International Business: External Environment and Cultural Differences

This report, prepared for a BTEC Level 3 International Business unit, analyzes the external factors and cultural differences impacting international trade. The report begins with an introduction to international business, defining it as the global exchange of goods, services, and knowledge. It emphasizes the importance of understanding external and cultural influences for businesses operating internationally. Task 1 focuses on the impact of external environments on businesses, utilizing the PESTEL analysis to examine political, economic, social, technological, environmental, and legal factors for Tesco and Barclays in Austria and India. Task 2 delves into the effects of cultural differences on international trade, considering factors like language, customs, and demographics, and their specific impact on Tesco and Barclays' operations. The report highlights the importance of adapting business strategies to local cultures and environments to ensure success in international markets. It concludes by summarizing the key findings and providing references to support the analysis.

International Business Btec Level 3 Unit
5

Table of Contents
INTRODUCTION..........................................................................................................................3
TASK 1...........................................................................................................................................3
Impact of External Environment on Selected Business...............................................................3
1. TASK 2........................................................................................................................................7
Impact of culture difference on international trade of organisation............................................7
C2 Business communication through internet.............................................................................1
Support systems for International Business-................................................................................2
2. TASK 2........................................................................................................................................3
Impact of culture difference on international trade of organisation............................................3
CONCLUSION...............................................................................................................................5
REFERENCES...............................................................................................................................6

INTRODUCTION
International business can be defined as trade of services, products, technology,
knowledge and many more across national borders at global level (Lu, Plewa and Ho, 2016).
When an organization does business internationally, there are various factors that are required to
be focused on the organization as it can impact their business both positively and negatively. One
of the main factors that affects business of an organization at international level is cultural
difference of different countries. Each country has its own culture and it is important for
organization to analyse impact of cultural differences on their business. This assignment will lay
emphasis on ways in which international business support systems helps a business to trade
internationally, external factors that impact a business, cultural differences and their impact on
business. This assignment will focus contrasting two business organizations that are Tesco and
Barclays. Tesco is a British multinational retailer that was founded in 1919 whose headquarter is
in London UK. Whereas, Barclay is a multinational investment bank that was founded in 1690
whose headquarter is in London, UK.
TASK 1
Impact of External Environment on Selected Business
This is important for the business organizations to analyse the external factors of the
organization in order to establish their business in effective manner. There are various external
factors can affect the business process and operations of the organization in target market. Th
external factors that can affect the business of organization are also known as macro environment
factors that are considered in the business environment study. External factors that are present in
the business environment of an country are categorised in six different factor to provide better
overview of the business conditions in particular company. The external factors can be analysed
for an business organization using tool known as PESTEL analysis. It is an acronym of Political,
Economic, Technological, Environmental and Legal. These are categories of various external
factors that are need to be considered for the business organization(Song, Sun and Jin, 2017). For
the business expansion process two different internal market has been selected for organization.
Market that are selected for business are- Austria and other is one of the fastest growing
economy and emerging market India. Austria is a Developed country and economy of Austria is
highly stable. These two market have huge potential for banking business. For the international

trade these two economies can be selected for business expansion. The external factors for the
business of banking sector organization are different for these two countries.
PESTEL for Austria Banking Sector
Political Factor
The political stability is one of the mos important factor for the performance of the
business organization in the target market. The political condition of Austria is stable and as one
of developed country there is huge scope for business organization. The taxation policies and
foreign policies that are used by Austria government are too easy form Banking Sector business
organizations. Easy taxation rate and effective business policies made by Austria government are
providing opportunities to the business organization to effectively run their business
successfully.
Economic Factor
Currently economy of Austria is facing some critical issued due to Brexit. This is major
problem for the business organization in Austria (Pan, Chen and Zhan, 2019). Due to Brexit
there is uncertainty in the market of Austria. These uncertainty is affecting the mindset of
investors who are available on national and international level. Investors are not showing interest
in Austria market due to risk of major financial risk because of Brexit. This concern of Investors
can affect the capital investment of the company in particular market. This can affect the
business stability and economy in Austria market.
Social Factor
The social conditions with in Austria are too good for the business organizations. There
are some factors that are positive for the business of Banking Sector organization. The per
capital income of population is high and the literacy rate is also high in Austria. Higher capital
investment allows the organization to sale their premium quality goods and services in the target
market. High literacy rate in Austria can help the organization to maintain talent in their
functions. This will provide capability to hire highly talented people as employees in Banking
Sector to gain effective performance in target market. High diversity on the base of race, culture,
religion in Austria also can help the Banking Sector to develop high range of customer in
market place.
Technological Factor

