global business environment essay

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An Agenda for the Future of Global Business

• Martin Reeves
• Johann Harnoss

Inequality, technology, and populism are changing everything.

For all of the uncertainty and anxiety in headlines today, the world is a much better place than it has ever been. In emerging markets,  billions of people have moved out of extreme poverty . In the developed world, we enjoy better medicines, connectivity, and mobility than most of us could have imagined even 20 years ago. The promise of global progress has become a reality for many — but not for all.

• Martin Reeves is the chairman of Boston Consulting Group’s BCG Henderson Institute. He is a coauthor, with Jack Fuller, of The Imagination Machine (Harvard Business Review Press, 2021) and a coauthor, with Bob Goodson, of Like: The Button That Changed the World (Harvard Business Review Press, April 2025).
• JH Johann Harnoss  is a Boston Consulting Group Fellow at the BCG Henderson Institute and an associate director for innovation.

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3.3 The Global Business Environment

Learning objective.

• Appreciate how cultural, economic, legal, and political differences between countries create challenges to successful business dealings.

In the classic movie The Wizard of Oz , a magically misplaced Midwest farm girl takes a moment to survey the bizarre landscape of Oz and then comments to her little dog, “I don’t think we’re in Kansas anymore, Toto.” That sentiment probably echoes the reaction of many businesspeople who find themselves in the midst of international ventures for the first time. The differences between the foreign landscape and the one with which they’re familiar are often huge and multifaceted. Some are quite obvious, such as differences in language, currency, and everyday habits (say, using chopsticks instead of silverware). But others are subtle, complex, and sometimes even hidden. Success in international business means understanding a wide range of cultural, economic, legal, and political differences between countries. Let’s look at some of the more important of these differences.

The Cultural Environment

Even when two people from the same country communicate, there’s always a possibility of misunderstanding. When people from different countries get together, that possibility increases substantially. Differences in communication styles reflect differences in culture : the system of shared beliefs, values, customs, and behaviors that govern the interactions of members of a society. Cultural differences create challenges to successful international business dealings. We explain a few of these challenges in the following sections.

English is the international language of business. The natives of such European countries as France and Spain certainly take pride in their own languages and cultures, but nevertheless English is the business language of the European community. Whereas only a few educated Europeans have studied Italian or Norwegian, most have studied English. Similarly, on the South Asian subcontinent, where hundreds of local languages and dialects are spoken, English is the official language. In most corners of the world, English-only speakers—such as most Americans—have no problem finding competent translators and interpreters. So why is language an issue for English speakers doing business in the global marketplace?

In many countries, only members of the educated classes speak English. The larger population—which is usually the market you want to tap—speaks the local tongue. Advertising messages and sales appeals must take this fact into account. More than one English translation of an advertising slogan has resulted in a humorous (and perhaps serious) blunder. Some classics are listed in Table 3.2 “Lost in Translation” .

Table 3.2 Lost in Translation

Furthermore, relying on translators and interpreters puts you as an international businessperson at a disadvantage. You’re privy only to interpretations of the messages that you’re getting, and this handicap can result in a real competitive problem. Maybe you’ll misread the subtler intentions of the person with whom you’re trying to conduct business. The best way to combat this problem is to study foreign languages. Most people appreciate some effort to communicate in their local language, even on the most basic level. They even appreciate mistakes you make resulting from a desire to demonstrate your genuine interest in the language of your counterparts in foreign countries. The same principle goes doubly when you’re introducing yourself to non-English speakers in the United States. Few things work faster to encourage a friendly atmosphere than a native speaker’s willingness to greet a foreign guest in the guest’s native language.

Time and Sociability

Americans take for granted many of the cultural aspects of our business practices. Most of our meetings, for instance, focus on business issues, and we tend to start and end our meetings on schedule. These habits stem from a broader cultural preference: we don’t like to waste time. (It was an American, Benjamin Franklin, who coined the phrase “Time is money.”) This preference, however, is by no means universal. The expectation that meetings will start on time and adhere to precise agendas is common in parts of Europe (especially the Germanic countries), as well as in the United States, but elsewhere—say, in Latin America and the Middle East—people are often late to meetings.

High- and Low-Context Cultures

Likewise, don’t expect businesspeople from these regions—or businesspeople from most of Mediterranean Europe, for that matter—to “get down to business” as soon as a meeting has started. They’ll probably ask about your health and that of your family, inquire whether you’re enjoying your visit to their country, suggest local foods, and generally appear to be avoiding serious discussion at all costs. For Americans, such topics are conducive to nothing but idle chitchat, but in certain cultures, getting started this way is a matter of simple politeness and hospitality.

If you ever find yourself in such a situation, the best advice is to go with the flow and be receptive to cultural nuances. In high-context cultures , the numerous interlocking (and often unstated) personal and family connections that hold people together have an effect on almost all interactions. Because people’s personal lives overlap with their business lives (and vice versa), it’s important to get to know your potential business partners as human beings and individuals.

By contrast, in low-context cultures , such as those of the United States, Germany, Switzerland, and the Scandinavian countries, personal and work relationships are more compartmentalized: you don’t necessarily need to know much about the personal context of a person’s life to deal with him or her in the business arena.

