Business Management

What is the Global Business Environment?

Dec 14, 2022 | By Jenna van Schoor
What is the Global Business Environment? - SACAP Global

The global business environment is complex and constantly evolving. Being so vast and multifaceted, it can be quite challenging to get a grip on what it is and how it works. However, if you’re in a management or leadership position, it’s advantageous to get a better understanding of how businesses operate in an international context.

In this post, we will give a brief overview of what the global business environment is, as well as some of the key trends that are shaping the international marketplace today. We’ll also talk about how you can go about getting a better understanding of how a business operates.

What is the global business environment?

The global business environment is the context in which all businesses operate. Diverse and perhaps overwhelmingly expansive, it’s made up of all international business activities that take place around the world. Whether or not a business directly trades with another country or international company, all businesses – even exclusively localised ones -are affected to some degree by what is happening in this arena.

To understand this commercial context better, it’s important to look at socio-political, economic and technological factors, as well as regulatory, tax and other legal considerations.

Overall, the global business environment shifts and changes according to all of the above factors, which can all increase or limit international trade or partnerships accordingly. For example, an ecological disaster can affect a country or region’s socio-political and economic standing. It can also impact how international and local businesses trade and operate. Another example is how wars can impact supply chains for locally manufactured products.

To understand how trade is facilitated across borders, it’s also critical to look at the cultural factors that can influence, drive or inhibit business relations. There are also many different ways of exchanging goods and services across borders, including trade, investment and strategic alliances. International business efforts can also include activities like licensing or franchising, where different countries use existing brands, trademarks and business models in exchange for royalty fees.

There are overarching trends that may take time to have a measurable impact, but which can set a trajectory for trade relations throughout the world. One of these is the trend towards de-globalisation, a result of shifting power dynamics between developed and developing countries.

For example, historically developed countries have manufactured their goods internationally using cheap labour. This trend is changing as consumers become more aware and more ethical business practices are being emphasised, including fair trade.

Developing countries have also begun to manufacture and sell goods locally, especially in the Global South and other emerging markets. This is also being affected by current challenges in supply chain management and rising fuel costs, which can hamper international transport, and encourage more decentralised forms of trade.

The recent pandemic has also brought a shift towards remote working and increased online connectivity. This means that client relations can be virtual, without employees having to travel anywhere.

As touched on above, sustainability and social responsibility are integral parts of doing business today. This brings about a shift in commerce, and what expectations there are when it comes to negotiating trade relations. In the context of climate change, this is becoming increasingly important, as international business needs to adapt to sometimes unpredictable environmental influences.

How to understand a business environment

You could spend years or a lifetime reading the history of international trade. It could certainly help you understand what is happening in the current global business environment. However, this isn’t feasible for many leaders needing immediate tools to understand the micro and macro factors influencing their businesses.

However, with even a brief insight into global trade, you can start to broaden your view, and see how businesses operate on a broader scale, and what factors can affect them. From there, you can shift your focus to understanding businesses on a more micro level, including all the functional aspects, from marketing and public relations to operations and supply chain management.

Learn more about understanding global business with SACAP Global

Looking to learn more about how to make effective decisions as a manager and leader? Our short online course, Intro to Business Environments, is the perfect starting point. In this micro-credential, you will explore the internal and external environments a business exists in. Delve deeper into:

  • The micro and macro environmental factors that can affect the management of a business.
  • Trends and challenges that come with operating in a globalised (or de-globalised) marketplace.
  • All of the functional areas of a business: what each area’s purpose is and challenges faced within all of them.

Read more about this online micro-credential by visiting our website, or contact us directly to find out more.

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