Technological factor are most important for the performance of the organization in the
competitive market. As Austria is a developed country. So, availability of the technical resources
is very high. Developed economy can help the Banking Sector organization to implement new
ideas and innovative technology in market place to provide better and effective services to
customers. The possibility of technological development is also high in Austria for Banking
Sector organization. This also can cause trouble for company because existing competitors also
have capability to implement latest technology in their organizational practices.
Environmental Factor
environmental and sustainability factors f are major for the business of Banking Sector
organization in international market. The environmental policies and laws that are made by
government and legal authority can prevent some actions of the organization in Austria market.
Company also can take advantage of government policy by using sustainable business practices
in the business process.
Legal Factor
In Austria there are some laws are their that can affect the business of Banking Sector
organization in Austria. Due to ban some activities by legal authority can prevent the company
from selling these services (Nurmi and Niemelä, 2018.). There are some policies are used by the
Banking Sector organization to run their business in the country. This is difficult for the
organization to make changes accordingly in business policy to keep their actions legal in
Austria.
PESTEL for Indian Banking Sector
Political Factor
The political stability in the Libya is also stable and the policies and decisions that are
made by Libya government are providing opportunities to the Banking Sector to establish their
business efficiently in the market place. The taxation policies that are made by Libya
government is too easy. The policy that is implemented by government is can help the Banking
Sector organization to define their business policy in order to run business effectively in Libyan
market. The foreign policy of Libya is also effective to run their business effectively in the
market place. The main factors that are need to be concerned in political factor are- trading
policy, administrative decision and corruption in country.
Economic Factor

The economical condition of Libya is effective in global economy. The per capital
income is around 12000 Dollars. Which is effective sign for organization in Libya market. Due
to effective economy and taxation policy this is easy for the banking sector organization to get
high benefit in Libyan market (Kara, 2018). There could be some challenges can be faced by the
company in preparing their business economy in order to improve their business in the target
market. The economic factors that are need to be considered in Libya are related to stability in
local economy, inflation rate in Libya and International trade in country.
Social Factor
The Demagraphic different between United Kingdom are highly different from the Libya.
This will be difficult for the organization to implement business practices in Libya with same
effectiveness. Different culture and education standard can affect the business of banking setor
organization in country.
Technological Factor
The major factors that can affect the business operation of Banking sector company in
Libya are- energy sources, Communication technology and transportation facilities in country.
This is important for the company to evaluate these conditions to establish business in Libya.
There is huge scope of Solar and wind energy in Libya so company can implement their business
with Solar energy supply in order to gain high technological advantage from local organizations.
Environmental Factor
The environment factors are major for the business of banking sector organization in
Libya. The major environmental factors in Libya are related to the sustainability of business
practices (Nicula and Spanu, 2019). The environmental laws that are made by Libyan
government can prevent some actions of banking sector organization but the impact of these
environmental factor will be low for banking sector organization.
Legal Factor
The impact of legal factors of local legislation could be very high for banking sector
organization. The laws related to the business of organization have high differences form UK
laws. This is major problem for the organization to start and run business effectively in Libyan
market.
This is how the PESTAL or external factors are different for Libya and Austria. These
factors can force the company to make respective changes in their business processes in order to

run business efficiently in particular country. As per current PESTEL analysis this will be much
easier for Banking sector organization to established their business in Austria.
2. TASK 2
Impact of culture difference on international trade of organisation
In international expansion a company enter into a new market or country. This highly
impact on their organisational culture. This is because in that country the ethics, values, etc.
followed by people are different. So, due to it there is a great impact in international trade as
well. Furthermore, there are various factors in cultural differences which impact on both tesco
and Barclays. They are defined as :
Cultural factors are those which are followed by society. In this it includes language,
customers, gender roles, etc. Alongside, it consists of ethics, values, etc. followed by people. It
can be identified that in Libya people are very conservative and basically there is high difference
in gender roles and occupation within society. Besides that, women in that nation are not
exposed outside and many restrictions are imposed on them. Due to it, they are not included
within society. So, it limits their freedom of going outside or engage in any activity. Alongside,
in Libya marriage is considered as high esteem. So,if tesco expand into this nation than they have
to focus more on men. It will highly impact in their growth. Furthermore, they will not be able to
trade with people in effective way.
Similarly, for Barclays bank culture factor is Libya will impact on their trade in negative
way. As people are conservative so they will not interact with each others. But, bank can provide
loans to people for marriage purpose.
Language is also a cultural difference in it which impact on trade. If business is not able
to understand the language and communicate with people, then it affect their growth. Also,
people needs are not identified and fulfilled. It leads to chaos in marketing of product or services.
In Libya language spoken by people is Arabic. This is official language of nation. Moreover, in
Austria most people speak English as common language. Thus, Tesco can expand in Austria
which will not impact to great extent on their trade. It is because as company is already operating
in many countries of Europe so they have knowledge about culture and language of various
societies and people. They can easily communicate with people and trade with them. Likewise,
Barclays is also operating in European nations. Thus, they will also be easily able to trade it
internationally with many nations. In Austria, there will be no impact of language barrier on

