The Impacts of BRICS for International Business - Term Paper Example

The Impacts of BRICS for International Business Name: Institution: Date: Table of Contents Table of Contents 2 Abstract 4 1.0 Introduction 5 2.0 Overall BRICS Impacts 5 2.1 World Economy 5 2.2 Social 7 2.3 Environment 8 2.4 Political 8 3.0 BRICS Members Role 9 3.1 Brazil 9 3.2 Russia 10 3.3 India 10 3.4 China 10 3.5 South Africa 11 4.0 Importance for Each Country 11 4.1 Strength 11 4.1.1 Brazil 11 4.1.2 Russia 12 4.1.3 India 12 4.1.4 China 12 4.1.5 South Africa 13 4.2 Weakness 13 4.2.1 Brazil 13 4.2.2 Russia 13 4.2.3 India 14 4.2.4 China 14 4.2.5 South Africa 14 5.0 Statement of BRICS 14 5.1 Vision 14 5.2 Mission 15 5.3 Strategy 15 6.0 Conclusion 17 References 18 Abstract Changes in the global market context are gradually changing. As such, the international business environment is gradually changing leading to the establishment of geopolitical alliances such as the Brazil, Russia, India, China and South Africa established the BRICS economic bloc. The evaluation offers an expository review of its accrued economic, social, environmental and political influences. Moreover, the evaluation describes the unique contribution of each of the member states as well as their strengths and weaknesses on international business. Finally, the evaluation describes the forecasted BRICS future. 1.0 Introduction The global market is gradually changing over the decades. Technology changes and globalization have implicated on the market operations across the globe. This has influenced the structures and practices adopted in doing business. For instance, this has led to increased international trade and multinational companies rise. However, free international trade despite its merits has resulted to an increased range of challenges. In this regard, Bhagwati (2003) argued that free trade has a likelihood of inclining towards the developed nations thus disadvantaging the developing countries. This has been the main motivation and rationale behind the establishment of regional based trade blocs to ensure increased bargaining power and collective responsibility of the members. One such example as Kolachi and Shah (2013) stated, was the regional trade bloc developed by Brazil, Russia, India, China and South Africa to form the BRICS alliance. Over the years, the regional trade bloc and gains to the respective members has gradually increased. As such, it warrants an evaluation of its functioning. This research term paper conducts a critical evaluation of BRICS. In this case, the evaluation conducts a PEST analysis of the bloc, its individual member’s contribution, the strength and weakness as well as the blocs’ future. 2.0 Overall BRICS Impacts 2.1 World Economy The BRICS alliance has greatly implicated on the global economic standards. This can be evidenced by the changed economic status of the respective BRICS members. Fr instance, the bloc in 2014 established combined members GDP of US $16.039 trillion. This represented an 18% of the global economy proportion (“Statistical Portal”, 2014). Therefore, it is apparent that the bloc through its economic development initiatives to its members has facilitated and enhanced increased economic growth. The evidence of this development can be illustrated by the growing and advancing ranking of the overall organizational GDP value across the globe as illustrated below . One of the fundamental institutions enhancing global economic change is the advent of the BRICS members onto Africa to expand global economic development. This can be evidenced by the bloc advancement of the As such, countries such as China have through their alliance in the BRIS bloc received increased investments in the African economy. Therefore, Cassiolato and Vitorino (2011) stated that the BRICS blocs’ alliance has expanded its overall influence to include not only the member states but also to incorporate and benefit other developing nations both in Asia and Africa. The table below offers a review of the business development in the member nations (Ross, 2014) 2.2 Social Social influence is classified as the overall influence on the population living standards and beliefs. In this case, a social influence is directly related to the overall social and cultural behaviors of a community. In this regard, an evaluation of the BRICS alliance establishes that the bloc has had minimal social influence on the members. In this case, the institution was developed with an economic orientation approach and thus no direct social policies have been developed by the BRICS institution. However, a critical evaluation establishes a range of indirect social implications. One among them is increased and improved living standards. Due to a growing and thriving economy, the overall earnings in the economies have increased. Therefore, this has over the years increased the disposable income levels allowing for improved living standards among the peers. Moreover, as BBC News China (2014) argued, the institution has allowed trade across members facilitating cultural integration. In particular, this has enhanced a merger between socialism and capitalism societal cultures and orientation as members form the respective regions and countries interact in business, thus promoting cultural integration. Therefore, though indirectly, the institution has had enormous social implications and influence on the member countries social aspects. 2.3 Environment The BRICS sixth summit was a clear indication on the gradually developing and growing role and contribution of the bloc on climate issues. In this case, the upcoming COP21 climate conference in Paris is an indication of the bloc influence on climate changes. In this case, the bloc is highly expected to vote against setting individual targets for the countries while advocating for the original 1992 convention agreement on common but differentiated responsibilities climate duties among its members (“UN”, 1992). Therefore, this demonstrates on the great influence that the BRIC bloc continues to gather in the development of international climate change policies and agreements. 