CS132-6 Developing Independent Research Assignment Sample
Introduction
Purpose of the study
The core purpose of the study is to identify the risk factors, which are negatively impacting on investors to invest in developing countries.
Scope of the research
The study is effective for understanding future challenges of international businesses while investing in developing countries. Therefore, the research is beneficial for investment in the internal businesses of developing countries.
Limit
The inclusion and exclusion criteria are followed in the paper to gain in-depth and specific knowledge regarding the topic. Only the information regarding “pandemic related issues in the international businesses on developing countries” is used in this report.
Discussion
Impact of Covid on international businesses
The outbreak of Covid-19 is the worst factor for international organisations, which negatively impacts their performance (Ratten, 2020). The hospitality and tourism sector is worst affected due to the lockdown-like situation. International trading is restricted due to the lockdown around the world. The large scale companies face huge losses due to the closing of business activities. International business is facing challenges to communicate with their franchises and taking necessary steps. Due to the lockdown, the airline industry was also affected. The visitors are not interested in visiting other countries, which is a negative factor for the airline companies. Apart from that, the strict Covid norms are another reason for the lower number of visitors.
In addition to that, the supply chain sector is the most affected industry due to the outbreak of pandemic. Consumer behaviour changed over the last two years. For this reason, businesses are unable to understand the buying behaviour of the customers. Besides, the transportation cost is rising over the period which directly impacts the supply chain industry (Van Assche and Lundan, 2020). The rising cost of fuel increases the cost of finished goods. Therefore, customers are not interested in buying high-quality products. Due to lockdown, the products are not delivered in a smooth and efficient manner, which is a disadvantage for supply chain management.
In the Covid situation, the governments are trying to save their indigenous businesses. Consequently, the government is imposing a huge tax on outbound organisations. This is a negative factor for the international organisations’ growth. The strict trade rules and regulations are the barrier for the market expansion of international businesses. Because of uncertainty, the investors are no longer interested in investing in multinational companies, which is a negative factor for the business entities. On the other hand, the organisational infrastructure is not appropriate, which negatively affects the employees’ productivity and organisational performance (Ratten, 2020). Often the organisations are unable to follow the health rules and regulations in the workplace, which creates ethical issues and affects the brand value of the organisation. The banking industry is also affected as the customers fail to pay off the loans. In addition to that, the interest rate is high, which de-motivates the customers to take out loans.
The large scale companies started following the digital marketing strategy to reach out to the customers. However, small scale companies are facing challenges to influence customers through digital media. A huge amount is needed to invest in digital technology, which is not possible for medium and small scale companies. In addition to that, there is a high risk of cyber threat, which demotivates the organisations to opt for the interpretation business process. Customers face problems regarding online scams, which affect their buying behaviour.
At present, it is difficult to manage the staff from overseas. Consequently, the communication system is getting affected due to the lockdown. Poor communication is a barrier for the businesses to expand the business in the international market. However, the pandemic positively impacted the e-commerce industry. The growth of Amazon was positive during the pandemic. The rise of the e-commerce industry changes consumer behaviour.
Risks of international businesses during Pandemic
The growth of international organisations has become slower due to the sudden outbreak of pandemics. The risks of the international businesses are discussed below:
Credit risk
The banking institutions are not interested in taking risks for the businesses, which is a barrier to the expansion of international businesses (Zahra, 2021). The financial institutes are charging a high amount to issue the letter of credit.
Foreign exchange risk
The currency is fluctuating very fast, which is a negative factor for the foreign organisations. Generally, the organisations are concerned about the fluctuation rate of the international foreign exchange market. It is difficult for organisations to predict the currency value of any particular nations and take precautionary measures.
Shipping risk
The challenges regarding the shipment of goods are the challenging factor for the businesses. International companies are unable to ship their products as there are high risks such as vandalism, accident, seizure, contamination and theft (Mathew et al. 2020).
Political risk
The political barrier is the disadvantage of international businesses. Often the government restricted outside businesses to run their business activities in this particular region. Often they impose higher amounts of tax on multinational companies, which demotivates the organisation to invest in the business.
Impact of Covid on developing countries
The COVID-19 pandemic has been impactful in developing countries. Due to the pandemic the developing countries were hurt in many ways. As stated by Khamis et al. (2021), in the developing world there are many individuals who are less educated and thus they have to work in the labour market. They earn based on the amount of work they do per hour or day. However, due to the COVID-19 pandemic, the businesses in the developing countries shut down unexpectedly. As a result, the developing countries experienced loss in many businesses. It has also been seen that most of the employees lost their job due to the economic strains experienced by the organisations they worked at. The developing countries have more labour workers than the developed countries do (Ratten, 2020).
As a result, the companies suffered from lack of manpower. However, it has been seen that most of the workers who were less eager to join the companies were women. Studies say, 41.8% women were not willing to work post pandemic compared to 30.6% men (World Bank Blogs, 2022). Even though many developing countries tried to deploy “emergency social transfer”, it has been seen that the strategy has not been enough to reduce the impact of the pandemic. Countries with low income spent $6 on the protection of each employee whereas countries with low-middle income would spend $26.
