Macro-environmental Factors Affecting International Business Environment Introduction Morrison (2009, p.16) argues that the business environment has become more competitive than ever before. The high competition is attributed to the fact that quite a number of companies operate in the same industry forcing them to compete for the few customers available in order to make profits…
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The internationalization of businesses is normally shaped by macro-environmental factors which impacts hugely on their operations. Therefore, it is advisable for managers to ensure that a thorough analysis is conducted on the macro-environmental factors before making a move to go global. The macro-environmental factors that shape the international business environment include political, economical, social, legal, and technological factors (Blythe 2006, p.21). These factors must be considered because failure to do so might lead to sub-optimization of the strategies and resources invested by the company. This paper will examine how the political, economical, socio-cultural, and technological factors shape up the international business environment. Political/legal factors Political factors that shape a company’s internalization strategy include laws, groups and agencies that impact and limit individuals and organizations in society (Viswanathan and Dickson 2006, p.26). The areas that must be evaluated by managers include the attitude of the government toward foreign businesses, political stability, government bureaucracy as well as the financial policies of the country in which the company wants to establish its operations. The legal and political forces are very crucial and need to be considered by any manager because they cover several aspects of policies adopted by a company. For instance, the policies adopted by the government affects the entire industry through its regulatory bodies such as Trade and Industry Departments and Environmental Departments (Morrison 2009, p.16). These bodies affect the industry in which the company operates through their policies on trade and standards and restriction within their areas of controls. Policies developed by these bodies can affect businesses in a number of ways including the products produced, sold, or promoted by a company. It is very important for multinational companies to acknowledge the fact that political backgrounds differs from one country to another. For instance, the political environment of the U.K. may be quite different from that of China. This implies that a multinational company in the U.K. wishing to set businesses in China must first be conversant with the political and legal issues in China before making any move set business in the new environment. Morrison (2009) notes that a majority of economies that were formerly centrally planned still receive protection from their governments. This implies that a move to have a joint venture can easily be accepted in such economies. At the same time, it is reported that legal implications pertaining to the marketing of a product globally is very complex (Daniels and Radebaugh 1998, p.51). This is because every country has its legal system which implies that global companies must adhere to such legal systems in order not to find themselves on the wrong side of the law. McDonald’s is one of the most famous Americas fast food restaurants with an international presence in several countries such as the U.K., Japan and Russia, just to name but a few. However, reports indicate that McDonald’s was hugely affected by a legal challenges in Russia in 1993 when a law was passed in Russia compelling all stores (both local and international) to have Russian names. The same law,
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