2.4 Political Although initially instituted as an economic institution, the BRICS bloc has had enormous political implications across the globe. On one hand, the institution has developed and emerged as a strong political bloc among the developing nations. This is characterized by the regular summits held by the national leaders on a regular basis. Through the summit resolutions, the BRICS institution has established a series of political decisions. For instance, the bloc established and initiated its peace efforts in the region (Carmody, 2013). For instance, through its veto power in the UN Security Council, Russia has established a great political influence such as through arms deals with nations such as Egypt and Morocco. In addition, the bloc has had other indirect political implications across the globe. One such influence is the perceived political challenge on the USA and NATO influence. In this case, as evidenced by an article developed by Taylor (2014), many of the critics of the bloc have over the years argued that the bloc seeks to build a geopolitical bloc to oust USA from its super power status. Although the bloc argues against this assertion, this evaluation reveals that it is a possible and likely outcome though indirect and unintended into the future, as the bloc continues to gain increased political influence both in Asia and across Africa. 3.0 BRICS Members Role 3.1 Brazil The Brazilian nation is one of the largest and most widely endowed nations across the globe. In this regard, the nation has developed a wide range of export materials that form a large bunch of its foreign investments in the globe. However, as Spitzeck and Chapman (2012) discussed, one key feature worth noting is the fact that most of the Brazilian exports are raw material both natural resources and form agriculture. This is its global comparative edge. Therefore, the nation brings with it’s the wide raw materials availability onto the bloc. In this case, The Brazil offers its vast raw materials to the bloc. This is transferred to both China and Russia on a preferential basis and reduced rates thus allowing for reduced production costs among the bloc players. Thus, Brazil offers its wide variety of natural resources and raw materials as its key contribution in the BRICS bloc. 3.2 Russia Russia offers a mixed series of contributions onto the bloc. In this regard, it has both key economic and political contributions to the bloc. Economically, the nation similar to Brazil has a wide range of primary resources in the market. As such, the nation is fundamentally rich in oil, thus providing energy to the other bloc partners (Wilson & Koester, 2008). Moreover, the nation has a veto power in the UN Security Council and an increased influence among former socialist nations. Therefore, the nation offers the bloc an increased geopolitical influence supporting its political development and advancement across the globe. 3.3 India India as a member of the BRICS has its major and unique contribution onto the bloc through its large population base, only second to China in the bloc. In this regard, Brooks and Menon (2008) stated that despite its reputation as an emerging economic giant in Asia, India is also reputable of its high labor supply. Therefore, the market offers a wide labor base at relatively reduced cost. The readily available labor supply in the Indian market allows fir the transfer of the same across the other bloc member such as Russia, Brazil and China to facilitate in the production process at relatively reduced costs. As such, India’s strong service industry and especially its labor supply serve as its key contribution in the market. 3.4 China This is the largest nation in the bloc both in terms of its population as well as GDP. On one hand, the large population of over a billion citizens offers the bloc a large market base for all the supplied goods. Moreover, through its high GDP values that are increasing and growing by the day, the nation offers an increased political contribution on the alliance. As Schiavenza (2014) reported, this can be evidenced in its contribution towards the New development bank initiative. In order to insulate the nations against a major financial fall, the leaders while on a sidelines meeting of the G20 in Russia agreed to set up a $100 billion fund to support their financial endeavors. To this coffer, the Chinese government offered $41 billion, an almost 50% of the fund. Therefore, this demonstrates the financial economic function and role offered by the nation as its unique contribution in the bloc. 3.5 South Africa The Southern Africa nation has the lowest GDP among all other BRICS members. As such, it has minimal economic or technical contribution to the bloc. However, essentially the Chinese invitation of the nation was perceived as a geopolitical contribution aspect. The nation is among the most democratic and economically developed African nations. Therefore, it serves as a role model across the continent (Kende, 2009). Consequently, through its inclusion in the bloc, the nation has served as an attraction of the African states to the projects’ and initiatives developed by the bloc, thus enabling the bloc advance its geopolitical agenda onto Africa. 4.0 Importance for Each Country 4.1 Strength 4.1.1 Brazil The Brazilian nation has its major strength drawn from its strong agricultural sector. In this case, the nation has developed a strong agricultural economy allowing for increased raw materials dispersion across the globe. This places the nation on a relative high global position. Further, the nation has an additional strength in its availability of the Brazilian oil resources coast. This offers the nation an increased opportunity for increased exportation in the international trade allowing for increased market reputation in the market. 4.1.2 Russia The Russian nation has a wide range of global comparative edges in the market. One among them is the vast oil wells in the nation (Taylor & Weerapana, 2009). This availability allows the nation increased exportation and the eventual favorable terms of trade on the nation. In addition the national emerging middle class population offers an increasing demand for goods supplied into the market. 4.1.3 India The Indian market has its key strategic strength in its high population as well as increased IT infrastructure in the market. In this regard, the population is beneficial on two fronts. On one hand, it provides a wide consumer base for the international trade and BRICS products supplies in the market. Moreover, it provides a wide supply of labor in the market allowing for reduced production costs. 