Using PESTEL to Overcome Complexities Involved in Internationalization - Coursework Example

Using PESTEL to overcome complexities involved in internationalization University Student Id Course Date Introduction Organizations are experiencing various complexities in the process of expanding their operations to the international markets. The complexities can be related to the differences in the business systems that exist in the foreign markets that the firms entering the foreign market might be aware of might be difficult to comply. It is crucial to ensure that the organizations expand their operations globally have some information concerning the foreign markets. This can involve conducting research to be aware of the different factors that are likely to affect the operations of the organizations in the international market. The complexities faced by firms that are expanding their operations to the foreign markets are likely to hinder the companies achieve their goals of entering the international market. For instance, most of the companies entering the international markets do aim at achieving larger market for their products (Das and Kumar, 2010). However, they can easily fail to achieve their targets of moving to the international markets if they fail to ensure proper management of the complexities existing in the process of venturing into the international markets. This is because entering in a new market exposes a business to the environment that is different hence the need to make the necessary adjustments. Overcoming the complexities using PESTEL analysis PESTEL analysis has proved to be crucial in the process of helping in exploring the external business environment especially the international markets. It is through the use of the PESTEL analysis that anyone venturing into the international market can assess the business environment before making a venture. The analysis entails exploring the economic, political, social, environmental, legal, and technological factors in the foreign market. The knowledge concerning these external factors in the foreign markets can be crucial in the process of overcoming the complexities that are associated with the foreign markets. Through the analysis of the external business environment the business venturing in the foreign market an easily realize the potential threats and opportunities that are likely to face the firm entering the foreign markets (Browaeys and Price, 2008). Therefore, the complexities facing the companies venturing into the international markets can easily be overcome by making the use of the PESTEL analysis. This is based on the fact through the use of the analysis a vision for the businesses can be built and establish the business landscape that can help in making organizations compete well in the foreign markets. The complexities facing companies entering the foreign markets can be overcome through establishing the status of the market concerning the future and present trends. The firms are in a better position to ensure proper understanding of the macro-environment hence helping in aligning the strategies of the organizations with the market forces. This can entail enhancing the ability of the companies of exploiting the change in the foreign markets. Proper knowledge of PESTEL analysis among the management of the companies that are venturing into the foreign market can be useful in ensuring that the operations of the companies are adjusted to meet the market need (Deresky, 2011). Therefore, the management of the companies entering the foreign markets can easily avoid the failing in their operations through making use of proper analysis of the external environment using PESTEL analysis. PESTEL analysis framework Political factors Firms overcome the complexities they face in the international market through researching the political factors affecting their operations. Establishing the political factors that are likely to affect the business entering the foreign markets can be crucial in the process of overcoming complexities in the international markets. For example the companies going international overcome the complexities through proper understanding of the political climate in the foreign market. The political climate can include labor laws, taxation policies, and corporate social responsibilities of the companies operating in the foreign market, environmental and social obligations. Besides, the companies venturing into the international markets need to establish other policies that might be necessary for the process of making decisions such as auditing, monetary, and fiscal policies (Browaeys and Price, 2008). These political factors can easily affect business operations as they affect the business environment and the business cycle. Therefore, the understanding of the political factors in the foreign markets can be crucial in overcoming the complexities associated with the international markets. For example, the firms can avoid the complexities by creating favorable relations with the foreign governments to overcome the possible political barriers. This is because through favorable relations organizations can be in a position to receive some considerations and even incentives. Economic factors Firms do overcome the complexities they face in the international market by ensuring that they are aware of the political factors affecting the market. The knowledge of the economic factors affecting the business in the international market can be a valuable tool in the process of overcoming the complexities faced by organization venturing the global market. Some of these economic factors worth knowing for the companies venturing into the foreign market can include unstable and weak economies that can be harmful and risky for the business. For instance, the companies can avoid complexities by having knowledge of some economic factors like inflation rate, currency value, and exchange rate, the rate of employment and growth of the economic conditions. However, there are connections of the economic factors with the political factor as an organization cannot be able to experience the favorable