International Business

1 Introduction

International business is the study of transactions that take place abroad to meet the needs of

individuals and organizations. These economic activities are commercial operations, as in the case

of exporting or importing goods, and the direct investment of funds in international companies.

The study of international business focuses mainly on the activities of large multinational or

transnational companies, based in one country but with operations in others.

This study aims to interpret and argue about different topics around international business.

Along with conceiving the current view of international business taking into account the changes

that globalization has and will continue to produce. This research presents some of the most

important topics covered by international business, including the globalization and generalities of

international business.

Also, the definitions, causes, benefits, characteristics and risks are addressed. On the

international business side, there are differences between domestic and international businesses

and the reasons why companies participate in international business are explained. Moreover, the

most relevant environments that a company faces when it decides to internationalize is discussed

as well.

The first of these is the sociocultural environment that addresses definitions and characteristics

of culture and cultural models, among others. The second is the political and legal one that includes

political ideologies, political risk and legal environment, among others. The third is the economic

one that includes the main economic systems and some determinants of economic development.
2 Sociocultural environment

Cultural differences are of great importance not only in terms of the use and consumption of

the products that are to be marketed, but also in the way of understanding the business, in the

perception of the company and even in the availability of the products. managers to move to certain

markets.

In addition to the definition of culture, next we will see some conceptual aspects related to the

sociocultural environment, bearing in mind that it is necessary to know and understand the impact

that the cultural differences of the countries have on international business, with the aim of

eliminating conflicts and improving the performance of multinational companies. Culture is the

set of norms and values implicit in a human collective that endow it with identity and give meaning

to the behavior of its members.

3 The Political And Legal Environment In Business International

Political and legal factors influence the environment in which managerial decisions must be

made, and force companies to rethink the best ways to acquire resources, reduce risk and adapt

operating modes. To operate in different markets one must understand how and where national

business environments converge and diverge, bearing in mind three aspects: Dismiss the belief

that organizations can directly transfer to other countries or markets the principles and practices

they have developed in their market. Accept that political and legal environments vary between

countries. These differences affect the way Organizations take advantage of Opportunities and

avoid Threats.
 Political Environment The company must analyze the political-legal environment, which is

the one that develops the laws that regulate business and commercial activities and that are key

pieces for a company to put its products into circulation. Some aspects to be taken into account by

the employer in relation to the political environment, that are; Political climate, Stability and

political risk, Government debt, Deficit or budget surplus, Level of corporate and personal taxes,

and Import tariffs, import restrictions, restrictions on international financial flows.

3.1 Political system.

The political system of a country provides the context where economic activity develops, and

its objective is to integrate the elements of a society guaranteeing a certain level of stability in

social relations. Political systems can be evaluated according to two dimensions: the degree to

which collectivism stands apart from individualism, and the degree to which they are democratic

or totalitarian.

3.2 Individualism.

It refers to the supremacy of the rights, liberties and function of the individual in the political,

economic and cultural spheres. Companies are encouraged to support the good of the community,

promoting clean and fair competition. Individualism defends democratic ideals and the free market

economy. Example: United States.

3.3 Collectivism.

It refers to the supremacy of the rights and function of the community over the needs of the

individual. Encourages State intervention in the economic activities of society in cases such as
structure of industries, management of companies and acts of managers. There is interdependence

between government and business and relationships are often cooperative. Example: China and

Japan

3.4 Politic Ideology.

It is the set of complex ideas that constitute the objectives, theories, and aspirations of a

sociopolitical program. Democracy and totalitarianism represent the opposite ends of the political

spectrum. Pluralism is the coexistence of different political ideologies. Democracy: implies a

broad participation of citizens in the decision-making process. There are 4 types: Parliamentary,

Liberal, Multi-party, and Representative.

As for Totalitarianism, the decision making is limited to a few individuals. Power is

monopolized, opposition is not recognized and there is unconditional support for the official

ideology of the State.

There are the following: Theocratic totalitarianism, Secular totalitarianism, Communism,

Sovereignty "Sovereignty refers both to the powers exercised by a State in relation to other

countries, as well as to the supreme powers exercised over its own members. However, due to

international and global dynamics of global trade, several States have had to give up part of their

sovereign rights in order to coexist with other nations, clear examples are the European Union and

the North American Free Trade Agreement.

4 Economic Environment

The economic development of a country has a direct impact on citizens, companies, managers,

political strategists and institutions. Understanding economic environments helps managers better

assess how events and trends have affected and will likely affect the performance and potential of

their companies.

When a company wishes to do business in another country, it must answer the usual questions

about wealth, income, stability, poverty, growth, etc. and for this it is necessary to analyze those

variables that indicate the level of development, potential and economic stability. Some of the most

commonly used macroeconomic concepts and indicators are growth rates, income distribution,

inflation, unemployment, wages, productivity, debt and balance of payments. The following are

economic aspects to be taken into account.

Economic System: is a mechanism that deals with the production, distribution and

consumption of goods and services and determines who owns the factors of production and

controls them. It is the set of structures and processes that guides the distribution of resources and

determines the conduct of business activities in a country. At the extremes of the spectrum of

economic systems are Capitalism and Communism. Some definitions are shared below.

Capitalism: is the free market system based on property and private control, argues that the

owners of capital have inalienable rights that include obtaining profits in exchange for their effort,

investment and risk.

Communism: advocates for a centrally planned system that is based on state ownership of all

factors of production and control of all economic activity.

 Market Socialism: the State has abundant resources, but the distribution of these comes from

the mechanism of market prices.

Market Economy: prices and the quantity of goods and services are not controlled, and the

private company predominates. Individuals and not the government make the most economic

decisions. Consumer sovereignty influences the distribution of resources through the demand for

products or services.

Directed or controlled economy: central planners set prices, the State has the means of

production and in general all economic activities are determined by a government plan.

Mixed Economy: has elements of the previous two. Market forces, as well as government,

play an important role in directing the investment activities of private companies and consumer

activities of individuals. It has different degrees of ownership of resources and control and exists

in most countries.