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The modern economy as globally connected

The International Business Environment

Overview of the International Business Environment

International business offers substantial potential risks and returns from an organizational perspective.

LEARNING OBJECTIVES

Recognize the complex factors that may impact an organization’s strategic decision to expand internationally

KEY TAKEAWAYS

Key Points

  • The modern economy is globally connected, and growing more so every day. Weighing the pros and cons of international expansion is a key strategic consideration.
  • The multinational enterprise ( MNE ) is the primary player in international business. MNEs are present in virtually every industry nowadays.
  • Entry modes for international businesses include global concentration, global synergies, and other strategic global motivations.
  • With the complexity of international operating environments, organizations should consider economic, technological, legal, socio-cultural and environmental factors.
  • Weighing the risks and potential returns and determining a required rate of return for an international expansion is a key aspect of global financial management.

Key Terms

  • MNE: Or a multinational enterprise, MNEs are defined as organizations which operate across multiple political borders.

International business is an enormously relevant facet of the modern economy, and will only become more integrated into core business strategy as technology continues to progress. International business is simply the summation of all commercial transactions that take place between various countries (crossing political boundaries). This is not exclusively limited to the domain of business, as NGOs, governments, and coops also operate across country borders with a variety of objectives (aside from simple profitability).

From a business perspective, the primary incumbent in an international business environment is the multinational enterprise (MNE), which is a company that pursues strategic success in global production and sales (i.e. operating within a number of country borders). The number of examples of this type of firm is constantly growing. From fast food chains like McDonald’s to auto manufacturers like Honda to smartphone designers like Samsung, the number of international players in most markets is constantly on the rise.