The emergence of a less restricted global economy, the convergence of consumer attitudes and purchasing behaviour, and the unstoppable expansion of the internet have all served to increase the levels of dependency and connection between the economies of nation states across the world. Business has become ever more international in its nature with the achievement of sustainable growth for enterprises becoming increasingly dependent on an understanding of, and engagement with, the complexities of the international business environment (Doole and Lowe, 2008). However, the recent global economic recession has caused new problems in the international business environment and left many organisations fretful about their futures. Research by the World Trade Organisation (WTO) reported that the full impact of the recent worldwide financial crisis really only manifested itself in the last quarter of 2008, when it was estimated that, compared to the same period in 2007, trade levels fell by 16% in Europe, 7% in the USA and 5% in Asia. The WTO went on to state that the first quarter of 2009 also saw big decreases in each of these regions's rate of exports and that there was no immediate sign of a recovery (World Trade Developments, 2009).
So what do the next ten years hold for the troubled international business environment? The critical examination of the trends and forecasts for a number of interdependent dimensions to international business will provide an insight into the changes and developments that may occur in the international business environment over the next ten years. To facilitate this process the PESTEL business analysis model, originally developed by Gillespie (2007), will provide a framework for examining the macro environment within which an international business operates. The framework consists of the following dimensions: Political: Economic; Social and cultural, Technological, Environmental and Legal.
Unstable governments can affect the international businesses environment as regulations governing business operations in a particular country may vary suddenly as the political environment changes. These changes can be positive or negative, presenting as they do either a threat to some enterprises or an opportunity for others. For example, the political situation in Afghanistan may have devastated most business operations in that country but in the next ten years, if the political situation stabilises, there may well be significant opportunities for international businesses to exploit due to the fact that the incumbent political leader of Afghanistan, President Hamid Karzai, is seeking more than $13 billion in international funding to help boost economic growth (Salahuddin, 2010).
There is international pressure on political regimes from certain non-governmental organisations, such as the United Nations (UN) and the WTO. The WTO, particularly, is very active in its attempts to create a more politically stable international business environment in the next ten years by negotiating a series of trade agreements with, and between, the world's leading trading blocs of the European Union, North and South America and Asia (Doole and Lowe, 2008). However, the WTO's efforts may be hampered by the slow upturn in the world economy which has caused a general climate of public mistrust in large international enterprises and especially in banks. Findings from the Edelman Trust Barometer (2009) indicate that trust in businesses in the UK and other western European countries is relatively low, and is on a steadily declining trend. Furthermore, the barometer shows that, amongst 25 to 64 year olds globally, there is less trust in corporations now than there was a year ago. The likely political response to this decline in trust in the international business environment is more government intervention and supervision over the next ten years which can only serve to hamper the efforts of enterprises to recover. (CBI, 2009).
Over the next ten years, the economic environment will be tough for international business. The CBI (2009) forecasts that there will continue to be constraints on the availability of finance due largely to a tougher banking regulatory framework, particularly in Europe. The CBI also propounds the view that finance for business will become more expensive thus negatively influencing business investment decisions both domestically and internationally. Businesses can also expect to see a higher level of global economic volatility compared to the last decade.
Research by Capgemini and Merrill Lynch (2009) shows that the world's wealth is still concentrated in the USA, Japan and Germany. However, China has now surpassed the UK and is ranked fourth in the world in terms of its population of high net worth individuals. As the global economy starts to recover then so will global wealth. The research suggests that the wealth held by high net worth individuals will grow by over 8% annually over the next ten years and the concentration of wealth in the Asia-pacific region is expected to surpass that of the USA as early as 2013.
Further support for the economic rise of Asian countries is offered by Deutsche Bank (2006) who believe that the openness of trade, investment in business and education and population growth will be the key drivers of its predicted 'growth stars' of the next ten years, which it states will be China, India, Malaysia, and Thailand. It also suggests that China's GDP will edge closer and closer to that of the USA by 2020. Additionally, Deutsche Bank propounds the view that the countries of Europe will show significant diversity in their individual rate of GDP growth over the same period.
The growth in the global population and movements in populations from one region or country to another are important indicators of social change. Currently it is estimated that about 80% of the world's people live in emerging and developing countries. This figure is likely to rise to 85% in the next ten years , according to Doole and Lowe (2008), who also predict that the population growth in Africa and Asia will continue inexorably, whilst in Europe population levels are expected to fall overall with any rises only being due to the migration of high net worth individuals.
In 1900, just 10% of the world's population lived in cities (Smith, 2001). However, by 2010 this figure had risen to just over 50% (United Nations, 2010). The United Nations forecasts that the urbanisation of the world's population, especially outside of Europe, will gather pace and by 2020 it is expected that nearly 4.2 billion people, 55 % of the word's population, will live in cities. Some of these cities are classified as 'mega-cities' with populations of 10 million or more. Currently there are nineteen megacities in the world but this number is forecast to increase to twenty-seven by 2020 with most of the growth centred on Asia (International Federation of Surveyors, 2010). The implications of this trend are that more homogenisation of products and services will be required globally as city dwellers demand similar, conveniently packaged products that are easy to move from the retail outlet to their residences.
