Introduction
Business governance is an outgrowth of political ideology and public diplomacy. The nature of business and industry shifts in the country or a trade bloc in the context of political scenarios in the countries that dominate international business. Political power dominates in trade negotiations, and defines the contemporary trade philosophy for trade governance. The political framework of trade powers within their territorial boundaries influences key players in the economy comprising industries, governments, and non-governmental organizations exhibiting the supremacy of people in postulating the business strategy. This could help in designing domestic and international policies for major customers and suppliers, concluding acquisitions and alliances, and securing finance for business from investors and banks. Political ideology and public diplomacy drive in building industry coalitions with political bodies to influence policy makers, institutional shareholders, key opinion leaders influencing the media, and business analysts.
Many leaders exercise their public authority drawn from the political regime to influence executive decisions. But when leaders take the governing roles in a country, the planning and implementation of business policies depend more on political influence. However, gaining the ability to shift business policies to current trends and motivate business governance in tune with international trade diplomacy is the major challenge among companies. The political roles of business icons navigate within a business-politics matrix and drive organizations to change the rules of business under the changing business diplomacy. Therefore, such government agencies lead to a critical support function for industry to shift their governance system. The shifts in the controls in human resources management, information technology, and budgetary management, and learning to practice corporate diplomacy effectively, are the rising challenges among the industries in the developing countries. The shifts in political ideologies leverage organizational alliances, business networks, and other business relationships in tune with the political ideology (Watkins 2009). The welfare marketing principle has been realized in the recent past as a global marketing practice of serving the consumers at the bottom of the pyramid to leverage their consumption patterns on par with those of elite consumers.
The Governance Trend
Globalization has become a functional dynamic of emerging firms in todayâs business environment. Most firms believe that globalization is a synonym for business growth, and invest perennial resources in developing strategy to go global. It has become one of the most pertinent issues for managers of growing firms around the world. A large number of companies in the developed countries are nourished by the huge domestic market, but typically lag behind their European and Japanese rivals in internationalization. Companies intending to go global exhibit two apparent objectivesâto take advantage of opportunities for growth and expansion, and to survive in the business amidst growing competition. However, firms that fail to pursue global opportunities eventually lose their domestic markets, and may be pushed aside by stronger and more competitive global firms. In the middle of the twentieth century, the nature of political life changed everywhere by novel forms of political activity as new means of mass communication, an increase of popular participation in politics, and the rise of new political issues offered better understanding of international politics and popular governance in reference to global integration. Besides, the extension of the scope of governmental activity, and other innumerable social, economic, and technical developments in the developing countries, urged for stability in the government for effective implementation of international development programs. Trade policies have been one among the international priorities (Rajagopal 2016).
The majority of the worldâs political systems have experienced one or another form of internal warfare leading to violent collapse of the governments in power. In addition, certain crisis situations seem to increase the likelihood of breakdown in the governing politics of a region or a country. In the politico-economic scenario, the economic crisis is another common stimulus for political setbacks as may be witnessed in the recent Argentinean crisis. The Brazilian economy was also on the edge of the cliff in the late 1990s due to internal economic instability. However, most companies are attracted more by the comparative advantages in the factors of production than the political risks, and jeopardize their manufacturing and marketing operations. A sense of insecurity and uncertainty about the future, and an aggravation of the relationships among social classes, also result in the politico-economic conflicts and business chaos in a country. A severe political crisis develops distrust in the economic system of the country, triggers outbreak of revolutions in the political systems, and decreases the prospects of business growth. Political unrest due to radical ideologies in a country spurs several experimental conditions for the stability of the political system in extremely revealing ways that often induce either change in the political leadership or the restructuring of the political governance system. Since the quality of the political leadership is often decisive, those systems that provide methods of selecting able leaders and replacing them possess important advantages towards internal and global political concerns. Many studies have shown that dealing with problems in the political arena is the principal challenge facing international managers in developing pro-political strategies to run the business successfully in the host country. It is observed that each country has its own set of national goals, but most countries also share many common objectives. Nationalism and patriotism refer to citizensâ feelings about their country and its interests. Such feelings exist in every country, and multinational firms, individually or collectively, may be perceived as a threat to that sovereignty. The foreign firms perceive greater threats if they are larger in size and more in number in a country. At the time of any political turmoil, the foreign firms may be targets for attack. Many countries seek ânational solutionsâ to help troubled companies to retain what are perceived to be national champions (Rajagopal 2016).
