International Business Outlook 2002: The Author Wishes to Thank Deborah Hernandez for Her Research Assistance for This Article

By Kedia, Dr. Ben L. | Business Perspectives, Winter 2001 | Go to article overview

International Business Outlook 2002: The Author Wishes to Thank Deborah Hernandez for Her Research Assistance for This Article


Kedia, Dr. Ben L., Business Perspectives


Much will be written in the annals of history about 2001 and its historic events. The September 11 attack on the World Trade Center in New York, the resulting fallout for U.S. businesses (most notably the travel and insurance industries), and the continuing and widespread failure of dot-com companies drove U.S. financial markets into a recession and the world into an economic downturn. With the worldwide GDP growth rate down and the U.S. goods and services trade deficit soaring, everyone is looking for signs of recovery. While some economists are beginning to report signs that the U.S. economy is bottoming out--and that they anticipate a rebound as early as the second quarter of 2002--many caution that it is unrealistic to expect a return to the robust growth of the past. With all this gloom and doom, what can we expect in the world of international business during the coming year? In general, we see seven forces driving the shape of global business opportunity in 2002:

1. Continued globalization of the world's economy;

2. Continued evolution of technological capabilities;

3. The rise of regional trading blocs;

4. The advent of a common currency in Europe;

5. Persistent recession in Japan;

6. Economic doldrums in Latin America; and

7. Continued fallout from September 11, 2001.

Continued Globalization of the World's Economy

As business continues striving to achieve greater efficiencies and tap new markets, it also finds ways to lower costs and enhance its competitive position, regardless of the national or regional barriers placed in its path. Strategic alliances, transnational investment, and mergers and acquisitions--tools used to circumvent barriers to business--will continue to propel globalization in the coming year, despite the continued rise of new regional blocs and the generalized stall in attempts to further liberalize the world trading system. Reverting to protectionist ideology is simply not a viable alternative, and no amount of regional conflict, terrorist threats, or trading sanctions will stop this overarching trend.

Continued Evolution of Technological Capabilities

The death of distance at the hands of communications and Internet technology has been a defining force in international business during the past decade. As business models shift from bricks to clicks, the rate at which firms become global, the pace at which they must react and respond to changes in business conditions, and the complexity of planning and business systems have changed fundamentally. Despite the well-publicized failure of the dot-com industry as a whole, the resulting technologies are reshaping traditional firm value propositions. Internet technology is helping companies lower costs, enter new markets, provide better customer service, and redefine business relationships. In no arena is the evolution of firm technological capabilities more evident or more critical than in global supply chain management. The events of September 11 and the rise of tensions in other world regions (South Asia, Southeast Asia, and South America) have made efficient management of supply chains increasingly important t o success in both domestic and global businesses. With added security concerns and the need to continue cutting costs, it is clear that marrying information technology and supply chain management systems will be necessary to maintain competitiveness and conform to new security demands. The elevation of integrated logistics management to executive rank in many firms underscores the increasing emphasis being placed on using technology to buy, sell and effectively manage supply chains. Inefficiency in these areas will likely spell the undoing of many firms in 2002, particularly as the shakeout in the U.S. retain industry--born of the recent economic downturn--continues.

The Rise of Regional Trading Blocs

The generalized deceleration in trade growth that began before September 11 has caused many to call for a new round multilateral trade talks. …

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