CHAPTER 3: THE Global BUSINESS MARKET ENVIRONMENT

Introduction:

 International business is much more complicated than domestic business because

countries greatly differ in terms of cultural, political, economic, social, technological
and legal systems. All these differences can and do have major implications for the
practice of international business. In general,

 They have a profound impact on the benefits, costs, and risks associated with doing
business in different countries.

 They equally influence the way in which operations in different countries should
be managed; and the strategy international firms should pursue in different
countries.

Because of this,

 company before entering into international market, must analyze the international
business environment very carefully so as to identify the different opportunities that
these differences offer to be exploited, or the threads they pose to be handled. The
success or failure of the firm in foreign business depends on this analysis alone.

 However, it is good to note that this analysis should not be done only at the beginning
but throughout the life of the business because the international business environment
changes really fast.

 Hence, the main aim of this chapter is to permit an understanding of the differences in
the political, legal, socio-cultural, economic systems, and technological factors that
characterize the international business environment and their implication in
international business practice.

N.B: though we seek to limit ourselves just to the macro environment (PESTEL) analysis, a
good and complete environmental diagnosis will require the analysis of the micro
environment (customers, suppliers, employees, competitors, distributors, etc) and end up
with the internal environment of the enterprise to see if she has the require resources,
competences, capabilities, skills and strategy for effectuating a business venture in the said
market.

Section 1: Socio- Cultural Factors Influencing International

Business
Be it at the international or local market, the social and cultural factors are very important to
be considered in crafting and implementing a company’s strategy. These factors in some
cases are similar and in other situations vary greatly and turn to influence the consumer’s
behavior in diverse manners.

Given that a company’s objective is not just to create goods and services but equally to
assure their effectively distribution, it becomes indispensable for a company wishing to
carry out international business prospect to do so without considering the diversity of social
& cultural factors. This is so because these factors shape the needs, taste, and behavior of
the consumer as such the enterprise must adapt products to these factors so as to enhance it
effective commercialization.

Basically, socio cultural factors are lifestyle and values, customs, beliefs and traditions
that characterize a given society. More specifically,

 cultural forces include: education language, religion, aesthetic, laws and politics,
social organization (sociological orientation), technological and material culture,
values and attitudes.

 The social factors include: reference group, family role and status in the society.

Enterprises therefore have to critically take note of this element in crafting here international
market strategy. For easy retention, these socio-cultural elements are presented on the
following diagram:
  Explanation of each element

1) Language:

It is made up of both verbal communication language and body or silent language. The
languages spoken all over the world varies. The spoken language of a given community is
decisive on the labeling and advertising of the products. As such the enterprise must take
into account the foreign language skill while drafting it advertising and communication
strategy. Failure to consider this factor could subject the enterprise to some challenges.

 Example, Pepsi’s slogan in China read ‘’Pepsi bring you back to life’’. In Chinese
language it was read Pepsi brings back your ancestor to live.

 The same situation was faced by the Italian brand of mineral water call Traficant
which in Spanish meant drug dealer.

Hence to succeed, in developing and marketing a product abroad we need to communicate

with the customers, know their needs, their purchase intention and motivation so as to be
able to produce products that are adaptable to their needs.

2) Education
The level and nature of education in each international market will vary. This has an impact
on the type of message or even communication medium selected. Example in a society in
which a high percentage of the population has some form of post-secondary education, a
company may use a more details and explanations in advertising and promoting their
products. Mean while in societies where the rate of literacy is very low the company may
rather make use of radio and virtual media such as billboards

3) Religion:

Different country is inclined to different religious backgrounds. The religious beliefs of a

country will turn to influence the type of goods they consume the type of promotion tolerated
and several other factors. As such the company must identify and understand the religious
practices of it targeted market so as to avoid crafting strategies that may hurt such religion
and position the enterprise at a disfavor able position faced with clients.

 Example Muslims and Christian community will have different taste of products.

4) Social organization:

It is concern with how a society is structured, how it considers kingship, status system,
social institution and interest groups. Example in setting up a marketing strategy for a
business at the international market, the role of women in the society as to whether they are
the major decision maker in shopping is a key factor to be consider

5) The references groups and family:

Generally, references groups comprise of a set of people with whom individuals compare
themselves. Human beings are social beings; as such each person has people around him who
influence his or her decisions. Reference groups are of two types;

➢ primary groups: The primary group here makes reference to the family members,
relatives and neighbors. At the level of the family, it will be necessary to know how
the spouse, children and grandparent influence the purchase decision.

➢ secondary groups: The secondary groups on the other hand consist of school’s mates,
work groups. They exert an influence on each other’s choices.

To succeed therefore an enterprise must study the different reference group on its
international market so as to identify the group to target which will permit to enhance sales.

6) Role and status in society:

A person’s role in the society and social and social status affects her buying decision.
Knowing income levels of consumers in different markets will permit the enterprise to craft
an adapted strategy.

7) Aesthetics

The phrase ‘’beauty is in the eye of the beholder’’ is a very appropriate description for the
differences in aesthetics that exist between culture. Example Americans believe that suntans
are attractive youthful and healthy mean the Japanese do not.

Others as on the diagram.

Section 2: The Impact of Cultural Diversity on International Market

Research

The major difficulty encountered international marketing research due to cultural differences
is that of the representative sample and the comparability of data. This difficult poses a
specific problem of non-equivalence. This nonequivalence can be in terms of:

1) The non-Equivalence of Concepts: Certain basic notions are defined differently

with respect to different cultures. E.g., the notion of dissatisfaction.

2) The non-Equivalence of functions: An identical product can have different

functions in different countries. E.g., chocolate, drink, motor bike.

3) The nonequivalence of judgment: The way different cultures of the world judge
things is practically difficult. This may be due to language differences, perception
differences, and religious differences.

4) The Acceptance of Response: Some societies do hide their information from the
researcher and consider the researcher as a spy.

5) The Braise in Response: Americans are very enthusiastic and exhaustive in inquiries
meanwhile Africans are too conservative and restrictive to inquiries.

6) Translation Difficulties: When a question is translated into another language, the

word-to-word translation of sentences do not bring out the logical sense. The lexical
and conceptual equivalence of work is required.

There are two methods which can be used to effectuate this equivalent transaction.

1) Retroactive Translation: it has to do with translating the text from a source

language to a targeted language after the translation from a source language to a
targeted language, and other translator who doesn’t know the text in the source
 language translate the targeted language to the source language. We then compare the
two text which are all in the source language.

• Example Source Language (FR) -------------------------------- Targeted language

(English) Source Language (FR) ------------------------------- Targeted Language
(English)

2) The Parallel Blind translation: It consists of having many translators who

simultaneously and independently translate from the source language to the targeted
language. After this exercise, the different versions of the translations are retained and
the best one selected.
3) A combination of the two methods: Two people can independently translate the two
questionnaires in French to two Korean versions K1 and K2 and a 3rd translator
translate the text to the source language F1 and F2.

 Conclusion: it is very important to carefully understand the differences in culture

from one international market to another in order to avoid these challenges and be
able to produce goods adaptable to the markets culture.

N.B. Political and legal aspects, economic and technological aspects, are to be presented
as assignment. However, their impact and importance were presented in chapter 1.

END OF CHAPTER

CHAPTER 4: THE GLOBAL BUSINESS ENTRY STRATEGIES