International Business Environment: Strategies and Capabilities

This document discusses the various dimensions of the international business environment, including strategies for diversification and speed, the role of cultural and formal institutional environment, and the importance of exploiting and exploring critical capabilities. It also highlights future research avenues in the field.

Business International
Environment

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
International strategy: From local to global and beyond........................................................1
Summary and discussion on International strategy diversification and speed.......................1
Summary and discussion on Cultural and formal institutional environment.........................3
Summary and discussion on Exploiting and exploring critical capabilities...........................4
Future research avenues.........................................................................................................6
CONCLUSION................................................................................................................................7
REFRENCES...................................................................................................................................9

INTRODUCTION
Business Environment comprises of various dimensions such as economic, tax
regulations, social environment, political, technological as well as legal environment that affect
the operations of international business.
In simple words international business environment basically emphasize on transferring
necessary goods and services across the national boundaries (Zolin & Schlosser, 2013). Thus, it
includes trading or export and import activities which require the need for licence or franchising.
This report carries the discussion about various sections such as establishing international
strategy to diversify its business as well as speed and timings of enter into international market.
Moreover, it emphasize on cultural, formal as well as informal institution based on international
strategies. Finally, discussion is made on exploiting and exploring critical capabilities (Dunning,
2014).
MAIN BODY
International strategy: From local to global and beyond
Here we need to analyse that internationalisation has led to the development of MNEs by
expanding its operations in various national, local as well as international market. The role of
building international strategy has growth over the last decades. Thus, to conduct operations in
local as well as global market business largely depend upon huge funds to conduct its social
performance. Earlier several economies were closed economy but emergence of
internationalisation has lead to enhancement of communication as well as technology facility as
compare to the past. Further, it has development of overall economy with the rise in competition.
From the above analyses I have analysed that internationalisation helps in growth of
development of country by increasing the employment opportunity for the local community.
Therefore, local communities must promote such practices. On contrary, my negative opinion is
that it will be tough for the organisation to adopt according to the culture of other market because
it is not necessary that the culture of foreign market is same as local market.
Summary and discussion on International strategy diversification and speed
The discussion will be about International strategy leaves a significant impact on the
growth as well as development of overall economy and diversification of multinational business.
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This has helped the overall organisation to increase the connectivity than helps in global
expansion of business.
Advancement due to international diversification
Diversify the business operations internationally is a kind of portfolio investment done by
company with the motive to generate huge revenue, expand the business overseas and also to
diversify or set off the chances of risk (Sasaki & Yoshikawa, 2014). Additionally, if the
investment is diversified in various markets then it leaves less burden of loss as the chances of
risk gets diversified in various markets. This help the international business to formulate flexible
strategies and strengthen its value chain activities. Along with that most of the multinational
companies identify the opportunity of expansion after properly analysing the external
environment and accordingly they take the initiative to move across overseas. Further, most of
the researchers on the basis of their findings seeks that there is a affirmative relationship between
diversification of business in international market and speed up the performance of enterprise to
diversify in order to flourish its business. For instance, product diversification strengthen the
relationship between diversification and business performance whereas unrelated diversification
weaken their relationship. Thus, there is a U shaped relationship among them which helps in
innovation, diversification of advanced technology, enhances the performance of people by
making them skilled, diversification of capital, taking patent rights over innovation and so on.
On the basis of survey most of the firms that consist of family members gets benefited by the
international diversification of business rather than non family businesses (Beugelsdijk &
Mudambi, 2013).
Focusing on timing and speed to enter in foreign market
Entry mode is a time when business takes decision of diversifying its operations in
international market (Wang, C., et.al., 2012). This time when business just start to cater
international market then the timing as well as speed of business is different from that duration
when business becomes comfortable in international market. The factor such as speed and time
differ because when the business starts its operations it get affected by various factors that act as
a learning which formulated the behaviours as well as its experience. In short run it act as a
learning where business can accelerate its speed on contrary in long term international business
various constraint are imposed in rapid expansion of business. Thus, the timing or speed to
conduct international business as well as merger or acquisition gets encouraged by large size of
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business, behaviour of competitor, economies of scale as well as risk factors. Moreover,
formation of strategic alliances as well are technological intensive company are more likely to
speed up the expansion process in comparison to labour intensive industry. Furthermore, there
are several factors such as fast mover, high brand equity, availability of huge capital as well as
advantage of economies of scale based on which firm gets the advantage of getting benefited by
the international performance. Like, the early entrant from foreign market who performed their
operations in China gets more benefit as well as advantage in term of expansion as compare to
late mover.
From the above analysis my positive opinion towards topic is that due to globalisation
more industries are keen to expand their business internationally rather than focusing on
domestic market only (Marquis & Reynard, 2015). There are huge number of multinational
enterprises that have increased the employment rate as well as job opportunity for the people of
various country. This has finally increased the connectivity to perform the operations effectively
as well as efficiently. Thus, international business has provided several advantages to the
company, local resident as well as overall economy. For instance, it has lead to expansion of
technology, innovations, enhances global connectivity as well as speed up the performance of
business. On other side my negative opinion towards this is that it is not possible for every
business to go globally directly as it requires high investment.
