Global Business Environment: Key Factors and Challenges

Global Business Environment INTRODUCTION 1 ACTIVITY 1 1 Critically analyse the impact of key factors on the global business environment. 1 ACTIVITY 2 2 Determination of various keystrategicchallengesassociatedwith operating in a global environment.2 ACTIVITY 3 3 Critically evaluate the global market influences by using appropriate theories.3 Activity 4 1 Influence of globalisation by analysingkey barriers in doing business internationally 1 CONCLUSION 2 REFERENCES 3 INTRODUCTION Business environment is a sum total of all internal as well as external factors that

Global Business
Environment

Table of Contents
INTRODUCTION...........................................................................................................................1
ACTIVITY 1 ...................................................................................................................................1
Critically analyse the impact of key factors on the global business environment......................1
ACTIVITY 2....................................................................................................................................2
Determination of various key strategic challenges associated with operating in a global
environment.................................................................................................................................2
ACTIVITY 3....................................................................................................................................3
Critically evaluate the global market influences by using appropriate theories.........................3
Activity 4.........................................................................................................................................1
Influence of globalisation by analysing key barriers in doing business internationally............1
CONCLUSION................................................................................................................................2
REFERENCES................................................................................................................................3

INTRODUCTION
Business environment is a sum total of all internal as well as external factors that affect
the overall functioning and growth of an organisation. It is a factor that affects both performance
as well as long term sustainability of a firm. Globalisation on the other hand is a quite vast
concept which infuses a changing trend where all business concerns expand their business
operations on a global level and also serve needs of their customers (Black, Morrison and
Gregersen, 2013). Almost all companies are using this medium for their overall growth and
development. In present context, globalisation is studied for Siemens AG which is a global
multinational business entity. It has its headquarters in Munich, Germany with a total turnover of
£53 billion. It basically specialises in electricals and electronics business and operates in around
190 different nations. This report focusses on various factors of globalisation such as cost,
market, environmental factors etc. Also the challenges faced by company while expansion
process have been stated here. Lastly, a critical evaluation of barriers that affect business
operations at international borders have been mentioned.
ACTIVITY 1
Critically analyse the impact of key factors on the global business environment.
Business expansion on a global level is a major factor that affects growth and profitability
of a business entity. Globalisation has a number of positive impacts on businesses but they have
to face a number of issues and challenges in their initial phase in order to be successful. It
context of Siemens AG, it is the duty of manager to identify impact of various key factors and
accordingly formulate strategies and policies for achievement of goals and objectives within a
specified time frame. Various factors that affect due to globalisation have been stated as under:
Cost Factor: Cost is a monetary factor and plays a quite important role in business
expansion on a global level. In the present scenario, as business of Siemens AG is expanding
globally large amount of monetary funds are needed for investment purposes as well as
production process (Cavusgil and et. al., 2014). This sometimes happens to be a major challenge
for companies as it is not possible that a company may have exact amount of funds as required
for fulfilling each and every requirement. Benefits or advantages of cost factor are that it will
help Siemens AG in enhancing their productivity as well as profitability and also redeem their
brand image in competitive market.
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Market Factor: A stable and saturated market plays a very important role in business
expansion of firms at competitive as well as global markets. Market factor is considered by
managers of Siemens AG for studying demands of customers as well as their changing lifestyle
experiences. Any business that plans about expanding its business operations need to carefully
and critically evaluate needs of the people. It is of great use as company will be able to meet
requirements laid down by customers and will also be able to earn economies of scale. This is a
major challenge for Siemens AG as demands of customers may differentiate from one another
and specialising for each customer differently will need a lot of time and skills.
Environmental factor: Environment is chiefly made up of anything that surrounds
business environment. Various environmental factors that need to be considered while business
expansion are political, social, legal, etc (Kasemsap, 2014). All these factors greatly help in
developing an effective understandability of rules and laws that are present in countries so
strategies could be framed accordingly. Main drawback or problem faced by Siemens AG is
rules of every country is different from another which makes policy formulation complex and
critical.
Competition: Analysing level of competition is very important for every business
concern if it wishes to be successful at a global level. It helps in strategy formulation that may
help in growth and also improve quality of goods and services. Siemens AG receives a number
of benefits from competition as it gives an entire spectrum or variety of goods and services as
per needs of common people. This will also assist the business concern in attracting a large
number of customers and also provide a competitive edge over other rival firms. Analysing
competitors and their strategies becomes quite difficult as a lot of study and evaluation needs to
be done behind it.
