Analysis of the International Business Environment - Report

This report provides a comprehensive analysis of the international business environment, examining key aspects such as international strategy, diversification, and the timing of market entry. It delves into the influence of cultural and formal institutional environments on international business operations, highlighting the impact of technological advancements and globalization. The report also discusses the importance of exploiting and exploring critical capabilities, including the role of research and development, innovation, and the impact of corruption. Furthermore, it explores the relationship between foreign direct investment and the strategies employed by multinational enterprises, offering insights into the dynamics of international market expansion and the challenges faced by businesses operating across borders. The report concludes by emphasizing the importance of adapting to institutional changes and leveraging capabilities for competitive advantage in the global market.

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...................................................................................................................................8

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. Thus, it include trading or export
and import activities which require the need forb licence or franchising (Hamilton and Webster,
2018).
This report carries the discussion about various section 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
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. Going globe helps an organisation in
increasing their profits and valuation of business. But, sometime desire of more money results in
losing present market share. Their are many start-ups who tried to rapidly enter in more countries
after tasting success in domestic market but after sometime, they failed to earn money from new
economies and lose their share on domestic market.
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Summary and discussion on International strategy diversification and speed
International strategy leaves a significant impact on the growth as well as development of
overall economy and diversification of multi national business. This has helped the overall
organisation to increase the connectivity than helps in global expansion of business (Bartlett,
Doz and Hedlund, 2013).
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. 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 (Hillary, 2017). 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 (Shenkar, Luo and Chi, 2014). 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 (Forsgren and
Johanson, 2014).
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 (Hintermeister and O'keefe International Business Machines Corp, 2012).
At 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 start its operations it
get affected by various factors that act as a learning which formulated the behaviours as well as
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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 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 (Taylor and Thrift, 2013).
Due to globalisation more industries are keen to expand their business internationally
rather than focusing on domestic market only. 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 advantage 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. Entry timing is considered as bigger issue compared to mode of entry as there are
numerous businesses who failed to successfully expand their operations because they entered in
the new country at wrong time. One of the main reason of TESCO's failure in USA was that they
entered in the market when their mortgage crisis was present and economy wasn't in good shape.
Summary and discussion on Cultural and formal institutional environment
With 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
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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 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 (Dunning, 2013).
Hence, various research was 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 provide 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 their 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 (Sena Ferreira, et.al., 2012).
MNEs do not prefer to enter in an economy which is culturally different from them.
Globalisation brought major institutional changes and even regulatory authorities are changing
their working style according to open economy (Falkner, 2017). Developing nations seek
investment so they showed their support to MNEs but there is friction between regulative,
normative and cognitive pillars.
Summary and discussion on Exploiting and exploring critical capabilities
On the basis of research 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 in 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
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exploit their existing capabilities by meeting need, preferences of customer as well as 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.
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 (Verbeke, 2013).
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.
MNEs exploit resource of parent organisation as it help them in exploring new options
but when these enterprises are highly dependent on their parent company then may fail to adapt
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according to the business environment of other nations. Managing subsidiary firms is also a big
challenge for MNCs as they may find difficulty is allocation of power. Sometime organisations
give more power to local division and it result in shutting down of business but one can find
many cases when giving freedom to region manager in foreign operations assisted company in
touching new heights.
Future research avenues
Furthermore, there is a huge opportunity for researchers to conduct research on formal as
well as informal institution have huge opportunities. As their 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. 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.
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.
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
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
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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
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
Hamilton, L. and Webster, P., 2018. The international business environment. Oxford University
Press.
Bartlett, C. A., Doz, Y. and Hedlund, G., 2013. Managing the Global Firm (RLE International
Business). Routledge.
Shenkar, O., Luo, Y. and Chi, T., 2014. International business. Routledge.
Verbeke, A., 2013. International business strategy. Cambridge University Press.
Falkner, R., 2017. Business power and conflict in international environmental politics. Springer.
Dunning, J. H., 2013. Multinationals, Technology & Competitiveness (RLE International
Business). Routledge.
Forsgren, M. and Johanson, J., 2014. Managing networks in international business. Routledge.
Taylor, M. and Thrift, N., 2013. Multinationals and the Restructuring of the World Economy
(RLE International Business): The Geography of the Multinationals Volume 2.
Routledge.
Dunning, J.H., 2014. The Globalization of Business (Routledge Revivals): The Challenge of the
1990s. Routledge.
Sena Ferreira, P., et.al., 2012. Framework for performance measurement and management in a
collaborative business environment. International Journal of Productivity and
Performance Management. 61(6). pp.672-690.
Hintermeister, G.R. and O'keefe, T. J., International Business Machines Corp, 2012. Goal based
user interface for managing business solutions in an on demand environment. U.S.
Patent 8,286,092.
Hillary, R. ed., 2017. Small and medium-sized enterprises and the environment: business
imperatives. Routledge.
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