Introduction
Political and social environment, as the macro environment of any business, considerably have an impact in the international and global business spectrum. In this paper, it discusses about the basic nature of international and global business, exploring into the external environment influences using the Political, Economic, Socio-cultural, Environmental and the Likely Future Trends (PESTEL) analysis. The PESTEL analysis, despite of it not being able to capture all the complexities of the external environment, it can still aide the firm in the development of an appropriate strategic framework. Further, it seeks to discuss the future developments of the international and global business, with emphasis in the political and the social environment
Main Part
International Business and Global Business
Seemingly, international and global business sounds synonymous. However, both businesses with its complexities, have different and varying nature. International business pertains to the cumulative topics that deals with the companies expressing interest to operate in several companies. Companies that are operating internationally is sometimes referred to as a multinational corporations (MNC’s), McDonalds, General Motors, Sony, General Electric, and so on, as it examples, and that of which generally have a subsidiary. As the operations of international business venture increases, it is can be considered a contributing factor leading to globalization. Thus, integral to globalization process is an increase in the intensity of competition in the international marketplace.
Global business, on the other hand, presumably covers a vast field and it’s broader than that of an international business. Fundamentally, the orientation of a global business focuses on the exploitation of business opportunities across boundaries to achieve corporate goals synergistically. Moreover, it takes into consideration the overall effect of diverse markets in the designing and in the implementation of strategic objectives.
The PESTEL Trend
In an international and global business setting, corporations must carefully and thoroughly foresee rather than oversee the macro environment especially in the context of political and social components. It is evident that social, cultural, political and economic factors can either push or hold back the process of globalization. Among the key aspects in the use of PESTEL analysis are to grasp the pivotal drivers of change, the focus impact of environmental factors, the combination of effects, and the like. To gain an in-depth analysis of the political and social environment, it is deemed important to look into the respective PESTEL analysis, and not only focusing on the social and political context because these factors are somewhat dependent over the rest of the factors.
Political
The political influence generally includes the stability of the government, policy of taxation, regulations of the foreign trade and social welfare policies. In this paper we would look into how the international and global business should adopt and fit in into the political arena, particularly in the country that holds a capitalist political ideology, and in the imposition of tax law. The capitalist is descriptive of the country sparing some parts of its economic activity to local citizens. Foreign-owned firms, in this regard, generously offer a tempting target for local politicians, and such that, firms already operating in a foreign country braces an ongoing public relations problems as they may be harassed by the local populace. With the fact that majority of foreign firms are wealthier, plausible cases of exploitations can surmount and indirectly found somewhere, which in turn, are counteracted in a means of a façade, like for instance, international firms promoting the locals to a managerial positions. Another factor that has an influence politically are the imposition of local tax law that is applicable and are mandated by individual countries to foreign companies. In some countries, especially the corrupt countries, there are cases, in which international operations are asked more than their normal tax payments. An import duty like in Saudi Arabia, for example, is a local tax not levied on local firms or companies but is being levied to international firms. Consequently, the income taxes levied to the international and global business operations have a direct affect on the businesses net profitability, resulting to changes in financial planning, new investments, dividend payouts, and similar factors. Similarly, the sales and excise taxes required on final products affect prices.
Simply, stated the political ideology trend interrelates with both international and local barriers, such that political philosophies of the leaders of a particular country are highly influenced from which the political leader has been a part of. Additionally, the political attitudes and philosophies held by a political leader mirrors partly in the sociological and educational factor in the given country.
Economic
Generally, economic analysis encompasses the particular country’s business cycles, GNP trends, interest rates, money supply, inflation rate, unemployment rate and the disposable income. The importance of determining resources would likely predict the competitiveness of a country as stressed by the conventional trade theories. Consequently, it prompts for international firms to ensure that adequate resources that are of sufficient quality can be accessible and the availability of the said resources are present. Thus, access to global resource base is a key factor influencing international production. For both international and global business, labor quality is a determinant of competitiveness such that it is resistant of imitation and the most immobile factors. To be specific, the IMS has a profound impact on the global business environment such that it evolves in a set of exchange rates between the states and primarily is the basis of trade. The importance of IMS is valuable because it enables states to finance respective trade deficits and in the accessibility of enterprise access in the realization of strategies.
Overall, the economic factors, both domestic and foreign, tend to alter rather rapidly, resulting to great alterations in the legal rules. Further, country may now in turn, imposed very tight exchange controls, restrictions in the profit remissions and strict in the import restrictions. Nevertheless, the failure of an international and global business to anticipate and miss out economic developments spells profit lost.
