international

1. International Business
environment
Dr Kate Lupton
BMM5312 Session 5

2. Re-cap: Where to
invest?
1. Read the FDI report on Moodle
2. Map out across areas:
• Who the main investors are into each area (inward
FDI)
• Where each area is investing themselves (outward
FDI)
• Which industries are popular for investment
• An example of recent projects
• Highlights of key trends
3. Look over your findings and decide:
• Who is investing the most?
• Which areas are receiving the most investment?
• Which industries are most popular for investments?

3. Competitive advantage of nations
• Porter’s Diamond of
National Advantage
• These are the
determinants of
national advantage Country
competitiveness
Factor
conditions
Demand
conditions
Related
and
Supporting
Industries
Firm
Strategy,
Structure,
and Rivalry

4. Competitive advantage of nations
Porter’s Diamond (1990)
• Factor Conditions: The nation’s position in factors of production; highly
specialised. E.g. skilled labour or infrastructure, necessary to compete in a given
industry.
• Remember that disadvantages can lead to innovation rather than resting on laurels
• Demand Conditions: The nature of home-market demand for the industry’s
product or service
• Character of home demand rather than size
• Related and Supporting Industries: The presence or absence in the nation of
supplier industries and other related industries that are internationally
competitive
• Internationally competitive home-based suppliers create advantages in downstream
industries in several ways
• Firm Strategy, Structure, and Rivalry: The conditions in the nation governing how
companies are created, organized, and managed, as well as the nature of domestic
rivalry
• The more intense the domestic rivalry the better

5. The international business environment
• What tools can we use to analyse the macro-environment?
• PEST
• PESTEL
• STEEPLE
• STEEPLED
• STEP-E
• Why is it important to for businesses to analyse and understand the
external environment?

6. Current trends in International business
• Growth of emerging markets
• Population growth; particularly in emerging markets with high
percentage of younger people
• Widening middle class; particularly from emerging markets
• Speed of change and innovation
• Increased competition
• More informed buyers
• Slower economic growth; exacerbated by COVID-19
• Focus on ethical and environmentally friendly practice; CSR, clean
technology
• How might these impact international business?

7. Activity: Rich picturing
• Start by drawing the global (megaenvironmental) level issues
international businesses face
• Now draw all the national macroenvironmental factors that may
influence a business entering a country (think PESTEL)
• Once you have drawn these influences, think about why they are
influential: do they represent opportunities or threats (or both?!)
• Where are there connections between factors?

8. Socio-cultural
• Cultural values
• Gender roles
• Language
• Traditions
• Religions
• Trends and tastes
• Consumerism
• Lifestyle
• Health; HDI and HDI adjusted
• Education; literacy levels, years in formal education, opportunity for
training
• Population composition; age, gender, nationality, ethinicity
• Geographic diversity

9. Technological
• Influence of new or changing technology
• Work practices
• Impact of communication technology
• Technology and the workforce
• Manufacturing capabilities
• Amount of knowledge and technology intensive (KTI’s) industries
• Innovation and number of patents

10. Environmental
• Natural resources
• Environmental plans and policies
• Waste management
• Energy use and alternative energy availability

11. Ethical
• Human rights
• Modern slavery including employment of child labour
• Employee rights:
• rates of pay
• minimum wage
• working conditions
• Hours
• holidays

12. Political
• Political system in country
• Democracy
• Stability
• Political freedom
• Mega political environment: Unions and trade agreements (ASEAN, EU,
GCC, NAFTA, TPFTA)
• Government policy:
• Fiscal (stabilisation of economic activity)
• Labour market incentives (minimum wage, tax, social security system, power of trade
unions)
• Economic integration
• Government control of assets – privatisation, SOE’s
• Civil society

13. Left and Right Spectrum of Political Opinion
‘Centrism’
Consensus in society
Left Wing
• Socialism
• Communism
Right Wing
• ‘Conservatism’
• Fascism

14. Implications
for business
of
democracy
Key stakeholders in the different variants of governance will vary
MORE stakeholders
Weaker rule of law in less democratic states?
Transparency issues
Heavily regulated or even impossible to establish businesses due to
proscriptions on private property in totalitarian states
Difficulties relating to nationalisation and public ownership (in total)
Radical movements in political position lead to instability

15. Electro-
Harmonix in
Russia
https://www.forbes.co
m/sites/karstenstrauss
/2014/03/07/rock-and-
roll-russian-gangsters-
rising-from-the-dead-
the-saga-of-electro-
harmonix/#3bbd231f7
482

16. Legal
• Laws and regulations that influence business
• EU/WTO laws that regulate trade/business
• Market regulation and control: Mergers and acquisitions
• State encourages competition
• In response, firms merge or create secret alliances, resulting in
Competition legislation (investigate monopolies; over 25% market
share)
• Consumer protection law
• Employment law (pay, conditions)

17. Types of
Legal
System
• Common Law
• Civil Law
• Theocratic Law
• Customary Law
• Mixed Systems
Type matters as the
basis of any contract
between parties needs
to rely upon ONE set of
laws – but consider
both!

18. Economic
• Economic size and growth: GDP
• Economic structure: Types of industry
• GNI per capita (income elasticity of demand)
• Inflation and interest rates
• Employment/ unemployment
• Benefit and cost of international trade (imports and exports)
• Exchange rate: A fall in exchange rates makes exports cheaper abroad
and imports more expensive at home

19. Activity
• Choose a company currently operating in the UK
• Explore a country you think might be a good option for the company
to expand into
• Perform a STEEPLE analysis of your chosen country

20. References
• As well as the Collins and Daniels core texts the following resources
were used:
• Freedom House (2018) Freedom in the World 2018: Democracy in
Crisis. Available online at:
https://freedomhouse.org/report/freedom-
world/2018/democracy-crisis (Accessed 19/10/20)
• Porter, M. E. (1990) The Competitive Advantage of Nations. Harvard
Business Review, 90(2), pp. 73-95. Available online at:
https://hbr.org/1990/03/the-competitive-advantage-of-nations
(Accessed 19/10/20)
• World Bank www.worldbank.org