Summary and discussion on Cultural and formal institutional environment
Here analysis is done on the growth of information technology and network economy led
to increase in interdependency between economical and political development. This lead to the
emergence and growth of multinational business. Though diversification require huge capital
investment but if run successfully gives positive return to the company. On contrary most of the
international business holds huge liability which means they carry huge fund at stake of risk. As
there are multiple institution out of them some are formal as well as informal institute holding
multiple power and operate at various level. So these institution should strategies in such a
manner it receives huge profit so that they can pay back the liabilities. On the basis of various
research on institution it has been examined that the environment of institution either in home or
host country gets better opportunity if the respective country has advance technology, research
and development centres. This further led attract the foreign direct investment from varies
countries. Thus, government officials plays a significant role in building effective institution as
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various MNEs gets motivated to operate its performances at these places. Moreover, the
institutional environment influences the various factors such as performances of international
business, competitive strategy as well as role of stakeholders (Johnson, Arya & Mirchandani,
2013).
Hence, various researches were conducted on institutional environment to identify the
effect of host as well as home country. The strategies build up by multinational and decision
regarding the market to be entered and through various modes and so on depends upon the
institution environment. Thus, it provides opportunity to business in order to formulate most
desirable strategy. For instance, there are huge number of research and development centres
which are established in big developed countries such as Germany and US. As they have
advanced technology and supportive rules and well regulation due to which they gain the
advantage of intellectual property right. Thus, whether the institution is formal or informal
should have strong legal actions and low crime rate which helps them to gain the advantage of
huge foreign capital investment by proper management of various stakeholders. As there is a U
shape relationship between market reform as well as profitability of firm so it needs to be
properly utilised in favour of company (Brockman, Rui & Zou, 2013).
As per my opinion, institution is one of the most important factors that help the business
to make the choice of expansion while adopting appropriate strategy. The performance, growth
as well as decision regarding expansion of business directly depends upon the institutional
environment of business so it needs to be well established because then it can help multinational
enterprise to produce desirable outcome. Further, my negative opinion is that the coordination
between the management should be there and the decision should be taken considering the
opinions of the people in organisation if not done so it may lead to internal disputes.
Summary and discussion on Exploiting and exploring critical capabilities
On the basis of analysis various research was conducted by international research strategy
multi national enterprise are more likely to identify the new opportunities which are available in
host country. The company uses their asset such as products or technology in order to exploit the
market opportunity. Each firm focuses on their capabilities of different manager like parent
company look forward to gain expertise knowledge, internationalisation emphasize to expand its
activities over international market. Though the purpose of both of them is different but their aim
is to exploit their existing capabilities by meeting need, preferences of customer as well as
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working as per government official. Moreover, in order to face intense competition in
international market MNEs tries to develop as well as upgrade their new capabilities so that they
can gain competitive advantage over their competitors. Like, due to R&D department the
innovative capabilities to develop the skills has diversified which lead to increase in exporting
activities that finally increases the FDI for exporting country (Zaheer, Schomaker & Nachum,
2012).
The operations of international business directly gets affected by role due to corruption in
host country as there is a curvilinear relationship between the investment done by multinational
enterprise as well as corruption in host country. Like when the corruption is in from low level to
moderate level within host country it discourages the investment done by MNE on other side
with increase in corruption rate promote the chances of investment. So that they can gain the
experience and develop its existing capabilities in order to deal with critical corruptions.
Additionally, MNEs has to bear negative effect because of international shocks such as any war,
disputes or terror of terrorist does not receive attention from international market. This is because
enterprise are less likely to operate in conflicting areas or where they faces huge threat of
survival. Thus, acquiring capabilities or strategic resources in comparisons with other helps the
enterprise to gain competitive advantage over other and encourages the company to provide
differentiated offering to the people of international market. In addition to it not only expand the
offering of enterprises but also helps to build global goodwill of company.
Further, internationalisation assist company to mitigate the chances of risk and shape the
perception of firm to gain opportunity that pertain in an international market. Firm makes sure
they export more product to various international border as it causes foreign direct investment.
Different researchers have mixed opinion over foreign investment some researchers have
identified positive relationship among firm's experience and their investment in international
market. On contrary, some researcher analyse negative or no relationship between international
investment as well as firms experience. So on the basis of different learning the viewpoint of
various authors differ. Though international includes both primary and subsidiary ownership so
the firm needs to encourage both the ownership for the better performance of business (Johnson,
Arya & Mirchandani, 2013).
From the above analyses I found that expansion is an opportunity for the firm that needs
to be identified as well as exploited before competitor takes the action. Along with that firm
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should not only maintain its capabilities they should also enhance their skill, knowledge with the
passage of time. In addition to it, firm must adopt innovative technology and must work on its
research and development department so that they can better coordinate their work with the
overall department of organisation. Thus, multi national enterprises must enhance their
performance with the operations of business conducted globally. Whereas, my negative opinion
is that sometimes a company is doing well initially but expansion leads to lack of coordination
and poor corporate governance.
