The International Business Environment
Clarke Ricks
School of Business, Liberty University
BUSI 690: Policy and Strategy in Global Competition
Dr. Hicks
April 5, 2021
The International Business Environment
Global expansion is costly and complex. To offset these costs and risks, organizations
must have strong reasons for developing a global strategy. These reasons generally fit one
(or more) of the following three strategic areas:
Global Concentration – Depending upon the competitive concentration of a given
industry in a given region, it may make sense to enter a market where competition is
relatively scarce (and demand is high).
Global Synergies – Some organizations have highly developed competencies that are
easily scaled. In these situations, global expansion means natural synergy.
Global Strategic Motivations – Other reasons for expansion to a given country may
exist strategically, such as developing new sourcing sites for production or acquiring
strategic assets in a given regiExternal Factors Impacting Expansion
International expansion can be a costly and complex procedure. Before considering
such a significant strategic move, management must weigh the external factors that will
impact success during a global transition. These include:
Socio-cultural:
The social environment of a given region can have a significant impact on success.
Food companies are highly impacted by this – certain cultures prefer certain types of foods.
Geographic/Environmental - For example, skiing equipment may not do so well in
regions without snow or mountains. Oil companies can only source oil from resource-rich
regions.
Legal/Political – Some countries have high barriers to entry, complex tax rates,
and/or unclear legislative practices. Ease of doing business is critical here.
Economic – The standard of living is different from region to region, and recognizing
the value of a given market in terms of spending power, currency, and market size is critical
to deciding upon expansion.
Technology – Access to internet, electricity, clean water and a variety of other
technological dependencies must be considered prior to entry if the organizational
operations rely on easy access.
Weighing the pros and cons of entering a given reason, and calculating projected
cash flows, costs, and required returns on investment are central financial
considerations to entering a new international market.on. The modern
economy is globally connected, and growing more so every day. Weighing the
pros and cons of international expansion is a key strategic consideration.
The multinational enterprise ( MNE ) is the primary player in international
business. MNEs are present in virtually every industry nowadays.
Entry modes for international businesses include global concentration, global
synergies, and other strategic global motivations.
With the complexity of international operating environments, organizations
should consider economic, technological, legal, socio-cultural and environmental factors.
Weighing the risks and potential returns and determining a required rate of return
for an international expansion is a key aspect of global financial management. International
business is an enormously relevant facet of the modern economy, and will only become
more integrated into core business strategy as technology continues to progress.
International business is simply the summation of all commercial transactions that take
place between various countries (crossing political boundaries). This is not exclusively
limited to the domain of business, as NGOs, governments, and coops also operate across
country borders with a variety of objectives (aside from simple profitability).
From a business perspective, the primary incumbent in an international business
environment is the multinational enterprise (MNE), which is a company that pursues
strategic success in global production and sales (i.e. operating within a number of country
borders). The number of examples of this type of firm is constantly growing. From fast food
chains like McDonald's to auto manufacturers like Honda to smartphone designers like
Samsung, the number of international players in most markets is constantly on the rise.
