International Business: Evaluating Practices and Market Selection

This study evaluates international business practices using PESTEL analysis and explores market selection techniques. It discusses the key elements of the international environment, patterns of international trade and investment, and methods of market entry and development.

International business

Executive summary
The study is based on the international business where the firms are engaged in the economic
activities of the international or broad. The trade policies are determined and evaluated. The
trading is the integral part of the globalization which leads to increase in the economies of scale
and growth share. In the study it has been done on the company of McKinsey and company and
international consulting firm where the discussion is done on the international practices having
an impact with the macro environment. The key elements of the global environment having an
impact on the business who wants to trade globally. With this not only the company also
determines the mode of entry in the international market and adopts the strategies to mitigate the
risk. Before doing a business internationally it is very essential to evaluate and select the
appropriate market.

Contents
Executive summary.....................................................................................................................................2
Introduction.................................................................................................................................................4
Main body...................................................................................................................................................4
LO1- Evaluating international business practices with the PESTEL analysis..........................................4
LO2- Key elements of the international environment..............................................................................6
LO3-Patterns of international trade and investment.................................................................................7
LO4- Demonstrating Market selection techniques...................................................................................8
LO5- Methods of international market entry and development...............................................................9
LO6- Methods of risk minimization available to international companies..............................................9
LO7- Appropriate concepts and theoretical frameworks to the workplace experience..........................10
Conclusion.................................................................................................................................................11
References.................................................................................................................................................13

Introduction
International business is a sub- field of economics which determine the international trade
patterns, implications and origins. It evaluates the effect of trade policies. The business activities
are done across the national borders involving the purchase and sale of goods, commodities and
service outside the national borders is known as international business (Aagaard and et.al.,
2019). The mode of trading can be privately or state owned organization. In the international
business the organization explores the opportunities for the expansion of the business activities
in the market related to manufacturing, mining, banking and more. With the help of world trade
organization the nations are connecting to each other by administration and build the business
relationship across the world. In the study discussed topics are based on the PESTEL analysis of
international organization, key elements with the pattern of international trade, market entry,
selection techniques and various theories.
The chosen organization is McKinsey & company an American worldwide management
consulting firm established in 1926. It was founded by the professor James O. McKinsey of
Chicago University which provided the advice on strategic management to corporations and
governments.
Main body
LO1- Evaluating international business practices with the PESTEL analysis
It refers to a component of strategic planning used for external analysis in macro
environmental forces of political, economic, social, technological, environmental, and legal used
for environment scanning. The analysis is done on the McKinsey & Company.
 Political factor- The factor has the influence on the organization of the long-term
sustainability and profitability. The factors which affected the McKinsey & Company were
the decision of the judiciary as they are independent. There is a necessary of strengthen
democratic institutions as to give bloom to McKinsey in open having transparent and stable
political environment so that level of corruption can be reduce. Under the norms of world

trade organization the government is adhere to rules and regulations which provides
consistency in policy making and its implementations (Bhuian and et.al., 2017).
 Economic factors- It has the direct impact on the potential attractiveness of the market
where it is essential for McKinsey & Company to determine the present and future market
such as inflation rate, growth rate etc. The increase in the inflation rate impacts on the
company growth where the firm is required to increase their prices leads to low brand
loyalty. The McKinsey can borrow funds from the federal reserve at cheap rates but also
bears the risk of interest rate it is raised. The high GDP growth rate reflects the growing
demand where the McKinsey can expand its product range and new customers can be
targeted (Brunet-Thornton and et.al., 2018).
 Social factor- It involves demography trends, power structure etc. the McKinsey should
analyses the attitude towards the authority before developing a market campaign for products
or services as various cultures in the world have different attitudes. There should be analyses
of the demand in the economy defining the power structure by the McKinsey. The
demographic trends should be consider by the McKinsey as it is a key factor in the demand
forecasting before development of new product and integrated features.
 Technological factor- It involves the technology of artificial intelligence, machine learning,
big data analytics helps in predicting the behavior of consumers. The McKinsey should focus
on the intellectual property right before entering into new market in the environment. It also
access the cost of production and level of automatization in the economy which leads to
technological innovation in manufacturing and production. The McKinsey also consider the
level of technology acceptance in the society before establishing new product.
 Environmental factor- The climate and ecosystem change, sustainability rate are involved.
The environmental standards and regulations at national and local level helps the McKinsey
in making various decisions regarding the pricing strategy, product development and plant
location. The McKinsey also actively participate in the CSR for the society welfare and to
cater the prospective market. It is also adhere to the waste management policy. It also
determines the consumer activism in the environment to develop environmentally friendly
products (Cohen 2018).
 Legal factor- This factors helps in the governing of market conditions, laws in which it
operates and procedure to resolve the conflict with other stakeholders. The independence of

