The students, managers and entrepreneurs need to study international business environment for the following reasons:
i. An analysis of environment will enable them to understand that today’s environment is turbulent, complex and dynamic, and hence they cannot afford to remain passive to the fast- paced changes taking place. And at the same time the organisation must learn to live with chaos in order to cope with the radical changes.
Image Source: files.internationalbusinessstrands.webnode.com
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ii. We often listen – the Earth is flattening, Death of Distance, the End of History, or Convergence of Tastes. But the reality is that the Earth is still round, distances still matter, history repeats itself, and tastes are still different (In India 45% of the population is still vegetarian). Ghemawat has rightly remarked that we live in a semi-globalised world. Cross- border integration is increasing, but still falls short of complete integration and will continue to do for decades.
iii. Environment is multi-faceted as it may influence different industries differently and within one industry different firms differently. Therefore, the environment has to be understood in a proper perspective.
iv. What distinguishes the strategic concept of marketing from the ‘new’ concept of marketing which appeared in 1960 is the emphasis on environment. “Knowing everything there is to know about the customer is not enough. To succeed, marketers must know the customer in a context including the competition, government policy and regulation, and the broader economic, social, and political macro forces that shape the evolution of markets.”
v. In terms of market, whether it is domestic or international, the different strategies are required only because of differences in business environments. If there are no differences then the same strategies would work for both.
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vi. “The key to successful international business in terms of global value creation in the face of large cross-border differences does not require one-size-fits all countries. It requires adaptation, aggregation (to overcome some differences among countries by grouping them based on similarities), arbitrage (exploit selected differences across countries instead of treating them all as constraints), and Arbitrage, tradeoffs among integration of AAA strategies (the differences in the environment that usually exist from one market to another). Adaptation ( and so also aggregation and arbitrage) is not a passive process but a conscious effort on the part of international marketer to anticipate the influences of both the foreign and domestic uncontrollable environments on a marketing mix and then to adjust the marketing mix to minimize their effects.”
vii. Business environments can be of different kinds – internal and external, domestic, national and global, and so on. The entrepreneurs will have to identify for themselves as to what is critical for them and focus upon them.
viii. The root cause of most international business problems is the self-reference criterion (SRC) in making decisions, i.e., an unconscious reference to one’s own cultural values, experiences and knowledge as the basis for decisions. Many MNCs have burnt their fingers because of it. Proctor and Gamble, like Colgate-Palmolive and Apple Computers, lost heavily when it entered Japanese market with American products, American managers, and American practices.
ix. Often, managers tend to simplify complexities by focusing on aspects of the environment which, perhaps, have been historically important, or confirm prior views. These are natural behavior of everyone faced with complexity. As a strategic manager you have to find ways in which you can break out of bias in understanding the environment.
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x. An analysis of business environment tells the entrepreneurs of opportunities and threats (through external environment), and strengths and weaknesses (through internal environmental analysis), a precursor to designing right kind of strategies.
xi. Organisations have a choice in how they manage their relationships with the environment. They may be reactive, when they just sit back and wait for the environment to change, and react to changes as they happen. They constantly engage themselves into fire-fighting immediate problems.
Or they can identify and foresee changes in the environment, and plan their responses before the changes happen. They are known as proactive – planning for the future. And some of the organisations go even beyond and manage the environment in their own interests – at different times since 1900, Ford, IBM, Sony, McDonalds and Microsoft have done it.