Business Plan

Factors Affecting International Business -Domestic, Foreign and Global Environment

This article speaks about factors affecting international business through Domestic, Foreign, and Global Environment. Every Company needs a business plan and infusion of capital to develop methods related to Joint Venture, Mergers, and Acquisitions.

International Businesses largely depends on economic activities of the world. To increase the trade, the policymakers, managers and entrepreneurs have focused their efforts and look for new opportunities in the global markets. The economies of all countries depend on each other today. The rise of globalization has made the world dependent on each other. So, it can be implied that every country’s economic policy will impact another country’s growth.  

For example, the Recession in one country like the USA will affect various countries like India, the UK, Australia, and many other countries. If they get disrupted, then economies around the world would get affected.

Developments of International Business

From 2010-2020, the world has seen some economic changes and developments. Some of these changes are as follows:

1. The trade agreement between United States-Canada-Mexico free trade region through the North American Free Trade Agreement (NAFTA).
2. Developments within the European Union.
3. Continental economic efforts to help rebuild Russia and the other countries of the former Soviet Union.
4. The continued economic power of Japan in the Pacific Rim and renewed progress of China.

What factors affect International Business?

In the 1990s the WTO was established. This organization affects international business^[1]. The liberalization policies and technology transfer are prime factors affecting international Business.

Positive factors affecting international Business:

1. Electronic Fund Transfer

The inception of electronic fund transfer has impacted the growth of international business. It means an improvement in the banking system, which has accepted the digital movement of funds.

2. Technological Innovation

The global business planning became more successful, with the integration of technology. The advancement of technology is seen with the effect of globalization. It improved global communication and transportation. They are great influencers or factors affecting international Business. The businesses are integrating due to technology advancement.

3. Dissolution of Communist Markets

The effect of the dissolution of the communist markets has led to the emergence of the global markets. With the dissolution of communism, countries start expanding their businesses. Due to this privatization occurs which would create a positive effect on the country.

4. Legislations Evolving

The legislative changes of the country are the factors affecting international business. The law of the country plays a pivotal role in the development of business. The progressive legislations like ease of formation of foreign company, less corporate tax and relaxed security legislations would affect companies established in the country.

5. Customer demands

The growth of Business in this digital age is dependent on the needs of the customer. International brands established by the big business houses in different countries are running globally. Such are- BPO-Business Processing Units where customer support is given for their product by the customer support agent sitting in one country to the customer purchasing from another country. There are businesses Like Amazon, or all e-commerce websites running solely due to customer demands. These big business houses have to incorporate themselves in another country, due to the heavy demand. The customer demands one of the factors affecting international Business.

It can be seen as:

1. Quality is the customer’s preference.
2. The sales process is more and more under customer control.
3. The rise of middle-class customer.
4. The rise of female power.
5. Advancement of new technology.

6. Taxation Laws

The taxation regime of any country is the factor influencing international Business. The treaties like double avoidance agreement attracts investors. The global integration of economies has influenced them to bring changes in their taxation policies.

Difficulties in doing international Business

1. Economic environment

The economic environment offered by one country is different from another country. There are countries which are developed, and some may be emerging. In each of these nations, there will be a vast difference visible in their growth and investors doing businesses internationally. This is one of the factors affecting international Business. There may be a difference from education to infrastructure. It may act as a hindrance to the development of international business.

2. Cultural Environment

The cultural environment of one country is different from another country.

3. Political Environment

The political environment of every country is different. There may be problems which the international business has to deal with.

Conclusion

It can be summarized that factors affecting the international Business are both a positive side and a negative side. It is essential to understand that to develop trade and Business the Governments today are imposing less restriction thus allowing products and services across the borders. This has enabled governments provide easy access to various goods and services.

Countries are developing infrastructure as per international norms to offer favorable conditions for foreign investment that is the key to development in this modern world. This includes laws, policies, banking, transportation etc. Consumer behavior is changing due to innovative products and services that enable them to meet their requirements. This gives pressure to organizations to introduce new innovative products and carry out research and development activities to satisfy their customers and gain market share.

Global operations of organizations lead to the development of good quality products as they can fully utilize global resources to develop such products and compete with domestic companies.

Read our article:Introduction and Types of International Business Environment (IBE)