1.The Cultural Environment

The term culture has been variously defined as ''patterned ways of thinking, feeling and reacting'' and ''the complex of values, ideas, attitudes and other meaningful symbols created by man to shape human behaviour'' or ''a selective, man-made way of responding to experience, a set of behaviour patterns''.

Firm’s Environments

Seven Principal Elements of Culture

1. Material culture: the extent to which a group places emphasis on the role of technology and the use of tools and machinery.

2. Language: every language is a special way of looking at the world and interpreting experience.

3. Aesthetics: colour, design, folklore and fashion are important not only in an organisation's marketing but in its complete image.

4. Education: determines the goals of the individual and hence his consumption and work-related needs.

Seven Principal Elements of Culture

5. Religion: is the quest for the ideal values in life; these ideals in turn shape the practices or behaviour of the members of a culture.

6. Attitudes and values: are largely derived from religion and will affect the individual's view on work, risk-taking, honesty, change, time, acquisition, etc.

7. Social organisation: the social relationships required by the culture such as the family, class/social status, friendship and power.

2. The Economic Environment

The economic environment in which international business operates can be divided into two separate areas for simplicity of analysis: the economic constraints imposed by independent government action, and the economic characteristics of individual markets.

Firm’s Environments

Government ActionGovernment action affects business in a number of ways and includes measures such as import and export controls (of both the home and the foreign nation), non-tariff barriers which may impose extra regulations on transportation, product testing and documentation, and exchange controls.

Government Action

Regional Economic Groupings, such as the EU, NAFTA and LAFTA with their common external tariffs, can have a great influence on the organisation's strategic planning when considering the location of subsidiaries or stockholding.

Economic Characteristics

Figures differ greatly and factors such as population size, growth, density, age and income will be critical in determining the organisation's approach to both its markets and operations.

Economic CharacteristicsDepending upon the organisation's level of involvement in international business it may be important to assess the market's natural resources (raw materials), topography (distribution of product), climate (stockholding, machinery environment), economic activity (labour force, customers), commercial infrastructure (retailers, wholesalers, middlemen), energy and communications, urbanisation, inflation (pricing policies, raw material sourcing) and the role of government.

3. The Political/Legal EnvironmentThe role of the government in an economy varies from nation to nation, from relative freedom of business operation to complete state control of all business, the means of production and distribution channels.

Firm’s Environments

The Political/Legal Environment

In its international arena the organisation is supremely vulnerable to the risks of nationalisation or expropriation of its assets and markets.

Abroad, the organisation is normally in a weaker political position than its local competitors and is at the mercy of political changes which are often swifter and more extreme than in its home market.

The Political/Legal Environment

For the international firm politics is a variable factor, the organisation must operate in many often conflicting environments simultaneously and it must deal with relationships between nations. The key relationship is that between home government - host government - organisation.

The Political/Legal Environment

The laws of society are another facet of its culture; they are the rules established by authority, society or custom. The laws of a nation often do no more than codify its attitudes, values and cultural norms.

Again, the organisation must pay careful attention to both home country and host country law, as well as international law.

The Political/Legal Environment

Home country law is important in that it defines acceptable behaviour for the organisation in all its activities (whether at home or abroad). The home government can influence the organisation's international activities by proscribing the export of certain products or know-how, by forbidding any commercial contact with certain nations and by condemning certain behaviour (e.g. bribery) which may be acceptable elsewhere.

The Political/Legal Environment

The host country, similarly, can control imports and practically every area of the organisation's activity. Although it is true to say that the laws of any one nation are different from any other nation, the real diversity of systems is less radical. International law is different again in that there is no international legislative body making international laws.

The Political/Legal Environment

What exists is a series of conventions, agreements and treaties between two or more nations.

For enforcement, international law relies upon national sovereignties. This problem of enforcement is especially pertinent when we consider one of the most important international laws for business - the law of patents and trade marks.

Globalization - Fact or Fantasy?

When Theodore Levitt published his article "The Globalisation of Markets" in 1983, international marketing standardisation suddenly became hot news after a lull of some 15 years. Levitt insists that "companies must learn to operate as if the world were one large market – ignoring superficial regional and national differences".

Customer convergence?

Very few articles have the power to create such discussion as has been provoked by Levitt.

Essentially he notes that many companies have moved from emphasis on customising products to producing standardised products which are advanced, functional, reliable and low priced.

Customer convergence?

Levitt continues by stating that many consumer preferences are "idiosyncratic" and that Global companies will only achieve long-term success by concentrating on what everyone wants rather than worrying about the details of what everyone thinks they might like.

Is the world really becoming one homogenous marketplace?

It is undeniable that certain products fall happily into this mould.

Levitt himself gives examples such as McDonalds, Pepsi-Cola, rock music, Greek salad, Hollywood movies, Revlon cosmetics, Sony television and Levi jeans. He says "touch products are as ubiquitous as high-tech".

Is the world really becoming one homogenous marketplace?

The motivating forces behind this move to globalisation are well known and include the economics of scale associated with longer standardised production runs, greater communications among world consumers, personal travel, etc.

Is the world really becoming one homogenous marketplace?

It is interesting to note that many domestic marketers are currently responding to national trends towards greater individualisation in the products people are buying. Certainly the more developed markets appear to be rejecting the standard, mass-produced products in favour of the different, the novel and the unique.

What should we do?

Much of the response to Levitt's article has been critical as well as supportive. Examples of industries/products which patently do not fit Levitt's idea of globalisation are as easy to find as supporting examples.

What should we do?

Nevertheless we should not dismiss globalisation out of hand. As Levitt says:

"I do not advocate the systematic disregard of local or national differences. But a company's sensitivity to such differences does not require that it ignore the possibilities of doing things differently or better.”

What should we do?

It must be seen as a positive move, the shift of a multinational's attention from the differences to the similarities between markets.

The extent to which standardisation/globalisation is possible, or indeed desirable, will largely depend upon the type of organisation and the markets.