War and Business
Introduction
War has both positive and negative impacts on business, depending on which side of the war a business stands. A war might benefit one type of business, while at the same time negatively affecting a different business. It is consequently a matter of understanding which position a business is supposed to take in case of a war. A war might be as a result of a business, a move which might be aimed at impacting an economy either positively or negatively thus leading the growth of a business in a given region. In a bid to understand the effects of war on business, this paper will discuss the effects of war on business, how business profit from wars, the impact of war to the market and the effect of war to the economy.
How Does War Affect a Business?
War and business can never get along, because war leads to insecurity, a move which results in poor economic growth (Stone, 2017). Most warring countries have ended up having the worst economic growth, due to the effect of insecurity and instability which leads to little or no production of services. War therefore leads to the closure of businesses, since companies cannot be able to operate in a region where there is no security. Security is the key to any business growth, and it is therefore necessary for a region to have security for businesses to grow (Smith, Mollan & Tennent, 2017).
War leads to the loss of manpower, skills and labour, a move which affects productivity in a business (Madura, 2014). In case of a war outbreak, most people tend to run for their lives, a move which either makes them to move to other peaceful regions or countries which are not experiencing any form of war. Due to running for security, the region loses manpower, a key component in the production of a company. In addition, companies lack the provision of labour, a move which affects the total performance of the company (Smith, Mollan & Tennent, 2017).
Issuance of curfews by the military because of a war tends to affect the working hours, hence negatively affecting a company’s production. In warring countries, the army dictates the working hours, and the hours which people are not supposed to walk freely, through a curfew (Madura, 2014). This consequently makes it hard for a company to be able to operate freely, a move which might affect its working hours, hence leading to the loss of time and customers due to unmet customer demands (Stone, 2017). Moreover, companies may also be forced to pay extra charges for the security provided by the military, a move which further affects the productivity of a company.
Insecurity leads to low or less demand for the manufactured products or even services. A company cannot operate in an area where there is no peace, due to the effect of war (Smith, Mollan & Tennent, 2017). People run from war tone areas, making such areas to lack viable market for goods and services. Most businesses may therefore be forced out of the market, because of the lack of a proper market. Furthermore, in such a case, a business may not be able to sustain itself, due to the lack of market which leads to no profits. Companies tend to seek funding in different ways, and it may therefore be very hard for them to pay the debts with the issues of war and the lack of a proper market for their products (Martin, 2013).
How do Companies make Profits from War?
Companies can make profits from war in dissimilar ways, based on the types of businesses involved, and the types of companies involved in the war. In addition, companies may also use war as a strategy to win markets for their products. The following are the ways through which companies can make profits from war.
Dominant companies tend to use the divide and rule system, thus dominating in a given market. In a company where such a company is not enjoying a huge market share, the company may fund rebels, or political mercenaries, in order to cause instability in such countries. After creating instability in such a country, most companies tend to move to other regions and countries, a move which creates a vacuum in the region (Stone, 2017). The dominant company then comes in with the name of offering financial aid to the country, and sets its businesses in the region. This allows the company to win over the hearts of the citizens of such a country, hence creating an automatic market for it to products, a move which allows the company to gain a huge market share in the region (Madura, 2014).
Arms companies use wars as a means of boosting their sales, hence increasing their productivity. Arms companies are tasked with the mandate of coming up with highly sophisticated arms, which cannot be matched by any given forces (Madura, 2014). The issue of uniqueness kicks in whereby any power using such arms, can have an advantage over its enemies. Most arms companies have therefore improved their technology, thus coming up with highly sophisticated and unique arms. These companies manufacture arms with the aim of helping warring countries to maintain peace. However, peace is not a good thing for arms companies, since they cannot make profits when there is peace. War means productivity, since warring nations would consequently run to the arms company with the most sophisticated arms (Smith, Mollan & Tennent, 2017).
In order to create war, arms companies tend to fund rebels, and terrorists, through providing them with arms (Stone, 2017). The arms provided to either the rebels or the terrorists may either be sophisticated or not, depending with the aim of the arms company. In order to deal with these groups, a country or even the international community should understand the types of arms used by the rebels or the terrorists, thus coming up with weapons which might counter such weapons (Martin, 2013). In order to get the best advice on how to restore peace, countries consequently hire representatives of arms companies, who will be responsible for providing military advice on how to counter the militants. In this case, the arms company will be allowed to sell weapons which might enable the war tone country to restore peace (Madura, 2014).
Arms companies are meant to maintain war, in order to increase productivity (Madura, 2014). If a country hires a military representative from an arms company to aid in the provision of arms advice, these representatives are meant to switch the weapons used by the rebels, as a means of making the country to change their weapons, thus leading to productivity. In addition, the representatives tend to elongate the time which a war should last, thus being able to receive more market for their arms (Martin, 2013). This is a strategy which is usually used by arms companies, with the aim of increasing their profits, thus staying on business. The aim of such companies is usually to maintain the war, thus creating a ready market for their products (Smith, Mollan & Tennent, 2017).
