Introduction
Modern businesses operate in a globalized world, where different cultures are merged. However, managers still have to consider the specifications of the local’s behavior and the business’s economic environment. Moreover, consumers pay more attention to the ethical standards that a business declares, requiring strong corporate governance. This essay will review several aspects of the economic, ethical, cultural, and global environments that a business manager should consider.
Impact of Economics
The economic environment affects international business operations by impacting the costs of operations and consumers’ purchasing power. As with domestic businesses, the state’s economic environment impacts the essentials that allow companies to obtain profits, for instance, the demand and supply, interest rates, and inflation. These factors define the costs that businesses have to allocate to produce a product and the consumers’ purchasing power — whether they have the money to buy goods or not.
From an international business perspective, monetary policies of different states may differ, placing constraints on international trade or, on the contrary, making it more accessible. Some of the elements to consider are “the nature of the economy, the stage of development of the economy, economic resources, the level of income, the distribution of income and assets” (“Unit,” n.d., p. 17). For example, a company that trades products in the United States has set a high price for a single item based on the purchasing power of the consumers and the local demand. However, when starting to sell the same product in a developing economy, the same business may find that the consumers’ purchasing power is low, which results in low demand and, therefore, no profits.
Here, by analyzing the internal economic environment, the managers may choose to change their strategy and lower the prices or develop an alternative to their product that will cost less, for example, by using materials that are not as durable. By navigating the economic environment, the management can ensure that their business does not fail when entering the international market because the economic conditions and policies of these countries are different from those in the company’s homeland.
Corporate Governance and Ethical Behavior
Good corporate governance and ethical behavior should be the basis of everything that any company does. Clarke (n.d.) argues that contemporary executives struggle to find a balance between accountability and following market opportunities. More companies recognize the need to implement sustainability plans and environmental awareness strategies, and this is undoubtedly a response to the increasing consumer awareness and attention towards these aspects of a business. Business behavior has to consider the impact on all stakeholders, which is the basis of modern corporate governance; otherwise, the consumers will condemn the actions of the management and choose products that apply ethical standards. Corporate social responsibility strategies help companies communicate their goals regarding ethical and sustainable behavior and set benchmarks to hold the management accountable for their actions.
Culture
Culture affects a business’s strategy in a specific state because it predefined the customs and preferences of people. Brooks (2019) notes that some things are so deeply rooted in a nation’s culture that they can cause significant problems for a business. Moreover, showing respect for people’s culture by adhering to the local customs and launching products that correspond to the preferences of the people is a sign that a business is concerned with the wellbeing of its consumers and not merely with the profits that can be obtained.
Since culture is a learned behavior that is prevalent in a community, a business cannot enter the market without first learning about the specifics of the people’s culture. Moreover, when enacting strategies such as partnerships with local vendors or licensing, it is essential to be aware of behavior patterns, such as preferences regarding handshakes or greetings. This approach helps establish a good relationship with the local partners and also shows that the business respects the local community. Hence, culture influences the business’s strategy because it defines the behaviors of the company’s employees when communicating with partners and customers, the type of partnership that is best suited for the local conditions, for instance, licensing, and the specific features of the products that this business offers.
Globalization
Although globalization has been a core strategy for many international businesses, recently, there are some downsides to it. The process of globalization can be described as an integration of people, governments, and companies facilitated through trade and the establishment of relationships between nations (“What is globalization,” n.d.). As a result, the companies benefit by having access to different markets, instead of having to sell to local consumers only. Moreover, this access allows sharing of knowledge and technology more freely. However, globalization poses several challenges as well, for instance, the exploitation of developing nations that goes against ethical principles. Some businesses choose to allocate their manufacturing facilities in states where labor is cheap. In some cases, child labor is used as well, which allows for increasing profit margins.
Conclusion
Overall, this paper addressed different aspects of international business operations. The economic environment of a state defines the demand for goods. Corporate governance should be managed with consideration for ethical and sustainable actions because consumers pay attention to the firm’s actions. Culture defines the strategy that a business chooses when entering a state. Globalization allowed access to different markets while also increasing the instances of using exploitative practices.
References
Brooks, C. (2019). Global expansion requires cultural preparation. Web.
Clarke, T. (n.d.). Ethics, values and corporate governance. Web.
Unit – I. (n.d.). Web.
What is globalisation? (n.d.). Web.