Understanding The Importance of the Global Business Environment

The rapid industrialization from the 18th century was a consequence of early involvement of merchants and businesses in trade. In the 21st century improved transportation and communications and cross-border business ownership have created, for most industries, a global business environment.

Global competition affects firms in several ways:

 It provides the opportunities of new markets to exploit
 It presents the threat of new sources of competition in the home economy from foreign firms
 It offers an opportunity of relocating parts of business activity (or supply chain) to countries able to perform them better or more cheaply
 It may drive cross border acquisitions and alliances

This leads management to make significant strategic investment decisions that rely on assessments of the stability and trends of the global business environment:
 Development of products for international markets
 Advancing credit to clients in international markets or investing in businesses and assets in host countries
 Reliance of international sources for supplies of crucial inputs

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