In seller, we are all integral. For instance, the

In today’s world, we all play a part
in international business. Whether we are the buyer or seller, we are all
integral. For instance, the iPhone is assembled in countries such as “Mongolia,
China, Korea and Taiwan” (Kabin, 2018) before returning to the USA as the final
product. It is then shipped to international Apple stores, to be purchased
worldwide by consumers.

 

International business is the
“exchange of goods and services among individuals and businesses in multiple
countries.” (BusinessDictionary.com,
2018). For example, a trade between UK and India. Trading internationally
consists of “PESTLE”, an acronym for Political, Economic, Social,
Technological, Legal and Environment (Academy,
2018). This is significant when trading overseas as these factors will affect
the business positively and negatively. In comparison with companies that
strictly sell domestically, they are targeting a small percentage of their
consumers. Therefore, by trading internationally, businesses will be able to
“diversify their portfolios and insulate them against periods of slower growth
in the domestic economy” (A. DiMatteo,
2016)

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A social aspect to consider alongside
international business is cross culture due to its significant influence on
society. Businesses can implement cross culture to increase interaction with
consumers of different backgrounds. Businesses have to alter their products to
specifically target their audience depending on the country of origin, for
instance, in the UK, it is acceptable to provide food containing pork, ham,
alcohol etc. Whereas, in Muslim countries such as Dubai and Pakistan, they are
prohibited due to religious and cultural reasons. Consequently, a business has
to understand the culture and values held by society before immersing
themselves into international business, altering their product to fit society’s
needs and wants. Another cultural factor is language, as interaction has to
take place for a sale to be made. “Joint
ventures, mergers, licensing, distribution agreements and sales of products and
services” (Yoko Brannen and Mughan, 2016) consist of face-to-face interactions,
highlighting the importance of language as it makes international trade between
countries smoother. For instance, having a multilingual instruction
manual rather than just English will appeal to more customers. Furthermore,
only through language will a multi-national company be able to cultivate
effective strategies to dominate their international market, implemented
through staff training and development (Von
Glinow, 1988; Gibson and Hodgetts, 1991).

 

 

Technological
factor is progressively essential to consider with international business. For
instance, it is possible to contact someone on the other side of the world via
email, phone etc. Additionally, through the use of technology, businesses can
use machinery to cut labour costs, create less wastage and perform dangerous
tasks. For example, in 2016 Amazon made its first air drone delivery, changing
the shift between delivery drivers to self-automated drones.

 

Economic concerns with international
business is inflation, as prices can rapidly increase or decrease at any time.
“Influence on interest rates, exchange rates, cost of living, inflation affects
general confidence in a country’s economy” (P. Neelankavil, 2015). Different
countries have different levels of inflation, developed countries have lower
inflation in comparison with lower economically developed countries who may
experience hyperinflation. For example, “1993, Brazil inflation rate was over
1,000 percent” (P. Neelankavil, 2015). This is alarming for organizations who
conduct business in Brazil as it destabilises their future due to factors such
as expenses, inventory and cash-flow and hyperinflation. 

 

Foreign direct investment “represents
the capital investments made by companies in other countries… including the
purchase of real estate, manufacturing plants, service and distribution
centre’s or foreign businesses.” (A. DiMatteo, 2016). There are three areas
where foreign direct investment has noticeably heightened over the past couple
decades, Europe, East Asia and America. We can infer that these regions have
strong political and economic power, driving international businesses to invest
in these countries.  In contrast with a
nation dealing with political or economic unrest, a decline in foreign direct
investment will follow, for example, “Russian Federation… saw FDI inflows drop
by 50 percent in 2014 compared to the year before” (A. DiMatteo, 2016). This
occurred because of the turmoil caused by Russia invading Crimea, which
resulted in sanctions from the west causing a decline in Russia’s oil, which is
what they are renowned for, as well as a downfall in currency. This shows the
connection between international economies and how certain decisions may affect
neighbouring countries likeliness to invest.