4.1.4 China The Chinese economy as a major player in the international trade as well as economy of the BRICS has its strategic base on the national infrastructure. In this regard, the nation established a strong infrastructure fir the manufacturing industry allowing for scale manufacturing and reduced costs of production against global and regional competitors (Zhibin & Ratliff, 2006). Further, the high national population offers a wide domestic market base thus ensuring stability of its local industries prior to venturing onto the global market. 4.1.5 South Africa The South African nation is one of the vastly developing economies in Africa. As such, the nation has the highest GDP in the sub Saharan Africa. Representing over a third of the regional GDP in the region. Moreover, the regional vast natural resources serve as its key comparative advantage. 4.2 Weakness 4.2.1 Brazil Despite its global international exportation increase and contribution in the market, the Brazilian nation has a major challenge in its infrastructure. In this regard, the national transport both road and railway is in poor state. Therefore, as noted by Baumol and Blinder (2012) this disadvantages the nation and subsequently reduces its overall export and resources exploitation capabilities. Further the nation has a major challenge in unequal distribution of income in that there exists a big gap between the rich and the poor in the society leading to reduced social development in the nation a major focus of the BRICS bloc. 4.2.2 Russia Russia as an international trade player as well as a member of the BRICS bloc has its challenge in doing business. Global analysis evaluating the nature and ability of the nations to do business established that the nation at 64 of the evaluated 181 nations across the globe (“World Bank Group”, 2014). As such, the low level leads to a reduced number of investments and low investment rates in the nation thus slowing down its GDP growth rate in the market. Moreover, political challenges and differences in the nation serve as an additional regional weakness of the nation. 4.2.3 India The high poverty levels in India pose a development challenge. As such, although the market has a high labor supply, a majority of them are unskilled and semi skilled (“Guateng Province”, 2013). Therefore, this leads to its eventual reduced overall global contribution as a service rich nation that offers cheap and available labor to international trade players. 4.2.4 China A major challenge of the Chine market is its growing population. Although currently a contributor in increased demand of the products, it possesses management challenge. In this regard, controlling and developing relevant social policies in the wake of increasing social inequalities in the region has been a major expenditure for the Chinese nation, thus reducing its overall GDP and economic growth a virtue expected to advance and progress onto the future. 4.2.5 South Africa A major challenge facing South Africa as a member of the BRICS is its high unemployment rate as well as the overall low growth rate that was the lowest among the members between 2000-2011 that was 3.5%. As such, this reduces the overall nation attractiveness as an investment center. As such, its contribution to the BRICS and international trade is reduced. 5.0 Statement of BRICS 5.1 Vision The BRICS bloc was established with a vision of a developed global economy. The establishment was based on the perceived global disadvantage of the developing nations against the developed nations. As such, the bloc was established with an aim of ensuring that the developing nations, through alliances and shared resources use, established a self made and regulated platform for their growth most especially economic (“University of Toronto”, 2014). However, the bloc also has a strategic vision of enhancing a geopolitical and economic situation through which the developing nations would be empowered and equally represented in global decisions and strategies development. 5.2 Mission The Main vision of the BRICS member states bloc is the creation of a favorable and sustainable economic development platform for the developing nations. In this regard, the bloc operates under the mission of drawing together the various contributors of the individual developing country members to provide economies of scale and the absolute increased bargaining power and leverage against the developed world. 5.3 Strategy In order to facilitate and promote the BRICS agenda in vision and mission statements, and based on anal analysis of the past six summits that the bloc has held over the years, this evaluation develops profile of the potential future strategies by the bloc. Kochhar (2014) stated that on one hand is the development and establishment of corporation with the Muslim world. This is based on the perceived increase on the development potential in the Muslim world as depicted in the chart below. The inclusion of the Middle East nations would promote the bloc geopolitical agenda exponentially into the future. Moreover, on an economic front, that is the main driving agenda, the bloc will establish a joint market. Through the joint market zone, products from the bloc members would be marketed jointly in the market (Pilling, 2014). This can be evidenced by the establishment of its financial partnership through the new development bank to aid economic projects within the bloc regions. The forecast analysis can be evidenced in the chart below (“The Economist”, 2008) 6.0 Conclusion In summary, this evaluation offers a critical evaluation of the BRICS alliance between Brazil, Russia, India, China and South Africa. In this case, the evaluation establishes the BRICS nations have over the years established a wide range of influence on the global political, economic, environmental and social orders. Moreover, each of the member states, despite their respective strengths and weaknesses, have each unique contributions to the bloc. Finally, the evaluation establishes that the bloc alliance will expand both its political and economic influence into the future. References Baumol, W. J., & Blinder, A. 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