Introduction
A global company has to formulate strategies based on its missions, objectives and goals. Strategy formulation is a must for a global company to make decisions regarding the markets to enter, product/service range to introduce in the foreign countries and the like. Further, the severe and intensified competition in the global market makes the strategy formulation a challenging task. The fundamental basis for strategy formulation is the environmental analysis. Environment provides the opportunities to the business to produce and sell a particular product. For example, the present day business environment provides wide opportunity for Internet.
Similarly, environment in India provides opportunity for production and selling of fuel saving motor bicycles. European climatic condition provides an opportunity for woollen and leather garments. Environment, sometimes poses threats and challenges to business. Business should enhance its strengths in order to face the challenges posed by the environment.
For example, China dumped steel at cheap prices in the Indian market and posed a threat to the Indian steel industry, i.e., consequently, Indian steel industry improved its technology in order to meet the challenges and dumped its steel in US markets. Study of environment helps the business to formulate strategies and run the business efficiently in the competitive global market. We understand that environment has significant and crucial impact on the business. Thus, business depends on environmental dynamics.
Meaning of International Business Environment
Environment means the surrounding. International business environment means the factors/activities those surround/encircle the international business. In other words, business environment means the factors that affect or influence the MNCs and transactional companies. Factors that affect International Business include Social and Cultural factors (S), Technological factors (T), Economic factors (E), Political/Governmental factors (P),. International factors (I) and Natural factors (N). (STEPIN) William F. Glueck defined the term environmental analysis as, “the process by which strategists monitor the economic, governmental/legal, market/competitive, supplier / technological, geographic and social settings to determine opportunities and threats to their firms.” “Environmental diagnosis consists of managerial decisions made by analysing the significance of data (opportunities and threats) of the environmental analysis.
International business environment factors
Business environmental factors are broadly divided into internal environmental factors and external environmental factors.
• Internal environmental factors influence/affect the business from within. They include: human resource management, trade unions, organisation structure, financial management, marketing management and production management, management leadership style etc. External environmental factors are further divided into micro external factors and macro external environmental factors.
• Micro external environmental factors include: competitors, customers, market intermediaries, suppliers of raw materials, bankers and other suppliers of finance, shareholders, and other stakeholders of the business firm. External macro environmental factors include: social and cultural factors, technological factors, economic factors, political and governmental factors, international factors and natural factors.
• Environmental protection received greater attention in order to protect the lives of the people, animals, plants and to maintain ecological balance. The analysis of internal environmental factors indicates the strengths and weaknesses of the business firm while the analysis of micro external and macro external environmental factors indicate the opportunities provided by the environment to the business. The strengths, weaknesses, opportunities and threats (SWOT) analysis helps to formulate strategies for the business firm.
