International business environment is multidimensional, which means that it includes all the external factors which affect the functioning of the business. Factors that affect and come in the international business are political, economic, legal, technological, cultural environments. In this article we will discuss the various types of international business environment.
Types of International environment-
The political environment consists of factors related to management of public affairs and their impact on the business. Internationally it refers to dealing with different governments of different countries and working in the risk of other country’s environment and knowing their relationship with the businesses. There are various types of governments in countries like- democratic, monarchy or dictatorship. To do business in any of the country you need to analyze their political system by factors such as-
- Political system of business
- Relationship between government and the business environment of that country.
- Legal restrictions.
- Percentage of sectors in the field of business like- private, government, and which of them prevails.
- Regulations of government to particular businesses.
- Restrictions on import and export industry.
- Packaging and pricing policies in the country.
- Procedural formalities required to set up a business.
The economic environment of any country is very important as it shows the attractiveness of doing business in that country. Countries are often divided into 3 categories according to their economies- developed or industrialized, developing or third world countries and newly developing economies. The more developed ones are richer countries which have world’s best infrastructure, education rate, technology, better healthcare facilities, etc. Developing countries do not have many good facilities but they try to improvise them. And newly developing economies are poor countries who want to get rich. Economic environment of any country shows that the GDP and growth of country which helps to decide for setting up a business in that country and knowing how much fruitful will it be. While analyzing the economic status and doing of business, you can check these factors-
- Economic system of that country.
- Stage of economy.
- Per capita income and GDP.
- Facilities like, infrastructure, healthcare, technologies, availability of raw materials, human resource, etc.
It relates to machines and technologies used in any business. As firms do not have any control over external environment, technological developments play important role in defining success of their business. The level and acceptance of technologies by different countries plays a major role in that. With advanced technology they can overpower other competitors. Their technology helps them globally. They can make best use of technology and achieve success. To analyze technological environment of any country, the factors to keep in mind are-
- Level of technological advancement of that country and its acceptance in business environment.
- Pace of technological changes.
- Sources of technology.
- Restrictions imposed on technologies.
Cultural environment plays a critical role in international business environment. People do not generally consider this factor. But the ethnicity, the culture of a place often affects the business. With the culture of that country, the factors like history of the place, language and tradition of that country is defined. The regulations of government have a basis from this. The pattern of doing business goes according to the traditions of business practices in the country, hence it should be considered as an important factor and to check the environment you can look upon for things like,
- Individualism, level of nation values and encouragement of individual decision making and actions.
- How nation deals with uncertainty and crisis situations in the economy.
- Approach of society towards doing of business.
- Influence of social, cultural and religious factors which can affect the functioning of business.
- Lifestyle of people.
- Acceptance of new traditions by the people.
- Values attached to the product for which the business will be operated.
- Demand for specific products, according to specific occasions.
- Propensity to save money and consume that product.
It depends on country to country but plays an important role in developing a business and economy of that country. the acceptance of changes in the world be it, political, environmental, change in people’s choices, government policies, it defines healthy competition and a sure shot way for getting solutions and getting ahead in the competition. All the factors combined help in getting to know the competitiveness of the country and business environment of the country.
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International business environment includes many factors. To do a business in any country these factors are looked upon and analyzed before setting up any business. These factors provide an advantage to know how a business would perform in that country and looking at these one can analyze the history of international business environment and regulations and restrictions. It is a way to determine the conditions of that country and whether that country will be suitable for functioning of any particular business.
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