Intercultural Communication

Different cultures have different communication styles —a fact that can take some getting used to. For example, degrees of animation in expression can vary from culture to culture. Southern Europeans and Middle Easterners are quite animated, favoring expressive body language along with hand gestures and raised voices. Northern Europeans are far more reserved. The English, for example, are famous for their understated style and the Germans for their formality in most business settings. In addition, the distance at which one feels comfortable when talking with someone varies by culture. People from the Middle East like to converse from a distance of a foot or less, while Americans prefer more personal space.

Finally, while people in some cultures prefer to deliver direct, clear messages, others use language that’s subtler or more indirect. North Americans and most Northern Europeans fall into the former category and many Asians into the latter. But even within these categories, there are differences. Though typically polite, Chinese and Koreans are extremely direct in expression, while Japanese are indirect: They use vague language and avoid saying “no” even if they do not intend to do what you ask. They worry that turning someone down will result in their “losing face,” and so they avoid doing this in public.

This discussion brings up two important points. First, avoid lumping loosely related cultures together. We sometimes talk, for example, about “Asian culture,” but such broad categories as “Asian” are usually oversimplifications. Japanese culture is different from Korean, which is different from Chinese. Second, never assume that two people from the same culture will always act in a similar manner. Not all Latin Americans are casual about meeting times, not all Italians use animated body language, and not all Germans are formal.

In summary, learn about a country’s culture and use your knowledge to help improve the quality of your business dealings. Learn to value the subtle differences among cultures, but don’t allow cultural stereotypes to dictate how you interact with people from any culture. Treat each person as an individual and spend time getting to know what he or she is about.

The Economic Environment

If you plan to do business in a foreign country, you need to know its level of economic development. You also should be aware of factors influencing the value of its currency and the impact that changes in that value will have on your profits.

Economic Development

If you don’t understand a nation’s level of economic development, you’ll have trouble answering some basic questions, such as, Will consumers in this country be able to afford the product I want to sell? How many units can I expect to sell? Will it be possible to make a reasonable profit? A country’s level of economic development can be evaluated by estimating the annual income earned per citizen. The World Bank, which lends money for improvements in underdeveloped nations, divides countries into four income categories (World Bank Group, 2011):

• High income —$12,276 or higher (United States, Germany, Japan)
• Upper-middle income —$3,976 to $12,275 (China, South Africa, Mexico)
• Lower-middle income —$1,006 to $3,975 (Vietnam, Philippines, India)
• Low income— $1,005 or less (Kenya, Bangladesh, Haiti)

Note that that even though a country has a low annual income per citizen, it can still be an attractive place for doing business. India, for example, is a lower-middle-income country, yet it has a population of a billion, and a segment of that population is well educated—an appealing feature for many business initiatives.

The long-term goal of many countries is to move up the economic development ladder. Some factors conducive to economic growth include a reliable banking system, a strong stock market, and government policies to encourage investment and competition while discouraging corruption. It’s also important that a country have a strong infrastructure —its systems of communications (telephone, Internet, television, newspapers), transportation (roads, railways, airports), energy (gas and electricity, power plants), and social facilities (schools, hospitals). These basic systems will help countries attract foreign investors, which can be crucial to economic development.

Currency Valuations and Exchange Rates

If every nation used the same currency, international trade and travel would be a lot easier. Unfortunately, this is not the case. There are about 175 currencies in the world: Some you’ve heard of, such as the British pound; others are likely unknown to you, such as the manat , the official currency of Azerbaijan, a small nation in Southwest Asia. Let’s pretend you suddenly find yourself in Azerbaijan and all you have with you is a credit card (which none of the restaurants or hotels will take) and U.S. dollars (which no one wants either). How can you get some Azerbaijani manats so you can buy a good meal and check into a hotel? If it’s during the day, you’re in luck. Head to the closest bank and ask someone there who speaks English to exchange your dollars for Azerbaijan manats. If you give the bank clerk $300 (all of your travel money), don’t expect to get back 300 manats; the two currencies are not equal. To determine how much Azerbaijan money you’ll get in exchange for your $300, the bank clerk will look up the day’s foreign exchange rate —which tells you how much one currency is worth relative to another currency . If today were August 23, 2011, the clerk would find an exchange rate of 1 U.S. dollar equals .79 manats (which means that you get 79 manats for every dollar you give to the bank clerk). In other words, when you hand the clerk your $300 you’ll get back only 235 manats (.79 × $300). Most likely, the deal does not sound good to you, but you have no choice—that’s what the exchange rate is. Plus, you’re lucky that it’s during the day and the banks are open: sleeping outside in Azerbaijan with an empty stomach doesn’t sound like fun, although it would give you time to wonder what would happen if an Azerbaijani traveled to the United States. When the traveler goes to exchange manats for U.S. dollars, he or she will get back $1.27 for each manat. Exchanging 300 manats for U.S. dollars yields $381 in U.S. dollars (1.27097 × $300). Well, this doesn’t sound fair. Why did you receive fewer manats for your U.S. dollars while the Azerbaijan traveler received more dollars for his or her manats? It is because the U.S. dollar is weak relative to the Azerbaijan manat. There are many reasons for the weakness of the U.S. dollar, but one possible culprit is the huge $14 trillion debt (and rising) carried by the United States. And if you are looking for things to get upset about, your share of this huge U.S. debt is about $47,000 (and rising) (National Debt Clock, 2011).

