Introduction
The global financial system has remained fragile since the global financial crisis of 2008. Since America was hit most, other economies across the world have remained on the path towards recovery and those in the emerging markets have been rapidly growing as opposed to the US economy.
The trends that are considered fundamental in global business are mostly macro-economic in nature and are majorly the increasing number of consumers in the growing economies and secondly the shifts in economic activities within the regions (Becker & Freeman, 2006).
This essay attempts to draw the global trends in trading especially in the light of the aftermath of the 2008 financial crisis. The essay will show the strategy that the US is using to survive in the international business as global competition continues to intensify.
Global Trends
In developing markets like in China and Brazil, rapid changes have been experienced, but despite this, majority of the investors still remain wary of investing in global markets. They argue that they have a lot of global exposure through the investments in US companies that transact business in the global environment.
But business commentators argue that an investment in US or in a multinational company is not enough. Among the global trends that shape the strategies on international investing especially by US firms are discussed below.
Reasons for Global Trends
The global Gross Domestic product (GDP) in the recent times has been dominated by other countries from outside Europe and the US region. The emerging markets contribute to approximately 37 percent of the global economy but this number has grown to the extend that the emerging economies contribute to 46 percent of the global economy and it is projected that by 2014 they will be accounting for 51 percent of the world economy.
This fact is as opposed to the US economy which now amount for 20 percent of the world economy and projected to shrink in the coming year. Consequently, 80 percent global market is dominated by countries that are outside the bracket of the developed economies (Junkans, 2011).
Furthermore, the emerging markets have given rise to the emergence of global consumers. The growth and expansion of business opportunities and the emergence of middle class economies have led to the rise of global consumers.
This is supported by the facts that there are more millionaires outside the United States of America, also there is more auto sales witnessed in the Chinese market than in US; Chinese consumers purchase a lot of phones than all other consumers of mobile phones lumped together in the globe.
World Trade Organization has predicted that trade by emerging world economies has been increasing at a faster rate than the trade driven by the US and at a double rate than the trade driven by the developed countries. Not all international trade is or should be export oriented. Russia, China and Brazil combined will import more goods than the US (Junkans, 2011).
This is one of the problems facing the General Motors a largely competitive automobile industry; the vehicles manufactured by the emerging economies have resulted in the erosion of its market share due to the weakness in its product offering and the time it takes to design General Motors products. This had led it to adopt the rebate strategy in order to maintain its operation and to adhere to the global trends.
Another global trend that is witnessed in the global markets is that international securities account for approximately half of the global capital markets.
This is largely due to the increasing role of international corporations of which 20 percent of the global corporations have their operations outside the US and consequently 20 percent of the most profitable companies are domiciled in Brazil in emerging economies (Morningstar, 2011).
Global change in portfolio operations: emerging markets are still underrepresented in several investment portfolios on the globe as compared in their economies and the growth prospects. It is also worth mentioning that the emerging economies are still rich in natural resources. In such a scenario, it is hard for key investors to tap into the opportunities found in the developing economies (Junkans, 2011).
The above explanation is evidenced by the actions of operations and strategies of most of the US firms. The McDonald Corp, for example, has been facing a lot of competition, less brand loyalty and more demanding consumers and as a strategy, they have switched to hamburger bun which does require roasting since customers prefer the taste of roasted bun. According to McDonald’s, roasted bun saves time.
The increase in competition between Kmart and Wal-Mart is another example of advanced global competitiveness. Despite that they both started operations in 1962 but by 1987 Kmart had 2,223 as compared to Wal-Mart’s 1,198 branches, it was observed that this did not stop the sales in Wal-Mart from exceeding those of Kmart.
The strategies pursued by the two firms are different; whereas Kmart emphasized marketing and merchandizing for example through the national TV advertisement campaigns, Wal-Mart invested a lot of money in its operations to lower costs.
Wal-Mart computerized its operations leading to better management. The profitability of Wal-Mart over Kmart was because the employees of Kmart were unskilled (Meredith & Shafer, 2010).
Factors Dictating Global Trends
According to the Ernest and Young Co. report on tracking global trends, the global trends and strategies are dictated by the following main factors:
Demographic Shifts
These include factors like the ever growing population, the increase in urbanization and the growing prosperity of the middle class.
Reshaped Global Power Structure
This has emanated especially after the global recession. This has been characterized by the strong relationship between the public and private sectors which has led to the shift in balance of power between the developed economies and emerging economies.
Disruptive Innovation
The increased innovations and inventions especially in the technological front have largely affected businesses and how businesses operate. The middle and lower class presents a great opportunity.
Businesses or firms who would want to expand and to execute their business strategies need to be good enough and they must deeply ponder on both the opportunities and the risks that emanate from the evolving global trends and the driving forces behind them (Ernest & Young Co., n.d.).
Merging is one of the strategies that are adopted by most US firms to remain competitive in the global market. This is evident in the merger between Kmart and Sears. This combined the potential synergies between Kmart’s convenient locations and the strong brands of Sears (Meredith & Shafer, 2010).
The measures adopted by the US as a reaction to these global trends is to maintain diversity and to improve its operations. This has the net effect of lowering the product costs, enhancing customer satisfaction and enabling them to have competitive advantage in the global market.
Improved operations can be achieved through the application of advanced technology (Meredith & Shafer, 2010). The production system which will enable the US to achieve their global competitiveness is shown below.
Each of the part in the production system as indicated above contributes to enhancing the quality of the product and hence increasing their competitiveness in the global market. It also enhances mass customization which can be achieved through low cost, high quality variety of goods.
This is motivated by the fact that it is not all products that can be customized and the only addition is to enhance their manufacturing quality (Meredith & Shafer, 2010).
Conclusion
It is worth mentioning that the global trend strategy affects future global markets together with the global contracts. The trends are also highly determined by price. The trend followers tend to follow the diversified global markets which include government bonds and commodity currencies whereas there are other trend followers who follow particular markets.
Since USA bore the greatest force of the global financial crisis which nearly collapsed its global dominance, it is at this moment experiencing difficult times in trying to adopt to the global trends and strategies that will enhance its competitiveness and that of its firms and to regain its leverage at the international commerce. The government needs to take an active role in ensuring that the US economy gets back on track.
References
Becker, W. M & Freeman, V. M. (2006). Forces shaping the business environment. Mckinsey Quarterly. Web.
Ernest & Young Co. Six global trends shaping the business world. Ernest & Young Co. Web.
Junkans, D. (2010). International investing: Global trends. Wells Fargo Conversations. Web.
Meredith, J. & Shafer, S. (2010). Operations management for MBA’S, (4th ed). New York, NY: John Wiley and Sons.
Morning Star. (2011). The global trend strategy. Web.