[Solution] International Management and the Business Environment
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Author: Sarah Bennett
Managers often find navigating the external and internal business environments more complicated in an international context. Three aspects of the general environment are of particular interest: the economic environment, the political–legal environment, and the cultural environment.
The Economic Environment
Managers should be especially aware of these three aspects of the economic environment:
- A country's economic system lies on a spectrum between a pure market economy and a pure command economy. In a pure market economy, consumers are completely free to choose what to buy, and organizations are completely free to choose what to sell. Also, businesses are owned by private individuals or organizations rather than by the government. Most countries today have or are moving to a mostly market economy with some government involvement.
- Examples of natural resources are oil, metals, timber, and arable land. In some countries, such as the United States, many kinds of natural resources are abundantly available. Other countries have fewer kinds of natural resources and/or less of them are readily available.
- A country's infrastructure includes the systems that support economic activity, such as the transportation, communication, energy, education, and health care systems. Countries vary widely in the quality of their infrastructure.
The Political–Legal Environment
Political and legal factors significantly impact international business operations, including government stability, regulations, and trade agreements.
The Cultural Environment
Cultural differences can profoundly affect business operations, from communication styles to decision-making processes and work ethics.
Select the terms that best complete the following sentences about the international business environment.
A manager considering whether to begin business activity in a country takes into account whether that country's economic system .
View Explanation
Whether free trade and private ownership are allowed and encouraged depends on a country's economic system. Businesses prefer to enter market economies where the government does not heavily regulate commercial activity or own most business entities.
When a government takes ownership of private businesses, it is those companies.
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A government nationalizes private businesses when it takes ownership of them. Sometimes nationalization is abrupt, such as when a government seizes property with no warning. Managers consider the risk of nationalization when thinking about entering markets where there is low government stability.
A country may enter into an to voluntarily limit its exports to another country.
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A country enters into an export restraint agreement in the hope that by voluntarily limiting the amount of goods it exports to another country, the target country will not impose harsh tariffs or quotas.
An economic community is a group of countries that trade mostly with each other. A mature market economy is characterized by private ownership, free trade, and large businesses. Most favored nation status is the understanding that if a country gives favorable terms to one trading partner, it gives those same terms to other trading partners within an association.
Match each statement to the dimension of culture it describes.
The interests of the individual may be more or less important than the interests of the group.
This dimension is measured on a spectrum between respect and tolerance.
Change may be seen as an opportunity or as an unwelcome disruption to structure and routine.
Material possessions and money may be more or less motivating than social relationships and quality of life.
People may be oriented to long-term or short-term rewards.
View Explanation
The social dimension of culture measures the relative importance of the interests of the individual and the interests of the group. It is measured on a spectrum between individualism (where the interests of the individual take precedence) and collectivism (where the interests of the group take precedence).
The power orientation dimension of culture measures how people perceive the legitimacy of authority in organizations. It is measured on a spectrum between power respect (authority is inherent in a position within a hierarchy) and power tolerance (authority arises from how the observer perceives the person's rightness or alignment with the observer's interests).
The uncertainty dimension of culture measures people's emotional response to uncertainty and change. It is measured on a spectrum between uncertainty acceptance (change is viewed as a source of new opportunities) and uncertainty avoidance (change is an unwelcome disruption to routine and structure).
The goal-orientation dimension of culture measures what motivates people to achieve different objectives. It is measured on a spectrum between aggressive goal behavior (people value material possessions, money, and assertiveness) and passive goal behavior (people value social relationships, quality of life and the welcome of others).
The time-orientation dimension of culture measures whether people adopt a long-term or short-term outlook on work and life. It is measured on a spectrum between a long-term outlook (people are willing to work hard for many years to reach a reward) and a short-term outlook (people prefer more immediate rewards for their effort).