ACTIVITY 2
Determination of various key strategic challenges associated with operating in a global
environment.
Operating on global scale provides a business concern with two advantages namely
meeting needs of customers in an effective way and also enhancing economies of scale. In spite
of these advantages there is a drawback or challenge i.e. it has certain amount of complexities
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involved in it (Laudon and Laudon, 2015). Various strategic challenges in context of Siemens
AG have been stated as under:
Impacts of international trade law: International trade is a process that deals in exchange
of goods and services between two or more countries. At the time of expansion every firm faces
certain amount of challenges. They can be in the form of custom as well as tariff laws. When a
business operates in more than one country there are chances that goods and services any get
imported or exported on a timely basis. This further affects functionality of an organization at
global level. In context of Siemens AG, they may have to face certain strategic complexities and
challenges while supplying goods and services from one country to another. Also it needs to
follow rules and laws of every country that it operates in.
Risk: Risk is an inevitable part of every business concern and its functionality. A
business concern that operates on a global level receives significant benefits from expansion and
geographically varied portfolio yet there are also certain disadvantages such as risk of language,
cultural differences, political influences and so on. Added to all these risks, there is also a risk of
uncertainty that products may or may not satisfy needs of customers. Also they can be ahead or
behind their competitors in a certain country. Hence in present scenario it has been noted that if a
business wants to operate effectively, they should identify risks well in advance from their
expansion. Managers of Siemens should undertake strategies and policies in such a way that
impact or effect of risks does not directly have an impact on functionality of business.
International supply chain management and its complexities: Managing suppliers and
supply chain is a quite complex process in context of supply and distribution of products in the
market. Supply chain complexity refers to a condition which studies inter dependence as well as
interconnectedness across one or more network may effect other areas of business also (Lee,
Olson and Trimi, 2012). Siemens AG is a globally operating business concern which has
numerous production and supply sites which creates a complexity due to a number of factors.
This often leads to a rise in customer's demands and expectations due to goods and services also
have to further be expanded. This often leads to delay in work and company may even have to
face certain complexities such as choosing appropriate suppliers, ensuring in time delivery of
goods and services.
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ACTIVITY 3
Critically evaluate the global market influences by using appropriate theories.
Globalisation refers to a process that deals in integration of various economies of the
world by using a method of cross border trade between various countries. This happens mainly
due to certain reasons that are demands of customers as well as competition that prevails in any
country at a given point of time. It is a global trend in today's scenario as business expansion
leads to attainment of higher profitability that can be achieved by fulfilling customers demands.
Various theories have been explained in context of Siemens AG:
McKinsey 7S model of organisational structure: McKinsey's 7s model is a tool or
technique which helps in examining organisational design or structure of a firm by understanding
various internal elements such as strategy, structure, systems, shared values, styles, skills, staff
and so on. This model is considered by Siemens AG so that it can analyse global market
influence (McKinsey’s 7S Model. 2016). It also helps an organisation in improving its overall
performance by adopting effective designing and implementing strategies as well. Furthermore,
there is also a global influence on structure of an organisation as strategies need to be framed as
per market situations and also employees or candidates are recruited accordingly. This helps
Siemens in achieving long term stable growth and sustainability. This model infuses a number of
independent factors which are further classified into two categories i.e. hard and soft elements.
This model is adopted by Siemens AG so as to have a better understanding of their
organisational structure.
Hard elements: Elements or factors that are easy to identify as well as define are referred
to as hard elements. Hard elements includes various factors such as organisational strategies,
systems as well as structure of a company (Zhang and Huang, 2012).
Soft elements: Elements that are difficult or complex in nature and cannot be defined
easily are referred to as soft elements. These elements are generally influenced by organisational
culture such as values shared by organisation, skills, styles as well as staff members.
7s of McKinsey model has been stated as under:
Hard Elements ( Structure)
Strategy: Strategies are mainly defined as a plan that is made for maintaining and
building a competitive edge over competition. Implementation of strategies as per market
conditions that are prevailing in a country is quite important and helps a business concern in
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effective performance on a global level. It also has a higher market influence on strategies and
they need to be framed as per competitive pressures, issues of environment and also customer
demands. In relation to Siemens, it has been analysed that company works with a innovative
global strategy for reducing its marker influence.
Structure: Organisational structure of present organisation Siemens AG is such that
functionality of company revolves around their production units that are present in different
countries. Siemens AG operates in numerous countries in the present scenario yet their final
reporting is done at parent branch located in Germany. Every business unit produces different
goods and services as per needs of customers and culture of countries they are currently
operating in. Every employee follows a certain code of conduct and cooperates with other
employees while performing activities but they still have to report to parent branch about each
and every activity.
