The importance of the international business environment

The global marketplace of today has changed the way companies do business as the international business environment is extremely competitive. Businesses all over the world compete for a slice of the global market pie. Small companies have to decide whether to concentrate on their local market or expand into the international one. Expansion is risky and so business strategies have to be very carefully considered. Multinationals have taken over in virtually every type of industry. There are many factors to be taken into consideration before a decision to venture into the international business environment is decided upon.

 

These factors include, but are not limited to: -

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It would make sense for small companies that are about to take the plunge into the global marketplace to do a great deal of very thorough research in order to identify a country and marketplace where there would be very little competition. If the demand for the company’s product or service is high, then it would make sense to move into that marketplace. However, if the large multinationals have a presence in a country, a firm could only make a profit by slashing prices, which may or may not pay off. Expansion is definitely a risky move, and analysts have to weigh up the pros and cons.

If a company has the cooperation of another, or others, then it has global synergy, which would make the move less risky than if it was acting totally independently. There are certain global strategic motivators which need consideration too. These might be –

  • to source new raw materials,
  • to develop a site that is suitable for building a new factory
  • to get more assets by buying out small companies

There are many external factors, as well as internal one that impact the decision to move into the global marketplace. These include –

  • Socio-cultural considerations
  • Geographical issues
  • Environmental considerations
  • Legal and/or political issues
  • Economic considerations and
  • Technological ones.

Socio-cultural considerations are perhaps the most important ones. The further the country’s culture is away from your native one, the more problems there are that could arise from misunderstandings. Employers would have to train their employees in how to deal with cultural differences. If you are not from an Asian culture, Japanese culture, for example, would seem alien, and it might be difficult to find common ground in order to build a business relationship.

The ways of conducting business meetings in Japan are not the same as those that operate in Europe or the US, for example. The Japanese are much more formal and polite. They would frown upon men taking off their jackets and rolling up their sleeves. This behaviour would seem very relaxed and give the impression that the men were not serious about the meeting. However, the men with rolled up sleeves would be indicating that they were now ready to get down to some serious business and ‘talk turkey’ as the Americans say. Such instances of cultural differences could jeopardise the running of a company. It would be necessary to give both the indigenous workers and the newcomers an in-depth training course in the culture of the others to avoid misunderstandings.

Geographical and environmental issues include ease of access to a factory, for example. If the factory were built in a place that was difficult to access because the necessary infrastructure was not available, then the company would soon find it difficult to transport goods and finished products to other countries. Also, it would be futile to build an oil refinery in a country which had no oil and no port close to the refinery.

Another factor to consider would be waste disposal. How does the country in general cope with its waste disposal? Does it rely on rubbish dumps such as those in some countries in South America, and the Indian subcontinent? Is the disposal of waste taxed if the company uses landfills? These are question that need to be thought about before an international move.

Legal issues are really very important. Residency permits may be difficult to obtain for all workers that move with the company. It would also be necessary to investigate the country’s tax laws, as these can be extremely complex. How easy would it be in practice to do business in the country? This is a crucial question and one that needs answering before any move is made. What tariffs are in place on imports and exports? How easy is it to get an import/export license?

Then a company would have to reflect on the country’s political situation. Does the country have a history of unrest? Is the government stable? How often has the country held elections in the last 10 years? What are the penalties for breaking the law? Is there a ban on alcohol? Does the country still have the death penalty? Research into the country must be carried out.

As the standard of living is different from country to country, prior to any move a comparison should be made between the country the firm is proposing to move to and the ‘home’ country. Is a move a viable proposition? Is the new market of sufficient size? Do consumers have sufficient buying power to make a move attractive? What is the current currency exchange rate and is it likely to change dramatically?

The last consideration is technology. In the global marketplace, it is very necessary to have access to fast internet connections. However, there are also other considerations. For example, does the country (or the region) the firm is proposing to move to have a good, continuous supply of clean water? How reliable is the gas/electricity supply? What about the telecommunications system?

Finally, consideration should be given to the state of the country’s infrastructure. If products are to be transported this needs to be efficient. Is there an airport or a port, nearby the proposed site of the company? What state are the roads in? Are there motorways/highways close to the proposed site?

There is a book entitled ‘The International Business Environment,’ which is on a great number of course reading lists. Some educational institutions use it as a course book for business studies courses. It was first published in 2009 and is recommended reading if you need to have more in-depth knowledge about the global marketplace and ways of conducting international business.

You may want to write a critique of the book mentioned above, but you may need some extra help to do this. Before writing a critique of any book, you should have read it thoroughly and made notes. The best way of making notes is to copy quotes from the book with their page numbers so that you can easily find them when you start to write you critique, essay or even dissertation.

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