Many industries today are investing a lot on information technology so as to be able to compete in the global markets and also survive in the prevailing global economy (Daft, 2008).
According to Daft (2008), the business sector heavily depends on technology for its success and development and this dependence is as a result of the technology’s capability to provide efficient services and perform tasks that would otherwise not be performed had it not been available. Many business activities in the current global economy would not be carried out effectively without the support of information technology and it can therefore be argued that technology is in one way working towards enhancing the global business environment through increasing the competitiveness of the businesses and improving their performances (Chen, 2006).However, information technology has not had only the positive impact on the business environment but negative impacts as well. The global economic crisis has had a major economic drawback on the effectiveness of information technology on business activities and it has become clear that the global business environment no longer sustains most businesses (North, 1990). These effects are the outcomes of the current global business environment and the changes that take place in the day to day world affect all aspects of business activities.The nature of the current global business environment:According to North (1990), every business in the world intends to grow rapidly and make maximum profits with as minimal costs as possible.
To be able to succeed in producing the best and with minimum costs, businesses have been focusing on adopting the most recent trends that are in existence in the business world. This has been through making use of outsourcing the business activities so that expenses and time resources are saved and this has been taken into consideration by both the large business enterprises as well as the small-sized and medium businesses.The global business environment makes use of the offshore development agencies to assist in the outsourcing strategies (Lan, 2005). The agencies have become the most common means of generating revenue through outsourcing and by the use of information technology services. They also provide qualified professionals to run businesses and make the best out of the available resources. The global business environment through the offshore development agencies aims at offering low cost customized services to create competitive advantage and promote productivity.
They work for all business sectors in the world and they have been gaining popularity mainly in the businesses that are specializing in outsourcing (Lan, 2005).Another characteristic feature of the global business environment is its ability to come up with the most qualified personnel that is proficient in the nature of businesses and is able to coordinate business activities with the changes that are taking place in the business world. Business professionals are aiming at bringing out their skills and expertise to achieve maximum profits and also improve the prevailing standards in the global business environment.
Without qualified professionals, businesses are not likely to succeed in the business environment especially with all the advanced developments that are taking place in the prevailing economic trends (North, 1990).According to Mike (2009), international businesses need to clearly understand the important aspects of the business environment so that they are able to overcome the shortcomings that arise in the global business environment. Lack of sufficient knowledge on the global business environment is one way that negatively affects the operations of most businesses in the international markets. Despite the fact that businesses have benefitted from the current global business environment, there have also been major drawbacks that have been arising which have affected the proper operations of international businesses. Inadequate knowledge has resulted into many international businesses incurring high expenses and earning fewer revenues while the local business enterprises continue to develop. It is therefore important that international businesses make use of the world wide web and other sources of information that have mainly been made effective by the advancement of information technology (Mike, 2009).
The limitations of dealing in international business come in when the global business environment changes with change in the salient features between different markets in the world (North, 1990). This is because business managers often find it difficult to deal in businesses in foreign markets rather than in the domestic markets when differences exist. International businesses may not be able to diversify into the international markets unless they fully understand the differences between the home country’s business environment and that of the foreign countries.Features that managers and organizations need to know concerning the global business environment:There are those aspects of the global business environment which managers must be aware of in order to make effective decisions and in turn succeed in the global economy. In this respect, there is need to identify priorities so as to establish the most important areas that a business should focus in to succeed in the global business environment. The macroeconomic aspects of the different countries in the world that involve in international business greatly affect the impact of the global business environment on business operations and it is important that managers take them into consideration in order to be profitable (Mike, 2009).Other aspects that need to be looked into include factors like the prevailing political and social advancements in the country and the availability and development of the important resources that are used in the business environment (Lane, 2008).
The key features of different countries and regions determine the nature of the business environment as well; which include the trends in trade, the consumer buying patterns, availability of raw materials and other inputs, the competitiveness in the market structure, among other factors. All these are to be taken into consideration in understanding the global business environment and its impact on business activities and the organization of international businesses.The global business environment is also characterized by the presence of formal and informal institutions that make up the different societies in the global markets (North, 1990).
