The Field of Climate Changes and Its Impacts on the International Business - Research Paper

2021-05-21 17:47:40
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Introduction

The field of climate change and its impacts on international business has been covered in several studies. However, the adaptation mechanisms have not been well outlined in these studies (West and Brereton 2013 p. 23). The recognition that there is a key relationship between climate change and international business has become common in the global business community. Developing a unified framework that can be used by businesses during these times is very critical (West & Brereton 2013 p.1). As a result of the climate changes, the investment portfolios, as well as the global market, adjust and opportunities created that result in both winners and losers. The industries that develop a competitive advantage become the winners while those who do not are presumed as the losers (Jones and Levy 2007 p. 430). This study will, therefore, focus on the ways to deal with the impacts brought by climate change. The effects on various industries will be discussed and the necessary measures to tackle the changes will also be presented.

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Companies understand that sustainability is not a choice but a market fact. While many businesses have taken some measures to adapt to the unexpected impacts of climate change, other enterprises are not aware of the future risks and the necessary adaptation measures (West and Brereton 2013 p. 23). Adaptation to these changes reduces the business vulnerability both in the short and long term. Adaptation measures can be either low cost or high cost but regardless, businesses should struggle to implement them. Some of the strategies developed by the firms in relation to climate changes denote patterns of market approach (Jones and Levy 2007 p. 430). Climate change effects can be well observed due to the rise in global temperatures, changes in heavy rain, and even extreme weather events. These changes have become common in global business.

Problem Statement: How Has Climate Change Affected International Business?

Every year, there arise new challenges in international business strategies that need to be addressed. For many companies, the effects of these changes are huge. According to a report by the International Leaders Forum (2012, p. 5), water shortages that are yet to be experienced will cause serious problems in the direct operation, distribution networks, consumer markets, and the general supply chains. Businesses must, therefore, come up with the right procedures to cope with these climate changes. These changes will also bring some changes in the market thereby shutting off some markets and creating new ones.

The distribution and benefits of climate change are core interests to many policymakers and business leaders (Bettina et.al 2009, p. 12). As a consequence, the changes have become a constant agenda in many companies in the world. Many corporate boards have regarded the phenomenon as important in reviewing the strategies in terms of investment, brand management, and product development.

The response of the business to climate change depends on its sector, the leader’s point of view, exposure to the change, and its capabilities (Jones and Levy 2007, p.2). However, despite the risks posed by these changes, many business leaders do not consider them while pushing for the development of new products. It is therefore vital for businesses to adapt to the changes if they want to prosper in the future.

Saudi Arabia is the largest exporter of fossil fuels in the world. Fossil fuel is also believed to be the major contributor to the current global warming leading to adverse climate change in the country (Depledge, 2008, p.34). Being a fast-growing economy, a lot of energy is needed that in turn requires a large amount of water for the machines. The government has been faced with the challenge of reducing the amount of fossil fuel consumed within the country in order to reduce the level of pollution (Nachmany et al. 2015, p.18). Climate change has brought a change in the average annual rainfall and the average change of temperature in Saudi Arabia (El Kenawy et al. 2016, p. 660). Climate plays a significant role in the smooth operation of business both locally and internationally (Kasa et al. 2008, p.114). Before an individual ventures into international trade, he or she has to consider the weather conditions in the targeted market.

High Capital Required for Emission Control

In an attempt to reduce the level of pollution, the Saudi government has launched a national energy efficiency program (NEEP) (Stern et al. 2006, p. 25). This has reduced the demand for fossil energy in the country causing diversity in business. The NEEP body has also put regulations in place to reduce the number of emissions, companies, therefore, have to spend additional capital on reducing the number of emissions they make into the air (Depledge, 2008, p.34). The cost of externality caused by the industries is directed to the companies through additional tax depending on the nature of the enterprises’ operation. Companies are also subjected to the purchase of credit that is approximated to the amount of pollution they cause on nature (Nachmany et al. 2015, p.18). For companies that continue to release more pollution, they are required to buy more credit. The additional credit causes an increase in the cost of production of goods and services that are reflected in the prices of goods and services.

How Has Climate Change Affected the Price of Goods and Services?

With climate change in various regions, the weather pattern has to change throughout the globe (Kasa et al. 2008, p.114). The weather change leads to a lot of adverse effects on human activities forcing insurance companies to spend much in compensating individuals who have incurred losses (Depledge, 2008, p.34). Poor weather always interferes with transport systems leading to increasing the prices of goods and services across the world (El Kenawy et al. 2016, p. 660). Some goods also take a long time to mature during cold weather leading to an increase in their demand at a low supply thus causing a deficit in the market.

