Challenges that International Businesses Face Today
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The challenges that international business faced today, the macro-environment explained and highlight the changes and factors. The macro-environment factors that affect on business which are legal, political, cultural and economic, these elements have a strong bond between each other that can be directly or indirectly affect each others. Even though is equally important but for this case the most relevant element that play the biggest role will be political especially applying to developing and emerging market. Different countries in the world have a mixture of different regimes and political environment. Countries with different political systems and legal regulation play a different role. Political directly affect on the economy and legal of the nation. Policies and regulations were set by the government and every policy and regulations there are pros and cons which is very difficult for the government to play an unbiased role in their position for whatever reason the nation come first before economic and cultural.
Political factors briefly explain mostly related of government interfering the nation economic for example such as trade law, tariffs, tax and so forth. Political force is considered as the external environment factor (Babatunde & Adebisi 2012). Political environment plays a very vital role in the companies domestically or internationally, does not matter the organization is large or small political factors applies to the operating activities (Caterora & Graham 1999). China is also considered as a public action nation whereas bride is illegal but they have been doing this for ages. Organisations that wish to expand their business overseas have study in depth of other countries political systems of the country.
According to the Sydney Morning Herald news on 18 August 2014 “Apple, Samsung faced tougher China market after subsidy cuts” reported by Edmond Lococo. First of all China is a communist country, where their political situation is very unstable. China economic reforms in the late 70s do bring more pros than cons to today China. The major change is more on to bring the China economic to a higher standard and on the hand China try changing their communist country to a more political stable country to grow with their economy. China does take strong control on their communist environment and build a strong economic nation (Blanchard & Shleifer 2001). China central government play their role to protect their nation product refer to the news Xiaomi and Lenovo by providing subsidy to the phone producer which produce the same quality compare to the phone industry giants (Samsung & Apple) with a lower price by doing such action it show a great result where the giant losses out in the sales in China, China central government did a great job to sustain their macro-economic environment by stable their economic and political force (Clapp & Helleiner 2012). Local phone giants (Xiaomi and Lenovo) and others local phone producer can take this opportunity given by the government to excel their product and organisation by the help and fund from the central government in long-term (Luthans & Doh 2012). According to Edmond Lococo, one of the factors that central government is worry about the US technology companies given order to spy or hack their data could be their threats, by having their own server in controlling the encrypted data (2014). Even-though Apple claim that their do not share information to third-party but to China central government prevention is better than cure in this case.
According to Sydney Morning Herald news on 16 September 2014 reported by Brian Robins, “Australian export risk on China dirty coal ban.” Highlighted that Australian coal exporters are force by China government to cut down the coal export amount, so this will cut down the air pollution in China. The reason behind this call by China Central government the haze in major cities had gone worse due to the ashes from coal burning (Li & Zhang 2010). Some of the big cities for example Beijing, Shanghai and so forth had to reduced the order amount from Australia which will caused a big losses to the Australia coal mining industry because China is one the largest buyer in the world that had been constantly buying a big amount of coal from the Australian coal miner industry. The policy made by China Central government may affect on the export rate of Australia coal industry and according to expert and predicted this policy could possible affect on half of the Australia Coal industry in the future, others coal export countries may be affected as well their investment to emerging market such as to market in China due to the reform of new political policy. The good side of this policy made by the China Central government is cutting down air pollution. The negative side is the China will have lesser energy to support the infrastructure in assisting the daily operation in China. This macro-economic factor indirectly affect the Chinese economic force, consequences of these are decision of other big organization who intended to invest or expand in China will consider about this policy.
Based on Rugman & Hogetts article they mentioned that “Probability that political forces will negatively affect an organisations profit or impede the attainment of business critical objectives” (2003). From the news article that highlighted about the policy reform in china, by changes or modifying the policy, it also affects other macro-economic factors as well. The potential investor will always put risk (economic risk, political risk and so forth) before expanding their business to foreign countries. The expert will always look into the specific countries political level and economic level and analyse the risk level for their organization if it fall under the safe zone they will more likely invest or expand to the country they look into (Johnstone 2010). They are two major risk where have a strong relation between each other which are economic and political risk, economic risk simply defined as the country paying abilities for example looking into their turnover and debts, whereas political risk simply defined as the political decision that made by the country will it affect on the investors for example the policy that are made by the nation are reasonably unbiased or biased towards the nation, people, and investors (Perry 2013). The changes of China policy in having subsidy the local phone industry affect the sales of the phone giants (Samsung and Apple) where they used to be the top five seller phone product in the first quarter but lose out in the second quarter after government providing subsidy to the local manufacturer. The changes of the coal policy have given a big impact to the coal exporters around the world. These two policies can be concluded to cause an impact to the foreign investor and the foreign market. China is consider as an emerging market which simply defined as China’s economic growth and industrial growing pace is coming up rapidly, emerging market have the highest investment return compared taking pollution into account where is showing social responsible towards the environment setting an example to China by making the policy because of the haze that caused by coal burning it is good start for China as a communist country leaning towards an open country today (Nelson 2008). China developed their own legal and laws that are up to the international standard (Lin, Lin & Song 2010)
In conclusion, China is doing great as a communist country and as an emerging market. After since the late 70s the international business activities had been rapidly growing. Many foreign investors are looking towards this big market (China). China is well known for their low minimum wages and low price for resources, by having these two criteria many foreign investors had move their production company to China and operate in China with a much lower operating cost. China macro-environment is so much more complex and dynamic macro-environment factors especially that China is one of the hottest market and faster growing emerging market today. To do extremely well in this growing market, investors have to be very clear on what is happening on this market (China) and have a good understanding of how the macro-environment works, and how the consequences and effect that cause changes of any macro-environment forces to be prepare and ready to sustain the business in China. Phone giants (Samsung, Apple and so forth) have been doing very well in china for the past but china is building for the own local product to improve their own economic forces, since after many years of experience they are strong enough to launch many of their own local product today and even selling across international market.
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