Globalization and its Effects on the Business Environment

1. The concept of Globalization can be regarded as the process to interact and integrate among the people of different countries, a process driven by investment and international trade and assisted by information technology. The process of globalization has its effects on some of the major aspects like business environment, culture, political system, economic development and different prosperities. Moreover, it has effects on the well-beings of the societies. Important policies that help in opening the economies internationally as well as domestically have major influence on the process of globalization. At the same time, the technological development also has positive influence on globalization process (Giddens 2018).

The process of globalization leads to greater interconnectedness among the financial and business markets all over the world; and this contributes towards increasing awareness and communication in business opportunities in different corners of the world. Thus, it becomes possible for more investors to access different investment opportunities along with giving the opportunity to explore new investment markets in greater distance (Beck 2018). At the same time, advanced communication technology helps the investors in analyzing the potential risks and profit opportunities. Nations get the chance to maintain positive relation between them by increasingly unify their economic conditions with the assistance of increased trade and investment. The availability of various products and services can be seen in the markets all over the world; it also helps in increasing the household income. In this way, affiliation can be seen between globalization and investment process (Beck 2018).

There are various advantages of investments proves with globalization. Investment process through globalization helps the companies as well as countries to maintain a cordial and peaceful relationship. At the same time, the policies for free trade are another major advantage of investment through globalization as the companies get the chance to make international investments in the absence of taxes, duties, quota and others. More importantly, investment with the help of globalization assists the companies in maintaining global connectivity with the business organizations all over the world (Schmukler and Abraham 2017). For example, the presence of many international investments can be seen in Wal-Mart Corporations. These are the major advantages. 

2. The presence of four global business environmental factors can be seen having influence on the business organizations; they are Political environment factors, Economic environment factors, Social environment factors, Technological environment factors and Legal environment factors. The following discussion shows the impacts of these factors on national as well as international organizations:

Political, Social, Economic, Technological, and Legal Environment Factors

Political Environment Factors: Some major factors of political environment are political organizations, ideology of the government, government philosophy, nature of bureaucracy, political stability of the countries, foreign policy, defense military policy and others; and all these factors have influence on both the national and multinational organizations. For example, a country’s policy for restricting the growth of multinational businesses will lead in limiting the business operations of the companies along with business growth (Harrison 2013).  

Economic Environment Factors: The major environmental factors having influence on both the national and multinational companies are economic system of the country, economic structure, economic policies, the organization of its capita market, factors and nature of production, infrastructure for socio-economic aspects and others. For example, business organizations involve in the analysis of external economic factors affecting the business operations so that profit can be maximized (Hamilton and Webster 2015).

Social Environment Factors: The major social environmental factors are work culture, mobility of the labors, work group, preferences of the customers and others; and these aspects have impact on the functioning of both national and multinational businesses. For example, companies determine the kind of products and services to be offered based on the preference of the customers (Black, Morrison and Gregersen 2013).

Technological Environment Factors: Technological factors affect both the national and multinational companies in the areas of technological investment, effects of technology in the investment market and the application of technologies.

Legal Environment factors: Legal factors involve the adaptability and flexibility of legal and legislation regulations that govern both the national and multinational businesses. Compliance with all the legal rules and regulations makes complexities for the businesses as these companies are needed to comply with large number of legal legislations. For example, business organizations have to witness either increase or decrease in the profit level due to these compliances with the legal regulations (Black, Morrison and Gregersen 2013).   

3. Wal-Mart Corporations (Wal-Mart) is selected for this purpose. The presence of some core values can be seen in the business operation of Wal-Mart. As per the core value of the company, Wal-Mart wants to be the most trusted retailer for their customers. The company believes in the concept of shared values. As per this value statement, the purpose of the operations of Wal-Mart is not only making their customers, associates and shareholders beneficial, but also makes all the stakeholders beneficial that include suppliers, community and society in general.

