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Changes In The Global Business Environment Management Essay

The international economy is complex structure where countries commonly integrate their efforts to create global market. Changes in the Global Business Environment are a consequence of opening of the new markets, developments of transport communications and, certainly, information technology and innovations. (Lamy, 2010) The Global Economy is composed of economic systems of countries, and the state economic system is considered as a framework of processes in the interaction of recourses to commercial performance of domestic companies. (Wild,Wild, Han, 2006:122) The significant elements of the Global Economy are rules, parts and structures of the world market. It is necessary to note that International Monetary Fund, World Trade and World Bank with the key business players-countries are the most important institutes of Global Economy. (Dicken, 2007:11) The study subject of Global Business is transactions between different countries with the aim of meeting the interests of individuals and organisations. These commercial transactions are considered as economic agreements in the trade domain concerned export and import operations. Additionally, investments of Global Companies flow to these operations around the world. (Rugman, Collinson, 2009:7) It has definitely distinguishes from Domestic Business, in particular, national business includes commercial transactions in the area of one country, while, Global Business doesn’t take in attention such details as nation borders. It involves different types of currency, legislation and culture. (Griffin & Pustay, 1999:8) All these mentioned factors like globalization process make the International business outstanding and important. Our societies are transformed under the big Business game and it creates different rules of play in each market.

Environmental factors define game rules: affecting International Business in Oil and Gas industry. The understanding how it is important to evaluate the environment in discovering of industrial activity in international business scope is definitively increasing. The particular industry as the open system depends on uncontrollable forces as political, economic, social, technological, environmental and legal factors. (Ball & McCulloch,1999: 17) Particularly, factors influencing on Oil and Gas industry, are complex.IEA (International Energy Agency) demonstrates a lot of evidences that today oil delivery is growing and predicts in the period of 2003-2030 it will be necessary to increase energy by 52 %.(Bonenfant, Kueny, Appert, Juvin, 2007) Trade in the raw materials market is rapidly rising as a consequence of increasing production prices. The averages of the global export of raw materials show 2.4 trillion US dollars. (Lamy, 2010)

The development of modern technologies is one of most significant factors affecting international business, and Oil and Gas industry is not an exception. «Technology is not independent or autonomous, it does not have a life of its own» (Dicken, 2007: 73) The capacity of high-quality equipments allows building new oil refining and gas processing factories. If a company builds factories on the territory of other countries, realization of oil products and natural gas is more productively, passing intermediaries-companies, consequently, delivers goods to the end-users, it is efficient way, because the existing gas suppliers are at long distance from the Markets. Lukoil Company’s geographical scope of marketing is extends to 26 countries, and it has own factories on their territories. (Lukoil Oil Company, 2010) Chevron Company is extremely successful in advertisement sphere, adhering to the slogan: «Think more like technology companies», every year attempts to bring innovations in their technology devices, create new types of energy in oil and gas market, and, certainly, boosts money in improving technological capacity of the Company. (Chevron Corporation, 2010) Demand for gas grows gradually faster than on oil as the reason of sharp consumption increase of fuel for electric and cleaning power production. For a long time the changes in oil and gas industry were not connected with price fluctuation, the most important impact on future industry is geopolitical and technological developments that we can’t control. (Longwell, 2002) Weaknesses in technological development lead to unproductiveness of the companies that in turn causes deficit of a product in the market. Nevertheless, the negatively effect of high-tech in oil and gas industry is rapid increase of necessity in developing alternative sources of energy. Oil as raw material is objectively exhaustible and nonrenewable natural resource. As a result of fast development of alternative sources of energy there is a real threat to Oil and Gas industry, for instance, wind energy is very developed in the European countries overtakes the peak of blossoming and continues shift to other less developed regions. (Alternative energy, 2010) It is connected with a rise in prices for oil, current problems of energy security and concerns with the increasing climate change problems. According to experts of Marathon Oil Corporation high prices for oil leads development of alternative energy sources thereby overshadowing traditional sources of energy as oil and gas. (Marathon, Living Our Values, 2008) Though, the development of alternative energy is really expensive, for example it is necessary to invest 92 USA billions to exploit nonconventional oil in Canada. (Longwell, 2002)

Addressing to history article of John Vidal high prices for oil make the USA armed forces to find the way by using alternative energy sources. Information concerning how much oil the USA military forces use is not available, but in routine life of the country the average amount of oil consumption is nearly 400,000 barrels per day. ( Vidal, 2010) Thus absolutely fairly to notice gradual transition to alternative energy sources could seriously impact on oil business sector in negatively way. One of vital issues which industry faces is shortage of natural resources: it becomes almost impossible to find new deposits of oil and gas. This challenge carries economic and environmental characteristics. Time Magazine published an article that the most part American population is ready to pay 50 cents more for a gallon of gas if it would be beneficial to force with the global warming. (Michaels, 2004)

The environmental problems lead to the limited exploration of oil and gas fields, particularly, in Alaska. (Longwell, 2002)

Obviously, ecological aspects have close linkage with political impacts on industries. The ecological problems causes to Government decisions to increase taxes on petroleum in order to decline a level of global pollutions. Therefore, there is a threat of reduction of demand for gasoline, and it would affect on gas oil industry. (West, 2010)

Recently the US Congress has expressed a readiness to increase the oil tax, if it will give a positive effect on the environment. (Fox News, 2010)

Political factors are expressed in actions of the governments on reduction of trade obstacles or increase in trade possibilities by multilateral agreements that subsequently, reflects on the policy of companies. (Czinkota, Ronkainen, Moffett, Marinova, Marinov, 2009:90) Last five years oil and gas export operations are the most important sources of economic domination in some countries. The Russia Government revenue was changed in oil prices in $ 1.4 billion by $ 1 per barrel. (Gelb, 2006)

The economic crisis in 2009 significantly affected the industry, world energy consumption decrease by 1.1 %, in addition, it was most remarkable reducing since 1980. OPEC oil production declined by 7.3 %, natural gas production – 2.1 %. (BP Global, 2010) International relations among governments substantially impact on business culture of countries. Political conflicts concerning USA and Iraq, Iran, North Korea led to lack of oil business. (Czinkota, Ronkainen, et al., 2009:113)

JOGMEC attempts to provide close relationships among Oil and Gas producing Companies and Japanese firms, thus, to deal secure and lucrative negotiations. (JOGMEC, 2010)

It is reasonable to take into account the gas conflict occurred between Russia and Ukraine, which directly affected business relations of the oil and gas companies in these countries: tariffs and prices changes, conditions of supplying. (Torres, Alvarez, Lauge, Sarriegi, 2009)

Moreover, there is emerging of new countries-dominants, which define the rules of business game, particularly in oil and gas imports and exports. The political interest balance shifts from one hand to other, subsequently, influence on industry. BRIC countries speed up on capture of the oil and gas markets. (Nikolova, 2007)

Summing up, it is necessary to notice that the future of Oil and Gas industry is under the threat. The mentioned factors will play large role next years: technological development, the environmental problems, the exhaustion of natural resources, and also shift in leaders-countries, increasing of competition between exporters and importers. Recent researches show the role of OPEC will gradually decrease by 2040, however to this time, the organization will dominate.( Duncan & Youngquist, 1998)

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