External factors
The external factors affecting international businesses can be studied using the headings of PESTLE analysis ( Political, Economic, Social, Technological, Environmental, Legal):
Political
 |
It is the government that sets out legislation in terms of doing business in a country and therefore the political situation can have a significant impact. Although the rules of the trade blocks of which the country is a part has some bearing on the political landscape, the government of the day is very influential. Governments will have different priorities that could affect business, e.g. net zero policies or immigration policies. |
Economic
 |
A country's economic situation can also have an impact. A country's relative wealth affects how much money its residents have to spend on goods and services, as well as having an impact on how much money the government has to invest in infrastructure, e.g. transport. The country's tax, interest and inflation levels will also make a difference to how profitable trading is, as they affect how much money people have to spend.
Countries go through different economic periods and a country going through a prosperous economic period is going to be a much better place to trade than a country going through difficult economic times. |
Social
 |
A country's social make-up has an impact on business, including people's lifestyle, age, level of education and culture. (We will look at the impact of culture in the next unit.) |
Technological
 |
Businesses operating across the world are often reliant on communication technology to stay connected. So, the level of technological development of countries can be an important factor. |
Legal
 |
Another aspect that can affect businesses is the legal environment, i.e. what is legal and illegal and what regulations and laws businesses must comply with. Some of the important laws that businesses need to be aware of are employment laws, criminal offence laws, and business laws of course. |
Environmental and ethical
 |
The environment increasingly plays a role in business activities across the globe. This includes how the business affects the environment and how the environment affects the business. Behaving in an ethical way is becoming more important to customers and they look out for businesses that do this. Social media means that customers have much more information about how businesses behave and examples of greenwashing can emerge quickly. |
Pause for thought
Click on the link to read more about unexpected employment laws around the world: