Analyzing the External Environment in International Business Context

This report provides a comprehensive analysis of the external environment in international business, focusing on strategic tools such as SWOT, PESTEL, and Porter's Five Forces to assess market entry strategies. It explains the application of SWOT analysis in identifying strengths, weaknesses, opportunities, and threats, highlighting its ease of use and limitations. The report then details PESTEL analysis, examining political, economic, social, technological, environmental, and legal factors, emphasizing its role in understanding macro-environmental influences. Furthermore, it explores Porter’s Five Forces model, analyzing competitive rivalry, potential for newcomers, power of suppliers, power of customers, and the threat of substitutes to determine industry attractiveness and profitability. The report also discusses globalization and its impact on economic environments, international trade, and national accounts, using the example of Microsoft Windows. Finally, the report applies these analytical frameworks to a case study of Agility, a supply chain services and innovations company.

International business environment – assignment
Part one – task one
External environment analysis of business events takes a preeminent
place in the development of any organization because the external
environment of an organization is characterized by a high degree of
complexity. Also, one of the main characteristics of business is the
organization’s ability to adapt to the changes in the external environment.
It is believed that any organization exists and functions in conjunction with
multiple factors; these factors have a different impact on the organization
and significantly impact its capabilities.
Many methods for analyzing the factors of the external market functioning
provide a vast opportunity to develop practical options for market entry
strategies.
One of the methods used in the analysis is SWOT and can be explained as
the “S” field – describes the organization’s strengths, through which you
can decide the strategic direction of the enterprise.
“W” field - decides which strengths an organization can use to reduce its
threats.
Strengths can be identified by acknowledging the organization’s
advantages and unique selling proposition.
“O” field - defines the possibilities of the enterprise in the presence of
many weaknesses.
Weaknesses would include what the organization could improve, what it
should avoid, and what factors lose sales.
Opportunities show up from situations outside the organization and
require an eye to what might happen in the future. They might appear as
improvements in the market or technology being served or used. The
ability to spot and grab opportunities can enormously change the
organization’s capability to compete and lead the market.
Also, government policy related to the field of the business must be
watched out. Moreover, changes in social forms, people profiles, and daily
routines can all throw up exciting opportunities.
“T” field - defines the exposed weaknesses of the company in conditions
of threats.
Threats include anything that can undesirably affect the business from the
outside, such as supply-chain troubles, swings in market requirements, or
a shortage of hires. It is crucial to foresee threats and to act against them.
The advantage of the SWOT technique is that it is easy to use. Also, it can
be used on a wide range of applications without having to spend a lot on

marketing research. In contrast, the disadvantage is that it is impossible
to track the changing aspects of time in the market and the imprecision of
the analysis results.
Another method for analyzing the external environment of an organization
is PESTEL.
PESTEL analysis is tool business owners use to analyze and watch the
macro-environmental factors that impact a company, an organization, or
industry. This analysis examines political, Economic, Social, Technological,
Environmental, and Legal factors in the external environment. Also,
threats and weaknesses are identified.
Political factors: include government policies, leadership, and change;
foreign trade policies; internal political issues and trends; tax policy;
regulation and de-regulation trends.
Economic factors: include current and projected economic growth,
inflation, and interest rates; job growth and unemployment; labor costs;
the impact of globalization; disposable income of consumers and
businesses; variations in the economic environment.
Social factors: include demographics; consumer attitudes, opinions,
buying patterns; population growth rate and employment patterns; socio-
cultural changes; ethnic and religious trends, living standards.
Technological factors: affect marketing (a) in new ways of delivering
goods and services; (b) new ways of supplying goods and services; (c)
new ways of communicating with target markets.
Environmental factors: are essential due to the increasing shortage of
raw materials; pollution targets; doing business as an ethical and
sustainable company.
Legal factors: include health and safety, equal chances; consumer rights
and laws; advertising standards; product labeling, and product safety.
Advantages of a PESTEL Analysis can be summarised as that It can warn
of possible threats and opportunities; It pushes businesses to consider the
external environment in which they work; The analysis can help
organizations understand external trends.
On the other hand, many researchers argued that the model’s simplicity is
that it is a simple list that is not sufficient and comprehensive; The most
significant disadvantage of the model is that it is only based on an
external environment assessment.
Another method is Porter’s Five Forces, a model that identifies and
analyses five competitive forces that form every industry and helps
determine an industry’s weaknesses and strengths. Five Forces analysis is
commonly used to identify an industry’s structure to define company

strategy. Porter’s model can be applied to any section of the economy to
understand the level of competition within the industry and improve a
company’s long-term profitability.
The five forces that are frequently used to measure competition intensity,
attractiveness, and profitability of an industry or market are:
1. Competition in the industry
Suppliers and buyers hunt for a company’s competition to provide a better
deal or lower prices. The larger the number of competitors and the
number of identical products and services they offer, the lower the
company’s power. Conversely, when competitive rivalry is at a low level, a
company has greater power to charge higher fees and set the terms of
deals to achieve higher sales and profits.
2. Potential of newcomers to the market
The influence of new competitors also influences a company’s power in its
marketplace. If time and money spent on the new entrant to enter a
company’s market and be an effective competitor were little, a recognized
company’s position could be significantly weakened. An industry with solid
obstacles to entry is ideal for current companies within that industry since
the company would be able to charge higher fees and deal with better
terms.
3. Power of suppliers
It focuses on how easily suppliers can raise the cost of inputs. It is
impacted by the number of suppliers of goods or services, the uniqueness
of these inputs, and how much it would cost a company to switch to
another supplier. The fewer suppliers to the industry, the more a company
would rely on a provider. As a result, the provider has more power to
boost input costs and push for other trade advantages. On the other hand,
when there are several suppliers or low switching costs between
competing suppliers, a company can bring down its input costs and
increase profits.
4. Power of customers
The ability of customers to push prices lower is one of the five forces. It is
influenced by how many customers a company has, how significant each
customer is, and how much it would cost to find new customers or
markets for its output. A smaller and more powerful client base means
that each customer has more power to negotiate for lower prices and
better deals. A company with much smaller, independent customers will
have an easier time charging higher prices to increase profitability.
5. The threat of substitute products

Alternative goods or services that can be used in a company’s products or
services pose a threat. Companies that produce goods or services for
which there are no close substitutes will have more ability to increase
prices and lock in favorable terms. When close alternatives are available,
customers will have the option to give up buying a company’s product,
and a company’s power can be weakened.
The Five Forces model can help businesses boost profits, but they must
continuously monitor any changes in the five forces and adjust their
business strategy.
I believe that PESTEL analysis method would be the best and more
informative to use when deciding to go internationally based on the
easiness of this method.
Task one – part two:
Globalization can be conceived as a process or set of processes that
represents a transformation in the spatial organization of social relations
and transactions, generating continent-wide or interregional flows and
networks of activity, interaction, and power.
Globalization has four types of change.
Firstly, globalization includes growing social, political, and economic
actions across the political limits of countries and continents.
Secondly, it recommends increasing inter bonds and trade flows,
investment, finance, and society.
Thirdly, developing extensity and intensity of global interconnections can
depend on speeding up global connections and developments as
worldwide actions of transport and communication speed up the flow of
ideas, goods, information, investment, communities.
Fourthly, the growing extensity, intensity, and speed of global
communications can be attached with their developing impression such
that the results of indistinct actions can be significant elsewhere.
However, all the local growth may come to have massive global
consequences. It makes sense that the boundaries between local affairs
and international matters can become increasingly blurred.
Overall, globalization can expand, increase speed up, and develop the
influence of worldwide interconnections. Globalization makes it possible to
observe patterns of worldwide contacts and business across all types of
fields of human activity, from the military to the cultural.
Globalization creates a significant change in the economic environment of
any state; it changes any nation in terms of economic development
policies under the national government. Globalization provides the free
movement of trade and investment, labor, and assets. Through

globalization, the nation’s economy grows globally, opening the barriers of
international trade, increasing stability, and positively impacting the
quality of life within a nation’s individuals.
Economic growth through Globalisation has both positive and negative
impacts on society. One of the main benefits of economic growth is the
higher incomes per capita and higher living standards due to increased
output, which creates employment opportunities, taking the nation
towards prosperity.
The best example of Globalisation is Microsoft Windows, which is done in
the United States of America, but the technical support is provided in
India, supporting the Indian economy. Job opportunities create in India for
IT professionals and the government’s income increases in terms of
Taxes.
The animation on cartoons is done in South Korea. The characters’ voices
are done in the United States of America or any country that buys these
cartoons.
In national accounts terms, globalization replaces national economic
structures and transactions with international ones. Corporations organize
their production and marketing globally, with several countries’ vertical
production processes. Capital such as intellectual property can be used
simultaneously across the world in a multinational enterprise (MNE).
Labour is mobile, and income returned to the home country can be
essential to its national income. Household and business spending
becomes more international as the world wide web expands spending
opportunities. The increasingly global nature of economic transactions and
arrangements challenges applying national accounts concepts and data
collection and compilation systems to measure domestic economic
developments. Features of globalization that directly affect national
accounts measures include the following:
a. MNEs organize their business across national boundaries to maximize
production efficiency and minimize their global tax burden.
b. Far more foreign direct investment (FDI) relationships and the need to
identify and allocate direct investment flows.
c. Transfer pricing between affiliated corporations (imports and exports
between related companies without a market transaction).
d. The use of offshore vehicles (special purpose entities (SPEs)) to arrange
finance for global activities and other purposes.
e. The increase in international trade in services, including the practice of
sending goods abroad for processing with no change in ownership.

f. An increase in international merchanting, where the merchant arranges
the export of goods from country A to country B, without the goods ever
crossing the country’s borders where the merchant is resident.
g. The trade-in and use of intellectual property products (IPPs) worldwide.
h. The limitations of administrative data in capturing economic
transactions in the context of complex enterprise groups and globally
organized production processes.
i. international labor movement and the labor income arising from it, and
remittances and other flows to the country of origin of the non-resident
workers.
j. An increase in household travel and investment abroad (including
residential property).
k. international trading via the internet by corporations and households.
Task two:
the company of choice will be “agility company – supply chain
services and innovations.”
company overview and its business:
Agility is one of the world’s leading providers of integrated logistics. It
brings efficiency to supply chains in some of the globe’s most challenging
environments, offering unmatched personal service, a global footprint,
and customized capabilities in developed and developing economies alike.
Agility’s core commercial business, Global Integrated Logistics (GIL),
provides supply chain solutions to meet traditional and complex customer
needs. GIL offers air, ocean, and road freight forwarding, warehousing,
distribution, and specialized services in project logistics, fairs and events,
and chemical logistics.
Agility’s story parallels the rise of emerging markets in the global
economy. The company started as a local warehousing provider in Kuwait
and became the largest logistics company in the region. It acquired over
40 logistics brands worldwide, investing billions in building a global
network with a strong impression in emerging markets. Today, Agility is
one of the world’s largest integrated logistics providers, with an
enterprise-wide headcount of more than 22,700 employees and
operations in 100 countries.

PEST analysis – agility:
Agility’s material topics:
Environmental:
Climate change: The risk was that rising temperatures in many emerging
markets would lead to increased demand for electricity, straining
distribution infrastructure, which would lead to service disruptions and
potentially higher costs, so the company reduced emissions through
energy efficiency measures, as well as through sourcing and generation of
renewable energy for both new builds and existing operations.
Air Pollution: The risk that air pollution and poor air quality negatively
affect employee health and well-being and slows economic development
in key markets, so the company raised awareness and educated its
customers on emerging regulations to help them to prepare.
Social:
Human rights: Agility created a culture of respect for human rights
through an industry-leading global human rights policy, training, and
assessment program.
Quality education: Poor education attainment leads to youth
unemployment, limiting economic opportunity in communities slowing
economic development, so the company supports quality education
through its extensive community investment program.
Political:
Compliance: the non-compliance with applicable laws and regulations at
the global, country, and local levels that would endanger business and
lead to fines, so the company established an international compliance
organization that administers and enforces the compliance program also,
Performs audits to ensure adherence to applicable company and
governmental regulatory and statutory requirements.
Economic:
Emerging Markets Growth:
The opportunity was to have the first-mover advantage by quickly building
the foundation for logistics infrastructure and services in high-potential,
underserved emerging markets. That is why the company built world-class
warehouses, light industrial facilities, and commercialized offerings to
address local market financing and affordability constraints.
Technology:

Big data:
The opportunities to take advantage of data to optimize performance and
improve real-time decision making, so the partnership with MIT Media
Labs helps the company stay close to some of the most innovative
thinking around technology in the world today.
Internet of things (IoT):
The opportunity to improve the efficiency and accuracy of data collection
and improve real-time decision-making, so the company implemented and
identified IoT-based solutions to meet customer requirements and
expectations.
The microenvironment related to the company:
by putting people first, both with employees and in the communities
where they operate, they can provide a more equitable world and help to
address poverty and low levels of education.
They can reduce their direct environmental impact by innovating to
improve energy efficiency in their operations and sourcing more
renewable energy. The extensive footprint means they can advocate for
change with suppliers and supply chain partners.
Agility’s success depends on integrating emerging markets into global
supply chains. Addressing gaps in infrastructure and designing services to
level the playing field for small and medium-sized businesses is suitable
for the company and a more sustainable, equitable trade system.
Create a safe, healthy, and productive workplace, which minimizes the
risk of preventable accidents, injury, and exposure to health risks.
There is no discrimination in interviewing, selection, hiring, promotion,
training, transfer, supervision, termination, layoff, compensation, benefits,
and education opportunities.
No harassment Creating an environment free from harassment based
upon race, color, religion, sex, age, national origin, physical or mental
disability, sexual orientation, or marital status.
No forced labor Agility prohibits and does not tolerate the use of
involuntary, forced, or bonded labor, including slavery, prison labor, or
labor demanded of employees because of their debt.
No child labor Employees must always be above the legal working age in
their country and should never be younger than 15.

Competitive work hours and wages Operate in full compliance with
applicable wage, work hours, overtime, and benefits laws of the
jurisdictions they operate.
Employee confidentiality Maintain the confidentiality of employee
information.
Ability to raise complaints Agility provides opportunities for all employees
to grow ethical concerns either in person or through an anonymous
hotline.
Protection for people that raise grievances Enforce a policy of no
retaliation against anyone reporting a suspected violation in good faith.
Microenvironment – suppliers:
Agility does not always own the ships, planes, and trucks they move
freights on as an asset-appropriate company. Instead, they offer the
technological backbone and supplier relationships to move freight
anywhere in the world using a combination of owned and outsourced
assets. The implication is that subcontractor management is integral to
their core business. Agility works closely with strategic carriers through
various industry partnerships described throughout this report regarding
sustainability issues.
Facilitating Trade in Emerging Markets Agility helps boost trade to and
from emerging markets, creating more profound social and economic
value by making some of the world’s most challenging environments
accessible to trade. Agility serves major multinationals that are expanding
their international footprint, and it helps small and medium organizations
tap into growing consumer demand in these dynamic markets.
Risks and methods used to reduce them:
- Dense, ambiguous, or inconsistently applied regulations, complex
bureaucratic processes, delays at customs:
So, with a strong understanding of local regulations and relationships with
local authorities, A proactive approach to securing correct documentation
in advance, and Committed to compliance with international regulations
like the Foreign Corrupt Practices Act (FCPA) and UK Bribery Act (UKBA).
- Connectivity challenges related to infrastructure:
Creativity in finding effective routes and modes of transport to move
goods.

- The ever-present need for talented, professional, and customer-
oriented human resources:
They hire experienced logistics professionals with a strong understanding
of the local market.
- Security concerns, supply chain resilience in parts of the world that
are often at higher risk for natural disasters or political change:
Implement a safety-oriented approach and respond quickly to external
events to minimize disruptions.
- Challenges of managing a diverse set of suppliers:
Strong supplier relationships, project management capabilities, and
systems and technology support.
- Fast-changing cost structures, escalating labor and property prices:
Well-established network in emerging markets, commitment to helping
customers manage costs, and proven ability to provide innovative
solutions.
Task three – implications for businesses of the cultural and
regulatory diversity in international markets:
Cultural differences can affect consumer behavior, ultimately placing a
brand’s opportunities at global success in the hands of their efforts to
bridge cultural barriers between local and foreign markets.
Today, whether we work in Düsseldorf or Dubai, Brasília or Beijing, New
York or New Delhi, we are all part of a global network (real or virtual,
physical or electronic) where success requires navigating through wildly
different cultural realities. Unless we know how to decode other cultures
and avoid easy-to-fall-into cultural traps, we are easy prey to
misunderstanding, needless conflict, and ultimate failure.”
― Erin Meyer, The Culture Map: Breaking Through the Invisible Boundaries
of Global Business
In a constantly evolving world, the act of going global must be
accompanied by the ability to conduct business in a manner that is
efficient, but also sensitive and respectful to the unique differences that
are weaved into the fabric of intercultural communication.

five common practices that businesses often overlook:
Adapting global business models to the local market
Lacking in understanding of the local culture and its influence on
consumer demand and decision-making can result in failure and
significant costs to the business. Therefore, keeping the people that are
being served at the top priority is one of the most important
considerations when entering a new market.
Studying local business and managerial practices
The influence of local culture is extensive. It impacts everything from how
employees are managed to the pace at which business is conducted, how
negotiations are handled, and how risk management is enforced.
Thus, an in-depth understanding of local business practices is crucial to
international business success. Unfortunately, many businesses enter new
markets without familiarising themselves with the business customs of
their host country and quickly find themselves struggling to win over their
new stakeholders and employees.
Implementing diversity management
Workplace diversity is a powerful tool for enhancing creativity and
inclusion. When it is successfully integrated into a company’s business
model, it can be a major draw for high-quality global talent. A diverse
workforce also fosters an environment that promotes fresh perspectives
and approaches to problem-solving.
Adapting HR procedures to local market needs
Globalisation is essential to business expansion and for companies that
enter foreign markets and hire local employees, their human resource
policies and practices must be adapted so that they are beneficial to their
foreign employees and subsidiaries.
Cultural values within a society affect how individuals feel about their jobs
and often define their workplace expectations. Human resource teams
must be mindful of these cultural differences in order to successfully
recruit, retain, support, and communicate with foreign employees.
Especially those with a workforce that is dispersed across several
locations with varying cultural profiles.
Identifying regional and subcultural differences
Not everyone within a country or society engage in the same behavioral
patterns or share the values that belong to the dominant culture.