Now, we’ll look at two business examples. First, let’s say that your business is importing watches from Switzerland. Because the watchmaker will want to be paid in Swiss francs, you have to figure out how many U.S. dollars you’ll need to buy the francs with which to pay the watchmaker. You’d start by finding out the exchange rate between the Swiss franc and the U.S. dollar.

Understanding currency values and exchange rates is important to understanding how global business functions.

epSos .de – Exchange Money Conversion to Foreign Currency – CC BY 2.0.

You could simply look in a newspaper or go to any number of Web sites—say, http://www.oanda.com to get the current exchange rate. To keep things simple, let’s assume that the exchange rate is 1 Swiss franc = US$1.27 (i.e., 1 Swiss franc is worth $1.27). Let’s also assume that you owe the Swiss watchmaker 1,000 francs. Doing some quick math, you figure that it will take $1,270 to buy 1,000 francs (1,000 francs × the exchange rate of 1.27 = $1,270).

Now let’s say that you don’t have the cash flow to pay the watchmaker for two weeks. When you check the exchange rate two weeks later, you find that it has gone up to 1 Swiss franc = $1.37. Are you better off or worse off? It’s easy to check: 1,000 francs × the new exchange rate of 1.37 = $1,370. You’ve just learned the hard way that when the value of the franc relative to the dollar goes up, it costs you more to buy something from Switzerland. You probably can’t help but wonder what would have happened if the value of the franc relative to the dollar had gone down —say, to $1.17 per franc. At this rate, you’d need only $1,170 to pay the 1,000 francs (1,000 × 1.17). In other words, when the value of the franc relative to the dollar drops, it costs less to buy goods from Switzerland. In sum you’ve learned the following:

• If a foreign currency goes up relative to the U.S. dollar, Americans must pay more for goods and services purchased from sellers in the country issuing the currency (foreign products are more expensive). This is bad for exporters who have to pay more for the foreign-made goods they buy to bring back to the United States to sell.
• If a foreign currency goes down relative to the U.S. dollar, Americans pay less for products from the country issuing the currency (foreign products are cheaper).

In the interest of being thorough, let’s look at this phenomenon from the perspective of an American seller and a Swiss buyer. First, we need to know the exchange rate for the U.S. dollar relative to the franc, which happens to be .79 francs = US$1. This means that if you want to sell something—let’s say your latest painting—for $1,000 U.S. to an art lover in Switzerland, the Swiss buyer will need only 790 francs to get the $1,000 needed to pay you. If the exchange rate went up to .89 francs = US$1, the cost of the painting would be $890. If the exchange rate went down to .69 francs = US$1, the cost of the painting would be $690. So now you also know the following:

• If the U.S. dollar goes up relative to a foreign currency, foreign buyers must pay more for American goods and services (they become more expensive).
• If the U.S. dollar goes down relative to a foreign currency, foreign buyers pay less for American products (they become cheaper). This is good for importers as their “cheaper” goods are more attractive to customers in the foreign country.

The Legal and Regulatory Environment

One of the more difficult aspects of doing business globally is dealing with vast differences in legal and regulatory environments. The United States, for example, has an established set of laws and regulations that provide direction to businesses operating within its borders. But because there is no global legal system, key areas of business law—for example, contract provisions and copyright protection—can be treated in different ways in different countries. Companies doing international business often face many inconsistent laws and regulations. To navigate this sea of confusion, American businesspeople must know and follow both U.S. laws and regulations and those of nations in which they operate.

Business history is filled with stories about American companies that have stumbled in trying to comply with foreign laws and regulations. Coca-Cola, for example, ran afoul of Italian law when it printed its ingredients list on the bottle cap rather than on the bottle itself. Italian courts ruled that the labeling was inadequate because most people throw the cap away. In another case, 3M applied to the Japanese government to create a joint venture with the Sumitomo Industrial Group to make and distribute magnetic tape products in Japan. 3M spent four years trying to satisfy Japan’s complex regulations, but by the time it got approval, domestic competitors, including Sony, had captured the market. By delaying 3M, Japanese regulators managed, in effect, to stifle foreign competition (Ricks, 1999).

One approach to dealing with local laws and regulations is hiring lawyers from the host country who can provide advice on legal issues. Another is working with local businesspeople who have experience in complying with regulations and overcoming bureaucratic obstacles.

Foreign Corrupt Practices Act

One U.S. law that creates unique challenges for American firms operating overseas is the Foreign Corrupt Practices Act, which prohibits the distribution of bribes and other favors in the conduct of business. Unfortunately, though they’re illegal in this country, such tactics as kickbacks and bribes are business-as-usual in many nations. According to some experts, American businesspeople are at a competitive disadvantage if they’re prohibited from giving bribes or undercover payments to foreign officials or businesspeople who expect them; it’s like asking for good service in a restaurant when the waiter knows you won’t be giving a tip. In theory, because the Foreign Corrupt Practices Act warns foreigners that Americans can’t give bribes, they’ll eventually stop expecting them.

