The International Businesses and the Ongoing Economic Crisis

The previous articles in this module discussed the various facets and aspects of the international businesses and the norms and rules with which they have to operate in the global economy. This article looks at the ongoing economic crisis and its impact on the operations of the international businesses.

Market experts and investors gauge the health of global trade and the growth of international businesses by a measure known as Baltic Shipping Index. This measure is a basket number of the size of global trade as measured in the shipping activity.

In the aftermath of the global economic crisis, this measure took a dip and is currently in the lower end of the scale. This is an indication that international businesses are having it tough in the global economy. Apart from this measure, there is the other index, which is known as the Purchasing Managers’ Index or PMI. This measures the inventory position and the number of new orders that have been placed for goods and services.

Both these measures indicate that international trade is down and the manufacturing, retail, and services activity is on the lower end. Hence, it can be said that international businesses are having a hard time in the global economy. Added to this is the prognostication of some commentators who have likened the ongoing global economic crisis as having a dealt a death blow to globalization and have proclaimed the “The Collapse of Globalism”. Taken together, these indicators are sobering for any investor and hence, international businesses have to consider all options and look carefully before they leap.

However, we argue in this module, that globalization is far from over and that the future of international business would depend on the BRICS (Brazil, Russia, India, China, and South Africa) and the next “Breakout Nations” that would form the tier two of the emerging markets. Further, the fact that globalization has integrated the world to such an extent that the ongoing global economic crisis is just a blip on international businesses and that the phenomenon would go on after this lapse has to be considered as well.

What this means are those international businesses had to innovate to grow and expand further to succeed. They would be well advised to look for opportunities in the next rung of the emerging markets like Vietnam, African countries, and Latin American countries.

Of course, the fact that the ongoing economic crisis has dented the confidence of international businesses cannot be denied. The moot point here is that instead of unfettered globalization, a trend wherein international expansion is done after doing due diligence would be the driving force for the future. Apart from this, the future would also belong to those international businesses that can thrive in the chaotic global economy that is the present state.

Finally, the ongoing global economic crisis has laid bare the stresses, strains of systemic risk, and has exposed the fragile nature of the global economy. Hence, the future of international businesses would be in the realm of guarded growth and better business practices as opposed to unrestrained expansion and dubious business practices.

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International Business