Ebola and International Business

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Table of Contents

Introduction
Literature review
Holistic view of the case
Conclusion
Reference List

Introduction

International Relations [IR] entail the study of various global issues and foreign affairs amongst states and non-state actors such as non-governmental organisations [NGOs], multinational corporations (MNCs), and inter-governmental organisations [IGOs]. These actors constitute the international system.

IR is a dynamic discipline due to the fast changing world. The contemporary society is characterised by numerous changes such as the high rate of globalisation, ebbing state system, newer international regimes, increase in cases of crisis within sovereign states, terrorism, and ethnicity (Ghosh 2013).

Different scholars have undertaken intensive research on international relations, which has led to the emergence of varied opinions on the scope of IR (Baylis 2013). Some of the studies have asserted that IR focuses on issue areas [trade relations, cultural exchanges, war], international security, conflict, and cooperation amongst states due to various issue areas and the international political economy (Ghosh 2013).

The high rate of globalisation has increased the interaction among different economies. Thus, businesses have a unique opportunity to maximise their profitability by investing in international business.

However, in order to develop optimal competitive advantage in international business, it is imperative for firms to develop effective strategies and collaborate with different actors. Studying international relations improves the effectiveness with which an organisation undertakes international business due to the improved understanding on how international business is intertwined with international relations.

Ruel (2012, p.16) emphasises that international entrepreneurs ‘need politicians and government representatives to get access to foreign markets and deal with legal issues across borders’. In an age where some different countries are undergoing remarkable political and economic changes, it is fundamental for businesses to develop effective international relations with respective governments in order to develop sufficient market intelligence.

Businesses are subject to different global issues, hence the need to integrate effective international relations in order to survive. One of the most notable cases relates to the recent outbreak of Ebola in March 2014. The outbreak was largely reported in some West African countries such as Sierra Leone, Guinea, and Liberia.

The disease led to a major crisis whereby over 4,900 people were reported dead by 14^th October 2014. This essay analyses the impact of the Ebola disease on international business.

Literature review

IR scholars have undertaken extensive studies, which have led to the development of different theoretical approaches. Some of the major theoretical approaches that have been proposed include constructivism, realism, and institutionalism.

Realism

This approach emphasises the existence of evaluating various elements, viz. national security, the use of force, and state power in understanding global politics. Cali (2010) argues that realists perceive states as the most critical players within the international system.

This perception is well illustrated by the view that realists often discuss international relations based on ‘state of nature’, which refers to the lack of sovereign authority. Thus, a state behaviour can best be understood by assessing the extent to which power is balanced.

Moreover, understanding state behaviour can also be attained by assessing various elements such as the economic performance, size of population, size of territory, and military strength. Acharya (2008, p.2) affirms that the ‘main goal of states is to ensure their survival and pursue their national interests, both of which may require them to seek greater power relative to their neighbours’.

The realism theory is based on the assumption that war and conflicts are inevitable (Brecher & Harvey 2002). Furthermore, the theory argues that international relations are based on the relative gains of the respective states rather than establishing a win-win situation.

Therefore, the realism approach affirms that understanding the extent to which a state has balanced power is the most effective method of understanding world politics (Shareen 2007). The compliance or defiance to international norms and laws amongst states that have adopted a realist approach depends on their self-interest.

Cali (2010, p.29) asserts that states ‘do not respond primarily to legal rules, but rather to practical considerations determined by the power they have vis-a-vis other states’. Thus, if the international laws formulated are beneficial, they tend to comply and defy if the benefits diminish (Cali 2010).

The realist theory best explains why the US is extensively committed to the ‘war on terror’ approach that was initiated during the Bush administration. In its commitment to ‘war on terror’, the US has largely ignored the International Humanitarian Law, which was enacted during the Geneva Convention.

Institutionalism

This theory argues that the level of cooperation amongst states depends on their self-interests. The cooperation is stimulated by the need to attain a particular goal, which the states cannot achieve individually. The cooperation between respective states is enhanced by the establishment of different institutions, which are charged with the responsibility of executing predetermined tasks such as trade.