Systems: Systems is an important keyword that is used to define or understand a process,
procedure as well as routine that is undertaken by personnels or managers in a business concern.
In context of Siemens AG, managers follow a unique system which they use for production of
goods and services as per current market situations. Systems also have a global influence over
market due to various processes and procedures that need to undertaken as per environmental
conditions in a specific target market (Ramamurti, 2012).
Soft Elements(Culture):
Shared Values: Shared values refers to various strategies and policies that are made in a
company and affect behaviour of workforce as well as overall management. In context of
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Illustration 1: MC Kinsey 7s model, 2016

Siemens AG, it is found out that employees share common values and beliefs while undertaking
operational activities in business in an ethical manner. Also these values are never affected by
any sort of global market influence.
Skills: Skills are special talent of individuals and help employees of any business concern
so that they can perform in an effective manner. Siemens AG has a number of production units in
different nations worldwide where a number of individuals are needed as work is to be done
based on needs and requirements of customers. It has also been suggested that since this
company operates in various countries, hence this geographical diversity has a great influence on
competitive market. Also while recruitment of employees they should recruit individuals who
have highly developed skills and potential to perform as changing needs and demands of
customers (Savrul, Incekara and Sener, 2014).
Style: Leadership and management style of every business concern differs from one
another. In context of Siemens AG, leadership approach undertaken by its leaders and managers
is democratic style where each and every employee is entitled to a right that they can themselves
choose task they wish to perform, only condition being that it should be beneficial for the
company. Also it is suggested that leaders should always timely delegate tasks and authorities to
employees so that they can achieve long term growth as well as sustainability.
Staff: In present scenario, Siemens AG employs a number of employees estimated more
than 450,000. It also has its place of operations in around 190 nations . Managers of Siemens
recruits and selects employees as per their vacancies. Also they conduct an overall skill test of
employees that are hired by them. It greatly helps in timely completion of assigned tasks and
activities.
Another important theory that is being studied in this aspect is Hofstede's culture theory
which has been explained as under:
Hofstede's Dimensions of Culture: As per this theory, it has been assessed that
organisational culture is greatly affected by culture of market that is present on a global level. It
happens so due to certains factors such as perceptions, cultural differences, values, as well as
beliefs of a person (Simic and Dimitrijevic, 2012). This theory infuses six main cultural
dimensions. Dimensions of culture and its influence on Siemens AG is specified as under:
Power Distance Index: PDI is a quite important tool that is used to define less powerful
or weak members in a company. As per this factor, power is assumed to be distributed in unequal
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amounts in a business concern. This approach lowers motivation level of employees and also
hampers their overall performance.
Individualism v/s collectivism: It explains or underlines ways which people consider for
performing both individually as well as collectively. In context of Siemens it has been said that
employees should work in a coordinated manner . Also collectivism should be promoted so that
business can achieve its global targets.
Uncertainty avoidance: Uncertainty avoidance is a quality that defines extent to which
people in a society are not comfortable with ambiguity as well as uncertainty. Siemens prepares
its employees in such a way that employees can easily deal with any uncertain or complex
situations (Solomon and et. al., 2014). This keep their organisational structure and culture intact.
Masculinity v/s Femininity: Masculinity is a term that underlines preference of society
for assertiveness as well as heroism whereas femininity refers to a condition which represents
both cooperation as well as modesty. Both these factors should focus on both key factors so that
cultural differences can be avoided and company can also earn profit.
Long term orientation v/s short term orientation: Long term as well as short term goals
are both important and Siemens should focus towards achieving both.
Indulgence v/s restraint: Employees who have a high indulging skill enjoy their life as
per their wishes whereas restraint employees always have a concern regarding their behavioral
characteristics and conduct as per the social norms. Such cultural differences within the
workforce have a large scale impact upon the operations of Siemens AG. It is essential that top
management of enterprise allows personnel to work in a manner that promotes enjoyment and
positive atmosphere at work station (Voegtlin, Patzer and Scherer, 2012). Such culture being a
significant part of the organizational working assists an enterprise in successfully running the
business across the world and accomplishing the goals and objectives of company.
Impact of globalization on organizational functions:
 Practicing globalization in an ethical way by adopting CSR activities will help in
performance enhancement of a business firm thereby leading to growth and
development.
 Also it will help in enhancing overall customer base of a firm thereby promoting their
brand image in competitive market.
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Activity 4
Influence of globalisation by analysing key barriers in doing business internationally.