Strategies for international businesses investing in the developing countries during pandemic
As per the view of Loayza and Pennings (2020), during COVID-19, the international businesses became an unstable form of business to invest in. The businesses did not guarantee continuity of the operation like they did in the pre-pandemic era. Therefore, in developing countries, if the companies are to perform effectively and attract more investors during COVID-19 then they have to follow certain strategies. These strategies can be valuable in the post pandemic era.
The most important strategy is to aim for the resilience and survivability of the business by taking the economy of the developing countries during the COVID-19 pandemic into consideration. In the post-pandemic era, the international businesses should carefully analyse the overall economic condition of the developing countries. It is often seen that the economy of those countries become unstable as lockdowns or restrictions are declared by the government. As argued by Abdurakhmanova and Rustamov (2020), many international businesses shut down due to lack of manpower and they experience losses in those countries. Therefore, to successfully invest in the developing countries the international companies have to properly analyse the economic conditions of those countries.
The organisations should also be able to make plans for the environmental and ecological threats that the developing countries pose. The COVID-19 pandemic has impacted the ecology and the environment of both the developing and the developed countries. However, if an international company wants to successfully invest in the developing countries then they have to make sure that the ecology and the environment of the developing countries are not too adverse. This way they can make sustainable plans for investments in those countries (Dinh et al. 2019).
Conclusion
Summary for the findings
During the COVID-19 pandemic, many international businesses such as the hospitality and tourism industry suffered the most. Various restrictions and lockdowns made it hard for these businesses to operate in developing countries. As a result, the developing countries posed an adverse environment during the pandemic. The international businesses faced various risks such as credit risk, foreign exchange risk, shipping risk and political risk during the pandemic. It has also been seen that many employees in the developing countries lost their jobs because the companies could not afford to continue paying them during the pandemic. However, the companies may analyse the economical, ecological and environmental analysis of the developing countries so that they can properly invest in those countries.
The rationale for conducting future research
In the future, an economic crisis might happen due to a pandemic or any other crisis around the world. The developing countries are at risk when the world experiences an economic crisis. This study shed light on the issues that international companies face while investing in developing countries during pandemic. Thus this study creates an opportunity for more exploration on this topic in the future.
Literature gap
While researching on the impact of COVID-19 pandemic on international businesses, the gap has been identified that there is less focus on the impact of the pandemic on other businesses such as the domestic business. The study has more scope to shed light on the above mentioned issue in the future.
References
Abdurakhmanova, G. and Rustamov, D., 2020. Venture investment environment in different countries analysis of venture business in Uzbekistan. Архив научных исследований, (21).
Dinh, T.T.H., Vo, D.H., The Vo, A. and Nguyen, T.C., 2019. Foreign direct investment and economic growth in the short run and long run: Empirical evidence from developing countries. Journal of Risk and Financial Management, 12(4), p.176.
Fabeil, N.F., Pazim, K.H. and Langgat, J., 2020. The impact of Covid-19 pandemic crisis on micro-enterprises: Entrepreneurs’ perspective on business continuity and recovery strategy. Journal of Economics and Business, 3(2).
Fabeil, N.F., Pazim, K.H. and Langgat, J., 2020. The impact of Covid-19 pandemic crisis on micro-enterprises: Entrepreneurs’ perspective on business continuity and recovery strategy. Journal of Economics and Business, 3(2).
Khamis, M., Prinz, D., Newhouse, D., Palacios-Lopez, A., Pape, U. and Weber, M., 2021. The early labour market impacts of covid-19 in developing countries.
Loayza, N. and Pennings, S.M., 2020. Macroeconomic policy in the time of COVID-19: A primer for developing countries. World Bank Research and Policy Briefs, (147291).
Mathew, N., Deborah, I., Karonga, T. and Rumbidzai, C., 2020. The impact of COVID-19 lockdown in a developing country: narratives of self-employed women in Ndola, Zambia. Health Care for Women International, 41(11-12), pp.1370-1383.
Ratten, V., 2020. Coronavirus and international business: An entrepreneurial ecosystem perspective. Thunderbird International Business Review, 62(5), pp.629-634.
Rodela, T.T., Tasnim, S., Mazumder, H., Faizah, F., Sultana, A. and Hossain, M.M., 2020. Economic impacts of coronavirus disease (COVID-19) in developing countries.
Van Assche, A. and Lundan, S., 2020. From the editor: COVID-19 and international business policy. Journal of International Business Policy, 3(3), pp.273-279.
World Bank Blogs. 2022. In developing countries, the COVID-19 crisis has not affected everyone equally. [online] Available at: <https://blogs.worldbank.org/voices/developing-countries-covid-19-crisis-has-not-affected-everyone-equally> [Accessed 17 March 2022].
Zahra, S.A., 2021. International entrepreneurship in the post Covid world. Journal of World Business, 56(1), p.101143.
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