Where are American businesspeople most likely and least likely to encounter bribe requests and related forms of corruption? Transparency International, an independent German-based organization, annually rates nations according to “perceived corruption,” which it defines as “the abuse of public office for private gain.” Table 3.3 “Corruptibility Around the World, 2010” reports a sampling of the 2010 rankings.

Table 3.3 Corruptibility Around the World, 2010

Source: “Corruption Perceptions Index 2010 Results,” Transparency International, Corruption Perceptions Index 2010 Results, http://www.transparency.org/policy_research/surveys_indices/cpi/2010/results (accessed September 20, 2011).

Key Takeaways

• Success in international business means understanding an assortment of cultural, economic, and legal differences between countries.
• Cultural challenges stem from differences in language, concepts of time and sociability, and communication styles.
• If you do business in a foreign country, you need to know the country’s level of economic development.
• In dealing with countries whose currency is different from yours, you have to be aware of the impact that fluctuations in exchange rates will have on your profits.
• Finally, in doing business globally, you must deal with the challenges that come from the vast differences in legal and regulatory environments.

(AACSB) Communication

After five years at a large sporting-goods company, your boss has asked you to spend six months managing the firm’s new office in Rio de Janeiro. It’s a good opportunity, but, unfortunately, you know absolutely nothing about life or anything else in Brazil. So, to get some advice on how to work and socialize with Brazilian businesspeople, you decide to do some online research. You’re particularly interested in understanding cultural differences in communication styles, dress, time, and sociability. To learn more about Brazilian businesspeople, go to these helpful sites:

• Executiveplanet.com ( http://www.executiveplanet.com/index.php?title=Brazil )
• Kwintessential ( http://www.kwintessential.co.uk/resources/global-etiquette/brazil-country-profile.html )

Write a brief report to summarize what you learned about cultural differences between U.S. and Brazilian businesspeople.

(AACSB) Ethics

You’re a partner in a U.S. engineering firm that’s interested in bidding on a water-treatment project in China. You know that firms from two other countries—Malaysia and Italy—will submit bids. The U.S. Foreign Corrupt Practices Act forbids you from making any payment to Chinese officials to enlist their help in getting the job. Unfortunately, the governments of Malaysia and Italy don’t prohibit local firms from offering bribes. Are you at a disadvantage? Should the Foreign Corrupt Practices Act be repealed? Why, or why not?

You’re the CEO of a multinational corporation, and one-fourth of your workforce is infected with AIDS. If you had the means to help your workers and their families, would you do it? This is not strictly a hypothetical question: it’s one that’s faced by CEOs of multinational corporations with operations in Africa, parts of China, and India. To find out what some of them have decided, go to the BusinessWeek Web site ( http://www.businessweek.com/magazine/content/04_31/b3894116_mz018.htm ) and read the article “Why Business Should Make AIDS Its Business.” Then, answer the following questions:

• Why have some multinationals decided to help control AIDS in their workforces?
• Why have others failed to help?
• From a humanitarian perspective, what’s the right thing to do? From a business perspective?
• What would you do if you conducted operations in a nation whose government was unwilling or unable to control the spread of AIDS?

National Debt Clock, http://www.usdebtclock.org/ (accessed August 23, 2011).

Ricks, D., Blunders in International Business (Malden, MA: Blackwell, 1999), 137.

World Bank Group, “Country Classification,” Data: Country and Lending Groups, http://data.worldbank.org/about/country-classifications/country-and-lending-groups (accessed August 22, 2011).

Exploring Business Copyright © 2016 by University of Minnesota is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License , except where otherwise noted.

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The Global Environment of Business

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Frederick Guy’s The Global Environment of Business offers a multi-dimensional analysis of the environment in which international business operates. International: How do multi-national corporations, nation states, regional trade blocs, markets, and global institutions interact to shape the international economic system? Who wins and who loses when the economy internationalizes? Is internationalization leading to a global world, or a regional one? How will efforts to curtail and adapt to climate change affect international business? Technological and historical: How has the business environment been shaped by production systems, new methods of business organization, information and communication technology, transport, and the process of technological change itself? Comparative: How do institutional differences affect national specialization and economic performance? How do the business systems of Europe differ from that of the United States, or those of East Asia from those of Latin America? Why do location and face-to-face contact matter in an age of high-speed communication and cheap long-distance transportation? Why have some countries grown so fast while others remain poor? The Global Environment of Business draws on extensive research by economists, political scientists, sociologists, geographers, and business historians. There is more theory and academic debate here than in most books on the subject, but it is presented and explained clearly, and illustrated with lots of examples.

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6 Pros and Cons of Globalization in Business to Consider

• 01 Apr 2021

Throughout history, commerce and business have been limited by certain geographic constraints. In its earliest days, trade happened between neighboring tribes and city-states. As humans domesticated the horse and other animals, the distances they could travel to trade increased. These distances increased further with the development of seafaring capabilities.

Although humans have been using ships for centuries to transport goods, cargo, people, and ideas around the world, it wasn’t until the development of the airplane that the blueprint of a “globalized economy” was laid. This was for a simple reason: You can travel greater distances faster than ever before.