Barclays bank.
The ethnic make up population refers to demographics of country. It includes education
level, gender, ethnicity, etc. of people and their religion. This is also a cultural factor that affect
during international trade. Here, business will have to enter in nation by analysing demographics
of nation. So, ethnic population of Libya is mostly Arab and, Berber. The people are originated
from Nomadic Tuareg. Usually, around 97% of them are Arab. It has been evaluated that for
Tesco and Barclays bank there will be a impact on expansion. As Arab tradition and ethics are
completely different from Austria, so it will affect on their growth. Furthermore,
However, in Austria 80.8% are Austrian and others are from various categories such as
German, Turkish, etc. thus, there is mixture of all these populations in it. Here, ethics and
tradition are similar to Europe so it will not affect to such great extent on business of Barclays
and Tesco.
Social structure refers to the pattern and arrangement of society. This highly impact on
international trade as company have to work as per structure defined. As Libya belongs ton Arab
side, its social structure is of dictatorship. Here the ruler makes laws and regulations for trade.
Also, the authority flows from top to bottom. Besides, laws are rigid and especially women are
bounded to certain limitations. Whereas in Austria social structure is flexible as there is
democracy followed in it. Moreover, people in society lives in freedom and there are no
limitation or restrictions on them. Therefore, tesco will have a positive impact if they expand into
Austria. It is because of flexibility in social structure. Moreover, Barclays bank will have
positive impact as well. It is analyzed that social structure in Libya and Austria differs. So,
expanding into Libya will be not beneficial. Tesco will have to adhere and follow trade laws
developed by Libya and as they are rigid it will create a culture difference.
There are many companies that are entering into new markets to raise their brand
awareness and become the global brand. If companies are unable to manage cross culture in
business unit then it may create problem in organisation and firm may get fail to retain its staff in
the organisation for longer duration. Culture can be defined as customs that are followed by
specific community that influence their behaviour to great extent (Lu, Plewa and Ho, 2016).
Religion is considered as most essential part of culture; this is considered as major
influencer that may affect overall working of international business to great extent. There are
many countries or culture where women are given unequal rights. Apart from thin there are many

culture where there is restriction in food consumption and holiday activities. For example: Tesco
plans to enter into Libya. International trade can help business sin raising its number of
customers and generating more revenues. Culture and regional believes of UK and Libya are far
different from each other.
Libya is the country where high level of social inequality present. There is poor economic
diversification. As there is social reparation system that affects consumption pattern of
consumers. Women are not allotted to complete their studies and also they get less employment
opportunities (Gurung and Prater, 2017). This kind of regional values affect the Tesco’s business
because Tesco may fail to provide equal opportunities to good performer if it is female
candidate. That might make the employee negative towards the brand. As people are more
concern about earning money hence they spend less or spend only in necessary things. This may
also affect sales of business unit. Employees of Libya are more focused and influenced by their
culture hence if company hires people from that country then it will have to make changes in its
structure and working pattern in order to develop coordination among all workers. Otherwise it
may get failed to sustain in market for longer duration. Tesco will have to know more about
social communication behaviour of local people of Libya so that it can make them satisfy by
serving them according to their needs (Beugelsdijk, Kostova and Roth, 2017). If Tesco conducts
its operations according to UK policies, then it will not be able to gain success in market. UK
people like to get freedom and they are free to buy anything due to adequate income source
availability. Hence such culture and regional difference may create difficulty for business to get
success in international market.
Barclays bank is the international financial institution that has branches in many countries.
Barclays wants to enter into Austria, it needs to take care of regional values of that particular
place otherwise firm may face difficulties in handling employees and consumers in new market.
Attitude is most important part of culture, if there is attitude difference between employees
then it can become problematic for managers to manage people and develop coordination among
them. Tesco always pays attention on the fact that if there is different culture people working
together then attitude of workers will be changed. Libya is the nation that focus on social
inequality, one group of people get more advantage as compare to other (Pauluzzo and Shen,
2018). This thing affects behaviour of other workers hence they do not support firm in critical
situations. Hence Tesco may get affected if it enters into Libya because of changed in social

