In the last 20 years, there has been a transformation in the composition of China’s export trade. The share of manufactured goods has risen from 50 percent to more than 90 percent, with primary goods contracting to a share of just 9 percent. As China is increasingly becoming the manufacturing centre of the world, there Is another nation becoming the centre of information technology and services, India. Between 2000 and 2004, India increased dramatically their software exports, being about $6 billion in the year 2000, reaching an astonishing $16 billion in 2004. The accounting firm Deloitte stated that, “within the next five years the world’s biggest financial firms will have shifted $356 billion and 2 million jobs offshore, mostly to India. One estimate predicts that India’s IT services industry will have revenues of $57 billion and employ 4.4 million people, and constitute 7 percent of GDP by the year 2008.”
An example of a Multinational Enterprise based in the United Kingdom but constantly expanding globally is Tesco. This Multinational is United Kingdoms leading retailer and the world’s third largest retailer, with over 2300 stores across 13 countries and employs 353,000 people. It has four key business units – the core UK Business (Stores), Non-food, Retailing Services and International Business. Originally specializing in food, it has moved into areas such as clothes, consumer electronics, consumer financial services, selling and renting DVDS, compact and music downloads and internet services.
Throughout the 1990’s, Tesco continued its international expansion. In response to a growing Eastern European market, Tesco opened stores in Poland, Hungary, Slovakia and the Czech Republic. During the same period, Tesco also ventured into Taiwan, Thailand and South Korea. Tesco has a sourcing base in India. 90 per cent of India sourcing is accounted for by apparel. Currently South Indian apparel hubs Bangalore and Tirupur account for a large proportion of the sourcing. Over four million vests and T-shirts sold in Tesco stores each year are made in Tirupur, and Tirupur’s knitwear alone accounts for 40 per cent of Tesco’s Indian imports. The company also imports shorts from Bangalore (about a million pieces a year).
Such a Multinational Enterprise, and many more international businesses based in the United Kingdom, will be affected by the oil shifts in world economy. As the price of oil increases dramatically due to terrorist attacks and the long and expensive war in Iraq, businesses have been restricted in expansion and exportation as oil consumption is a key factor to aiding development. Furthermore, as the rising oil prices continue there is less consumption because the basic necessities of heating, food and travelling to work will overrun general consumer consumption and this will have a negative effect on the Multinational Enterprises, such as Tesco. Consequently, consumer products will not be wanted causing a reduction in production.
There have been added global pressures on the economy, effecting directly Tesco’s, on top of the oil prices spiking. The July attacks on London by Al-Queda terrorists have created further instability and fear. Due to this factor potential customers fearing another attack avoided going out, reducing incredibly purchases. In conclusion, its understandable that the shifts in the world economy, have a substantial impact on international businesses. Furthermore, due to natural disasters terrorist attacks and on going conflicts between nations, the world economy will be under constant fluctuation, which will greatly affect international businesses both domestically and internationally. Ultimately, at present time business growth in the world is evolving; within the European Union growth is solid with China and India continuing to be engines of growth.
The world economy consists of many different factors. One of the most important ones is the GDP (Gross Domestic Product) of all countries. This factor is influenced by each countries performance in respect to the level of trade, investment and government spending. It is hard to identify an exact definition of the World Economy, since it consists of a vast amount of variables. “It is inseparable from the geography and ecology of Earth, and is therefore somewhat of a misnomer, since, while definitions and representations of the “world economy” vary widely, they must at a minimum exclude any consideration of resources or value based outside of the Earth.”