 

 

 

 

 

 “A country’s political system influences the
decisions made by an international firm” (P. Neelankavil, 2015). A secure and
welcoming government would hope to see international businesses flourish in
their country, in comparison with other governments who may be unreceptive due
to clashes in political ideology e.g. Democracy vs communism. Additionally, “government
introduces policies…through actions of wage, price controls, taxes,
manipulation of money supply, decisions on government expenditures, production
and the way businesses operate” (P. Neelankavil, 2015).  For instance, these changes could insinuate
an increase in minimum wage, which could be costly for the business, or if
government modify existing policies such as restraining amount of international
trade allowed in a country. Moreover, some government may require countries to
pay additional charges for them to be allowed to trade legally. Governments use
tariffs and quotas to shield domestic business and make them look more
attractive in the eyes of the consumer as they would be cheaper. This is limiting for international businesses as their
profits can be affected due to tax and a limit to the amount they can sell.
However, if countries want to increase the amount of international business,
they can use encouragements such as Free Trade Zones, allowing manufactures to
conduct their business activities without interruptions from resident
authorities. A majority of these zones
exist in developing countries such as Pakistan and Sri Lanka as developing
countries are more in need for foreign investment. A political decision that had a major effect is Brexit. Since Britain
choose to leave the EU in 2016, it has since come with many negative
implications such as devaluation of the pound by 15%, increasing gas and oil
prices and a decline in the investment for real estate (J. J. Welfens, 2017).

 

Demographics is a factor to consider
whilst conducting international business. The “study of human population in
terms of size, density, location, age, gender, race, occupation and other
statistics” (P. Neelankavil, 2015). As the world population is rapidly on an increase
(6 billion people on earth) this will have an effect on international business
because some areas are more congested. Depending on the size and population of
the country will determine whether a business will want to invest into a
foreign market as they will want to view how economically active the country
is. For instance, “1 billion inhabitants in China to less than 1 million in
Luxembourg” (P. Neelankavil, 2015).  This
indicates that there are more business opportunities available in China due to
the fact that there is a wider target market and people are more economically
active, implying more people are ready to work and spend their disposable
income.

 

 

National laws affect how businesses
carry out their day-to-day activities and this could have an effect on the
organisations overall performance. Legal factors are vital for an organisation
that wants to establish longevity, especially for countries that want to expand
globally. Therefore, businesses have to consider legal acts such as health and
safety, equal pay, child labour etc. The government can put in legislations in
place, for instance to pay men and women the same amount per hour of work.  Also, there are specific laws that cater to
international businesses, for instance “investment of capital and repatriation
of earning” (P. Neelankavil, 2015). 
Additionally, different countries have different forms of law, United
Kingdom follows a common law, France follows civil law and theoretic law for
countries that follow a religion such as Saudi Arabia. The importance of
understanding the difference between country law is crucial for a business’s
trying to expand internationally as they would have to abide by laws of the
country they’re in. For instance, in Saudi Arabia, women have to keep their
modesty in public and cover themselves head to toe, whereas in France, it is
banned to wear a hijab in public.

 

A crucial aspect that countries must
evaluate before doing business internationally is the condition of the market.
Certain markets have no space for new businesses to co-exist as there are
presently too occupied, therefore no opportunities for new businesses to
flourish. Kokemuller, 2007 explains the limitations that may occur from
entering a business that is too saturated. The issues are that it may restrict
the profitability of the business, as there are too many businesses operating
in the current market and therefore there may be a little customer left, which
may construct the businesses aim of profitability. Additionally, another issue
is the potential to grow within a market. If a market is already overly
saturated, there will be no space for new business to flourish and grow.

 

To conclude,
international businesses brings risks such as language barriers, exchange rates
and legal requirements, however, it creates opportunities like integration of
economies, increase profitability and brand notoriety.