attitude. As seniors common the people and control their behaviour.
On other hand Barclays is planning to move into Australia where people are more focused
towards social equality hence company can keep its organisational structure flat. That is the
reason that firm has informal approach of communication where people can coordinate with each
other freely (Landqvist, 2018).
This kind of culture differences can create problem for Tesco and Barclays bank. In
attitude difference positon firm face difficulty in defining role of various people hence people
fail to work in team properly. In such condition Tesco and Barclays bank will have to
concentrate on culture of particular country and accordingly they will have to treat its employees
so that they support team members and interact with other properly. Tesco and Barclays have to
be aware with cultural approach of target market otherwise it will not be able to gain success in
market (The Effects of Cultural Differences on Global Business, 2018).
Openness to change is the most important part of culture. There are many cultures where
changes are accepted by people easily whereas in some culture people do not accept changes so
easily. If Tesco move internationally in Libya, then it will have to make contract with its workers
that people will accept decisions of company. Many times firm has to make sudden decisions for
the growth of organisation but if employees do not accept these changes then firm will not be
able to gain competitive advantage (Lu, Plewa and Ho, 2016). Where Barclays bank is planning
to trade in Australia where people like take challenges and they want to work with new practices.
Here Barclays has to develop relationship with employees so that they support firm whenever
required. This may aid business in implementing modification effectively. This may support the
business sin running operations in new market successfully (Beugelsdijk, Kostova and Roth,
2017). Hence culture difference have significant impact over international business, if enterprise
fail to react as per the culture demand then it would not be able to gain success in market and it
may face huge loss in international market.
Religion is considered as most essential part of culture; this is considered as major
influencer that may affect overall working of international business to great extent. There are
many countries or culture where women are given unequal rights. It has been analysed that
Barclays bank is engaged in improvising the culture aspects of workplace. They have been
engaged in promoting equality so that organizational culture become better. It has assisted them
in creating workers loyalty (Pauluzzo and Shen, 2018). It has also helped them in growing. They

make sure that no belief, religion, attitude if people gets hampered. As this can lay negative
impact on mind of people or employees. So all these measures are taken up by Barclays bank. It
has also been analysed that organization is also been engaged in motivating employees through
rewards and incentives in order to enhance working conditions of firm. This has assisted them in
creating employee belongingness. This has also positively impacted on culture of organization
that is necessary for growth of firm. It has also been analysed that to make organization culture
better Barclays bank is also been engaged in identifying needs and demands of employees so that
they can increase their satisfaction level. This will help firm in growing.

C2 Business communication through internet
Before internet business found difficultly to connect with the customer but now
technology changed and the way of communication made easy. It has also changed the way of
business. Internet is the biggest support system for operating the Tesco. It provides to the
organization easy way to selling their product. Through internet international business is
possible. Organization easily manage import and export of the product from foreign to India.
Through internet communication Tesco save their money and time and Tesco can easily
approach in any country. Owner can spread their brand information in everywhere. Internet
provides much quicker transfer information to the other organization. Even it can well
communicate with other organization through email ,message instantly. E-mailing, video
calling , social media consumer support etc. are providing great return of investment for
business.
Speed of internet also provide the face to face communication facility through video call
from the medium of Skype and many social media sight. Where Tesco show and explain there
product and take opinion from other thus company can improvement in its product (Schofield,
and Davidson, 2017). The advantages for Tesco is that they can provide the many job
opportunities. It the platform for the employee for getting the job. Some people want to do
international job this is also good platform from them.
Internet provides cash less transaction from one country to another country customer can
pay with various internet medium like- debit card credit card internet banking etc. which is
growing the Tesco capital and probability. Internet can use in buying and selling the product.
Tesco can sale their through various e-commerce website anyone can buy product easily on e-
commerce website because people would like prefer to buy product at home to go intends
anywhere. Online mode makes easy for spreading product information and company
information.
Tesco can found their competitor on internet for searching organization information. After
observing competitor information Tesco can improve in their product by innovative idea
(Advantages and Disadvantages of Internet Communication 2020). They can take change their
advertising idea, or they can give discount advertisement for their product. Without internet
customer communication is not possible in different cities, So Internet is the heartbeat of
product marketing.