There are various strategies that help Wal-Mart in achieving their value. One of such strategies is Every Day Low Price (EDLP) strategy that helps the company in providing products as well as convenient services to their customers. At the same time, Wal-Mart provides grants to thousands of organizations to do the betterment of the society and the people of society. For this reason, the company donated more than $1.4 billion in cash for this purpose (giving.walmart.com 2018).    

Core Values and Strategies of Wal-Mart Corporations

Wal-Mart has adopted some major strategies for enhancing their core values. The generic strategy of Wal-Mart is based on Cost Leadership in which the main aim of the company is to maintain low prices of their goods and services. Moreover, another important strategy of Wal-Mart is to keep the operating costs low so that economies of scale can be achieved. On the other hand, Wal-Mart has adopted the market penetration strategy as the incentive strategy for growth. At the same time, market development and product development are two other adopted strategies for Wal-Mart where the company involves in entering in new market with new products and services. All these strategies help Wal-Mart in maintaining their core values (s2.q4cdn.com 2018).

In order to enhance the organizational values, Wal-Mart is recommended to ensure further expansion of their business as this expansion can address the pressure of tough global competition. At the same time, the company is recommended to ensure that there are effective leaders within the organizations to ensure the maintenance of the core values of the organization with the introduction of effective business strategies (corporate.walmart.com 2018).    

4. Over the years, the management of Wal-Mart has taken many strategic decisions in various operational field of the business. They are discussed below:

The strategic decisions of Wal-Mart cover its products and services. Under this decision, the company addresses the design of products and services while emphasizing on cost-effectiveness and efficiency variables. Thus, the focus of Wal-Mart is to increase efficiency of products and services. Another major decision can be seen in the quality management aspect of Wal-Mart throughout the tiers of quality management. The decision is to specify the minimum quality expectations for the majority of customers so that low cost can be maintained with higher-quality of products and services (Wilson 2015). Major decision making process can be seen for Wal-Mart in the aspect of location strategy. This area puts emphasis on the efficiency in the movement of materials, human resources as well as business information throughout the organization. As per the strategy, the stores of the company have been located in or near the urban centers; moreover, strategic warehousing helps Wal-Mart in making the materials and goods available for the target customers. For the purpose of layout design strategy, Wal-Mart has decided to use the behavior of their customers for designing the payout of their stores. As per the decisions, Wal-Mart has adopted the strategy of continuous recruitment in the area of human resource management (Shepherd and Rudd 2014). Wal-Mart uses both the information technology as well as bargaining power of the suppliers to address the issues in supply chain management. These are the major strategic decisions of Wal-Mart.

Strategic Decisions Taken by Wal-Mart

It needs to be mentioned that the above-mentioned strategic decisions have positive financial consequences. The main aim of these strategic decisions is to increase the sales of the company so that profit can be maximized. It can be seen that Wal-Mart has been able in increasing their business profitability over the years. Apart from this, these decisions have positive consequences on the cash flow position of Wal-Mart as they help in improving the cash inflow of the company due to increase in sales (Wilson 2015).    

5. Business organizations have the option to select between three major sources of finance; they are Long- Term Sources of Finance, Medium-Term Sources of Finance and Short-Term Sources of Finance. Long-term finance refers to the capital requirements for a period of more than 5 years to 10, 15 and 20 years. The major sources for long-term finance are equity shares, issue of right shares, leasing, debentures, loans from industrial and financial institutions and others. Medium-term financing refers to the finance for a time of 3 to 5 years. The major sources of medium-term finance are loans from commercial banks, debentures, loans from specialized credit institutes and others. Short-terms finances are provided for a period of less than a year. The major sources of short-term finance are advance from customers, credit installments, bank overdrafts, cash credits, discounting bills, creditors, factoring services and others (Brooks and Mukherjee 2013).

