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Environmental Factors And Expanding Internationally Commerce Essay

Paper Type: Free Essay Subject: Commerce
Wordcount: 1563 words Published: 1st Jan 2015

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In the performance of any business, it has been said that environmental factors is of prime importance and consideration. It is not enough that organizations consider only internal factors. They should also put an unwavering emphasis on external factors as they are deemed to be affecting the nature of the business by large scale impact as well. Some of the environmental factors which are internal include the company goals and objectives, their purpose, and the values of the top management. However, when we speak of environmental factors, more emphasis is given on external environment because they show a greater impact on the performance of the business. External environmental factors include social and cultural climate, the economic competition, technological advancements, political and legal climate, and demographics (Loudon et al). these factors must be given enough and ample attention especially in determining the company’s policies and practices to at least guarantee success especially in cases of international expansion where there is no assurance of success in the international market which is entirely different and much harder to handle as compared to the local scene.


When a business aims to expand international operation, that is trying to reach a wider market by introducing their business to places other than what can be considered as the host country, it is of paramount concern that they study carefully the environmental factors of the country in which they will operate because this will create a very big impact on their business performance and can be a very big reason for their success or failure in the conduct of doing business.

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In international expansion, there are many environmental factors which should be considered. One of the factors would be the social and the cultural environment of the country in which international expansion will be done. These factors include, but not limited to, the influences of beliefs, values, social institutions, and market behaviors which should be carefully analyzed especially in the formulation of strategies. Moreover, another thing which should be considered by businesses in their international expansion would be the demographic environment which includes the size and growth of the market, the general population with regards to the target market, age, sex, education, gender, marital status, and any other demographics which will be relevant in their business performance and strategic formulation. Technology would be other environmental factors which should be considered because they will determine hiw the innovation, production, manufacturing, and distribution of the products in the international market would be innovative. This can also include new research and development practices and advancements which will inevitably improve the business in a particular international market. Furthermore, the economic and competitive environment shall be also given an unwavering emphasis because they affect the international business in a major way. Some of the factors which should be considered on this aspect include inflation, employment, growth in the market or economy, new competitors, and the economic condition of the country. Lastly, another factor which should be considered in international expansion would be the political and legal environment. This includes factors such as laws, regulations, and policies which might affect pricing strategies, marketing practices, and distribution policies. Every company hoping for international expansion, more than paying attention to international laws, should also study local laws in their chosen country or countries of operation because they will have more impact in the performance of their business (Pagano & Verdin, 1995).

These environmental factors can also be helpful in different ways. It can open a lot of opportunities for the business such as development of new markets, fall in the rates of interest, long tern credit facility by suppliers, and positive government policies. On the other hand, there are also dangers which are associated with these environmental factors. This includes fall in demand, increase in competition, products getting out of trend, and technology being old (Boyes, n.d).


For me, the environmental factor with the biggest impact on the strategic moves of a business will be both the economic environment and the political and legal environment. These factors will have the biggest impact because they are all very unpredictable and very volatile and sensitive to the global condition. The political factor is very critical and can have the biggest impact on the strategy because every part of the marketing mix – product, place, price, and promotion – is subject to laws and restrictions dependent upon the individual policies of different countries. The existence of federal laws, state laws, and other regulatory agencies has a big impact on what strategies can be formulated by the company. To add up to this scenario, what even makes it worse, is the fact that they have to consider the individual local policies and regulations on a per country basis, on a per government analysis to deal and understand the governing laws associated to doing business on that specific country (Lamb et al, 2006). Furthermore, the economic environment also has a very big impact on the strategies which are formulated. Once a business started its operation or expansion in a particular market or country, it is a given fact that the management and the whole organization has already come up with a set of strategies which were formulated to trigger success in their chosen market. These strategies already include a set of measures and programs which shall be implemented in a given time frame to promote and market their business. However, economic condition is very unpredictable. An economic turmoil on big countries such as the United States can affect other countries. The decrease in the gross domestic product of a country and the changes in the purchasing power of the locals are of utmost consideration as well. Because of the occurrences of such economic turmoil, companies and businesses are then forced by economic chance to change, reformulate, and redirect their strategies to be able to combat the changing economic environment.


With the discussion presented above regarding the environmental factors and its impact on international expansion, it can be assumed that many business have already experienced the truth of this phenomenon. Being able to expand internationally is no esay task for it entails a careful analysis of individual and per country analytics which will have a very great impact on the performance of a business. Failure to look and study such environmental factors will lead to the business not earning at all on that particular country.

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Fast food chains and other restaurants, for instance, are some of the busineses which should be very wary on the impact of environmental factors for international expansion especially when eyeing countries which have unique set of beliefs and traditions. Wendy’s, when it expanded in the Orient, considered the impact of the culture on their business. They add local products such as noodles and rice in their menu in order to satisfy the needs of their local market. McDonald’s also did the same thing when it expanded in India considering the fact that the locals on that place consider beef as sacred. Failure to do these steps can result in the loss of business (Loudon et al, 2005). Different companies must be bale to customize their offering to the public so that they can be able to establish a stable market which will generate them profit in the long run of their local operation in the particular country. These considerations must be always noted and they must be careful not to disregard the local beliefs which shall shape the operation of their business.

Another example which can be noted on this topic is what has been happening with Microsoft. Many considered working for Microsoft as a dream job, it is high in terms of compensation, and the brand itself gives the employees a sense of satisfaction in their jobs. However, it has been estimated that an average of 50 employees leave the company on a weekly basis. If they want to expand internationally, they should be able to consider these factors such as the technological advancements and the government regulations (Koontz & Weihrich, 2004).

The last example would be the global expansion strategy which was executed by WalMart. To effectively handle international expansion, the company paid attention to tight government control over trade which impacted their business since they were able to easily facilitate trade because they have studied these rules beforehand. They have also acknowledged internet as a tool for technology and therefore will impact their international operations (Cravens & Piercy, 2006).WalMart paid attention to these factors because they are aware that their profit generation in the international market is highly dependent of how effective they are in the management of the environmental factors.


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