Future research avenues
On the basis of analysis there is a huge opportunity for researchers to conduct research on
formal as well as informal institution. As there is a limited understanding between formal as well
informal structure so there is a potential to identify the causal relationship among them as well as
effect of various institution on the strategy of business (Casillas & Moreno-Menendez, 2014).
Similarly, MNE require more research work for both home as well as host country. This helps to
identify the constraint that can impact the activities or strategies of MNEs which are related to
rational, socio cultural bridging as well as infrastructure building. Furthermore, with increase in
diversification led to the use of research to identify the risk business can face with the mobility
of corporate investment. The role of corporate social responsibility directly or indirectly affect
the financial performance of business. As it is one of the motivational factor that positively affect
the performance of business (Abdi & Aulakh, 2012).
According to my opinion with increase number of research has lead to the long term
sustainability. Further, adopting proper corporate social responsibility helps to safeguard the
environment and maintains efficient relationship with local community. Thus research must be
conducted for better business operations. However, my negative opinion towards the topic is that
research requires huge fund and even manpower and does not always guarantee the success.
RECOMMENDATIONS
 After analysing the international environment if the business takes decision to perform its
operation internationally then it will strengthen their relations with various stakeholders.
As it minimises the chances of risk which further leads to generation of high return.
 in order to perform at international market firm should be fast mover in comparison to
late mover. As early movers are more likely to recognise by most essential stakeholder
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that is customer. Therefore, it give advantage in term of speed and entry timings in
comparison to those company which diversify later on.
 Moreover, business should analyse varies factors based on which it can improve its core
competency such as adoption of innovative technology. This helps to strengthen the
relationship of business with various stakeholders and help them to acquire core
competency over competitors.
 Diversification can help the business to generate funds from the various investors that can
help the firm to raise fund at the time of expansion or diversification of business.
 Business after analysing external market takes decision of expansion and formulate
strategy accordingly it helps to enhance the productivity of employees by engaging
employees that finally helps in enhancing the productivity as well as profitability of the
firm.
 Every country whether it is a developing or developed country wants multinational
business enterprise to establish at their market. Thus, here the legal rules and regulations
plays a major role if the government make favourable policy for host company as well as
take strict action against any crime then it provide opportunity to MNE to perform their
operations. Thus, home country should make favourable laws so that they can attract host
country which helps to increase the job opportunity for local community bas well as
development of overall economy.
 Counties should focus on establishing attractive institution so that they can generate
inward foreign capital investment. Along with that it attract the entry of multi national
enterprise.
CONCLUSION
From the above report it has been determined that international business environment
plays a significant role in the growth as well as development of business in various countries.
Thus, if the firm has high market share in home market and huge capital then they can take
decision to diversify its business in international market. This helps the firm to mitigate the
chances of risk and can make the advantage of fast mover, even if the firm is not fast mover then
its wise strategy as well as differentiated product or services can help the business to flourish in
international market. Moreover, multi national enterprise should always enhanced its capabilities
so that they can generate good position and make the advantage of its core competencies to
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overpower their competitors. Furthermore, many researcher has identified that well established
institution, advantage technology as well as research and development centre help the firm to
generate foreign direct investment by enhancing its offerings worldwide.
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REFRENCES
Books and Journal
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involvement in international new ventures. Thunderbird International Business Review,
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Zaheer, S., Schomaker, M., & Nachum, L., 2012). Distance without direction: Restoring
credibility to a much-loved construct. Journal of International Business Studies, 43: 18–
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Sasaki, I., & Yoshikawa, K., 2014). Going beyond national cultures-Dynamic interaction
between intra-national, regional, and organizational realities. Journal of World
Business, 49: 455–464
Wang, C., Hong, J., Kafouros, M., & Wright, M., 2012). Exploring the role of government
involvement in outward FDI from emerging economies. Journal of International
Business Studies, 43: 655–676
Marquis, C., & Reynard, M., 2015). Institutional strategies in emerging markets. The Academy
of Management Annals, 9(1): 291–335
Johnson, J. H., Arya, B., & Mirchandani, D. A., 2013). Global integration strategies of small and
medium multinationals: Evidence from Taiwan. Journal of World Business, 48: 47–57.
Gaur, A. S., Kumar, V., & Singh, D., 2014). Institutions, resources, and internationalization of
emerging economy firms. Journal of World Business, 49: 12–20
Casillas, J. C., & Moreno-Menendez, A. M., 2014). Speed of the internationalization process:
The role of diversity and depth in experiential learning. Journal of International
Business Studies, 45: 85–101
Abdi, M., & Aulakh, P. S., 2012). Do country-level institutional frameworks and interfirm
governance arrangements substitute or complement in international business
relationships? Journal of International Business Studies, 43: 477–497
Beugelsdijk, S., & Mudambi, R., 2013). MNEs as border-crossing multi-location enterprises:
The role of discontinuities in geographic space. Journal of International Business
Studies, 44: 413–426
Brockman, P., Rui, O. M., & Zou, H., 2013). Institutions and the performance of politically
connected M&As. Journal of International Business Studies, 44: 833–852
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