What are the Recent Trends in International Business Environment?
Dashmeet Kaur | Updated: Oct 17, 2019 | Category: News
A rapid growth in International Business Environment (IBE) is apparent over the past years. Presently, a remarkable number of goods, services, technologies, and resources have crossed the national boundaries, thus, bringing together different parts of the world.
Further, IBE has not only helped Indian traders to expand their businesses but also served as a platform to gain recognition on a global level. It is a multidimensional sphere wherein one can face some barriers such as cultural diversity, exchange risks, legal & taxation issues.
In this article, we will talk about the Recent Trends and Challenges faced by the International Business Environment.
Benefits of International Business Environment
The benefits of International Business Environment are as follows:
- Helps in Business Growth and Expansion;
- Exposure to More Customers;
- Assists in the Proper Management of the product’s Life Cycle; and
- Helps in obtaining Mutual Growth
Difference between International Business and Business Environment
The main difference between International Business and Business Environment is that the former deals with the global exchange of Goods and Services. That means a transaction takes place between two countries. Further, another name for International Business is Globalization.
However, the latter deals with the surrounding in which the companies operate.
Types of International Business Environment
There are numerous forms of internationalizing the business. One can opt amongst the following activities to set up their business.
Import and Export
The exchange of goods from one country to another, which is popularly known as import and export is the primary gateway to an international market.
When a parent company with a high reputation gives authority to another company to do business using the franchiser’s name and products under prescribed guidelines; it results in franchising.
Just like franchising, the licensing works on contractual agreements. As per the contract, the licenser enables the other party to use patent,trademark, technology, brand name, copyright, and intellectual property for a specific period to gain royalty.
Foreign Direct Investment (FDI)
As the name suggests, FDI stands for a company’s physical investment in foreign countries. Companies practicing FDI get the perks of tax exemptions, cheaper labor costs, and other benefits in that foreign country. On the other hand, the host country receives leverage to introduce new technologies, services, and products.
Joint Venture & Strategic Partnerships
A joint venture is a strategic alliance wherein the partners across the globe collectively establish a company to produce innovative goods and services. The cooperation amid the companies helps them to share advanced technologies, production cost, development, and sales networks.
If you also wish to enlarge your business through one of these international pedestals, then you must get acquainted with the latest trends in International Business Environment. It will give you a prospect of the success rate for your upcoming endeavors.
Tools for Analyzing International Business Environment
The tools for analyzing International Business Environment are as follows:
The term PEST Analysis stands for the Political, Economic, Social, and Technological factors operating in the external environment of an organisation. It is a functional strategic tool used for understanding the following:
- Growth and decline of the market;
- Business Position;
- Potential and Directions for Operation;
PESTEL Model is an effective tool which has a collection of information relating to both Internal and External Factors. Further, PESTEL Model is a part of PEST Model and includes the following:
- Ethical; and
- Demographic Forces
The term “SWOT Analysis” stands for Strength, Weakness, Opportunities, and Threats. This tool helps in comparing the company’s internal strengths and weaknesses with the available opportunities and threats in the external world.
Porter’s Five Forces Model
Porter’s Five Forces Model is an International Business Tool that uses different factors to determine the Profit level of an Industry. It also assists in framing the competitive strategy of a company.
Recent Trends in International Business Environment
Since the International Business Environment is extremely competitive, it becomes utmost essential to update oneself with the current trends to survive in the market. Consider dealing in one of these emerging domains:
One major trend that seems to have a bright future in international business is Crowd funding. It is the best way to finance new business ventures by collecting a small sum of capital from a large group of individuals.
It employs a vast network of people via social media and creates Crowd funding websites to form a direct link between the investor and the entrepreneur. Currently, there are several online portals available which are providing the service of project funding.
Another prevailing global trend in international business is the remote workforce. The progressive modes of communication like webinars, video calls have increased connectivity that facilitates companies to hire employees remotely.
This mode of employment is much faster than the traditional hiring methods and helps employers to hire resources from any part of the world. It is greatly beneficial for startups because they get a wider pool of talent to choose from without needing to pay tax returns. Remote employment builds a win-win situation for both the employer and the employee as the employees get online jobs on their convenience and employers have access to an efficient workforce.
Advertise via Live Video
Social media platforms like Instagram have added a new feature called live video stream, which created a lot of buzz among people as it is very engaging. Companies can use the feature of live video for advertising their services and providing real-time experience to the users. Moreover, one can also do a Q/A session through live video streaming, which raises the participation of viewers and helps Entrepreneurs to strengthen their bond with their client base.
Augmented Reality Marketing
The world embraces the experience of augmented reality, which was perceived with the success of a video game called Pokemon Go in the year 2016. It opens more doors for implementing creative approaches to marketing. The users crave for such type of immersive techniques so its companies should gear up their marketing methods by using current technologies.
These were some trends that will massively impact International Business Environment in 2019. An understanding of these macro-level trends will improve your company’s functionality.
Challenges Faced by International Businesses
The challenges faced by International Businesses are as follows:
The economic environment differs from one country to another. The economy of countries fall under three categories developed, under-developed, or emerging. Further, within each of these categories, there are a lot of variations, which majorly affect everything from infrastructure to technology and healthcare. The structure of a nation’s economy as a centrally planned market, free-market, or mixed market also plays a vital part in easing international business efforts.
The political environment refers to the relationship between business and government. International business must deal with multiple types of governments, namely, one-party states, dictatorships, constitutional monarchies, and multi-party democracies. Every government has a different perspective about foreign businesses where some view it as positive, while others consider it as exploitative. Because international companies are dependent on the goodwill of the government, they need to take consideration of the political structure of the foreign government.
The cultural environment is a crucial component of the International Business Environment. The cultural environment of foreign countries involves religion, geographic location, language, government, education, and history. It is the most common obstacle that international firms face; therefore, they have to conduct a cultural analysis to get a better understand of the factors and how it will affect their international business efforts.
The international business environment is highly dynamic and changes consistently as per the political, economic, and cultural factors. The nature of competition differs from place to place. The level of technological innovation has a substantial role in regulating the competitive environment as companies compete for access to the newest technology.
At last, it will be right to state that to obtain success in the International Business Environment; the companies must have knowledge regarding the latest trends and challenges prevailing in the market, as these factors can affect both growth and productivity of a business.
Also, Read:Biggest Challenges Faced by International Business Environment
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