Additionally, the institutions improve the effectiveness with which states undertake interstate negotiations as they provide the rapport for such negotiations. The institutions formed are formalised with time, thus leading to the establishment of an International Organisation [IO]. Some of the classic examples of such institutions include the World Trade Organisation [WTO], the Conference for Security and Cooperation in Europe [OSCE], and the General Agreement on Tariffs and Trade [GATT] (Cali 2010).

The member states formulate comprehensive rules and regulations, which all the state actors follow. The proponents of institutionalism affirm that the establishment of such institutions fosters the development of a high level of transparency, reduction of the risk involved in international business, and minimisation of transaction costs.

The interaction amongst various states leads to the establishment of a long-term relationship amongst the member states. Berejikian (2004) asserts that a high level of reciprocity is established, hence promoting cooperation and stability (Cali 2010).

The theory further argues that the institutions established gain extensive power and identity. Consequently, they constrain state behaviour even if the state members wish to deviate from the formulated rules and regulations. This aspect shows that the likelihood of the established institutions going beyond serving the member states self-interests is high.

Constructivism

Brecher and Harvey (2002, p. 111) posit that constructivism ‘focuses on the role of culture, norms, and ideas in world politics’. Similar to realists, constructivists cite the state as the core player in the international system. Furthermore, constructivists assert that state’s interests are subject to change.

The change might be spurred by the intensive interaction between states. The interaction between states leads to the development of a learning process. Therefore, the theory postulates that international institutions are critical promoters of state norms and identities. Furthermore, international institutions contribute significantly in restructuring the preferences of various state actors (Kydd 2005).

For example, countries that have joined the European Union have a mandate to accept the Copenhagen Criteria. Some of the aspects that the criteria advocate include human rights observance and the adoption of democratic systems of governance. Additionally, the member states have a duty to incorporate a market economy (Baik 2012).

The theory further asserts that the IOs such as transnational advocacy networks and NGOs may influence the behaviour of state members. For example, the international organisations may require the member states to comply with specific norms.

The first step according to constructivism theory entails the formulation of promotion of the desired international norms (Webber 2005). Secondly, the norms are institutionalised whereby the state actors are required to follow the established norms.

The third stage entails socialisation, whereby the state actors accept the established norms. Therefore, the establishment of the desired state behaviour follows a ‘norm cascade’ (Joffe 2012). One of the most important stages in the ‘norm cascade’ entails signing of international treaties and international conventions.

The member states may be compelled to sign the international treaties by instrumental reasons. However, this process might culminate in a significant change in state behaviour.

Case study

The Ebola epidemic has claimed the lives of over 4,900 citizens in West Africa alone since January 2014 (CNN 2014). Furthermore, the disease has affected most economies around the world. The most affected countries include Sierra Leone, Guinea, and Liberia. The first case of Ebola hemorrhagic fever was recorded in the Democratic Republic of Congo in 1976.

The disease is highly infectious, which explains the significantly large number of deaths that have been recorded. The incubation period ranges between 2 to 21 days. Some of the countries that have been affected by the outbreak include Liberia, Guinea, South Sudan, Uganda, Ivory Cost, and the Democratic Republic of Congo.

The WHO asserts that there is no specific vaccine for the disease, which makes it a continuing case. Thus, patients are offered supportive care, which increases its fatality to 90% (CNN 2014). Due to the high rate of international cooperation, for example through trade, the disease has spread to other countries such as Spain and the United States.

Four cases and 1 death have been reported in the US. Two of these cases originated from the US, while the others originated from Liberia and Guinea (CNN 2014).

PEST analysis

In order to undertake international business successfully in the wake of the Ebola epidemic, it is imperative for businesses to develop extensive understanding of the prevailing external environment. One of the models that businesses can utilise in understanding business environment entails the PEST model.

