Global Connections Weighing the Strategic Management under International
Business Environment
Clarke Ricks
School of Business, Liberty University
BUSI 690: Policy and Strategy in Global Competition
Dr. Hicks
April 6, 2021
Global Connections Weighing the Strategic Management under International Business
Environment
The contemporary economical management is globally connected, and growing
more in every day. Considering the pros and cons of international expansion is also known
to be a key strategic consideration under International Business Environment
Moreover, the Multi-National Companies or Enterprises are the primary players in
international business which is present in virtually every industry these days.
Global synergies, global concentration, and other strategic global motivations
include in the entry modes for international businesses.
Also, the organizations should consider technological, economic, legal, socio-cultural
and environmental factors with the complexity of international business environments.
Determining a necessary rate of return for an international expansion and weighing
the risks and potential returns is a key feature of global financial management.
Multinational Enterprise As Relevant Facet
Multinational Enterprises are known to be organizations which operate across multiple
political borders in the world. According to the perspective of business, the primary serving
in an international business environment is the MNE (multinational enterprise), which is a
company that pursues strategic achievement in global production and sales (Cross-border).
There are many number of examples of this type of firm which is constantly growing these
days. The number of international players in the majority of markets is constantly on the
rise From auto manufacturers like Honda to fast food chains like McDonald’s to smartphone
designers like Samsung, RedMi.
What Do You Mean By Global Expansion & External Factors Impacting Expansion?
You must note that the global expansion is relatively must costlier and complex by its
operation /nature. Organizations must have strong reasons for developing a global strategy
to offset these costs and risks. These reasons in general fit one (or more) of the following
three strategic areas:-
Global Concentration
The entrance of a market where competition is relatively scarce and demand is high will
be depending upon the competitive concentration of a given industry.
Global Synergies
It is quite evident that some organizations have highly well developed competencies
that are easily scale, in which the global expansion means natural synergy.
Global Strategic Motivations
Some other reasons also may arise for the expansion to a given country may exist
strategically, such as acquiring strategic assets or developing new sourcing sites for
production in a given region.
External Factors Impacting Expansion
The management must weigh the external factors that will showcase the success during
a global transition before considering such a significant strategic move. Those particular
elements are given below:-
Socio-Cultural: Highly Impacted
The social environment as an external factor in impacting expansion of a given region
can have a significant impact on success of the business. Food companies are highly
impacted by this in which certain cultures prefer certain types of foods and values
associated.
Geographic/Environmental: Resource-Rich Areas
In the context of geographical/environmental will include as example of the skiing
equipment, which may not do so well in regions with no mountains and snows. It also
means that the oil companies can only source oil from resource-rich areas.
Legal/Political: Ease Of Doing Business
Complex tax rates, and/or unclear legislative practices may have high barriers to entry
in some countries making ease of doing business critical.
Economic: Terms Of Currency
The economical standard of living varies from region to region, and recognizing the
value of a given market in terms of currency, spending power and market size is critical to
choosing upon expansion.
Technology: Prioritize To Entry
Access to electricity, internet, clean water and a variety of other technological reliance
should get prioritize to entry if the organizational operations rely on quick access.
Considering the pros and cons of entering a given reason, and manipulative projected costs,
cash flows, and required returns on investment are central financial contemplations to
entering in a new international market.
What Are The Major Problems Or Issues In International Business Environment?
Calculating the overall significances, the investigators have found that they face
numerous challenges and issues when firms operated at international scale. International
businesses must comply with the local regulation and rules in which they operate and set
up. When the organizations try to expand, they have foreign languages and complexity to
gather information about foreign countries their business in other countries. Moreover,
they have to deal in foreign currency also, which is again known to be a severe problem as
associated.
When working in other countries, the exchange rate may be varied & their culture and
social value should also be taken in account for consideration. You must also take the fact
into consideration that the risk factor is high in overseas business operations which includes
commercial, political, and financial. It is very difficult to understand the demand of the
international market Communication and control of international business is complicated.
One of the major issues associated in the international businesses is trade restrictions.
By saying this, a trade restriction means particular import controls, which is known to be a
very significant problem in the international dealer faces. It has also been observed that
trade practices and customs may differ in between two countries or nations. A few of the
issues in international business environment include ethical, social, environmental and legal
issues.
Benefits of the International Business Environment
Even though the firms have to undergo a lot of problems when expanding their
business internationally, still the international business brings countries collectively. This
process makes the world as global village & creates an atmosphere of unity. It exchanges
the ideas, information, service, and capital across the country’s borders.
This has encouraging outcomes in terms of greatest use of human capital that enlarges
employee opportunity in the global market. There is equal growth of price stability, wealth,
availabilities of goods & services to each and every one. It also brings new environment of
development, alliance, stability, affluence, modernization and technologies in the world.
You must also note that foreign markets create a larger share of the total business of a lot of
firms that have wisely sophisticated markets aboard.
The ultimate benefits of export in the international arena are clearly acknowledged in
today’s time. It is because the imports can also be highly helpful to a country since they
constitute reserve capacity for the local economical market. There is no incentive for
domestic firms without imports to moderate their prices. The lack of imported product
results in inflation and excessive profits for local firms as the alternatives forces consumers
to pay more.
This particular development usually acts as introduction to workforces demand
stipulation for higher wages, further intensifying the problem of inflation in the economy.
Saying this means that the prospects of a business depend not only on its possessions as
well as resources but also on the environment too.
The MNCs i.e. multinational corporations need to involve themselves in systematic
collection of information on all environmental dimensions. It is to adapt to the international
business environment and the economic agents in the local markets, identifying the more
vulnerable internal areas, processing this information to enhance environment knowledge,
and external opportunities. It must address towards a better environmental fit; and ultimate
execution of the “best practices” more familiar to the identified environment.
