Global economic environment

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Within the global economic environment there are fluctuating variables that must be controlled. This task must be performed in advance by companies in order to prepare for various situations. These factors must be anticipated in many occasions, by the personnel trained for this action, which always turn out to be the professionals in Digital Business.

The term global economic environment refers to the set of all external economic factors that influence consumer buying habits and the marketplace and therefore affect a company’s performance. These factors are often beyond a company’s control and can be both large-scale, the so called macro factors, and small-scale, the micro factors.

In addition to these two groups, there is a third group that deserves to be considered separately because of its relevance: the technological factor which, in the current era, is a source of constant opportunities and challenges for companies in all sectors.

Global economy

The global economy is a concept of special relevance in recent decades, which at a basic level understands the world economic system as globalized and free of barriers or state borders.

The creation of large economic unions, such as the European Union, for example, and the development of trade agreements and treaties of different types between a large number of countries around the world, has undoubtedly helped to lower the legal and economic barriers for carrying out economic activities in other places in recent years.

Characteristics of the global economy

The characteristics of the global economy are:

• Companies operate in different territories throughout the world, acting in a legal and controlled manner not only in their country of origin.
• Growth of trade around the world.
• Existence of large multinational companies in many different economic fields.
• The use of the Internet in connecting communications around the world at high speed.
• The global economy involves the movement of people, considered as human resources, as well as goods, which are what have made collectivities into communities of goods and services.
• Globalization of production. Especially in countries with cheaper labor.
• Interdependence. A state in which two or more locations are mutually dependent and connected. So, if something happens, a failure or a crisis, everyone is affected by some kind of direct or indirect relationship.

Advantages of the global economy

• In economy:
  • Free trade of goods and services worldwide.
  • Decrease in production costs.
  • Increased business competitiveness and product quality.
  • Technological development that favors production levels and speed.
  • Increased job opportunities in developing countries, as multinational companies strategically locate there because raw materials and labor are cheaper.
• In politics:
  • Changes in national and international legislation to encourage trade, cooperation plans, legal security, market security and new public policies.
• In culture:
  • Increased cultural exchange through various communication channels.
  • Tourism Incentive.
  • A set of universal values is created.
• Socially:
  • Increased human relations.
  • Greater accessibility to exchange and access information of national and international interest.

Disadvantages of the global economy

• In economy:
  • Economic imbalance, as developed countries with large economies have imposed themselves over developing countries with smaller economies. Increased unemployment in developed countries because multinational companies open headquarters in developing countries, where labor and raw materials are cheaper.
  • Economic inequality among the citizens of a country, since large companies have greater profits and financial capacity than those of smaller size and power.
  • Weakening of natural resources and raw materials in production processes.
• In politics:
  • Sometimes it has generated greater social, cultural and economic inequality.
• In culture:
  • Developed countries are able to superimpose their cultures on developing countries, through a strong commercial and media push, causing the latter to lose their national identity.
  • Minority languages can be blurred.
  • Some of the autochthonous traditions are being modified to incorporate new customs from other countries.
• Socially:
  • Social inequality has limited the access and use of different resources such as educational, technological and economic resources in many poor social groups.
  • More conflicts between social groups seeking to reclaim their social, religious and cultural values in the face of those that have been implanted through globalization.

Global economic environment: business globalization

Macro factors in a company’s economic environment

Macro factors of the economic environment are usually beyond the company’s control, although their influence on results is significant. This group includes the following:

• Employment/unemployment.
• Income.
• Inflation.
• Interest rates.
• Tax rates.
• Currency exchange rate.
• Savings rates.
• Consumer confidence levels.
• Recessions.

Micro factors in the economic environment of a company

The company can act on the micro factors of its economic environment and, unlike the macro factors, it has the possibility of driving change. This group includes, among others, the following factors:

• Demand.
• Competition.
• Availability and quality of suppliers.
• Reliability of the company’s supply chain.

International markets and their environment

Companies must be aware of the local peculiarities of the international markets in which they may be present. This will make it possible to perfect marketing strategies and make commercial actions as profitable as possible. Many companies have failed, despite having very good products, because they did not know how to understand the markets in which they were immersed.

The cause is due to the difference in scenarios between local and foreign markets. In the latter, the environment becomes hostile due to unfamiliarity and lack of familiarity with local customs, norms, methods and other factors. Understanding the new scenarios, and knowing the factors that influence them, becomes key to the success of the international mission.

Mastering the global economic environment

Knowing the economic environment in its entirety does not mean that it is completely mastered. Being such a changing area, with so many factors that define it, it is almost impossible to predict how its movements will be. Even so, the fact of having the knowledge gives us a clear advantage in the market: being able to anticipate some fluctuations.

TECH Technological University directed its efforts and professional resources to design a master’s degree specialized in this area. This specialization can be found in the School of Business, where it is also possible to find high quality master’s degrees such as the  Master’s Degree in International Taxation, Foreign Trade and Customs and the Master’s Degree in Strategic Business Management.

The fluctuating market can be known in its entirety and learn from the best. The Master’s Degree in Digital Business brings us closer to this panorama, offering through its modules the possibility of acquiring this advantage in record time, and get trained by experts today!