ARTICLE: Major Factors Affecting International Business

There are various companies that are involved in international business, and the working of those companies is further affected by some factors that might or might not be under its control. The company’s interaction with the environment determines its success or failure. There are certain restrictions also that are imposed on the companies, and their working is affected by the different forces. There is little influence on the environment by the companies. For the international businesses, there are different modes of entry and for the complete understanding of the 5 different modes of entry into foreign market, click the link mentioned.

There are two types of factors that affect international business:

  • External factors
  • Internal factors

External factors

It includes various factors such as social conditions of the economy, the influence of the political environment and there are also some legal factors that affect the working of the business. The technological advancements also make changes in the working conditions and the economic conditions of the country.

  • Social conditions
    The social conditions include various demographics such as the trends and the status of the people living in the society. There are also some work ethics involved and the personal values of the culture. It helps the management to achieve the objectives. The social environment is different from one country to another.
  • Influence of political conditions
    The political environment also affects the environment of the international businesses. Better the political environment, highest is the growth of the business and on the other hand, worst the political environment, lowest the growth of the international business.
  • Legal practices
    There are different law practices in different countries, and the country has to abide by the laws formulated by the legal system. It has a direct impact on the working of the business operations. For example, the task of licensing is completely according to the law. Thus, the business entities have to follow it.
  • State of economy
    The economic conditions of the country also affect the dealing of different companies. There are certain resources that has not be used by the companies, and the company has to comply with the regulations also. The economic environment affects the working of the business dealings. It is affected by various factors such as:
  • Rate of inflation
  • Interest rate
  • Allocation of government budget
  • Distribution of income and wealth

Advancement in technology

The last factor that affects the working of the organisation is the advancements in the technology. He changes on technology brings about the change in the working conditions and the company can have major advancements due to latest technology and techniques.

Internal factors influencing international business

These are the factors that are under the control of the company. The company can change these factors as per the need and requirements.

  • Land
    The land is the place for the business that includes everything such as the size of the building, boundary of land and the machinery which is installed in the workplace.
  • Labour
    Labour are the people working in the field hired by the industry. These are blue-collared people. These are not the skilled people, but the skills can be taught to them by providing them with the coaching of the tasks that they have to perform. It also involves the wages that are to be given to them and an environment to work. They also demand the security of their job and factors that can provide them with the satisfaction of work.
  • Capital
    Capital is the investment made for the better functioning of the organisation. The capital includes the collection of the funds from the sources like:
  • Capital that is completely owned by the owner
  • Funds collected from the partner in an agreement
  • Borrowing loan from the financial institution
  • Collection of funds from the capital market
  • Funds collected from the joint venture
  • Location
    Location of the business also affects the working condition of the company. The success of the business depends largely on the location. There is the requirement of certain facilities that have to be provided to the business entities such as the facility of transportation, the raw material should be available at that location, labour force should also be there, and it needs good security. These facilities have to be up to the mark for the better functioning of the organisation.