Political environment

According to Prasad (2010), changes in the political environment have a significant impact on the degree a country’s political stability, hence the degree of political risk faced by international businesses. For example, the occurrence of civil disturbance or war might affect the level of cooperation amongst countries.

Such instability might also affect an organisation’s capacity to invest in international business. Additionally, a change in government policy may affect international trade positively or negatively. For example, if a particular country lifts import quotas on certain products, other economies exploit this opportunity by increasing the volume of exports of the specific products to that country (Williams & Green 2009).

Economic environment

According to Pailwar (2009), businesses are subject to economic cycles, which affect a country’s economic performance. Economic factors have a significant impact on international business operations. One of the most significant economic factors relates to national interest rates.

A negative change in the rate of interest rate has adverse effects on an organisation’s ability to maximise its cash flows. Furthermore, change in the prevailing economic environment might affect an organisation’s ability to implement its expansion strategies.

For example, the recent global economic crisis led to a significant reduction in the level of profitability amongst most international businesses (Madura 2014). Due to the high rate of globalisation, most economies have appreciated the need for economic integration, as well illustrated by the various trade agreements and regional trading blocs that have been established. Examples of such trading blocs include the European Union and the GATT.

Social environment

The social business environment is comprised of the society’s lifestyles, beliefs, norms, trends, and habits. Additionally, the sociological environment is also comprised of a country’s population structure. For example, a high birth rate presents international businesses with an opportunity to sustain their future growth due to the potential increment in demand for products and services.

However, a high death rate is a threat to international business due to a reduction in product demand (Bensoussan & Fleisher 2013). Furthermore, international businesses are also affected by the prevailing income gaps within society. A high-income gap may lead to a reduction in international businesses’ capacity to maximise profitability (Bensoussan & Fleisher 2013).

Technological environment

The past few decades have been characterised with extensive technological changes. Subsequently, businesses are obligated to keep abreast with technological advancement in order to achieve and sustain long-term competitiveness.

The technological advancements currently being witnessed present a classic opportunity for businesses to increase their customer base by focusing on delivering unique customer experience. Failure to respond to technological changes might lead to a decline in market share due to the inability to respond to customers’ needs.

Holistic view of the case

Impact on individuals and businesses

The PEST analysis above shows that international businesses are subject to different macro environmental forces. These forces emanate from different issues and they affect the respective business environments, hence the businesses’ operations.

The case of Ebola outbreak has affected international businesses in a number of ways. First, the epidemic has led to the death of over 4,900 people. Additionally, most businesses in West Africa have halted operations in an effort to curb the spread of the virus.

Despite the fact that most businesses have been closed as a preventative measure, the crisis has led to remarkable changes in behaviours amongst individuals. The level of fear amongst citizens has increased tremendously. Thus, the level of demand for goods and services amongst individuals has declined due to the decline in domestic income.

Additionally, some countries such as Liberia have experienced a significant reduction in the occupancy rates due to the declining number of incoming flights. Consequently, most hotels have laid off employees in an effort to minimise the cost of operation (World Bank 2014).

Impact on states

According to a report released by the World Bank shows that the most affected countries, viz. Guinea, Liberia, and Sierra Leone could lose approximately $97 million if they collaborate in containing the epidemic by 2015 or $807 million if the Ebola virus is not controlled adequately (World Bank 2014).

Furthermore, the World Bank asserts that the rate of economic growth in Guinea has been revised downwards from 4.5% to 2.4%. Thus, there is a high probability of the country experiencing a poor economic performance, hence reducing individual consumers’ purchasing power.

One of the sectors that have adversely been affected in Guinea is the agriculture sectors. The World Bank (2014) affirms that the cocoa and palm oil farming has been adversely affected following exodus to villages. A significant proportion of the country’s palm oil and cocoa exports are produced with the help of village farms workers.

Ebola has also affected Sierra Leone’s economy, which was advancing towards becoming a middle-income status. Prior to the occurrence of the epidemic, the country’s annual growth rate was estimated to be 11.3%. However, the annual growth rate is estimated to be 8% by the end of 2014 and 0% in 2015 (World Bank 2014).

