Global Environment Thousands of Companies Compete in Essay

Global Environment

Thousands of companies compete in the global environment. Some of the most prominent global companies are Exxon Mobil, Microsoft, Nestle, Honda, Coca-Cola, Anheuser-Busch InBev, and HSBC. These companies all operate in different industries, and many are based outside of the United States. For companies, operating in the global environment gives them access to a wide range of customers, providing not only growth opportunities but geographic diversification. Global presence can also help a company to attract top talent from around the world, giving it further competitive advantage over companies that are not global in nature. For consumers, global companies often offer a mix of global and local products, providing variety but also product consistency. Shareholders benefit from the diversification and sources of growth.

Exchange rates between nations are directly affected by the differential interest rates. The value of money changes at different rates in different countries, and these changes are reflected in the exchange rates. This is because interest rates attract foreign capital, so higher rates attract more capital.With more capital flowing into a country, the value of that currency increases. Thus, there is a direct correlation between interest rates and exchange rates (Van Bergen, 2011).

Inflation rates affect exchange rates because they are related to interest rates. Central banks adjust interest rates to manage the rate of inflation in an economy. Thus, if inflation rates are higher, interest rates will increase to offset this, and this will cause the currency to weaken. Productivity and income are also related -- the greater the degree of economic activity the increased likelihood that the central bank will raise interest rates to curtail the inflation that results from that activity. This again will have an effect on exchange rates.

Global economic conditions impact on exchange rates. Canada is a good example of this. The Canadian economy did not suffer as much as the U.S. economy did during the recession, and Canada recovered more….....