The development of the internet accelerated this process even more, making it easier to communicate and collaborate with others. Today, your international co-worker, business partner, customer, or friend is only a few taps or clicks away.

Globalization has had numerous effects—both positive and negative—on business and society at large. Here’s an overview of the pros and cons of globalization in business.

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What Is Globalization?

Globalization is the increased flow of goods, services, capital, people, and ideas across international boundaries according to the online course Global Business , taught by Harvard Business School Professor Forest Reinhardt.

“We live in an age of globalization,” Reinhardt says in Global Business . “That is, national economies are even more tightly connected with one another than ever before.”

How Globalization Affects Daily Life

Globalization has had a significant impact on various aspects of daily life.

For example, it’s changed the way consumers shop for products and services. Today, 70 percent of Americans shop online. In 2022, there were 268 million digital buyers in the US and by 2025, this number is predicted to reach 285 million.

In addition, the globalized economy has opened up new job markets by making it more feasible to hire overseas workers. This has created a wide range of career opportunities for both job seekers and employers.

The emergence of remote work post-pandemic was also made possible by globalization. According to a survey from WFH Research , only seven percent of paid workdays in the US were remote in 2019. However, this number climbed to 29 percent by January 2024.

Check out the video below to learn more about globalization, and subscribe to our YouTube channel for more explainer content!

Advantages of Globalization

1. economic growth.

It’s widely believed that one of the benefits of globalization is greater economic growth for all parties. There are several reasons why this might be the case, including:

• Access to labor: Globalization gives all nations access to a wider labor pool. Developing nations with a shortage of knowledge workers might, for example, “import” labor to kickstart industry. Wealthier nations, on the other hand, might outsource low-skill work to developing nations with a lower cost of living to reduce the cost of goods sold and pass those savings on to the customer.
• Access to jobs: This point is directly related to labor. Through globalization, developing nations often gain access to jobs in the form of work that’s been outsourced by wealthier nations. While there are potential pitfalls to this (see “Disproportionate Growth” below), this work can significantly contribute to the local economy.
• Access to resources: One of the primary reasons nations trade is to gain access to resources they otherwise wouldn’t have. Without this flow of resources across borders, many modern luxuries would be impossible to manufacture or produce. Smartphones, for example, are dependent on rare earth metals found in limited areas around the world.
• The ability for nations to “specialize”: Global and regional cooperation allow nations to heavily lean into their economic strengths, knowing they can trade products for other resources. An example is a tropical nation that specializes in exporting a certain fruit. It’s been shown that when nations specialize in the production of goods or services in which they have an advantage, trade benefits both parties.

2. Increased Global Cooperation

For a globalized economy to exist, nations must be willing to put their differences aside and work together. Therefore, increased globalization has been linked to a reduction—though not an elimination—of conflict.

“Of course, as long as there have been nations, they've been connected with each other through the exchange of lethal force—through war and conquest—and this threat has never gone away,” Reinhardt says in Global Business . “The conventional wisdom has been that the increased intensity of these other flows—goods, services, capital, people, and so on—have reduced the probability that the world's nations will fall back into the catastrophe of war.”

3. Increased Cross-Border Investment

According to the course Global Business , globalization has led to an increase in cross-border investment. At the macroeconomic level, this international investment has been shown to enhance welfare on both sides of the equation.

The country that’s the source of the capital benefits because it can often earn a higher return abroad than domestically. The country that receives the inflow of capital benefits because that capital contributes to investment and, therefore, to productivity. Foreign investment also often comes with, or in the form of, technology, know-how, or access to distribution channels that can help the recipient nation.

Disadvantages of Globalization

1. increased competition.

When viewed as a whole, global free trade is beneficial to the entire system. Individual companies, organizations, and workers can be disadvantaged, however, by global competition. This is similar to how these parties might be disadvantaged by domestic competition: The pool has simply widened.

With this in mind, some firms, industries, and citizens may elect governments to pursue protectionist policies designed to buffer domestic firms or workers from foreign competition. Protectionism often takes the form of tariffs, quotas, or non-tariff barriers, such as quality or sanitation requirements that make it more difficult for a competing nation or business to justify doing business in the country. These efforts can often be detrimental to the overall economic performance of both parties.

“Although we live in an age of globalization, we also seem to be living in an age of anti-globalization,” Reinhardt says in Global Business . “Dissatisfaction with the results of freer trade, concern about foreign investment, and polarized views about immigration all seem to be playing important roles in rich-country politics in the United States and Europe. The threats in Western democracy to the post-war globalist consensus have never been stronger.”

2. Disproportionate Growth

Another issue of globalization is that it can introduce disproportionate growth both between and within nations. These effects must be carefully managed economically and morally.

Within countries, globalization often has the effect of increasing immigration. Macroeconomically, immigration increases gross domestic product (GDP), which can be an economic boon to the recipient nation. Immigration may, however, reduce GDP per capita in the short run if immigrants’ income is lower than the average income of those already living in the country.

Additionally, as with competition, immigration can benefit the country as a whole while imposing costs on people who may want their government to restrict immigration to protect them from those costs. These sentiments are often tied to and motivated—at least in part—by racism and xenophobia.

“Meanwhile, outside the rich world, hundreds of millions of people remain mired in poverty,” Reinhardt says in Global Business. “We don't seem to be able to agree about whether this is because of too much globalization or not enough.”