Business in the global marketplace moved on through capitalist, socialist, democratic, and mixed political philosophies over centuries and had often changed governance patterns affecting profitability, growth, and stakeholder values. Globalization has evolved with similar burst of political ideology, public diplomacy, and industrial policies in the mid-twentieth century. After a relatively long period of success of globalization with liberal trade and economic philosophy backed by the political ideology and trade diplomacy of developed countries like the United States, Great Britain, and the European Union, the Cold War mentality, driven by the protectionist ideology and public diplomacy in geopolitics, is back in the twenty-first century. The United States, by displaying a protectionist political viewpoint (2017 onwards) and restricting the flow of international trade, investment, and movement of factors of production, has raised a violent confrontation to grow their business in isolation by setting a number of vigilante business controls and changing the existing rules of the game. Businesses across the world cannot be confident of strategic status quo of the political business ideology. Such ideologies are governed by the balances of power and international negotiations on foreign trade policies dominated by the super powers in the world. A corporate foreign policy has two componentsâgeopolitical due diligence and corporate diplomacy. The former philosophy involves the assessment of local, regional, and transnational risks facing a company while the latter aims to enhance a companyâs ability to operate internationally (Chipman 2009).
Political intervention is a decision taken on the part of a host countryâs government, in its own interest, that is intended to force a change in the operations, policies, and strategies of a foreign firm. Such interventions may range from enforcing control for complete takeover to annexation of the foreign enterprise. The magnitude of intervention varies according to the companyâs business existing in the host country and the nature of political decisions taken thereof. In countries where foreign investment plays a significant role in the economy, the possibility of political interference in the operations of foreign firms is higher and more stringent. In addition, the political system of a country, whether it be democracy, communism, or a mix, indicates the nature of intervention. Businesses in developed countries, such as the United States and Great Britain, are ruled largely by government interventions as they are in reference to the public policies of the country. The political directions may also govern the functions related to transfer pricing, price ceiling and price floor, price contracts, price paid for local raw materials, and price paid for imported raw materials to be used in production in the host country. The activities of distribution and product retailing may also be subject to political interventions in many developing countries. Advertising and communication is another important area of a multinational firm that is affected by political interference in a country.
Major structural shifts in the global economy are creating new opportunities in transaction banking, particularly in trade finance. International trade is growing faster than global GDP, and Asia is now the center of global expansion, driving trade growth in other emerging markets and in developed economies as well. An ongoing shift in global economic activity from developed to developing economies, accompanied by growth in the number of consumers in emerging markets, is the global development that executives around the world view as most important for business and most positive for their own companiesâ profits over the next five years. Executives also identify two other critical positive aspects of globalization: technologies that enable a free flow of information worldwide, and increasing migrations in the global labor markets. The global economy faces significant challenges as it continues to integrate high levels of public debt in Europe and North America that are causing the fear of a negative impact on GDP growth. Emerging markets, with populations that are young and growing, will increasingly become not only the focus of rising consumption and production but also major providers of capital, talent, and innovation. Over the trend of trade liberalization as experienced in the Latin American countries in the first decade of the twenty-first century, the North American Free Trade Agreement (NAFTA) has created a single market with the United States and Canada that has helped to propel Mexico to the top ranks of manufacturing exporters (Rajagopal and Zlatev 2017).
Political ideologies have commonly been associated with particular social classes, such as liberalism with the middle class, conservatism with the landed aristocracy, socialism with the working class, and so forth. These ideas reflect the life experiences, interests, and aspirations of a social class, and help to foster a sense of belonging and solidarity. However, ideas and ideologies can also succeed in binding together divergent groups and classes within a society. A unifying set of political ideas and values can develop naturally within a society. The values of elite groups such as political and military leaders, government officials, landowners, or industrialists may diverge significantly from those of the masses. Ruling governments may use political ideas to contain opposition and restrict debate through a process of ideological manipulation. The problem today is the political aggression narrowing the business corridors on the plea of achieving political manifestos. Often leaders view politics as war, where victory is paramount, which compromises several social and business interests. Such ideologies often shift the business governance from globalization to privatization on the political manifesto of making their countries great again. However, every single policy of business gateway countries like the United States and China affects the global business systems and might either elevate or threaten to cripple the existing business dynamics. Revitalizing Americaâs culture of democracy where the health of the nation comes first, above economy, political party, and ideology, plays a key role in international business development (Moss 2012).
Trends and Ideological Shifts
In the mid-twentieth century, with the downfall of the Soviet Union, one of the super powers driving the trade and economy in the world, American policymakers within the government and sitting at the world forums began championing neoliberal economic policies. The new doctrine focused on ensuring capitalist philosophy in business by empowering private-sector and market-led economic growth, which prompted the government to become involved only in policy-making overpowering regional trade blocs through business diplomacy and negotiations. American investment protection policy supports domestic and global investment climates and prompts s...