These institutions play a major role in influencing the macro economic aspect of a nation or region and it can be noted that the institutional framework govern both individual and business behavior through the formal and informal institutions in the global business environment. The formal institutions assist in the establishment and implementation of laws and regulations that govern the business activities in a country or region. Informal institutions, on the other hand, involve the norms, cultural behaviors and ethical aspects among individuals. These also greatly determine the nature of the global business environment which in turn affects the operation and organization of most business enterprises.According to North (1990), this view on the institutional framework implies that managers willing to know the nature of the global business environment should lay their emphasis on the formal and informal institutions that are established in different regions of the world. Understanding the key international agreements like the World Trade Organization and international formal institutions such as the International Monetary Fund may help provide sufficient knowledge of the major aspects regarding the business environment in various parts of the world.Other factors that affect the performance and operations of international businesses in the global business environment are the business’s available resources as well as its capabilities and also the nature of the industrial competition (Chen, 2006).
The ability to understand the nature of the existing competition with other businesses will affect the particular business’s competitive strategy. A business’s expertise and available assets will determine its competitiveness and its success or failure depending on its competitive strategy. The formal and informal institutions directly influence the global business strategies for the various business organizations and these in turn influence the ultimate impact of the performance of these organizations in the business environment (Chen, 2006).
Hence, it can be argued that focusing on the formal and informal institutions in the different regions and countries all over the world is one major way of analyzing the global business environment and its impact on the business organization and operations.Impact of global business environment on business organization and information technology:International trade has played a major role in the global economy and despite the shortcomings that affect its success it continues to form a large proportion of most countries economic development. Information technology industry and its related businesses have been mostly influenced by the global business environment. There was, for instance, major downfall in 2001 with the Dot Com company which almost led to the collapse of most businesses that had adapted information technology in its operations. When the global economy rose, the information technology firms improved and operations were eased (Lan, 2005). Most organizations had started making use of IT services like outsourcing and web designs and these experienced a great boost in their operations and were able to gain competitive advantage over other firms that had not made use of the services.The global economic and financial crisis that has been prevalent since 2007 has changed the situation in the IT departments, with most companies going through major difficulties and encountering financial hardships.
The global business environment has greatly affected the operations of businesses and the IT departments have been forced to slow down their operations as profitability has greatly reduced (Mike, 2009). The global business environment since 2007 has prevented businesses from coming up with more advanced services for enhancing their business operations and this has resulted into employees losing their jobs as laying-off workers has been seen to be the solution to lower the costs of operation. On the other hand, there have been benefits that came with discovering the global knowledge management especially through outsourcing.Discovering the global management knowledge has created new and more improved ways of data processing procedures. American and European companies opened their facilities in China and India and the global information industry went through a revolution. Technology applications and experiences in the global information systems development and operations ultimately resulted in the penetration of these technologies to poor nations (Lan, 2005).
Despite some gloomy conditions, the current global business environment for information technology industry is not very bleak (OECD, 2008). During 2008, IT industry saw a growth in the software and IT services. However, there was a downward trend in the computer manufacturing and communication sector. The global semiconductor market grew at a rate of 2.2%, an almost satisfactory ratio.The impact of this confused business environment is most visible in the budgets and working of information technology departments. IT departments of organizations that have nothing to do with technical information handling, like American Bible Society, are also facing a heat due to recession.
CIO department of ABA and other religious denominations are facing budget cuts. Even if they are able to save some budgets, the amount is diverted to include security in the IT budget, among other things (Tucci, 2009).Global business environment is also directly affecting the research and improvement projects going on in different companies (Mike, 2009). When the money is spent on payrolls and administrative charges, there will be no spending on improving the performance of these companies.Conclusion:In summary, it can be noted that global business environment has had a great impact on the various sectors of the business organization, both on the positive and the negative. Companies and other business organizations are trying to cope with the unfriendly business environment. Budget cuts on the information technology departments are now a regular feature but some companies are still spending a sizable amount on not only maintaining but also developing their IT departments.
CIOs have a major role to play in this regard. They are the eyes and ears of the management and can avoid any financial disasters (Daft & Lane, 2008). First, they have to prove their worth to their bosses though.
Conclusively, the paper has discussed some of the significant aspects of global business environment. It is hoped that the paper will be beneficial for students, teachers, and professionals in better understanding of the topic.