3. Environmental Concerns

Increased globalization has been linked to various environmental challenges, many of which are serious, including:

• Deforestation and loss of biodiversity caused by economic specialization and infrastructure development
• Greenhouse gas emissions and other forms of pollution caused by increased transportation of goods
• The introduction of potentially invasive species into new environments

While such issues are governed by existing or proposed laws and regulations, businesses have made climate change concerns and sustainability a priority by, for example, embracing the tenets of the triple bottom line and the idea of corporate social responsibility .

Managing the Risks of Globalization

The world is never going to abandon globalization. While it’s true that individual countries and regions put policies and practices in place that limit globalization, such as tariffs, it’s here to stay. The good news is that businesses and professionals willing to prepare for globalization’s challenges by developing strong social impact skills have the potential to benefit immensely.

Whether you’re a business owner, member of executive leadership, or an employee, understanding the impacts of globalization and how to identify its opportunities and risks can help you become more effective in your role and drive value for your organization.

Taking a course like Global Business is one path toward developing international business skills and gaining an understanding of the macroeconomic, political , and social conditions that continue to impact globalization.

Are you interested in breaking into a global market? Sharpen your knowledge of the international business world with Global Business , one of our online business in society courses . If you aren't sure which course is the right fit, download our free course flowchart .

This post was updated on February 26, 2024. It was originally published on April 15, 2021.

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Global Business Environment Essay

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Background information on the company

Pest analysis of the country’s environment, political factors, economic factors, socio-cultural factors, technological factors, recommendations.

The tang dynasty is a chain of restaurants that specializes in the provision of Chinese desserts. They have branches in many parts of the world. Some of the dishes that can be found in the various restaurants include Ja Leung, Glutinous rice wrapped maltersers, carrot cake, steamed custard bun, mushroom Chee Cheong fun, and fried crispy chicken.

The company is currently involved in an expansion. The expansion will involve the setting up of more restaurants in potential cities and regions in Europe. Although the expansion is not limited to one continent, the current focus of the company has been set on Europe. The company is looking to open a number of restaurants in the cities that will stand out as being the most financially viable.

The level of financially viability of a given city will dictate the number of restaurants to be established. The more financially viable a city is, the higher the chances of increased investment by the Tang Dynasty (Steinberg 1996, p. 96).

The expansion will also present the company with a chance to work on its weaknesses. The company will look to increase its viability through strengthening the weak areas. The company is also set to conduct a market analysis on the proposed region and the candidate cities.

This will ensure that the company has a detailed overview of what the market holds with respect to its expansion. It is vital for the company to know what it is getting itself into with regards to investment. The market study on the European region will also help the market to understand the level of viability that exists in each region that stands out as a potential candidate for expansion.

Before any organization invents in a certain market, conducting an analysis is very vital. The business environment is a vital factor to take into consideration in an examination. The marketing environment of a business is made up of the macro-environment, the internal environment, and the micro-environment. PEST analysis is an scrutiny on the various factors that influence the setting up and running of any business organization.

The factors analyzed by in the PEST analysis include political factors, economic factors, socio-cultural factors, and technological factors. The pest analysis is imperative as it looks at all the factors that are imperative to take into consideration in the establishment and running of business. (Steves 2009, p.23)

In the analysis of the political factors there are imperative considerations that are analyzed in details when conducting a PEST analysis. It is imperative to note that the political arena has a great influence on the behavior and spending power of the consumers. Political factors also influence other businesses both in the short and long term.

Due to the interplay presented to the market by the relationship between various businesses, analyzing the political environment is essential so as to assess the influence it has on the market.

In conducting an assessment on the political factors, an analysis should be made on the stability if the political environment, the nature of government involvement in business, the extent of government involvement in business, the governmental policies and how they affect business, the government’s take on religion and culture, the governments involvement in the trade unions and other trade organizations, and the extent of government involvement in domestic and foreign trade.

In the analysis of economic factors, there are essential factors to take into consideration. The economic factors are directly related to the level of profitability of investment in a certain market or investment region in the world.

Through the economic policies formulated for a given market or trade region, it is possible to deduce the level of profitability of investment in that particular region. In the economic analysis, the assessment of inflation is also essential. The level and nature of inflation is one of the primary determinants of profitability.

Through assessing the inflation, organizations and business are equipped with relevant information about investing in a given region. An economic analysis through PEST also looks at essential factors such as the GDP, the nature of the per capita of the potential regions, the import trade, and the export trade of the particular region.

Through this information, the potential investor is equipped with the relevant knowledge about the domestic and international marketing condition. The business or organization is also able to plan on both the short and long term prospects with regards to the economy. (Alice and Gourvish 2003, p.15)

The socio-cultural factors are also essential in the analysis of the business environment. Through the socio-cultural factors, investors are able to analyze and determine the level of profitability and financial viability of investing in a certain region. In depth analysis on socio-cultural factors also looks at the different changes occurring in the social and cultural fronts and what these hold for business.