Production Demand and Climate Change

Some goods and services could only be demanded in given weather. The demand for warm clothes will be below at a high temperature caused by global warming, therefore, companies producing warm clothes run at a loss (El Kenawy et al. 2016, p. 660). No tourist will dare visit the beach during the cold seasons leading to low demand for tourism along the coastlines. It is the demand for goods and services that keep business people in operation, a fall in demand will automatically lead to the collapse of various businesses (Kasa et al. 2008, p.114). Taking the case of Saudi Arabia, there is zero demand for warm clothes following the presence of a warm climate in the area.

Impact of Climate Change on Public Perception

The image of a firm is a very crucial factor that every business always strives to keep clean (Stern et al. 2006, p. 25). The public will always attempt to associate and purchase goods and services from firms that are having a positive public image. A company that causes high pollution on the environment will experience a loss as most of the customers will shy away from buying its produce (Depledge, 2008, p.34). Most of the firms have now changed their production methods to new technology that is a bit expensive in order to reduce the amount of air pollution (El Kenawy et al. 2016, p. 660). Firms in Saudi have adopted the use of atomic and renewable fuel in their production to win public trust.

How Does Climate Change Affect Business?

With the current trend in weather change, most of the businesses have been forced to either stop their production or change the methods they use in producing some particular goods and services (El Kenawy et al. 2016, p. 660). Most of the energy production companies have been closed to give way for the more sustainable and efficient form of energy such as solar power (Stern et al. 2006, p. 25). Companies operating internationally are forced to pack up and return to their native homes after the host has declared their produce illegal.

Research Objectives

The primary objective of this study will be to establish the mechanisms that will enable businesses to adapt to the changing climate (West and Brereton 2013 p. 23). The study will also show the industries that are most affected and how best they can do to counter the changes so as not to go out of business.

Alongside the primary goal, the research is also aiming at providing an alternative method of energy production that will enable economic development (Stern et al. 2006, p. 25). Saudi Arabia being one of our areas of study, will be of significant help change the pattern of production in the global market (El Kenawy et al. 2016, p. 660). It is a reality that climate change cannot be stopped but just reduced to a sustainable level. Therefore, more study is still needed for a better solution.

Methodology

The research will be conducted in Saudi Arabia, a country expected to be the largest oil producer in the world (Furrer, 2009, p. 89). During a workshop with business societies based in Saudi, the amount of pollution reduction will be audited to come up with a better way of solving the pollution situation (El Kenawy et al. 2016, p. 660). The reaction of the attendees towards the proposed new methods of energy production will be used to make a concrete resolution on which method to use. Taking a chance to stay in Saudi Arabia will be an added advantage for the study since it gives the researcher the opportunity to have first-hand information (Stern et al. 2006, p. 25). The researcher will not need to be told about the level of pollution but will witness the impact on the environment.

The research will utilize several research methods in order to select the best adaptation mechanisms. First, a desktop survey will be conducted to review the reasons for climate change and the adaptation methods that have been used over the last ten years (West and Brereton 2013 p. 23). All the related research studies conducted at this time will be identified and used during the survey. A detailed report will then be produced so as to find out the existing gaps in the adaptation process due to climate changes.

A workshop will also be conducted with leaders of various companies, regulatory authorities, and other key stakeholders (West and Brereton 2013 p. 23). The report produced initially from the desktop survey will then be handed to each of these participants to serve as a guide during the session. Each workshop session will be used to build on the theme of the previous workshop.

Significance of the Study

From the study, business individuals will be able to appropriately set their strategies on the available market for their goods and services (Stern et al. 2006, p. 25). Saudi is the largest producer of oil and one of the leading contributors to global warming (El Kenawy et al. 2016, p. 660). Climate change has been an international disaster, and the most affected group is the business. The research will, therefore, benefit the entire global businesses community.

The sessions will be as follows.

Session 1- the approaches to adaptation

Session 2- the risks brought by the climate changes

Session 3- costs involved in the adaptation

A comprehensive report will be written during the final session of the workshop and classifications will be made. The results of this study will be generated after consultation from some of the workshops attendees and thorough consultation with other global business heads.

Information gathered from the study will be useful to business policymakers and company leaders across the world (Furrer, 2009, p. 89). Climate change is an inevitable course and, therefore, companies will need to use the proposed mechanisms from this study so as not to waiver in the wake of the changes...

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