Business concepts and applications

Business

The Decision Making Process in the Global Context

In making corporate decisions, managers must take into account a wide series of micro and macro forces. Some of the immediate factors impacting the decision making process could revolve around the organizational customers, the employees or the shareholders. To best understand how these forces impact the decision, take the hypothetical example of an economic entity desiring to invest the annual profits into a new venture. The shareholders however could oppose this by voting a distribution of the profits in the form of dividends, rather than its further investment.

Aside the forces in the micro environment, the decision making process within organizations is also impacted by several features of the macro environment. These most often refer to economic and political policies.

In terms of the global economic regulations, international institutions such as the World Trade Organization, the World Bank or the International Monetary Fund, implement various policies which restrict corporate actions. They for instance place an increased emphasis on reducing monopolistic actions. In this order of ideas then, when two multinationals take actions for a potential merger, they must receive approval from the international forum. If the future merger is to create a monopolistic market, the decision to merge could be negatively impacted by the ruling of the committee.

The WTO also obliges economic entities to conduct their operations in a transparent manner (Website of the World Trade Organization, 2008). This then means that the organizations engaged in international trade must allow public access into their corporate transactions.

Individuals and companies involved in trade have to know as much as possible about the conditions of trade" (Website of the World Trade Organization, 2008). Consequently, an organization has to be properly informed before launching international operations. The process of becoming informed however implies additional costs and resource consumption. Financial resources have to be allocated for the process and organizational employees must take time to analyze the foreign markets.

Foreign direct investments represent yet another aspect of the economic and politic policies impacting the corporate decision making process. When trying to attract FDIs, organizations have to act in accordance with various policies, such as increased transparency or reduced corruption. The decision making process has to be a simplistic one, based on real arguments and no hidden agendas. "Investors tend to look for predictable environments where they understand how decision-making processes work. Governments therefore are incentivized to build up a track record of rational decision making. The business environment often requires work to remove onerous regulations, reduce corruption and encourage transparency. Governments often also seek to improve their domestic infrastructure to meet the operational needs of investors" (Economy Watch).

Another major policy impacting organizational decision and extremely relevant in the current context is given by the increased emphasis on protecting the natural environment. In this order of ideas, international institutions are promoting 'green' strategies to reduce pollution and the emission of greenhouse gazes. To respond to the newly emerged policies and become responsible entrepreneurs, corporate entities invest significant financial resources in replacing the older technologies and training their staff members how to be responsible employees and consumers. In this context then, a decision to purchase a cheaper technology would be replaced with a decision to purchase a more expensive technology, which eliminates less waste.

The International Monetary Fund promulgates numerous laws that regulate the international economics and politics of corporate action. Its primary aim is to set the currency exchange rates and offer a correlation between financial policies as to ease the international operations between partners and countries. "The IMF is responsible for the creation and maintenance of the international monetary system, the system by which international payments among countries take place. It thus strives to provide a systematic mechanism for foreign exchange transactions in order to foster investment and promote balanced global economic trade" (Investopedia, 2008).