Business Environment In A Global Context Pdf To Excel
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What Is the Political Environment in International Business? The political environment in international business consists of a set of political factors and government activities in a foreign market that can either facilitate or hinder a business' ability to conduct business activities in the foreign market. There is often a high degree of uncertainty when conducting business in a foreign country, and this risk is often referred to as political risk or sovereign risk. Common Political Factors Let's look at some common political factors that influence the international business landscape. The type of economic system a country builds is a political choice. Foreign countries often will have different economic systems from your domestic market, and adjustments often need to be made to take these differences into account.
Business Environment in a Global Context offers, in a readily accessible way, an in-depth analysis of the business environment at regional, national, and international levels. Incorporating case studies throughout, the key issues, concepts, and theories are supported by practical examples from the business world. Implementing Sustainable Competitive. Advantage for Proactive Operations in. Global Turbulent Business. ACTA WASAENSIA NO 227. Competitiveness strategies in China and other countries in the global context by utilizing the same. The object of investigation - The processes of international business negotiations. The aim - To make a comparative analysis of world literature and practice in international business negotiations. Research methods - The systematic, comparative, logical analysis and synthesis of the scientific literature.
For example, a country may operate in a market economy where private individuals own most of the property and operate most of the businesses. A market economy is usually the best economic environment for a foreign business because of the protection of private property and contract rights. Some countries lean more towards a socialist economy where many industries and businesses are owned by the state. Operating businesses in this environment will be more difficult, but products can still be produced and sold as people still pick their jobs and earn money. A few countries operate under a communistic economic system where the state pretty much controls all aspects of the economy.
Conducting business in this environment ranges from difficult to impossible. Of course, the reality is that all economies are mixed economies that take parts from two or more of the 'pure' economic systems. For example, you can conduct business in communist China in Hong Kong and other special areas where a market economy is allowed to operate. Businesses also must often contend with different governmental systems. Examples include democracies, authoritarian governments, and monarchies.
Some governments are easier to work with than others. Democracies, for example, are answerable to their citizens and the rule of law. Authoritarian regimes are usually answerable to no one, including the law. It is less risky to conduct business in democracies and constitutional monarchies, a monarchy with a constitution that protects the public and subjects the monarch to the rule of law, than in countries with authoritarian regimes.
The next major factor is trade agreements. Countries often enter into trade agreements to help facilitate trade between them. If your country has entered into a trade agreement with another country, conducting business in that country will usually be easier and less risky because the trade agreement will provide some predictability and protection. One great advantage, for example, is that your products will be subjected to fewer trade barriers that serve as obstacles to exporting your products into the country. A trade barrier is simply anything that makes it harder for a company to export products to a foreign country. Formal trade barriers are enacted by governments for the purpose of restricting imports to protect a country's domestic industries. Formal trade barriers include tariffs, which are taxes on imports that help make domestic products more competitive, and product quotas that limit the number of products imported into the country.
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Businesses may also have to deal with informal trade barriers. Governments may impose regulations that aren't primarily promulgated as barriers to trade but have the same effect. Examples can include specific product standards and health and safety standards that businesses will be required to meet before the products can be sold. Finally, political instability can be a huge factor. Some countries are not politically stable and are subject to civil unrest and even violence.
The civil unrest during the 'Arab Spring' is a good recent example. Civil unrest can make conducting business very risky, including the possible loss of property and life. Impact of Political Factors A significant part of business is managing risk. The less you know about the environment, the less stable the environment is, and the less control you have over the environment will all increase your risk. Conducting international business offers much opportunity but also much risk.
While most of the economic growth in the coming years will come from the undeveloped foreign markets that promise great profits, these markets often come with authoritarian political systems, underdeveloped economic systems, and unstable political environments. Compounding these risks are the extra costs imposed by informal and formal trade barriers that can make exporting expensive and sometimes not profitable. Lesson Summary The political environment in international business can be complex and poses some serious risks to companies seeking to operate in it. Factors that make up the international political environment include the type of political system and economic system in which you will be operating. While trade agreements may help you, you may have to contend with both formal and informal trade barriers.
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Finally, some foreign markets are in politically unstable areas where you risk not only losing money but also life. The risks may be worth it because much of the economic growth in the coming years will come from emerging and developing international markets. Learning Outcomes After you've reviewed this video lesson, you will be able to:. Describe the political factors that make up the environment in international business. Explain the risks associated with engaging in international business.