The involvement of certain risks can be seen with these sources of finance. In the process of short-term finance, business organizations involve in collateral like accounts payable, inventories and others. It implies that the companies take pledge to sell its receivables to the creditors in exchange of immediate cash; and this aspect increases the business risk. At the same time, long-term and medium-term finances also have risks. Both these finance sources increases the debt balance of the companies and make the financing of the companies highly leveraged. Due to limitedness in the cash flow due to these finances, risk of negative growth of business can be seen. At the same time, this aspect increases the risk related to business vulnerability. Moreover, companies have to bear the risk of collateral as these types of finance require high collateral (Palley 2013).

There is a need for the development and implementation of effective risk management strategies for the companies in order to mitigate the above-mentioned risks. For this reason, the companies are needed to incur high cost and this cost needs to be allocated certain head. First, there is a need for the companies to hire a risk management specialist for the development of risk management framework. After that, the company is needed to incur expenses in different stages of the process of managing the risks (Barton and Wiseman 2014). Thus, the companies are needed to take into consideration all these aspects at the time to determine the risk management costs.       

Sources of Finance for Business Organizations

6. The following discussion shows different kinds of global risk associated with Wal-Mart and their mitigation strategy along with their effectiveness:

Political risk is considered as a major risk for Wal-Mart in the process of global business. The change in political condition of the countries can lead to abrupt transformation in legal and security environment. Thus, as a mitigation strategy, Wal-Mart is needed to develop a business plan after considering both the political and business environment by determining demand of the products, legal compliances, costs and others. This mitigation strategy is effective as it will help Wal-Mart in considering all the required political aspects (Uhl and Gollenia 2016).

Another major risk can be seen for Wal-Mart in the selection of the right business partner while entering into international market. There are instances when companies collaborate with other companies at the time of business expansion. This aspect can lead to failure in business expansion in case the business partner is not good. Thus, the strategy for minimizing this risk is the selection of right business partner. At the same time, Wal-Mart needs to wary of extensive resource commitment in the expansion to avoid any losses. This strategy is effective as it will provide Wal-Mart with the right choice of business partner and resource allocation (Piekkari, Welch and Welch 2014).

Hiring of non-experience business people is a major risk in the global business for Wal-Mart. There can be significant amount of loss and business failure as well in the absence of experience people. Thus, this risk mitigation strategy is to hire local experienced employees for the new business as they have the knowledge of doing business in that specific area. This strategy will be effective as it will diminish the possibilities of business failure to large extent (Belás et al. 2014).

Lack of effective business model is another major global risk for Wal-Mart in international expansions. The expansion can lead to business failure in the absence of effective business model. Thus, the mitigation strategy is to develop a business model that fits the host country and its demographics. This strategy is effective as it will help Wal-Mart in segmenting the market. At the same time, Wal-Mart is needed to have a well-developed contingency plan.      

7. In the provided situation, it is assumed that Wal-Mart is considering entering into new marker. This expansion process will involve in establishing new facilities along with associated working capital, repositioning in the existing facilities and sale of investments. For this reason, the investment decision of Wal-Mart will involve for facilitating all the aspects of business expansion. At the same time, various components of the expansion strategy of the company will be significant employee training facilities along with electronic infrastructure investments (Clemen and Reilly 2013). At the same time, other investment strategies will involve in the establishment of new research facilities for the reason of the development of new products and services. At the time of making the investment decisions, Wal-Mart is needed to consider some crucial factors affective the capital investment decisions; they are the outlook of the management, opportunities from the technological changes, competitors’ strategies, budget for cash flow, incentives of the fiscal, market forecast and other non-economic factors. At the time to expand into the international market, the management of Wal-Mart should consider all these aspects as these aspects can lead to successful investment decisions (Lin 2013).   

Effective decisions and strategies have some effects on the global environment. In the presence of effective decisions and strategies, the companies become able to make connection with the marketing decision making in the global environment. At the same time, the process of decision making and development of strategies in the global market involves risk as the companies are needed to consider all the aspects related to them at that time. Most importantly, the companies are needed to take into consideration the strategies of global competitors in case of decision making and strategy development (Therivel 2013). 

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