The 21 st Century global economy has transformed the educational, economic, political, and social landscape to a great extent. The new economy is influenced by forces such as trade liberalization, communication revolution, economic integration, globalization, as well as information technology. This article will analyze a case study of the globalization of Papa John's International Inc. and how the declining trade, investment barriers, technological change impact the business' globalization. Furthermore, the paper strives to assess the impacts of currency fluctuation on product price across the business' operations. The modern economy is founded on new initiatives, new technologies, and new ideas which, for a business to succeed must embrace.
The 21 st economy has experienced a decline in trade and investment barriers in many ways that affect global businesses. International trade is determined by the export of goods and/or services to other regions or countries by global firms such as in the case of Papa John's International Inc. Investment barriers and declining trade have affected Papa John’s organization in several ways (MarketLine, 2018). First, International operations of the firms have led to its success whereby its revenues increased by 11.7 percent in 2017 representing revenue of US$126.3. MarketLine (2018) asserts that the growth in revenues is majorly attributed to the increase in international restaurants from 2016 to 2017. Second, however, globalization also negatively affects the operations of Papa John’s business through competitions from other national, regional and international firms such as Domino’s Pizza, Little Ceasar Enterprises, and Pizza Hut.
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Technological change in the modern economy includes factors such as changing world output and world trade view, FDI, nature of multinational businesses, and world order. Consequently, Foreign Direct Investment (FDI) is experienced when an organization invests its resources in activities of its business in other countries (McCauley, McGuire & Sushko, 2015). Moreover, according to Bruno and Shin (2017), General Agreement on Tariffs and Trade (GATT), an international trade treaty, commits signatories to lower trade barriers across national borders. Technological change in the global economy has impacted global businesses in many ways. Firstly, changing world output and world trade view is influenced by the changing World Output demographics whereby Papa John’s restaurants owes its success to operation through a franchise. As a result, the franchise model which operates 4,456 restaurants allows the organization to operate in diversified geographical regions whereby margins are boosted and costs reduced. Secondly, the rising labor wages in the US may impact the operating costs of the organization thereby affecting profit margins negatively.
Currency fluctuation in the global economy could grossly impact the prices of Papa John’s business products in two major ways (MarketLine, 2018). Firstly, the cost efficiency of the enterprise would affect operating expenses thereby affecting operating margins. For instance, the organization experienced a decline in cost efficiency in 2017 which resulted in an increase in operating expenses of US$1548.2 million in 2016 to US$1632.3 million in 2017. The increase in operating expenses is attributed to incline in domestic restaurants' expenses. On the other hand, the product price of the organization is also threatened by the rising cost and availability of raw materials which are all affected by product prices. For instance, the restaurant industry, which is affected by volatility in costs and availability of food and commodity, is also affected by inflation of the economy. Consequently, the profitability of the organization would be affected where the organization would adjust by increasing the prices of their products.
The impact of monetary drivers on global firms can be understood by examining factors such as declining trade, investment barriers, technological change, and currency fluctuations. Consequently, factors that hamper global trade such as changing world output and world trade view, FDI, nature of multinational businesses, and world order should be regulated to facilitate the globalization of the world economy. While the global economy, in the modern world, is shifting its control to supranational organizations such as the UN, WTO, and EU; the federal governments must ensure that the interests of entrepreneurs are considered when formulating economic policies by reducing trade barriers, receiving debts forgiveness, and implementing economic policies based on free market economies.
References
Bruno, V., & Shin, H. S. (2017). Global dollar credit and carry trades: A firm-level analysis. The Review of Financial Studies . 30(3), 703–749.
MarketLine. (2018). Papa John’s International, Inc.: Company Profile. A Progressive Digital Media Business, P. 3-7.
McCauley, R. N., McGuire, P. & Sushko, V. (2015). Global dollar credit: Links to US monetary policy and leverage, Economic Policy . 30 (82), 187–229.
