What factors do a company wishing to globalise has to research before when venturing into the global markets?
When a firm wants to plant a flag in a new country, it has to be especially aware of the political, economic, social, technological, legal and government variables (PESTLG) that shape the business environment.
1. Political
Firms that want to expand into a foreign country must also analyse its political stability; the business attitudes of its government, ruling and opposition parties (legal and illegal), and the effectiveness of its government bureaucracy. Both a country’s internal and foreign policies can powerfully influence the business environment. For this reason, companies must assess political risks, the possibility that political changes, either in the short or the long run, will affect its activities abroad.
2. Economic
To reduce the risk of any international venture, organisations must pay particular attention to such economic variables as, foreign patterns of economic growth, investment, and inflation. Besides assessing current economic conditions, they need to forecast future conditions in any country they operate in, sell to, or purchase from.
Organisations must also concern themselves with various aspects of international trade, such as, the value of a country’s currency relative to other currencies. (The foreign exchange rate) and its balance of payments, as well as the type of controls placed on imports, exports, and foreign investors.
Managers of a company wishing to globalise must also evaluate a country’s infrastructure, the facilities needed to support economic activity. Infrastructure includes transport systems, communication systems, schools, hospitals, power plants and sanitary facilities. The state of a nation’s infrastructure often reflects the strength of a nation’s economic and government’s priorities.
3. Social
Analysing the demographics and lifestyles of people in different companies is vital to the successful marketing of products that will appeal to foreign customers. The ultimate success of companies expanding globally hinges on its skill in fitting into the social fabric created by another country’s values and culture. This is especially important for managers who must motivate and lead employees from different cultures with varying concepts of formality and courtesy.
4. Technological
Multinational managers must be sensitive in introducing new technology to foreign cultures and adapt to the fact that levels of technology vary among countries. Production technologies that work well in the USA, with its fairly high technological level, might not work well in Zimbabwe. Moreover Zimbabweans and their governments might resent being forced to adapt to new technology, a change that is often traumatic. Any technological change is difficult, and support of the host government may be nearly essential.
5. Legal
Companies wishing to enter into other countries must do some research on the legal requirements of the countries in which they want to invest in. For example companies who want to invest in Zimbabwe must know what is stated in the indigenisation Act in this country. This is essential as companies should know the legal side of the country they want to enter.
6. Government
Firms must also be in the know of the government involvement in economic development. Policies they craft and how they are implemented.