economic condition in the politically unstable countries (Gillespie, Jeannet, and Hennessey, 2010). Inflation rate affects the supply and demand that can lead to unfavorable conditions for making investments. For example, the firms expanding to the foreign markets have been avoiding complexities in the market through researching the consumer’s purchasing power in the foreign markets aiming at ensuring that the products are affordable and competitive pricing is adopted. Also, the exchange rate affects the exportation and importation through affecting the costs. Therefore, firms that are expanding to the international markets need to ensure that they have the necessary knowledge concerning economic factors in the foreign markets to overcome the possible complexities. Social factors The firms expanding their operations to the international markets do ensure that they are aware of the social factors in the foreign markets to overcome the complexities facing organizations in the international markets. For instance, the firms entering the international markets do consider the social factors in their operations to avid the complexities in the foreign market. The social factors that are considered by the firms expanding to the international markets can include domestic markets, population, demographics, and culture. These factors are crucial for consideration as they affect the products needed in the market. The lack of the necessary social factors knowledge can affect the demand patterns. For instance, different culture might require different products hence the knowledge of the essential products in the market is important (Griffith, 2010). The companies venturing in the international markets have been avoiding the complexities through evaluating the demographic aspects and the population in the market to be aware of the services and the products that should be offered. The knowledge of the various social aspects can be important in overcoming the possible complexities as the management of the organizations expanding to foreign markets can easily evaluate the market needs. Technological factors The firms expanding their operations to the international markets do overcome the commodities the face through researching on the technological issues in the foreign market. Overcoming the complexities associated with the foreign markets can be possible to the knowledge of the technological trend in the international markets. The technological factors are important in the process of determining the important components that can assist in improving the organizational performance in the organization. The knowledge of the technological factors in the foreign markets can be crucial in overcoming the complexities. For instance, organizations do overcome complexities in the foreign market by ensuring automation of the operations hence leading to achievement of efficiencies in operations. Organizations can also employ the use of technology I the process so achieving costs advantages in the market (Engelen and Brettel, 2010). Organizations operating in the international markets need to ensure that they are updated regarding the innovations they employ in their operations. Keeping pace with the innovation trend in the industry can assist an organization in the process of ensuring that they are competitive. Environmental factors The firms have been overcoming complexities the face in the international market through ensuring that they have the necessary knowledge concerning the environmental factors in the market. Knowing the environmental conditions in the foreign markets can be important in the process of overcoming the complexities associated with the international markets. The environmental factors do affect the accessibility of the raw materials necessary in the production process. Especially for the companies dealing with consumer products need to consider the environmental factor before venturing into the international markets. Legal factors The firms expanding to the international markets do overcome the complexities they face by ensuring that they consider the legal factors in their operations. The failure to know the legal factors can easily cause some complexities in the business operations hence the knowledge of the legal factors is important in avoiding the possible complexities in the foreign markets (Griffith, 2010). These legal factors can include regulations and laws that business expanding into the international market need to comply with. Conclusion The complexities of the foreign markets are mainly caused by the lack of knowledge concerning the foreign markets as some firms might fail to conduct research before venturing into the markets. The international markets have different external business environments that can negatively affect business if not well managed where the management of the external business factors can be possible through market research. For instance, the marketing activities in the international market can be different from the domestic markets due to the cultural diversity aspects of the customers. Therefore, in the process of expanding to the international markets is important to ensure one is aware of the possible complexities and formulate the strategies necessary for ensuring successful venture in the international markets. References Browaeys, M. J. and Price, R. 2008. Understanding Cross-Cultural Management. Prentice Hall: Essex. Das, T. K. and Kumar, R. 2010. Interpretive schemes in cross-national alliances: Managing conflicts and discrepancies Cross Cultural Management: An International Journal. 17(2). Pp.154–169. Deresky, H. 2011. International Management Managing Across Borders and Cultures. 7th ed. Prentice Hall: Boston. Engelen, A. and Brettel, M. 2010. Assessing cross-cultural marketing theory and research. Journal of Business Research. Gillespie, K. Jeannet, J. and Hennessey, H. D. 2010. Global Marketing. Cengage Learning. Griffith, D. A. 2010. Understanding multi-level institutional convergence effects on international market segments and global marketing strategy. Journal of World Business. 45(1). pp.59-67. Read More