Cultural differences have a significant impact on the way a business operates internationally. There is, however, a growing trend for the 'westernisation' of global cultures and the creation of a 'global village', which is likely to gather pace over the next ten years. Legendary international business guru, Kenichi Ohmae (2005, page 176) says this global village 'will be a nationless state marked by the convergence of customer needs that transcends political and cultural boundaries'.
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Over the past decade there have been dramatic improvements in worldwide communications through the use of such technologies as the internet and advanced telephone networks. Over the next ten years there will be a continuing growth in wireless technologies that will make overland cable and traditional telephone lines virtually redundant. This is evidenced by the fact that countries in the developing world have abandoned their investment plans for traditional land-based communication systems in favour of wireless-based systems (Doole and Lowe, 2008). This will result in more and more mobile access being available to the internet, for example. The use of Global System for Mobile Communications
(GSM) technology means that mobile phone operators to can locate their customers anywhere in the world. Mobile phone operators will use this information to target customised advertising messages to those users both on behalf of the companies and third party businesses.
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Back in 1998 two American university professors developed a spreadsheet for forecasting internet growth. They estimated that by the year 2018 the internet subscriber base would reach 1.6 billion users (Dash and Kajiji, 1998). In fact this figure was exceeded by 2010 when it reached 1.9 billion users (World Internet Stats, 2010). Over the next ten years the National Science Foundation forecasts that the internet will have nearly five billion users (Marson, 2010). The growth in internet access and usage has resulted in many small and medium sized businesses being able to reach previously inaccessible international customers.
From the consumer point of view the internet has enabled the sourcing and purchasing of products from the anywhere in the world. The effect of this ease of access has been to increase the rate at which products and services are standardised in terms of their specification and price. Many businesses have exploited the worldwide growth in the internet. This has particularly been the case with those enterprises marketing holidays, entertainment and flights. Indeed, with the World Tourism Organisation (2005) forecasting that international flight arrivals will grow to over 1.56 billion by the year 2020, it seems likely that this sector of the online shopping market is set for further rapid expansion.
There is an increasing emphasis on the achievement of a global 'low-carbon' economy which promotes the more responsible use of the world's resources. The economic and environmental imperatives of a low-carbon economy have started to be raised at the highest levels of government, even by the world's biggest polluter, the USA. In 2008, the then US Vice President Al Gore (2008) called for a totally carbon-free electricity supply system to be in place in the United States by 2018. Action has also been promised at state level in the USA with the California Public Utilities Commission for example, pledging to reduce energy use in its existing homes by 40% by the year 2020. In Asia, the powerhouse economy that is China has been making progress towards a low carbon economy and expects to reduce its emissions to 37% below the current levels in the next ten years (Howes, 2009).
The trend towards economic globalisation has advanced the need for a critical examination of existing national legal systems and the growing requirement for a more integrated global legal framework for international trade and business. There has already been a plethora of multilateral global trade agreements promoted by such organisations as the WTO. In addition agreements have been set up for free trade areas such as the North American Free Trade Agreement (NAFTA), and the European Union (EU). The EU is anxious to move beyond pure trade and customs agreements and achieve a high degree of regulatory and legal standardisation across its member states. To this end it has a vision for 2020 focusing on the harmonisation of national standards in the member states, supported by a new legislative framework. The EU also intends to promote this approach outside of Europe (ESS, 2010).
In conclusion, it can be seen that the international business environment will evolve and change significantly over the next ten years. There seems to be little doubt that the onward march of economic globalisation will continue unabated and will manifest itself in many ways including a continued social shift in terms of the urbanization of the world population and the increasing homogenisation of world cultures. There will also be a shift in economic power over the next decade away from its traditional strongholds of the USA and Europe towards the new 'growth stars' of Asia. The internet, already a major player in the international business environment, will continue to be adopted by more and more businesses and consumers as a communications and commerce tool. This together with the improving sophistication and capabilities of electronic wireless and mobile devices will see individuals increasingly accessing the World Wide Web on the move. There will be growing pressure for nation states and businesses to be more conscious of their impact on the environment and this may well be supported by more legislation from Governments. Regulation for businesses, especially those in financial services, will also get tougher as a consequence of the consumer backlash against the banking industry following the recent global recession.
So there is a mix of positive and negative factors that may confront international businesses in the next ten years. However, what seems most certain is that, despite the best efforts of international organisations such as the UN and the WTO in promoting stability amongst global governments, the world will continue to be a volatile place for international businesses for at least the next ten years.
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