Lecture 3.ppt - THE GLOBAL BUSINESS ENVIRONMENT Lecture 3 Complexity of the Global Environment Carrying out business in the global environmental is more

Lecture 3.ppt - THE GLOBAL BUSINESS ENVIRONMENT Lecture 3...

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THE GLOBAL BUSINESS ENVIRONMENT Lecture 3
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Complexity of the Global Environment Carrying out business in the global environmental is more challenging than is the case in a purely domestic environment. This is because the global environment presents highly complex interactions among the various contextual variables (economic, political-legal, socio-cultural, and technological). The highly complex interactions result into a vast number of potentially relevant external influences on the firm’s business operations. Further, the interactions occur in very dynamic ways that present a firm with either opportunities or threats.
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Consequently, global strategic planning become equally more complex than purely domestic planning. At least five factors contribute to the increase in this complexity: 1. MNEs face multiple political, legal, social, and cultural environments as well as various rates of changes within each of them; 2. Complex interactions between the national and foreign environments because of national sovereignty issues and widely differing economic and social conditions; 3. Geographic separation, cultural and national differences, and variations in business practices which make communication and control efforts between HQs and the overseas affiliates difficult; 4. Extreme competition faced by MNEs because of differences in industry structures within countries; 5. MNEs are restricted in their selection of competitive strategies by various regional blocs and economic integrations.
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Global Environmental Variables The global environmental variable is very important and needs to be understood first and foremost before any considerations are made in global management. The environmental variable is the main determinant of the difference between domestic business and international business. It refers to factors or forces that a business is likely to encounter in foreign markets. Different frameworks have been used to classify business environments e.g The macro and micro environments. Remote, industry, and operating environments. Economic, political-legal, socio-cultural etc environments.
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For purposes of this discussion the third approach will be adopted with some reconfiguration. Accordingly, the forces are therefore classified depending on whether they are: Economic Political-legal Social-cultural Factors involved in each of these variables can facilitate or hinder international business depending on their precise nature, which is either favorable or unfavorable to foreign business in a country.
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THE ECONOMIC FRAMEWORK Its major components include: 1. International trade factors such as: The balance of payments Exchange rate Regional or international groupings Each facilitates or hinders business in a foreign market.
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