Managing Resources In The International Business Environment
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Introduction: Globalization's Effects on International Business Resource Management
Question 1
Globalisation is referred to a process by which the world becomes more interconnected and increases the exchange of trade and culture in a massive way. This paper aims to identify the importance of globalisation through discussing opportunities and challenges faced by globalisation.
Causes of backlash against globalisation
Globalisation is an effective process that helps to increase the number of trade and culture; however, it also has a downside such as unfair globalisation. The research study of Rewizorski (2021) represents that backlash against an unfair globalisation is increasingly analysed by different empirical studies. These studies provide a result regarding the rise in a backlash against globalisation is the economic factors such as crisis in finance and economy and shocks in trade. Moreover, this paper implies that shocks in imports are mostly triggered by excess competition from China imports. Due to this reason, around 2 to 2.4 million jobs in industrial plants of the US are in liquidation. Therefore, it can be stated that backlash against globalisation hits the import process and causes job liquidation.
Backlash politics include three elements such as goals and tactics that are extraordinary and challenge dominant script, a threshold condition for entering into disclosure of the public mainstream, and an objective that is retrograde for returning to a prior condition of society (Alter and Zürn, 2020). Globalisation is mostly impacted through political backlash as the strategy of backlash mobilisation changes in backlash politics. In addition to this, the research paper shows that authoritarian populists in Europe backlash movements seek globalisation and eliminate the delegation of authority regarding politics to the institution of Europe. Therefore, it can be stated that political backlash is an essential issue for globalisation.
This figure shows that there is no clear trend regarding the backlash direction however, there is a rising of scepticism in a few aspects of globalisation. The research study of Walter (2021) showed that major transformations in structure of the last three years are the primary cause of facilitating backlash globalisation. Such transformations refer to changes in cultural value, changes in technology, globalisation acceleration, end of cold war, and many others. Therefore, it can be stated that backlash globalisation is the result of an increased number of transformations regarding structure. Through this discussion, it is identified that political factors, economic factors, and social factors are important causes for backlash globalisation.
Opportunity and challenges that globalisation may face
Globalisation is an effective way to trade at a high range with each other's countries. There are a few opportunities and challenges that globalisation may face in the future and especially the global issue of climate change.
Opportunities
The research study of Huh and Park (2021) shows that globalisation helps to increase the growth of the economy and worsen inequality in income of different countries. This paper proves that there is a strong relationship between economic growth and globalisation through the analysis of regression. Therefore, it can be stated that growth in economy is the result of an effective globalisation. Through this discussion, it is identified that countries will get an opportunity to increase growth in GDP that helps in the growth of countries as well. Similarly, according to Yayaet al. (2020), after the outbreak of Covid-19, globalisation has increased and enhanced the global supply chain. Due to this reason, a country becomes able to increase the growth of its economy. Moreover, this paper represents that globalisation brings economic benefits to Asian countries during a lockdown. Therefore, it can be stated that there is an opportunity for all the Asian countries that they can use such growth in providing opportunities to the society and community. There is a huge opportunity to decrease the rate of unemployment, increase the rate of inflation and GDP as well. Through this discussion, it can be stated that globalisation primarily and mostly provides benefits to the economy of a country by which they can enhance opportunities.
Challenges
Climate change is considered as a global issue that has long-termimplications on the sustainable development of countries. It is identified that warming the system of climate makes implications on the availability of a few necessities such as energy, freshwater, and security of food (Sdgs.un.org, 2021). Therefore, it can be stated that climate change is the primary challenge for globalisation. In addition to this, the research study of Alterman (2017) globalisation has faced different types of challenges such as internationalisation, simulation of e-communication, and experiment of AESOP. Therefore, it can be stated that all these factors can be a barrier to globalisation in the future. In contrast, the research study of Suleet al. (2018) shows different factors that globalisation may face in the future as challenges including exploitation of economy, stagnation of society, oppression of politics, backwardness of technology, internal strife, and many others. Other research studies also state that institutional and political challenges may be faced by globalisation rather than technological challenges. Therefore, it can be stated that globalisation may face different political and economic factors in the future.
Identification of the current development
Current development regarding politics, economy, and technology has implications for globalisation. The research study of Zeiboteet al. (2019) represents that development of technology makes an impact on the process of globalising. Moreover, this paper identifies that technological readiness is the primary factor that makes an implication on globalisation. In addition to this, the research study of Olimpia and Stela (2017) shows that the social dimension of globalisation makes a negative implication on the growth of the economy. Therefore, it can be stated that political factors are included in globalisation which has negative implications.
Conclusion
Many research papers identify that globalisation is an effective process for increasing the number of trades in each country. This paper aims to identify the different factors that make implications on globalisation. This paper identifies that political factors, economic factors, and technological factors are the important elements that make several implications on globalisations. A few opportunities and challenges of globalisation are presented in this paper.
Question 2
Introduction
Investment is a process by which a company can generate positive or negative returns based on the performance. This paper aims to identify the appropriate project for investment as it provides two different projects situated in the USA and Europe. Viability of both the projects will be identified in this paper. An appropriate project will be chosen based on NPV and present value of the investment.
a. Discussing viability of projects and allocating discount
Project viability represents that a project becomes viable when such a project generates more economic benefit than economic cost (Rosenblatt et al. 2019). Based on this factor, it can be identified whether a project of the USA has viability or the project of Europe is viable. As per the case study, both the projects are large in size, which represents that they might require an increased cost. Moreover, it can be identified that such large-sized projects will provide economic benefits at a large scale as well. Therefore, it can be stated that both the projects of the USA and Europe are viable.