Socio-cultural
The socio-cultural context typically comprises the population demographics, population’s income distribution, social mobility, consumerism, level of education, technological efforts and among others. Among the PESTEL trend, socio-cultural analysis is the most difficult to look into since aside from its unpredictability, it is said to be barely readily quantifiable. Citizens of every country greatly have a deep sense of national identity. By deep it connotes it is difficult to alter or can be instantly transformed. For international and global businesses to fit in they must be adaptive, recognize and give utmost respect to the national identity projected by the local populace. National identity impacts the foreign firms or companies into two folds; one is the indirect effect from the laws, restrictions, regulations that mirrors the national attitudes and two is the direct and unofficial, such as aggressive attacks towards a United Stated embassy in a dominantly Muslim country. Also evident is the way the local populace views foreigners, since in some countries foreigners are being viewed evil and opportunists. Although, there are also countries who views foreigners as only hope for development. From the sense of natural identity that is innate to the people, emerges the national ideology that can be viewed as a linkage of the citizen to the country, like it is a unified thinking and strong beliefs often leading to stereotyping. Political leaders reflect on the national ideology and the attitudes of the people and are largely considered most of the time. For instance, the Egyptian president publicly expresses disgust over the Americans, he is expressing reflectively the strong national ideology he held being an Egyptian. The sociological analysis, as been discussed, revealed that it is interlock with both legal-political and economic analysis.
EnvironmentaI
Environmental analysis includes the measures of environment protection, competition law, employment law, product safety, and basically all factors that are related to environment. In fact, according to Hurell and Kingsbury (1992), the interaction between economic development and the complex, often fragile ecosystems on which that development depends has become an international political and economic issue. In this paper, we would particularly be discussing about the labor law. As a general rule, all countries necessitate the foreign corporation to treat the local employees just like local firms have rightfully treated the locals. It is mandated that foreign companies should and must at all times observe the local labor legislation. The local labor legislation varies between countries that are indicative of the presence of the variety of political factors. Like in the communist country, for example, unions are banned and are subject to authoritative management. An alternatively second type of labor law is existent such that foreign firm employees are treated disparately by local employees. Common law of this type is embodied in countries like Costa Rica, wherein 90 percent of the workforce should be Costa Rican and must receive 85 percent of the salary wage.
Likely Future Trends
Lastly, are the likely future trends in the operation of international and global businesses. For instance, energy as a key resource for all businesses, when it will be used as a political weapon, its impact will be significant to the economic growth. That is why, countries like the United Stated who have dispute to some of the Middle East countries, are forced to find and develop alternative sources of energy. By being not able to do so, would mean that in the future, United States would extremely suffer in the scarcity of energy.
Future Developments
With economic institutions such as the World Trade Organization (WTO), the World Bank (WB) and the International Monetary Fund (IMF) monitoring and implementing fair practices in the business, the future development of international and global business would likely lead into globalization. The degree to which businesses has been internationalized is a function of changes and developments in the world economy. Towards the twentieth century, apparently, changes in the world economy deeply affects business, politics, society, citizens and the interaction between the stakeholders is what is come to be known as globalization. Globalization as defined by the International Monetary Fund (IMF), is the growing interdependence of countries world-wide through the increasing volume and variety of cross-border transactions in goods and services and of international capital flows, and also through the more rapid and widespread diffusion of technology. By growing interdependence of economies, it pertains to the increasing acceptance of economic liberalism that serves as a precursor to globalization. Moreover, as competitive liberalism extends into domestic economic policy had somewhat deepened the roots of globalization. The changing regulations and attitudes promotes additional and more opportunities for investment security, like the increasing participation of privatization programs in developed countries, like the United Kingdom, at one level.
Interestingly, included in the key drivers that characterize the future growth of international and global business, are the involvement of international governance and regulation (the political environment) and the convergence of socio-cultural. First, is the stretch of international governance and regulation, wherein, it is at first formulated in a regional level like the European Union or at the international level. Second, is the socio-cultural convergence as a resulting consequence of liberalization and the emergent outstretch of the global communication technology. It is like the continuing efforts of international and global business to foster a careful dealing with the hard to transform social and cultural components as a barrier have been somewhat conquered already but does not necessarily mean that there are altered to a very great extent, however, there is only an accommodation with regards to the operation of the international and global business.
Conclusion
The development of both international and global businesses extends their opportunities to maximize profits and gain a competitive edge. However, with the presence of macro environment that is hard to penetrate, these businesses looks for means to get through and get over the barriers for them to penetrate successfully. Political environments are dependent with the social environment such that political leaders are mainly influenced from pertinent social factors. The social factors, on the other hand, also have a political influence such that they are subject to the political environment they are operating.
The future marked by globalization offers boundless growth and prosperity, not only for the developed countries but for the developing countries as well. But given its opportunities, there are also the negative impacts globalization can bring such as further widening the gap between the rich and the poor promoting inequality, anarchy in the economy, surrender in political control and the extreme negative impact may be the lost of cultural identity of a country.
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