users (Bbc.com, 2018). It is one of the biggest violating issues that raise concern about the intention of the organization. Due to the design of heavy fine, the number of customers has declined heavily in the organisation those impacts on the market position of the organisation. The unethical practice within the organisation has been acknowledged by the higher authorities and they have assured their users to prohibit this type of unethical practice in future.
Nowadays, organizations are taking the site of political issues and convey their social message through their issues based campaigns that are creating awareness among the customers. Nike is the multinational footwear organisation that has taken side of multiple political issues through their campaign. Nike has recently released an ad that reflects their protest against the police brutality against the minority group in the US by featuring NFL player Colin Kaepernick in the centre. Their decision may have added some spark in the media and many customers are taking sides due to their latest campaign decision. However, the business of Nike has been soared due to releasing relevant advertising strategies and they have witnessed a 40 million rise in free advertising and 30 percent hike in their sales rate (Theguardian.com, 2018). Nike has always taken stand political issues that enchanted their relevance rate in the international market and gained the attention of their potential customers.
Shifting in trade policies
Britain's decision to exit from the EU has severely changed the business relationship with other countries and also altered the trading relationship with EU and non EU countries. The export of an import relation of the UK with EU countries has been changed but the UK has successfully secured the post Brexit trading deal with the EU that allows them to continue their free tariff trading. However, organizations need to comply with the rules and regulation of TCA (Trade and Cooperation Agreement) 2021, to continue their business performance traffic barriers form in the EU countries (Gov.uk, 2021).
The US withdrawal from TPP
Trans Pacific Partnership (TPP) has provided opportunities to the US and other 11 countries such as Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam to form trading agreements with Pacific Rim economies and lower the tariff barriers among the countries. However, recently the US has withdrawn from the agreement and that has changed trading relationships with other TPP countries. On the other hand, it provides an opportunity to the US to gain advantages over China and balance economic growth in Asian countries.
Impact on organisation
The announcement of Brexit has an adverse effect on more or less every sector and organisations are concentrating on reviving their situation to cope up with the sudden political changes. Mark and Spencer are among such organizations that has been greatly impacted due to the announcement of Brexit. The organization has to close their 11 stores in France as they are run by the franchisor agreement with the local partner SFH (Bbc.com, 2021). On the other hand, their supply chain management has been hugely impacted due to increasing complexity as the UK decided to leave the EU. In addition to that, the organization has also changed their strategy of supplying food in Czec Republic due to the announcement of Brexit. M&S has witnessed an almost 17% drop in their sales rate as the political scenario of the UK has shifted due to the political changes.
Measures to protect from policies changes
International business performance of M&S has been impacted due to shifts in the trading relationship. In order to overcome the obstacle, they can now concentrate on improving their business performance in Asian region and enhance their performance in China, India and other Asian countries to gain competitive advantages. The Asian country can also become a source of supply as it can provide low price labour and products to the organisation that can enable them to provide lower priced products to a wide range of customers. On the other hand, the UK has considered joining the TPP agreement to form a new trading relationship with the Pacific economic region that can provide opportunities to M&S to explore new markets (Theconversation.com, 2021).
Hence it can be concluded that, international organisations are required to gather extensive knowledge about the changes within the trading relationship between countries and take effective initiatives that can allow them to foster required changes and modify their performance in the global market.
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