Environmental Challenges of International Management

Managers functioning in a global context must be aware of several environmental challenges. Three of the most important include economic, political/legal and cultural challenges.

The Economic environment:

There are three aspects of the economic environment in particular that can help managers anticipate the kinds of economic challenges they are likely to face in working abroad.

Economic System:

The first of these is the economic system used in the country. Most countries today are moving towards a market economy. In a mature market economy, the key element for managers is freedom of choice. Consumers are free to make decision about which product they prefer to purchase and firms are free to decide what products and services are provided. For this supply and demand determine which firm and which products will be available.

            A related characteristic of market economies that is relevant to managers concerns the nature of property ownership. There are two pure types-complete privet ownership and complete public ownership.

Natural resources:

            It is an important aspect of the economic environment in different countries. A very broad range of resources is available in different countries. Like Japan have few natural resources of their own. The USA has enormous natural resources and is a major producer of oil, gas, coal, iron ore, copper, uranium and other metal and materials.

Infrastructure:

            Another important aspect of the economic environment of relevance to international management is infrastructure. A country's infrastructure comprises is schools, hospitals, power plants, railroads, highways, shipping ports communication systems, air fields, commercial distribution systems, and so forth. The United States has a highly developed infrastructure. For example, its educational system is modern. Roads and bridges are well developed, and most people have access to medical care.   

The political/legal environment:

            A Second environmental challenge facing the international manager is the political/legal environment in which he or she will do business. Four especially important aspects of the political/legal environment of international management are government stability, incentives for multinational trade, controls on international trade and the influence of economic communities on international trade.

Government stability:

            Stability can be viewed in two ways-as the ability of a given government to stay in power against opposing factions in the country and as permanence of government policies toward business. A country that is stable in both respects is preferable, because managers have a higher probability of successfully predicting how government will affect their business. Government policies are likely to be and whether the government will be able to guarantee the safety of international workers.

Incentives for international trade:

            Another facet of the political environment is incentives to attract foreign business. Incentives can take a variety of forms. some of the most common include reduced interest rates on loans, construction subsidies, and tax incentives. Less developed countries tend to offer different packages of incentives.

Controls on international trade:

            A third element of the political environment that managers need to consider is the extent to which there are controls on international trade. In some instances, a country's government might decide that foreign competition is hurting domestic trade. To protect domestic business, such governments may enact barriers to international trade. These barriers include tariffs, quotas,

export restraint agreements, and "buy national', laws.

Economic communities:

            Just as government policies can either increase or decrease the political risk facing international mangers, trade relations between countries can either help or hinder international business. Relations dictated by quotas, tariffs, and so forth can hurt international trade. There is currently a strong movement around the world to reduce many of these barriers. The movement takes its most obvious form in international economic communities. An international economic community is a set of countries that agree to markedly reduce or eliminate trade barriers among member nations.

The Cultural Environment:

            Another environmental challenge for the international manager is the cultural environment and how it affects business. A country's culture includes all the values, symbols, beliefs, and language that guide behavior.

Values, symbols, beliefs and language:

                Cultural values and beliefs are often unspoken; they may even be taken for granted by themes that live in a particular country. Cultural factors do not necessarily cause problems for managers when the cultures of two countries are similar. Difficulties can arise; however, when there is little overlap between the home culture of a manager and the culture of the country in which business is to be conducted.

            (Cultural differences between countries can have a direct impact on business practice. For example, the religion of Islam teaches that people should not make a living by exploiting the misfortune of others; as a result, charging interest payments is seen as immoral.

            Some cultural differences between countries can be even more subtle and yet have a major impact on business activities. For example, USA managers clearly agree about the value of time.)

 Individual behaviors across culture:

            From another perspective, there also appear to be clear differences in individual’ behaviors and attitudes across different cultures.

1.      Social orientation is a person's beliefs about the relative importance of the individual versus groups to which that person belongs. The two extremes of social orientation are individualism and collectivism. Individualism is the cultural belief that the person comes first. Collectivism, the opposite of individualism, is the belief that the group comes first.

1.      Power orientation is beliefs that people in a culture hold about the appropriateness of power and authority differences in hierarchies such as business organizations.

2.      Uncertainty orientation is the feeling individuals have regarding uncertain and ambiguous situations. People in countries with uncertainty acceptance are simulated by change and thrive on new opportunities.

3.      Goal orientation is the manner in which people are motivated to work toward different kind of goals. One extreme on the goal orientation continuum is aggressive goal behavior.