Question
Global economic growth is leading to increasing levels of affluence around the world. The rate at which societies are becoming more prosperous is particularly rapid in some developing economies. Critically review what the main consequences will be for businesses and for the management of people if these trends continue?
Solution
Question 4
Global economic activity is currently going through a broad-based and sharper-than-projected slowdown with the inflation increasing. However, IMF (2022) argue that this is despite of a projected global growth of 2.7% by year 2023. Nevertheless, OECD (2022) argued that due to the issues in Russia’s war of aggression in Ukraine and linked cost-of-living crisis in majority of the countries, the projected growth is expected to remain low in 2023 to 2024. In the developing economies, Myovella et al. (2020) argue that the society end up becoming highly prosperous. This is in their social and quality of life increasing with their economic development. The economic growth and development is influenced by the demand of improving the overall efficiencies, options, quality and management of the prices. The role of the government entail freeing up the different markets inclusive of the public services for international competition. The outcome of this is development of the monetary and fiscal policies with the capital expenditure and markets in terms of infrastructure, human capital, effective stock and bond market. This is supported by Adil et al. (2021) which evaluates Keynesian and Monetarist theory of monetary policy identifying control of supply of money flowing into the economy. This is while allowing it to fix themselves. This is with Keynesian economists believing that a troubled economy progress in a downward spiral unless a situation the intervention drives consumers in buying more goods and services.
For the purpose of identifying the consequences for a business and management of people, the following trends and factors would need to be put into consideration. These include;
Affluence and inequality (social and economic)- inclusive of polarised workforces– In Aiyar and Ebeke (2020) research by application of Kuznet Curve theory, the impact of affluence and inequality is put into consideration. The basic assumption of this curve is that there is a U-Shaped relationship of inequality and growth. This is with inequality increasing and eventually decreasing the process of economic development. The impact is even evident from what Barros et al. (2021) identify Barro’s Analysis model as reflecting on influencing the scope of per capital incomes but equally on the impact of new technology. For example, technology innovation as part of the economic growth would lead to increased inequality at first when less individuals would be sharing high-level incomes of the advanced sector.
For businesses, the impact of this trend would include increased market opportunities despite of the increased competition. As such, the organisations in such markets would be required to leverage on competitive advantage successfully. According to Ejiogu et al. (2020) the business growth would have a limit to productivity and a potential for constraining consumer spend and growth, destabilised supply chain, triggering political instabilities and jeopardising social licenses for operations. As evidenced in Xu et al. (2021), the labour market polarisation also lead to a decline in the job opportunities which are accessed in Middle-Skill occupations which basically entail inclusion of routine tasks such as occupations in manufacturing, production and transportation. The outcome of this would be the situation in UK where Bapuji et al. (2020) identify as having a significant economic inequality defined by unequal income distribution of income (earnings) or wealth (net worth/savings) in a society. This is where 20% of their citizens earning more than 20% of the country income with bottom 20% earning less than 20% of the income.
De-industrialisation and rise of a service/knowledge-based economy– The global economic growth would lead to an increased knowledge-based economy. By reflecting on Human Capital Theory, CIPD (2021) argued that the knowledge-based economy is characterised by existence of intangible abilities and skills of workforce and knowledge inherent within the organisation structure, routines, systems and processes. These input on knowledge capital of the organisations. According to Botta et al. (2022), to the business, this has influenced the rise in the rapid growth and development in North-South Trade (this is a trading process of the advanced economy and developed world. This influence the positive impact of the economies explaining reasons the deindustrialisation are in place in manufacturing industry as opposed to the industrialised sectors. The growth of their living standards in the advanced economies in the future-based practice. For the employees, Schindler et al. (2020) argue that this has a direct implication on the decline in the overall share of employment in the manufacturing sector. This is with the decline in the overall share of employment in manufacturing sector which is noted as mirroring a decreased share of the manufacturing industry with value addition to their GDP. However, there would be new opportunities emerging which impact on the demand-and supply-side factors in a large shirt of the employment sector of their active operations. The different requirements integration successfully lead to services employment being increased compared to the manufacturing sector and expenses on the agricultural sector.
Importance of knowledge management (KM): enhancement of intellectual capital (human, organisational and social)–
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