When any company makes a decision to carry out expansion in global market, there are
various factors or challenges which hinder this process. These hindrances can be in terms of
cultural, technological and financial aspects. A company has to design and develop such
strategies that can facilitate a positive business commitment within global market. Siemens AG
needs to evaluate such barriers of global expansions and determine ways to cope with them.
These barriers have a massive impact upon the profitability and functioning of business. Some of
the barriers that need to be considered by Siemens are as follows:-
Cultural and Financial barriers: When a company strives to expand in a global market,
it needs to take into consideration the diversities within the workforce in terms of cultural and
national backgrounds. This may give rise to linguistic barriers and lead to conflicts between
individuals. Thus, it is imperative for Siemens to analyse the culture of new country prior to
entering it so as to avoid such barriers. Also, the cost associated with conducting operations
globally can be high and need to be largely taken into account by Siemens.
Technological factor: In today's competitive world, it is essential for companies to take
into account the advancements in technology so as to feasibly enter the new market (Wetherly,
2014). By gaining knowledge about the latest trends and techniques existing in market, Siemens
cam make use of high-end technologies so as to gain a strategic edge in market.
Routes of internationalisation: There are a number of routes that help business concern
in going in international markets. These routes have been mentioned as under:
Joint venture: It is a process when two or more business concerns join hands with each
other for entering into global markets. A significant example of joint venture is General motors
has initiated a joint venture with local companies of China so that they can receive labour and
raw materials at cheaper rates.
Franchising: It is an important factor which considers marketing strategies that are
basically undertaken by companies for expanding their business operations. A franchiser licenses
its know how, procedures, intellectual property etc. while business expansion.
Recommendations to overcome those barriers
It is recommended to Siemens to take these essential steps while expanding operations in
international market so as to overcome the barriers, such steps are:-
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 To overcome the cultural as well as financial barriers, it is imperative that management of
Siemens AG takes into account the prevailing culture of the country in which expansion
is being done so as to avoid cultural barriers (Wetherly, 2014). Also, it is essential that
cost associated with this process is priorly ascertained so that there is no issues related to
it later.
 To overcome the barriers related to technology, it is significant that company makes use
of latest tools and techniques so as to gain a strategic edge in global market
CONCLUSION
From the above report, it has been concluded that globalisation is a process of integration
of people, economies, companies, nations and governments across various parts of the world.
Also, it has been analysed that by gaining proper knowledge of this process, business entities can
feasibly enter a new market and foster expansion. Besides this, it has been assessed that it is
imperative for companies to assess the needs and requirements of customers so as to become
profitable in global marketplace. Furthermore, it has been assessed that there are various factors
which facilitate and hinder the expansion of enterprise in global context.
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REFERENCES
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Black, J. S., Morrison, A. J. and Gregersen, H. B., 2013. Global explorers: The next generation
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River: Pearson.
Kasemsap, K., 2014. The role of social networking in global business environments. Impact of
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Laudon, K. C. and Laudon, J. P., 2015. Management Information Systems: Managing the Digital
Firm Plus MyMISLab with Pearson eText--Access Card Package. Prentice Hall Press.
Lee, S. M., Olson, D. L. and Trimi, S., 2012. Co-innovation: convergenomics, collaboration, and
co-creation for organizational values. Management Decision. 50(5). pp.817-831.
Ramamurti, R., 2012. What is really different about emerging market multinationals?. Global
Strategy Journal. 2(1). pp.41-47.
Savrul, M., Incekara, A. and Sener, S., 2014. The potential of e-commerce for SMEs in a
globalizing business environment. Procedia-Social and Behavioral Sciences. 150.
pp.35-45.
Simic, V. and Dimitrijevic, B., 2012. Production planning for vehicle recycling factories in the
EU legislative and global business environments. Resources, Conservation and
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Solomon, M. R. and et. al., 2014. Consumer behavior: Buying, having, and being. (Vol. 10).
Pearson.
Voegtlin, C., Patzer, M. and Scherer, A. G., 2012. Responsible leadership in global business: A
new approach to leadership and its multi-level outcomes. Journal of Business Ethics.
105(1). pp.1-16.
Wetherly, P., 2014. The business environment: themes and issues in a globalizing world. Oxford
University Press.
Wetherly, P., 2014. International business. Pearson Education Limited.
Zhang, A. and Huang, G. Q., 2012. Impacts of business environment changes on global
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ONLINE
McKinsey’s 7S Model. 2016. Available through<https://www.educational-business-
articles.com/7s-model/>
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