Sample: Environment Of International Business And Its Significance

2.2.1 Environment Of International Business And Its Significance

Strategy formulation is sometimes defined as establishing a proper firm-environment and it highlights the critical importance of analyzing the international business environment to the development of international business strategies (Ghemawat and Hout, 2009). The strategic concept of marketing which was major evolution in the history of marketing thought shifted the focus of marketing from the customer or the product to the customer in the context of the broader external environment. Knowing everything there is to know about the customer is not enough. For being successful it is required that marketers have knowledge about the customer in a context including the competition, government policy and regulation, and the broader economic, social, and political macro forces that shape the regulation, and the broader economic, social and political macro forces shaping the evolution of markets (Moon, 2009). Now here the point arise that is environmental orientation is the essence of strategy, the, what makes the international business strategy different from the domestic strategy is, obviously, the differences in the business environment. The strategic question, therefore, is not whether the market of foreign or domestic but whether business environment is the same or different (Reddy, 2008). If the foreign and domestic business environments are the same, then there is no need for different strategies. On the other hand, if there are substantial differences in the business environment within the domestic market, there may be a need of different strategies.

What makes a business strategy successful in one market and a failure in another is often the differences in the business environment (Paul, 2008). In other words, the differences in the business environment may call for changes in the business strategies, i.e., there should be adaptation of the business strategy to suit the environment of the market. In short, it is the differences in the marketing environment which may make the international business strategy different from the domestic one. A firm in international business encounters three different sets of external environment including domestic, foreign and global environment (Figure 1).

The internal environment of the firm is also important. The competence of a firm to do international business depends on a number of internal factors such as the mission and vision of the firm, the attitude, capabilities and commitment of the top management and the entire people in the organization, organizational structure and decision-making and implementing factors, financial and other resources and capabilities (Moon, 2009).