Analyzing The Necessity Of Micro And Macro Environmental Factors For Business Management

PESTLE framework for business policies

Discuss about the Introduction to Global Business for Micro Environmental Factors.

This paper is going to elaborate on the necessity of analyzing the micro environmental factors and the microenvironment in regards of the global business. The paper has shed light on the four primary factors i.e., the political, legal, social, technological, environmental and economic factors that assist the growth of the business in the global market. They describe a framework of the micro environmental policies (PESTLE) that could govern the businesses in order to carry on the business effectively in the business market. All these factor can also assist in the scanning of the environmental components of the strategic management and they are all important to be analyzed by every organization as they have the potential to affect the business both positively and negatively (Utami and Lantu 2014). However, the paper will identify the one most relevant macro environmental factor for an international business while choosing to internationalize into the developing country. The paper will also focus on describing some international business concepts and theories that could be used in order to help to justify the explanation of the paper. The major aim of this paper is to elaborate on a brief discussion about the importance of political factors in the process of decision making as well as the success of the firms.

Political factors is concern about the stability of the political environment and the attitudes of the political parties and the movements (Quintelier and Van Deth 2014). It is to be mentioned that the political factors of any nation have the most influence on the overall business in each of the organization present there. They manifest in the government influence on the government involvement, tax policies in the trading agreements (Williams 2018). The political factors are automatically entwined with the legal factors like that of the international trade regulation, restrictions, consumer protections, monopolies, mergers’ rules, national employment laws etc. The only difference in between the legal and the political is that the legal factors are the ones that have become regulations and laws that are bound to be addressed by every organization (Burley 2017). On the other hand, the political factors refers to the approaches and the attitudes. The political factors might also represent the restrictions, influences or the opportunities. However, unlike the legal factors, the political factors are not mandatory and they are bound to be compiled of. The political factors are capable enough to introduce the risk factors that may cause the business to suffer massive losses and to compromise over the profit stream (Jackson 2018).  It is the most important of all as it is a fact that it does not remain constant. These factors remains changing with the change in the existing policies and the existing governments, as they the changes in them change the actions at every level, right from local to federal. Hence, it is very necessary for all the companies to plan for following the liability in the regulations and the policies of the government in order to maintain a stable business environment. In fact, it is also to note that all the other factors of the macro environment, such as the social, environmental, economic, and technological and not to mention the legal issues are all interdependent on the change in the governmental policies.  For example, the economic factors such as the rate of interests, rate of inflations and the rate of exchange that are directly concerned with the business operations are all dependent on the government policies (Baker, Bloom and Davis 2016). The rate of exchange accepts the costs of exporting the services and goods and the price of the imported goods in the economy but it is also to note that they will be positively impacting the business growth of any firm only when the government policies are positive. Furthermore, in case of the social factors, the government ownership have a great impact on the demands of the people and the population as they have to buy only those products that are allowed by the government and are made available by them for making purchasing (Charles 2017). Also, the technological are also affected by the political factors of the country. The technological factors determines the barriers to entry in the global markets as well as they also encourage the outsourcing decisions and they may also manipulate the quality, cost and the innovation of the products and services of any firm (Dunning 2015). However, the change in the procedures of the firms and the shifts in the advanced technology highly relies upon the regulations and policies of the government in absence of which the international firms could not introduce their process of production. The political factors are capable of influencing the development rate of new technologies as well.

Importance of political factors in global business management

Hence, it can be said from the above analysis that the political factors have a strong impact on the business of every firm present in a country. Such factors adds on further risk in the business process of every company that might lead to huge loss in the business. Hence, it is very important for every business to plan for the variability in these governmental policies and the regulation in order to maintain a stable business environment. However, it would be wrong to focus upon the negative sides only. These political policies could also be supportive for many of the firms. The employment laws that are made the government are solely to protect the rights of all the employees (Porter and Kramer 2018). The theory of Porter’s five forces shapes the competition within a specific industry prevailing in a country and that are regulated by the powers and trade barriers of the firms and the markets. All these five elements- the bargaining power of the consumers, the bargaining power of the suppliers, threat of new entrants, threat of substitutes and industry rivalry, are purely regulated by the governmental policies that provide some protection and predictability for the business (Beesley and Clittlechild 2013). Through the trade agreements, every nations could ease trade among themselves making the international countries getting the opportunities for entering into the new markets. With the same, the political support assists all the firms in facing less trade barriers for exporting their products internationally.

In the article “Nike executive resignation coincides with workplace behaviour inquiry”, published in 16 March 2018 by Tiffany Hsu, it has been described that Nike has been very fortunate as the United Sates government have formulated many policies that would foster the business growth of it (Financial Review, 2018).  The company is enjoying low-interest rates, stable currency with competitive tax agreement in the recent years which is helping it in advancing the growth (Schimmelfennig 2014). The US government have taken many initiatives with respect to transparency in the international value chain. Nike has outsources man manufacturers in the other parts of the world such as in Vietnam, Thailand and Indonesia. The article have hence described on how the governmental policies could through positively affecting, change the face of business and the regional economy. The article has provided a clear insight on how the political support and stability could be advantageous for both companies and the country.

In contrast to this, the article “Amazon has lots of company as Trump slams ‘stupid’ businesses” by Cecilia Kang and Michael D. Shear, published in 4, April, 2018 has suggested that how the political issues that are taking place in USA have affected the global business organisations including many online retailers (Kang, 2018). The president of U.S has planned of business which has been proved to be one of the most negative factors for the business companies operating in all over the world including United States (Macaulay 2018). Despite of the fact that there are many political leaders who have a clash with the prevailing business industries in terms of interests, the IU president has been slandering the global brands which are not reinforced by the United States’ chamber of commerce. The authors have highlighted the point on how the political criticism on the overall performance of the international brands have a far reaching impact which could be recognised (Eshuis, Braun and Klijn 2013). As of Cecilia Kang and Michael D. Shear, “Lately, Trump’s anti-business rants have become particularly menacing and caused the stocks of some companies to plunge”. This newspaper articles has also elaborate on the tremendous pressure that are been implemented on the automobile industries, drug companies, mobile phone corporations, tech firms, the Wall Street giants, air-conditioner manufacturers etc., have changed the face of the political benefits that these companies have been relishing so forth.

Conclusion

To sum up, it could be said the major macro environmental factor that has the most influence in the business today is of the political factors. It has the potential to affect both positively and negatively. Hence, every firm must consider this factor and should be ready to deal with all he domestic and international level of political consequences. The above mentioned two articles has suggested that although the political factors associated with the government policies could damage and influence the overall business procedure in both the national and international level, it is also to note that if they are set with positive intention that they could also assist in improving the business at global level. Also, political support and stability could increase certainty level of trade that benefits the firms along with the local region. However, it is also suggested that the criticism by influential political leaders could enhance the associated risk factors from the companies doing business in the global market.

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