the judiciary reflects strength and credibility of the institution. The McKinsey determines the
consistency of the employment laws and access the data laws and the need to comply with
them in the country. It is enforced with the consumer laws defining the attitude of authority
towards the consumer protection law.
LO2- Key elements of the international environment
International business environment is the multidimensional involving the political risk,
cultural differences, exchange risks, legal and taxation issues. An international business
environment refers to the surrounding in which the international companies run their business
which brings many differences. The international business environment consists of various
factors of macro environment such as political, social, and legal and many more. It also refers to
the globalization where the exchange of goods and services is conducted across national borders
in the business environment of international. The key elements are- (Dranev and et.al., 2019)
 Political environment- It defines the types of government, relationship with business and
political risk in the country. The factors involved such as change in tax rates, policies,
political stability etc. the lack of political stability and changes in tax policies affects the
business operations and growth. It is necessary for the organization to consider the various
aspects such as political system, approaches of government towards the business, legal
restrictions, restrictions on export of products and services with pricing and distribution.
 Economic environment- It is related to all the factors that have the contribution in attracting
foreign business which varies from one nation to another. The countries are divided into
three parts developing, less developed and new emerging economies. It defines the
economic system of the country where business operations are carried involving inflation
rate, income distribution, employment level, government budget etc. all the factors have
direct affect on the business operations. The organization consider the aspects such as stages
of economic growth, sources of finance, level of per capita income, infrastructure facilities,
and availability of the manpower with salary and wage structures (Kingkaew and et.al.,
2018).
 Technological environment- It consists of the factors that are related to materials &
machines used in manufacturing and production of goods and services. The rapid adoption of
the technology in the organization influences the decision which leads to consumer

satisfaction. The technological change protects the demand of various products and increases
the efficiency in the business process. The success of the organization in the international
environment depends on the level and acceptance of the technological innovation in the
country. The advancement in the technology enlarges the customer base and provides the
competitive advantage to the firm (Koning and et.al., 2018).
 Cultural environment- It determines the general beliefs and values that determine the right
for the groups formed by the factors involving language, religion, government and education.
In the environment the Hofstede in 1980 developed the dimensions of the cultural values
involving individualism, uncertainty avoidance, power distance and masculinity. The
organization considers the aspects related to approaches of business towards the society,
lifestyle of people, influence of social, cultural and religious factors on the product
acceptability and demand of the products by the consumers. The organization also
determines the consumer’s needs, wants and preferences regarding the goods and services.
LO3-Patterns of international trade and investment
International trade defines the exchange of goods and services, capital across
international borders to fulfill the need of goods and services. It represents the significant share
of gross domestic product in the country. It is a complex process rather than the domestic trade.
The trade is influenced by the government policies, currency, judicial system, laws and markets
etc while trading in two or more states. In the global economy the demand, supply and prices are
impacted by the global events. The world trade organization works towards the facilitation and
growth of international trade. The international trade involves the import and exports for the
goods and services. The goods sold or transferred in global market from domestic country refer
to export and goods bought or received from the international market in the domestic country
refer to import. The balancing between import and export defines the balance of payments
(Krasnov and et.al., 2017).
The international investment defines the strategies where investor diversifies portfolio
through purchase of financial instruments such as shares, mutual funds and makes investment in
acquiring the ownership in distinctive companies to gain the return and reduce the risk across the
globe. The international investment delivers the opportunity to the investor to capitalize high-
quality performance in the foreign economy. The international investment is classified into types

of investment involving FDI and FPI. Foreign direct investment refers to the investment done by
the investor to obtain the ownership or collaboration by investing in the business situated on
foreign land. The investors establish the lifelong interest with the business entity for the
existences of long-term relationship with the enterprises having significant influence on the
business management. In FDI the foreign investor has the direct and indirect ownership of more
than 10% of voting power in the business (Muhamad and et.al., 2017). The FDI transactions are
done in three ways- Greenfield project, joint ventures, merger and acquisition. Foreign portfolio
investment (FPI) defines the investment made by the investor in the foreign economy having no
motive to gain the role in the management of the organization. The investor’s purchases
securities which are highly liquid traded in another country and get buyers easily when required.
The securities involve instruments of stocks and bonds. In the nature it can be short term where
investor require quick return due to the change in exchange rate, interest rate. The FPI is done to
hold the assets for long term which drives the growth rate, economic stability and interest rate in
the economy.
LO4- Demonstrating Market selection techniques.
It is essential to select the right market to determine the viability of the expansion
strategy. The selection of market helps the business in international development, business
planning and growth potential. The selection of market depends on the types of business and
marketing environment. The choice of strategy involves market concentration where focus is on
few selected markets with the aim to secure constant sales growth. 2. Market diversification
introduction of new product in the market to increase the sales and to diversify risk. The criteria
for the selection of the international market involves the environment and market analysis by
understanding the external forces of national, local and international that would have affect on
the business. The analysis of the completion with the competitors by understanding the price
structure, networks, market maturity and financial position, expansion strategies all these factors
should be determined by the company. The entrepreneur should have the complete information
regarding the supply chain of the product or distribution channel. To select the type of
distribution sales structure should be analyzed in the country for the expansion of the company in
the market. In the selection of the market the analysis of present and potential demand is
essential regarding the product or service in the sourced markets (Nakagawa and et.al., 2017).

