GLOBAL BUSINESS ENVIRONMENT

Global Business Environment



Global Business Environment

PEST Analysis and Rising Global Food Prices

The natural surroundings where we reside, is capable of being very unpredictable. All associations have its advised interior flaws and power; however, the out-of-doors globe will additionally have a foremost influence on the company's upcoming opportunities. The PEST analysis is considerably like trading administration device and procedure, for analyzing the numerous distinct external components influencing the prices of food.

Political Aspects

The global food price index produced by the UN Food and Agriculture Organization reached a historic peak of 237 points in February, well above the peak of 213.5 reached in 2008. Then in March it dropped slightly to 230, before leveling out at 232 in April. Supplies of principal food crops are more plentiful than two years ago. Harvests in southern and eastern Africa have been good, keeping the cost of staples such as white maize stable. Reserves of rice, wheat and white maize (the most important staple food crops in many vulnerable countries) are adequate and that lessens the risk of a repeat of the 2007- 2008 crisis.

Rising prices of food is a problem for the every country, but it is observed that the developing countries get affected to it that has to import a lot of food to feed their populations. Countries will also be vulnerable if they already have high inflation, have limited foreign currency reserves and if their local currencies are depreciating against the foreign currency. According to the World Bank, 44 million people have fallen into extreme hunger and poverty in the developing countries as a result of the increase in the food prices (Hill, 1977, pp. 315-338).

Beginning in 2005 there was a rise in food prices on a global basis. One reason for this was the congressional mandate that ethanol be used in gasoline. Derived from corn, the use of ethanol diverted about a fifth of the corn crop from the global marketplace. The rise in food prices, along with the global financial crisis that began in 2007, contributed to a significant increase in the number of people both in the United States and globally in need of food aid. The European Union supports farm subsidies, but as in the United States, they are a matter of political controversy. The opponents generally point to the costs of the programs as a waste. However, the proponents see the programs as a way to keep farmers in business and to ensure adequate supplies of food. An appropriate objection is that dumping cheap surplus commodities on Third World markets depresses prices and hinders the development of regional commodity production. Efforts to develop market-government collaborative programs have met with some success (World Bank, 2010).

One fact that is important about surplus commodities is that the surpluses are a food/commodity bank that is available in times of famine or other forms of suffering. Without food surpluses, famines will occur because there will be inadequate supplies of commodities for people or their ...