As both the projects are large and viable, therefore, this paper forecasted that the rate of discount for both the projects stands at 5%. It is identified that an equal rate of discount for both the projects will be helpful to identify an appropriate and effective project. On the other hand, in case there are different rates of discount for both the projects; therefore, it can be stated that there might be a misconception in selecting an appropriate project.
b. Determination of investment and NPV
Discount rate
5%
Year
Net Cash Flow – USD USA
Net Cash Flow - EUR Europe
0
-20 million
-20 million
1
2 million
2 million
2
4 million
3 million
3
5 million
4 million
4
6 million
8 million
5
8 million
8 million
NPV
$ 1.01 million
$ 0.89 million
Table 1: Calculation of Net Present Value
Discount rate
5%
Year
Net Cash Flow – USD USA
Net Cash Flow - EUR Europe
0
-20 million
-20 million
1
2 million
2 million
2
4 million
3 million
3
5 million
4 million
4
6 million
8 million
5
8 million
8 million
Present value
$ 261.71 million
$ 261.71 million
Table 2: Calculation of Present Value
c. Discussing calculation and advising an appropriate project
Net Present Value (NPV) of a project is referred to as an analytical tool that helps to analyse economic valuation. The research study of Dwiputraet al. (2019) shows that the value of NPV of less than zero or negative represents that the cost of the project is greater than the profit. In this regard, it can be stated that an appropriate project can be identified based on the value of NPV. The calculation of NPV for the USA project stands for $1.01 million while on the other hand; the value of NPV for the Europe project stands for $0.89 million. As the value of NPV for the USA project is more than the value of the Europe project, therefore, it can be stated that the USA project will be an appropriate project for investment purposes.
However, it is also identified that both the projects have positive NPV value and due to this reason, it can be stated that both the projects can provide a positive return. As the NPV value of the USA project is more than other projects, therefore, it can be stated that an investor can generate more positive returns from this project rather than from the Europe project. Based on Positive value of NPV and increased positive return, it is identified that the USA project will be most appropriate to investment by which an investor will be able to generate a positive return at a high range.
This paper determines the present value of both the projects, which stands equal, and the value of the project, which stands for $261.71 million. In this regard, it can be stated that the present value of both the projects is equal and provides a different value of NPV. Based on this fact, it is identified that the USA project will be most appropriate. This is because an investor will be able to gain more return by investing equal amounts in the USA project.
d. Ways of analysing changes in exchange rate
The current world economic climate is the primary reason for uncertainty in the exchange rate. There are a few ways by which changes in exchange rate can be analysed such as Purchasing Power Parity, Relative Economic Strength, and Economic Model. Purchasing Power Parity is a theory that forecasts that the changes in exchange rate will offset with the changes in price because of inflation (Al-Gasaymehet al. 2019). In addition to this, the theory of purchasing power parity represents that movements on exchange rate occurred based on time. Therefore, it can be stated that analysis and changes in time can be helpful to analyse the changes in exchange rate and in this reward, PPP helps to analyse the changes in exchange rate over time.
Startegies for anticipating the changes
Relative Economic Strength is considered as another strategy that helps to analyse the changes in rate of exchange. This approach considers the strength of growth in the economy of various countries for forecasting the direction of exchange rates (Li et al. 2018). The primary reason for adopting this approach is that foreign investors provide more attraction to a strong environment of economy and high growth environment as well in order to invest in this country. Because of this reason, the investors have to buy the currency of respective countries for purchasing an investment. Therefore, it can be stated that Relative economic index is an important approach to analyse the changes in exchange rate.
The Economic Model represents that there are a few factors, which influence the rate of exchange such as growth rate of GDP, a growth rate of income, and the difference in an interest rate of different countries (Borkovskayaet al. 2018). Therefore, it can be estimated that these are the factors by which changes in rate of exchange can be analysed.
Proposal of the ways of mitigating exchange rate fluctuation
There are a few ways to mitigate fluctuation in exchange rates such as investing in hedged assets and hedging exchange rate risks. The easiest way to reduce the fluctuation in exchange rate is by investing in hedged assets. Hedge assets are widely available and traded in major markets. The fund of hedge exchange-trade providers offers both unhedged and hedged versions of tier funds that attract customers and track indices of investment (Guzman et al. 2018). In
this way, investors can reduce the risks regarding changes in exchange rates by mitigating fluctuation. In addition to this, some other factors can mitigate fluctuation of exchange rates such as currency forward, currency futures, currency options, and currency ETFs.
Conclusion
Investors are most likely to invest their funds in a company or a country with the expectation of a high return. This paper aims to analyse the most appropriate project based on the value of NPV of both the USA and the Europe projects. This project identifies that both the projects have a positive value of NPV; however, the USA project has more value of NPV than the other project. Due to this reason, this paper recommends investing in the USA project, as there is a possibility of generating a more positive return. This paper also analyses that PPP, economic model, and relative economic strength are the approaches that help to analyse changes in exchange rate. A few ways are presented in a study by which fluctuation of exchange rate can be mitigated.
Reference list
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