In an effort to curb the spread of the virus, most West African countries where deaths as a result of Ebola have been reported especially Liberia, Sierra Leone, and Guinea have been affected by international travel bans imposed by various countries and companies.

For example, the British Airways temporarily halted its flights to West Africa. Subsequently, the company experienced significant reduction in its sales revenue generated from international operations. Furthermore, this action affected the level of tourism to and from West Africa, hence the country’s economic underperformance (Caulderwood 2014).

The imposition of travel bans to West African countries by various governments around the world shows that most countries have adopted a realism theory in dealing with the crisis. This aspect arises from the view that the travel ban imposed by most countries to some of the West African countries has been instigated by self-interests.

Markets have been closed, thus affecting the citizen’s livelihoods. Additionally, foreigners working in different economic sectors have fled the country due to the fear of contracting Ebola.

Impact on international cooperation

The Ebola outbreak has increased the level of cooperation amongst different states in fighting the epidemic. The international community emphasises the need for cooperation in fighting the disease. The high levels of cooperation have been enhanced by the infectious nature of the disease and the high rate of fatality.

Most developed and developing countries such as the US and China have emphasised their commitment to assisting the affected countries deal with the situation. One of the areas of cooperation amongst the international community relates to research on how to deal with the crisis.

For example, the international community has provided extensive technological support to the affected countries on how to prevent the spread of Ebola crisis. Additionally, the international community is collaborating with the affected countries in providing treatment to victims. Therefore, the international community has adopted a constructivist approach in dealing with the epidemic.

Conclusion

This paper illustrates that the international business is closely associated with international relations. In order to deal with the various environmental factors successfully, it is imperative for businesses to appreciate the contribution of various actors.

The contribution of the various actors such as states, NGOs, and other International Organisations affects the nature of strategy adopted by the international businesses. Due to the recent Ebola outbreak, most international businesses have limited their business transactions with some of the affected West African countries.

The case study illustrates that countries adopt different approaches, viz. realism, institutionalism, and constructivism in dealing with crises.

Reference List

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Baik, T. 2012, Emerging regional human rights systems in Asia, Cambridge University Press, New York.

Bensoussan, B. & Fleisher, C. 2013, Analysis without paralysis; 12 tools to make better strategic decisions, FT Press, New Jersey.

Berejikian, J. 2004, International relations under risk: framing state choice, State University of New York, Albany.

Baylis, J. 2013, The globalisation of world politics; an introduction to international relations, Oxford University Press, Oxford.

Brecher, M. & Harvey, F. 2002, Realism and institutionalism in international studies, University of Michigan, Ann Arbor.

Cali, B. 2010, International law for international relations, Oxford University Press, New York.

Caulderwood, K. 2014, Ebola economic impact felt beyond affected countries. Web.

CNN: World Bank cost of Ebola could top $ 32 billion. Web.

Ghosh, P. 2013, International relations, PHI Learning, New York.

Joffe, J. 2012, Realism, constructivism and institutionalism; a tale of partial theories in search for general relevance, . Web.

Kydd, A. 2005, Trust and mistrust in international relations, Princeton University Press, Princeton.

Madura, J. 2014, International financial management, Cengage Learning, New York.

Pailwar, J. 2009, Economic environment of business, PHI Learning, Chicago.

Prasad, V. 2010, Business environment, GenNext, Delhi.

Ruel, H. 2012, Commercial diplomacy in international entrepreneurship; a conceptual and empirical exploration, Emerald, Bingley.

Shareen, P. 2007, Literature and international relations; stories in the art of diplomacy, Ash Gate, Burlington.

The World Bank: Ebola: economic impact could be devastating, 2014. Web.

Webber, C. 2005, International relations theory; a critical introduction, Psychology Press, New York.

William, T. & Green, A. 2009, The business approach of training, Gower, Aldershot.

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