International political economy is the melting point of both politics and economics as it concerns the states at the global level. In common parlance, international political economy is the interaction between: productions, buying, selling, laws, customs, and beliefs of different countries playing at the international scene to protect our foreign investments.
One lesson that was learnt in the most recent global financial crisis of 2006-2008 is that companies need to be truly global in all perspectives in order to be successful. What this holds for forward thinking businesses is that assets and other factors of production have to be moved global for it to yield positive return on investment.
Companies that were truly global in the true sense of it were able to diversify away some of their risk thereby minimizing the adverse shock that would have otherwise been seriously felt by the company.
There have been so many arguments as to the distinction between political economy and economics studies. This article is not one of such articles that try to establish an academic stance but, to give accountants and managers insight into the potential benefits of leveraging on global strategy though international political economy.
HOW TO LEVERAGE ON INTERNATIONAL STRATEGY USING POLITICAL ECONOMY
Just like any other economic activity, the sole aim of satisfying customers’ needs is paramount to its success. Treating every business stakeholder as a customer is the key to making success in strategic repositioning. Below are the most important factors that must be considered:
International customer responsiveness:
Swift response to the queries of customers can never be substituted with any other customer services. Being attentive to the needs, wants and expectations of your customers makes you respond with swiftness. Nothing makes customers happier than realising that there is an ‘ever ready listening ears’ to listen to their plights. Advancement in information technology has made it possible for customers to easily switch vendors that are slow to respond to their queries.
Total quality management (TQM):
TQM is a relatively new management concept that has zero tolerance for failure. The whole idea behind TQM is to achieve high level of customer service (both internal and external). For a company to reasonably reap the benefits of going global, it ensures that products and services delivered to customers are of the highest possible standard. This practice will not only bring in money but will save cost in the long run as ‘quality save money’.
Global sensitivity analysis is a managerial accounting tool used to determine and adopt the best mix of economic variables. This is basically the study of interactions among key elements of any given context- international political economy in this context. The ability of a business to use the numerous global sensitivity analysis tools in practice today (which I will discuss in this article) is a key success factor to any meaningful strategic planning. The trend now is to use global sensitivity analysis to study and predict the reaction of customers to firms’ policy on the international basis. Companies can even use this technique to test the effects of raising finance globally.
Educating your customers:
It is better to teach your customers how to solve a problem than solving that problem for them especially when it is a recurring problem. This is more appealing when the customer is an international client. It is natural for human beings to be more comfortable dealing with situations if they know that solutions to common problems are within their reach. No wonder it was said in time immemorial that it is better to teach a man how to catch a fish than to give him the fish.
Establishing online customers’ resource centre:
One of the greatest discoveries of our time is the internet; people over the years have become fond of seeking solution to all sorts of problems over the net. Although the creation of an online resource centre for your customers will not give your company that cutting edge advantage that is needed to keep afloat in the competition war that is going on the international scene, proper and tactful management of the online resource centre is a key advantage. It will also help your business create some sort of free data Mining Avenue that will be strictly used for planning.
GLOBAL STRATEGIC BENEFITS OF INTERNATIONAL POLITICAL ECONOMY
Better management of foreign exchange and interest rate exposures:
Economic theory teaches us that the value of our wealth can be eroded by movement in foreign exchange if not properly managed. Therefore, one of the most outstanding benefits of having close eye on our international political environment is that the values of our assets are reasonably preserved from being eroded by economic variables.
Reduced cost of doing business:
Our ability to manage our cross border economic variables will help us significantly reduce cost. Large chunk of these costs can be saved in the form of tax reduction and minimal or zero legal expenses.
Better source of planning and strategic information:
Decisions are based on analysed and processed information. The ability of a going concern to manage macroeconomic variables on the international market helps ease the stress of decision making that accountants and managers face on a daily basis. This also will reduce the incidents of suboptimal decision making and increase the motivation of staff in an organization.
Helps build a more robust business that can withstand major economic shock:
Close monitoring and sound management of global economy gives managers the benefits of having foresights. Although not all signs of economic crisis can be well understood and interpreted, chances are that the obvious once would be easily spotted and protective actions taken to minimize the loss that could accrue from economic turbulences.
In as much as having a global strategy that heavily taps from international political economy is difficult and tasking, the benefits of keeping an eye on the macroeconomic indicators at the world business stage has proven to payoff and will continue to do so.