When a company decides to conduct business internationally these are just some of the things they have to take into consideration. A ton of effort is always required as a way to make the correct decision. The international business environment provides new opportunities that may include growth and profit as well as a positive reputation globally. The international business environment tends to be globalized and has a few driving forces. These forces can be categorized as political, economic, cultural and technological; these are referred to as PESTLE (political, economic, social, technological, legal and environmental).
PESTLE is considered a macro-environment and these forces affect the microenvironment of a business. The political environment of international business tends to refer to the influence that government has on a country. According to Feys, Marmol, & Probert, established authorities are making more decisions that have a direct impact on the daily operations as well as the financial and social aspects of the company (2015). Any company doing business internationally should understand such political bodies that govern international trade policies such as World Trade Organization (WTO) as well as the European Commission. The political environment of a business affects the economic environment as well.
The economic environment of international business relies on the condition of the country where that business operates. If the country is in political turmoil then the economic environment will reflect this. When doing business internationally the economic environment is one thing that companies look at. According to Keillor, an economic evaluation including a countries activities and systems apply to any markets that are being considered (2013). The reason this economic evaluation is done is to see whether the location is operational and if there will be some form of revenue being generated. If a company does not access the economic factors then there is a potential for the business not to prosper and even see closures sooner rather than later.
The socio-cultural aspect of an international business is an important factor that needs to be analyzed because a company has to formulate strategies around foreign countries. There is a cost to a business that chooses to ignore the traditions, customs, and taste of locals. A business must create a strategy that aligns with the socio-cultural environment of the host country. According to Hamilton & Webster, socio-cultural factors such as a distribution of income, language, and beliefs need to be assessed (2015); knowing the buying habits of the host country is essential in conquering the market. A company must remember these things and formulate adequate strategies.
Technological advancements have aided many international business deals as well as pose challenges. Businesses are interested in the knowledge advancement in which they may exploit (Hamilton & Weber, 2015). The technological environment of doing business internationally may include a boost in revenue, cost cutting as well as entering new markets. The technological environment of a country is sometimes benefited when companies from developed countries decide to have manufacturing units. The technological environment of doing business internationally may include a boost in revenue, cost cutting as well as entering new markets.
The technological environment of a country is sometimes benefited when companies from developed countries decide to have manufacturing units. Companies are able to pump resources into research and development as well as be a leader in new technologies. For example, places such as India, China, and even Taiwan have a more developed technology sector due to companies outsourcing their work.
The external environment of the host country is important and will have major opportunities for a business. The company must be able to thoroughly analyze the environment for which they plan to do business. A business needs to understand how politics govern the host country as much as they must understand how the country has been developed economically. Each works hand in hand and must be analyzed together as well as separately. Strategically knowing when to enter a new market is crucial to the success of any company wanting to do international business. Eliminating threats and weaknesses through the strengths of a company will leverage a strategic position and allow the company to prosper.
Feys, B., Marmol, T., & Probert, C. (2015). PESTLE analysis. 50Minutes.
Hamilton, L., & Webster, P. (2015). The international business environment. Oxford: Oxford University Press.
Keillor, B. D. (2013). Understanding the global market: Navigating the international business environment. ABC-CLIO.