Global Business Environment and Issues †Free Samples for Students

Question: Discuss about the Global Business Environment and Issues. Answer: Introduction Global business environment can simply be termed as the environment in foreign countries that relates to organization or companys home environment which influences decision making(Parisa Samimi, 2014). Cross-border business activities can simply be defined as business operations in a foreign country. International businesses may be described as business operations that take place between two different countries(Muhammad Akram Ch, 2011). This consists of small companies that do exportation of their products to a single foreign country as well as very huge companies with many operations all over the world. Distinctions are usually defined among various types of global firms. One distinction that can be of help is the difference between multi-domestic firms and global firms. Domestic and international firms share the same objective which is functioning successfully to continue operations. Different countries have different laws, political systems and regulations, currency, import taxes and duties. An individual who plans to travel across borders to another country must have legal documents accepted by the country, currency of the country, should be able to communicate easily in that country and also be dressed decently according to the culture of the foreign country(Reich, 1998). Doing business transactions in a foreign country also consists of similar necessities and hence it is even difficult than doing business transactions at home country. The following sections will explore some of these issues. Political system Every country has its own political system and every company or organization planning to engage in international business must be aware of political environment of the country its exporting its product or services to. Democracies follow the rule of the law. It states that no one is above the law including the government whereas authoritarian regimes often do whatever their leaders want them to do(Farhad Nezhad Haj Ali Irani, 2011). For a case where a company chooses to do its business in democratic regimes it will have protection of the rule of law as a necessity whereas in authoritarian countries it is not a necessity to have protection of the rule of law. Various countries impose barriers so as to protect their domestic businesses from competition from foreign businesses hence they will be forced to contend with tariffs. Economic systems When an organization or a company starts engaging in cross-border businesses it faces different economic systems(Muhammad Akram Ch, 2011). A good economic market for a business is a free market. A free market is where the government is not involved in regulating business transactions in the country. Though finding a country with a free market is hard hence the best suitable economic system for a business is mixed economy. Mixed economy has characteristics of both command economy and free market economy. Cultural environment Having adequate knowledge of cultures and customs of a country a firm wants to indulge into business transactions with and respecting them plays an important role in international business. Cultural practices include values and manners, religion and tradition. Culture has a major impact in the consumption market hence its very vital for any business to understand the culture of the country it plans to do business with. This is done by marketers to establish the acceptability of a product in foreign market. When studying culture of a country Hofstedes model is the appropriate model to carry out the study. Hostedes model helps in outlining various ways in which culture can be classified into(Hofstede, 2011). They include power distance, individualism vs. collectivism and masculinity vs. femininity, uncertainty avoidance and finally long term orientation. Social environment Social environment is also an important thing to understand. A person is limited by the society he lives in. Social class is a key part in the society(Muhammad Akram Ch, 2011). The level of brain wave of each class and their buying frequency differ from region to region. Family is an important part of this type of environment and over time lifestyle has been changing due to changes in trends, technology and many more and this influences their consumer behavior. International trade theories For business to take place between countries comparative advantage is considered whereby country A exports what it does best in to country B and imports what it is poor in from country B. Therefore, for a business to thrive in cross-border trade it must first know what the foreign country is poor in maybe its a service or goods(Sen, 2010). Having known what, the country is likely to import it should also consider which regions the foreign countries gets the products from and the price at which it acquires its needs with. This helps in eliminating underpricing or over-pricing. International strategies for a firm to thrive. A company may plan to start business in foreign country in various ways which includes: exporting, contracts, franchising and planting their own company in a foreign country, joint ventures e t c. Exporting is always the first choice for many companies as it is cheap for a start and many companies rely on exports since they started their operations(Kasimoglu, 1997). Effective exporting requires one to be careful and pay attention to details so that the process can be successful, an exporter should know if it is important to use intermediaries and when to use them, when and how to process export documents, which mode of transport to use, arrange payments methods suitable for both parties and so on. Contracts are often used by companies which transact special services e.g. engineering, technical support, food supply and so on, in another country for a limited period of time at a specified constant fee. Contacts are usually short term. Their short period nature is a major drawback and the contracting company needs to develop new businesses in the region(Kasimoglu, 1997). This requires a lot of expertise as marketing a company in a foreign market is time consuming and very expensive. Large companies can start new companies in foreign countries construct facilities and train foreigners and the hand over the company to a foreign owner, this is known as Turnkey contracts(Reich, 1998). This usually involves large projects for example construction of airports, railways, dams and so on. This usually requires large financing hence financed by international financial institutions like World Bank. Firms involved in this type of business can be very profitable but on the other hand require expertise in their operations. Franchises is sale of the right to operate business operations. A good example is Mercedes Benz in countries like Kenya, Uganda and many African countries. A good franchise requires power over something other people are willing to spend on, for example name, products or a way in which things are done. Finding franchisees and maintaining power over franchisable assets in a foreign country may not be easy. To be successful the franchising company must make sure it accomplishes both of these. In the global competitive environment, the capability to initiate cross-border organizational ability is the main factor that can assist the company to adapt to the changes that are present in the dynamic environment. It is crucial for organizational managers to have international mindset in order for them to be effective. This is because the traditional ways of conducting business have been rendered useless due to the globalization. As discussed in this paper, strategies for global cooperation will result from the combination of international business and strategic management. These strategies are influenced by political, economic, social, and cultural environment. References Farhad Nezhad Haj Ali Irani, M. R. N., 2011. Globalization and Challenges; What are the globalization's contemporary issues?. International Journal of Humanities and Social Science , 1(6), pp. 216-217. Hofstede, G., 2011. Dimensionalizing Cultures: The Hofstede Model in Context, s.l.: s.n. Kasimoglu, M., 1997. Survival Strategies for Companies in Global Business World: A Case Study , s.l.: anakkale 18th March University. Muhammad Akram Ch, M. A. F. M. K. B. D. I. A., 2011. Globalization and its Impacts on the World Economic Development. International Journal of Business and Social Science, 2(23), pp. 291-296. Parisa Samimi, H. S. J., 2014. Globalization and Economic Growth: Empirical Evidence on the Role of Complementarities. PLOS ONE, 9(4). Reich, S., 1998. What is Globalization? Four Possible Answers, s.l.: s.n. Sen, S., 2010. International Trade Theory and Policy: A Review of the Literature, s.l.: Levy Economics Institute of Bard College.