Business: Key Drivers for Business

¶ … Business: Key Drivers for Business in the Next Decade Following the introduction of the Internet and computer-based technologies in the closing decades of the 20th century, the pace of change has accelerated in the 21st century, and all signs indicate that these trends will continue well into the future.

As the move from third generation to fourth generation cloud-based technologies continues on the way to ubiquitous computing, a number of key business drivers will become evident in the coming years and it is possible to discern some of these by examining current trends and projecting these into the future.

To this end, this paper provides a review of the relevant literature to demonstrate that liberalization of trade, financial deregulation, the formation of international trading blocs as well as further refinement of existing trading blocs and technological innovations will be among the key business drivers during the next decade. A summary of the research and important findings are presented in the paper's conclusion.

Review and Discussion Background and Overview A number of important drivers, including the liberalization of trade, the financial deregulation (allowing the free flow of capital), the formation of international trading blocs, as well as further integration and refinement of existing trading blocs, have been evident in recent years and these drivers will remain key in the years to come (Sutherland 2003).

Likewise, other authorities cite the increasingly rapid proliferation of sophisticated computer-based applications and mobile devices and suggest that technological innovations will be a key driver in the next decade (Businesses Expect Steady Growth but Increasing Foreign Ownership over the Next Decade 2011). These four key business drivers are discussed further below. Liberalization of Trade Clearly, as trade policies are liberalized around the world, trade will concomitantly increase in response.

In this regard, Tran-Nguyen and Zampetti (2004) emphasize that, "Opening the economy to trade is often seen as bringing benefits in terms of broad-based and sustained growth, as trade will entail more efficient allocation of resources in the world economy" (p. 15). Moreover, the liberalization of trade is taking place in both developed as well as emerging nations around the world.

For instance, the editors of World Economic Outlook (2002) report that, "Openness to trade and capital flows has increased in both industrial and developing countries in recent decades, reflecting the liberalization of trade policies and capital account restrictions" (Trade and financial integration, p. 108). Therefore, it is reasonable to suggest that one of the key business drivers in the coming years will be the liberalization of trade, particularly given the pace of internationalization of many corporations as well as the globalization of the marketplace.

In this regard, Sutherland (2003) reports that, "Liberalization has been an important condition, allowing transnational corporations to embark upon their firm level strategies of expansion" (p. 97). In fact, there are already a number of signs that the liberalization of trade is serving to drive business expansion in emerging nations, most especially the so-called BRIC nations of Brazil, Russia, India and China. In this regard, according to Hawser, "Global trading volumes have sky-rocketed in the past 50 years since the World Trade Organization first began its quest to demolish trading barriers" (2005, p. 28).

Current indications also suggest that developing nations such as India, Cambodia, Laos and Vietnam are increasingly inviting foreign investment in their markets, and trading levels are expected to continue to increase well into the 21st century (Hawser 2005).

In response to these trends, a series of international negotiations has resulted in the general principles for the liberalization of trade and it is reasonable to suggest that in the near future, a basic legal structure under which a system of specific international commitments in this area will also be forthcoming (Tran-Nguyen & Zampetti 2004). Financial Deregulation Although the liberalization of trade frequently involves financial deregulatory policies, the two drivers of business are not exactly the same and their effect on the marketplace will also be different.

In this regard, Boer-Ashworth (2000) report that, "Many see the liberalization of financial markets as simply a natural extension of the liberalization of trade in goods. However, the effect of financial deregulation is profoundly more invasive than the agreed removal of border tariffs or non-tariff barriers" (p. 26).

Financial deregulation has fueled economic growth in the former countries of the Soviet Union in Central Europe (Boer-Ashworth 2000) and the countries of Latin America in recent years (De La Torre & Schmukler 2007), for example, but the financial deregulatory process is not without its problems and the transition to a free market economy for many of these emerging nations has required more time than many observers expected (Boer-Ashworth 2000). To become fully effective in driving business, financial deregulation must achieve three fundamental actions as follows: 1.

The opening up of a nation to the free flow of capital in and out of it; 2. The removal of regulations on financial institutions operating within a country; and, 3. The removal of political controls from the central bank (Beder 2009). The net impact of these actions will include the transition of the country into the global economy as well as generating the surplus capital that is needed to fuel additional business growth.

In this regard, Beder adds that, "Financial deregulation was demanded by business interests, particularly large financial firms and transnational corporations that wanted to be free to move their money around. The economic argument for financial deregulation was that the free and unregulated movement of capital is more efficient, because capital can move to where it gets the best return" (2009, p. 18). Because more and more countries are deregulating their financial systems and increasing their trade levels with other countries, they are also forging mutually beneficial trading blocs as described further below.

International Trading Blocs International trading blocs such as the North American Free Trade Agreement (NAFTA), the European Economic and Monetary Union, and a host of other multilateral trade arrangements will continue to proliferate and reorganization and refinement will continue to take place in existing trading blocs to maximize their efficiency and profitability during the next 10 years (Sutherland 2003). One of the most significant up-and-coming trading blocs at present that can be reasonably projected to have an enormous effect on global business through 2022 is the Association of Southeast Asian Nations (ASEAN).

The current membership in ASEAN, for example, already includes Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam as shown in Figure 1 below and new members are lining up to join as well. Figure 1. Current Membership in ASEAN Source: http://www.aseansec.org/images/map_all.gif As an indication of their growing economic impact over the next decade, a number of ASEAN countries have implemented free trade agreements with countries outside their region, including Australia, China, South Korea, Japan and the United States (Hawser 2005).

Furthermore, ASEAN entered into a Comprehensive Economic Co-operation Framework Agreement (CEOFA) with China that focused on liberalization of trade issues, services and investment and increased economic cooperation to fuel commerce (Hawser 2005). This is an especially salient event for the purposes of this paper since it will provide the framework for reducing and eventually eliminating trade tariffs between China and ASEAN member nations (Hawser 2005).

With respect to the future of ASEAN and its effects on the global economy, Hawser predicts that because around 150 tariff lines remain in place and further reductions of tariff lines on the "sensitive" list may not take place until 2018 or 2020 for more recent ASEAN members (2005, p. 29). Trading blocs, as well as the other key business drivers reviewed above, will all be affected to varying degrees by the final key business driver, technological innovations, which are discussed further below.

Technological Innovations Perhaps the most important of all of the key business drivers reviewed herein, technological innovations will most likely be the most important and will contribute to all other business drivers as well. In fact, virtually all of the other key business drivers reviewed herein as well as numerous trends that were not reviewed are all being driven in large part by technological innovations (Sutherland, p. 97).

As Moore's Law continues to hold basically true and software engineers design applications for processing speeds that are not even readily available yet, a sense that technological innovations will continue to solve many of humankind's problems has become apparent. In this regard, a survey of 664 business owners in the U.K. released by Barclays Corporate (2011) found that an overwhelming majority (88%) believed that technological innovations would be a key driver for their companies in the next decade (Businesses Expect Steady Growth but Increasing Foreign Ownership over the Next Decade 2011).

Other authorities have also cited the rapid rate of technological innovations as one of the key business drivers in the coming years, with new applications for these innovations being developed every day on the path to pervasive computing. For example, Wiedmann, Hennigs, Varelmann and Reeh (2010) report that, "With the emergence and increasing use-density of new technologies like the mobile internet, for example, different areas of the human living environment grow digitally together" (p. 137).

Across the board, then, technological innovations will not only be a key driver of business in the coming decade, they will also facilitate the effects of the other key drivers of business discussed herein. For instance,.