The risks, opportunities, and the management of business activities crossing national boundaries differ from purely domestic activities. This is true because multinational business involves operations (1) in many countries with different legal and political systems (2) under different monetary systems and economic conditions (3) with people differing in terms of language, culture and values, and (4) in markets varying in size, potential and problems.
MNCs who conduct business across national borders must pay attention to differences in environment between or among countries. They must consider differences in the socio-cultural, economic, technological, and political and legal environments.
The Socio-cultural element of environment includes the attitudes values, norms, beliefs behaviors and associated demographic trends that are characteristics of a given geographic area. When comparing individuals in different nations, people commonly speak in terms of cultural differences. Language differences can be another major problem. The same strategy cannot be used in all places because of the social and cultural variations. Strategies are to be carefully planned by taking into account the social and cultural backgrounds of each country. The social and culture differences can have a major impact on international business.
Most of the world’s trade is conducted between the economically advanced nations. Underdeveloped countries that are rich in natural resources, however, have the potential to develop faster, and thus attract more interest as potential markets and bases for setting up plants, than underdeveloped countries that are poor in natural resources.
A country’s tax structure also affects its appeal to multinational firms that are considering settling up operations there. Other elements of the economic environment are inflation rates , employment levels, per capita income , GNP(The market value of all final products and services produced by a nation during a given year), the distribution of income among the people, and the stability of the economic system.
The transportation and communication system s may not be advanced or alike. The managers must evaluate the level of the technology that is available in the country and adapt their operation according to the present technology, or attempt to import new techniques. Thus, considerable technological transfer typically takes place in the course of international business. Technological innovation is important both for competing in global markets and for protecting domestic markets from foreign competition.
It is very difficult to distinguish between politics, economics economies, business and ethics. Both the legal and political conditions affect the ability of organization to conduct business in foreign countries. Major considerations include the level of political risk associated with doing business in a particular country which may vary from one country to the other.