Through such details, the analysis is able to formulate the long term goals as well as the short term goals in business. In analyzing the socio-cultural factors affecting business, the PEST analysis looks at the dominant religion, the attitude of the consumers on the different domestic and foreign commodities, the roles of the different genders in the society, the impact of language on the effective diffusion of the different commodities in the market, the impact of green issues to business, the social take on the green issues, the relevant details about the population, the leisure trends of the different citizens, and the distribution of income in the population. (Bensoussan and Fleisher 2008, p. 60)

The technological factors also form an essential section of the PEST analysis. For the purpose of investment, it is essential to understand the role played by technology on the market. The influence of technology on any market is great. To understand the details contained in the technological trend is essential because it provides the investor with a background through which they can formulate the short term and long term goals.

In analyzing the technological factors, it is essential to look at the part played by technology in production. Does the technology in the given area reduce or increase the cost of producing the different goods and services? Does the technology in the area increase or decrease the effectiveness level of the different goods and services? These are essential questions that are presented in scrutiny of the impact of technology on production and quality. (Rook and Jardine 1995, p. 25)

Technology should also be analyzed with regards to the supply in the market? What role does technology play in the overall distribution of the goods and services that are produced in the market? The role played by technology on the innovation level is also essential under the overall study of the technological factors.

In analyzing innovation, the scrutiny should look at the commodities that are being offered to consumers and other businesses and the level of innovation in these commodities. The study of technological factors should also look at the role played by technology with respect to technology.

What has technology done with regards to communication? Has technology in the area advanced communication? Has communication been made less effective by technology? What are the specific changes that have been introduced into the market as a result of technology? What is the impact of technology on the communication that exists between the consumer and the business organization? (OECD 2006, p. 24)

In the study, a research was conducted so as to establish the most political stable area. Europe is generally a politically stable continent but there are areas which are more prone to political disturbances than others. The research established that there was a variance that existed between the different regions in Europe with regards to political stability. There were areas that exhibited increased political stability as compared to others.

The country that displayed the highest levels of political stability was Switzerland. The political environment is one of the most stable not only in the region but also in the entire world. The government of Switzerland has never experienced any civil wars or cases of coup on the government. The changes that take place in the government are conducted in a democratic fashion with the people’s say being the determinant of these changes.

The government of the land is involved in the investment processes and trade relations both domestically and on the foreign front. The government is responsible for the formulation of policies that ensure trade within the boundaries of the country and outside the boundaries is conducted in a free and fair fashion.

Through the involvement of trade unions and the representatives of the common people, the government is able to assess the different factors that contribute to the best practices in trade. Through this, the government is able to look into the trade through the eyes and opinions set forth by the trade organizations and the common citizens. (Kobrak and Hansen 2004, p. 15)

The government of Switzerland is very strict with regards to business and marketing ethics. The policies that are formulated to govern the market ensure that all businesses are in accordance with the stipulated laws of ethics. These laws ensure that the practice of business is free and fair.

In the event a business goes against these rules, there is a set procedure that ensures the business law takes its effective course in administering justice. The government plays a key role in ensuring that the market ethics govern the course of domestic and foreign trade. (Hunt and Murray 1999, p. 10)

The government has also set policies on the economy. The government is concerned about the trends and overall health of the economy. In the event the economy is growing, the government takes a back seat role but ensures that it keeps a keen eye on the manner in which the economy progresses.

In the event the economy is going through a rough patch, the government increases its involvement in business and investment. It sets aside funds which are directly injected into the economy through the various sectors in the economy. The government is also involved in the provision of the relevant training and information that help in strengthening the economy. (Bensoussan and Fleisher 2008, p. 45)

The government is supportive of the different religions and culture within the composition of its population. The government does this in the bid to ensure calm throughout the country and also in a bid to attract different types of investors. The government also takes up the role of ensuring that the interaction between people from different cultures and religion is maintained at peaceful levels.

This is done through the formulation of rules, regulations and policies that ensure the interaction between the interaction different people is maintained at the required levels.

This is very essential to the overall welfare of business. For business to be effective, it is essential to ensure that people from different walks of life and religions are always in a good relationship. It is this relationship that determines the level of efficiency of intercultural business and the trade that exists between people of different religions. (Henry 2008, p.40)

The government of Switzerland is involved in different trade agreements and is also a member to different regional and international trade organizations. Switzerland’s membership to the Joint Economic Commission ensures that the government is in a good relationship with the United States and its trade partners.

This opens the markets in Switzerland to the United States and other potential investors as well. The relationship that exists between Switzerland and the People’s Republic of China as well as India makes the place a heaven to invest. The two counties have the highest potential with regards to market potential as well as market sustainability. Any business looking to invest in Switzerland is practically exposing itself to the best market conditions. (Grant 2005, p. 121)

Although the natural resources in Switzerland are failing, investing in the country is very viable. With regards to economics, the country is considered to be the most prosperous and advanced nations. It has a Per capita income that other countries in the world strive to achieve.

Their Per capita income is ranked among the top nations in the world. With regards to these, the company is set to expand more in the event it establishes business in the country. The business will thrive mainly because of the market condition and the number of tourists visiting the country.

The country has been cited as being one of the best places to establish the hotel and hospitality business. In the event the company should be established here, it will be venturing into business in an area that has already been proven to be viable for the specific business the company engages in.