LO5- Methods of international market entry and development.
To enter into the market the company first aims to the market or analysis the competitor’s
success. The high investment capital is required depending on the method of market entry to
meet resistance from the potential local partners to ensure the success of the product. There are
various market entry methods such are-
 Exporting- It defines the direct sale of goods and services from one country to another
country having the low risk. It is the best method for entering into a foreign market as it
does not require the investment for the production facilities because all the goods are
produced in the home country and sent to foreign which leads to cost effective in sales. In
exporting of the goods can increase the transportation cost. The cost involved in the
exporting comes from marketing expenses which requires the involvement of four parties-
business, importer, transport provider, and government (Ratten and et.al., 2017).
 Licensing-The other country is allowed to use the property in the home country. It involves
the intangible property such as trademark, patents, production technique etc. to use the right
of the property the licensee pays fee which also consider the manufacturing and marketing
cost in the foreign market. It requires the little investment which can provide high return on
investment.
 Joint venture- It is a kind of partnership which comprises of two companies to establish
jointly owned business. One owner is from the local business. The companies provide new
business with management team and control the share of joint ventures. The profits and risk
are shared equally between the members (Saranga and et.al., 2019).
 Piggybacking- It is unique way of entering in the international market. The domestic firm
is interested in selling the unique product and services in the foreign markets in which they
are involved and analysis the inventory of the international market for the product or
service. It helps in reducing the cost and risk as the product is sold in domestic and large
firm market the product for internationally.
LO6- Methods of risk minimization available to international companies.
Doing business internationally leads to high exposure of the risk rather than the domestic
business. The laws, customs and business practices make the work complicated which increases
the level of risk. There are various methods to minimize the risk.

 Assessing the political and business landscape- By developing an effective business plan
the political situation and business environment can be consider which will help in
determining the demand of the product. There must be the evaluation of transportation and
distribution infrastructure to have adequate support (Sokol 2017).
 Choose the right business partner- the risk in international business can be mitigate if the
partner has professional understanding of the local culture and business practices. The right
partner guides in the regulations and cultural expectations.
 Hiring experienced local talent- To ensure the success in the company experienced people
should be hired who have the understanding of company vision, strategies and goals.
 Developing a business model for the market- The large countries have diverse market
segments and geographic regions which require a multi part model including the specific
strategies. The model considers all the direct and indirect costs with the international trade.
LO7- Appropriate concepts and theoretical frameworks to the workplace experience.
In the business the mangers are the integral factors which motivate the employees, take
decisions and allocate the resources. The business uses various management theories to handle
the process, people and information. The management theories are classified into classical
management theory, behavioral management theory and modern theory in the workplace.
 Classical management theory- It is the oldest management theory focusing on the
operations and creation of the standards to increase the production output. The compensation
is considered as the prime motive for the employees who help in improving the output and
rewards the high performing employees through wages or bonuses. This theory considers the
scientific management theory which focuses on the waste minimization and reduces the
production time. It applies the scientific approaches to improve the operations and
performance by reducing hit and trail practices. The administrative theory it was developed
by the Henri Fayol stated the 14 principles of management which consider the business activity
as prime and provides the guidelines to the managers. These principles were used to manage the
organization benefit of planning, decision making, and process management. The bureaucracy
theory promotes the management decisions. it as formal authority systems. It involves the
hierarchies of the unity and authority of organizational which is central to the bureaucracy
theory (Stoermer and et.al., 2018).

 Behavioral management theory- In the organization and industries the complexity is
increasing of the human interest in the workplace. This theory is related to the people
oriented determining the human behavior and satisfy their interpersonal needs. The manager
motivates the teamwork to foster the collaborative atmosphere. It involves the human relation
theory it considers organization as social entity which recognizes the money and morale
factor to satisfy the employees and to enhance their performance. The behavioral theory is
the mixture of the psychology, sociology, and anthropology to provide a scientific basis. It
examines the factors of social needs, conflicts and self actualization to motivate the
employees (Yayla and et.al., 2018).
 Modern management theory- In this theory there is the development of the technology
which is adopted by the business rapidly to increase their productivity. It incorporates the
elements of the traditional and human theories. For measuring the performance statics is used
and encourages the cross functional cooperation. This theory involves the quantitative theory
which was developed to solve the issues of integrating systems of people, materials and
systems and to support military decision-making. The system theory is interrelated
component of the organization where management support goals and process in the
organization system to serve organizational health. The contingency theory determines the
effective managers that can adaptable in the unique situation or circumstances to solve the
problem. It also determines the better use of technology to enhance the business decision in
complex situations (Zhu and et.al., 2017).
Conclusion
From the above study the conclusion has been made that international business is a wide
concept related to the purchasing and selling of the goods across the world. The international
business encourages acquiring the foreign exchange that is utilized in the export of the goods
from the global market. To start the business in the global market the business considers various
external factors so that growths can be maintained of the economy. The profits of the company
are improved by the sale of the products in the nations. The organization can utilize the surplus
funds and resources to increase the profitability of the activities. To enter in to the market the
companies adopts various methods such as joint venture, exporting and many more. With the

business operations running in the international market the company also consider the various
risk and ways to mitigate them.

References
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