What does War do to the Markets?
War has both positive and negative impacts on the market, depending on the type of market at hand. Wars affect the general market of products and services negatively, but it affects the stock market positively. In this part, the paper will discuss how war affects the market of goods and services negatively, while affecting the stock market positively.
Impact of War on the Common Market
War negatively affects the common market, due to the migration of people who provide a stable market for goods and services (Stone, 2017). In addition, the provision of labour becomes a challenge, making it hard for a business to be able to carry out its activities at ease. Due to this reason, most companies are forced to run out of business, since they cannot be able to carry out their daily activities at ease. In addition, the businesses may not be able to pay the debts a move which leads to bankruptcy (Madura, 2014). On the other hand, since war is relative, some businesses may benefit from the war, a move which allows them to dominate and grow exponentially. For instance, during a war, as explained earlier in the previous section, arms companies may benefit positively, since they will have a chance to sell their products while confusing the minds of the warring country. However, war in general tends to affect the common market negatively, since people cannot carry out their daily activities at ease, a move which makes it hard for them to purchase goods or otherwise to seek services provided by most businesses (Martin, 2013).
Impact of War on the Stock Market
The stock market is an enemy of uncertainty, and wars are a good thing which help in dealing with uncertainty. For instance, during the 911 attacks in the US, the company’s stocks exchange drastically dropped, due to the tension which had been caused by the war. Three days later, the stock exchange was up 12%, from a loss of 3% (Madura, 2014). This consequently explains how the marketing trends in the US changed during this period, a move which led to the gaining of the stock exchange in a period of three good days. In simple terms, in case of a war or an attack, most people tend to buy assets relating to the failure of the currency in the affected country. During this period, the currency of the affected country tends to go down, a move which leads to losses in the foreign exchange. However, a few days after the incident, things change after a very huge investment in the field of stocks market, a move which leads to the realization of huge profits immediately after the incident (Smith, Mollan & Tennent, 2017).
During the times of war, stock volatile changes within the shortest time possible. This leads to either the huge sales which may either lead to productivity or losses. In an oil producing country, wars are responsible for changing the oil prices in the market, a move which also affects the volatility of the stock exchange (Madura, 2014). Due to the falling prices of oil in the market, most people would buy gold or even silver over oil in the stock exchange market, a move which is only meant to last within a few days or hours. Due to the continuous trend of falling oil prices, more people would purchase more stocks, and when the trend changes, then the stock exchange market tends to profit by a very huge margin, thus recovering the losses it had earlier on made (Stone, 2017).
How does War Affect the Economy?
War affects the economy in different ways, but most of it all, war negatively affects the economy of a given country. This paper will discuss the impacts of war on the general economy of a company.
Negative Impacts of War on the Economy
War comes with a lot of consequences, since peace is not easily gained, at it requires a lot of time, money and strategies (Madura, 2014). In order for a country to be able to conduct a war, it needs to have a stable funding, thus making it to sustain the military in the course of the war (Rockoff, 2012). War is however very expensive, as it is required of the government to use all the resource which it has in order to restore peace and stability. This makes most countries to seek huge debts, which may be paid in decades. In addition, the country may also have to cut on its expenses in order to finance the military operations, a move which makes it hard for it to develop, a move which affects economic growth (Stone, 2017).
Inflation
Huge borrowing comes with a lot of challenges, and this includes inflations. The prices of products go high, while the purchasing power of the currency drastically drops, a move which may lead to economic collapse if care is not taken (Rockoff, 2012). The living standards of people in the country also drops, making it hard for the country’s economy to be able to grow. In addition, for the country to be capable of paying for the war, it would need to raise its taxes, hence affecting the lives of its citizens, since the will not be having enough money to save. The country will focus its attention on the war, and not on the growth of the economy hence impacting its economy negatively. Furthermore, this will lead to a rise in poverty levels, a move which will lead to economic downfall in the country (Smith, Mollan & Tennent, 2017).
Investment Decrease
Investors only invest in countries which are at peace, because war might lead to the loss of their investments (Rockoff, 2012). War tone countries become out of bounds for investors, as they only seek countries which are at peace, where they are sure of gaining a market for their products. On the other hand, due to investment decrease, the levels of unemployment will be on the rise, thus affecting the total economic growth, since the citizens cannot be able to cater for their own needs. War should therefore be avoided at all costs, to make sure the economy grows at ease (Madura, 2014).
Conclusion
This paper has discussed the effects war on businesses, how companies make profits from war, what wars do to the market, and how war affects the economy. The paper has therefore provided the reasons as to why war and business can never get a long, due to poor markets and provision of labour. In addition, the paper has also looked at the negative impacts of war on the economy, where it was evident that war leads to inflation and investment decrease which translates economic decline.
Reference
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