One of the economic trends that make Switzerland stand out is evident from the import and export market. The country makes most of its profits from the exports and this is matched to the level of dependency on the imports. The country is a major importer in the world market and most of the imports are directed towards the expansion of the domestic economic sectors. (Henry 2008, p.20)

The commercial laws in the country are well defined and the government has a special focus on agricultural produces and products. The company will be presenting itself to a market where the raw materials are readily available and in the best condition. The country has also established laws and policies that govern investors.

These laws ensure that the investors are protected and their business is taken care of by the government. The economy of the country stands out with regards to banking, tourism, insurance, and engineering. These are essential factors for the company in the bid to set up business in the country. The country is an active member of the EU and a leading exporter in the region. (Alice and Gourvish2003, p.45)

There are three main groups that make up the cultural environment of Switzerland. These three communities are the French Swiss, the Italian Swiss, and the German Swiss. The majority of the people are German Swiss while the Italian Swiss form the minority group in the country. The main languages that are spoken throughout the country include French, Italian, German, and Romansch.

The official languages that are used in Switzerland are German, French, and Italian. Although Romansch is classified as an official language, it is not used as much as German, Italian, or French. The origin of Romansch is Latin. It is spoken by less that 3% of the total population.

With regards to religion, there are two main religions in Switzerland. These religions are Roman Catholic and Protestants. Some of the most essential traits among the people of Swiss include precision, excellence, and time consciousness. These traits are essential to take into consideration because of the nature of Tang Dynasty. (Greenwood 1995, p.185)

The Swiss are very cautious when it comes to foreign investors. They look forward to foreign investors who bring quality commodities into the market. This presents the company with a challenge as the bar has already been set high by the lifestyle of the common people. The Swiss people have a lot of time at their disposal for leisure. Although they are hard working people, they find time to attend to their leisure lives.

This is beneficial for the company as business is dependent on the leisure time of the consumers. There is no disparity in the roles that have been assigned to men and those that have been assigned to women. The society believes that what a man can do, a woman can also do. Understanding the socio-cultural environment is essential for the business. This understanding is also essential in determining the level of success of the business. (Greenwood 1995, p.152)

Technology in Switzerland has improved the process of production as well as the standard of commodities. Through improved technologies, the different products being manufactured are brought to the market and sold cheaply. This is mainly due to the fact that the process of production has been improved and made cheap by the improved technology. The quality of production is also maintained at high levels through the improved technology.

The technology in Switzerland also provides the businesses with innovative products and services. For instance, the ordering process has been made easier and more convenient by technology. Majority of the businesses in Switzerland have made access of their commodities to customers more efficient. Consumers are now able to access products through online option provided for by the different businesses.

Technology has also changed the manner in which different commodities are delivered to the consumers. Through improved technology, the gap between the consumer and the product has been bridged to make the process more efficient. The process of communication between the consumer and the company has been made more efficient. This translates to more efficient customer care options and an improved customer relationship between the business and the customer. (Grant 2005, p. 91)

The Tang Dynasty should establish its operations in Europe. Since Switzerland has proven to be viable in more than one aspect. The market is Switzerland is viable with regards to political factors, economic factors, socio-cultural factors, and technological factors. The company should also look into collaborating with other companies in the Switzerland market. This is essential because the company will receive a number of advantages.

Collaboration will ensure that the company experiences the cushioning effect with regards to market knowledge. This will ensure that the company comes into the market and assume the level of companies that have been on the market for a long period of time. Collaboration with another organization will also ensure that the company receives added knowledge about the market and learn from the experiences of the other partner.

Alice, T. and Gourvish, T.R (2003) Business and politics in Europe, 1900-1970: essays in honor of Alice Teichova . New York: Cambridge University Press. p 15 – p.35

Bensoussan, B.E. and Fleisher, C.S. (2008) Analysis without paralysis: 10 tools to make better strategic decisions . Albany: FT Press. p.45 – p. 60

Grant, R.M (2005) Contemporary strategy analysis . 5th ed. USA: Blackwell Publishers. p.91 -p.121

Greenwood, J. (1995) European casebook on business alliances . Alexandria: Prentice Hall. p. 152 – p.185

Henry, A. (2008) Understanding Strategic Management . London: Oxford University Press. p. 20 – p. 40

Hunt, E.S. and Murray, J.M. (1999) A history of business in medieval Europe, 1200-1550 . London: Cambridge University Press.

Kobrak, C. and Hansen, P.H. (2004) European business, dictatorship, and political risk, 1920-1945 . Providence, Oxford: Berghahn Books.

Organization for Economic Co-operation and Development (OECD) (2006) Switzerland: seizing the opportunities for growth . Berne: Organization for Economic Co-operation and Development.

Rook, C. and Jardine, E. (1995) European casebook on business alliances . Alexandria: Prentice Hall.

Steinberg, J. (1996) Why Switzerland? 2nd Ed. New York: Cambridge University Press.

Steves, R. (2009) Travel as a Political Act . New York: Nation Books.

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IvyPanda. (2019, March 24). Global Business Environment. https://ivypanda.com/essays/global-business-environment/

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IvyPanda . "Global Business Environment." March 24, 2019. https://ivypanda.com/essays/global-business-environment/.