International Companies' Operating Environments

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  • 0:01 International Business Models
  • 0:27 Domestic
  • 1:37 Foreign
  • 2:35 International
  • 4:16 Lesson Summary
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Lesson Transcript
Instructor: Jennifer Lombardo
International companies' operating environments are complicated due to numerous factors. In this lesson we will identify and describe the three environments in which the international company operates: domestic, foreign and international.

International Business Models

More and more companies are moving from the local market to the world market. Technology and population growth have created a need for products and a simple way to reach millions of consumers.

Sword Automobiles is a global giant in the manufacture and sales of cars. The company conducts business across national borders in three different environments: domestic, foreign and international. Let's see how Sword conducts business in each of the three environments.

Domestic

Sword's home country is the U.S., which is thus considered their domestic environment, or base country. All of the United States' unmanageable factors, such as economic, cultural, legal and environmental issues, influence Sword's business. For example, the recent recession in the United States has drastically affected Sword's bottom line because consumers are holding off on purchasing new cars. Sword can have some influence on these unmanageable factors by doing things like offering cheap leases or having sales on used vehicles to increase profits. Another issue facing Sword in their domestic market is a finite or smaller customer market.

Nevertheless, the demand for their cars has been shrinking, and the company needs to acquire new customers. The answer is to seek out customers in other countries. The managers at Sword do view domestic business as an easier environment to control, especially with communication factors such as ads or marketing messages. More serious complications arise for Sword in their other business environments.

Foreign

Sword's foreign environment consists of all of the domestic business within a foreign country. Since Sword's home country is the U.S., their operations in China, Japan, Spain and Mexico would be considered foreign. Any factors that develop outside of the U.S. would cause foreign business issues. Swords' biggest difficulties often arise from dealing with political or legal changes in other countries. For example, the new Mexican leader has an anti-American business platform, which has made it difficult for Sword to conduct business within that country, and their production has suffered. Communication can also be difficult when Sword is trying to market their products overseas. Ads and marketing messages have to be tailored to reach the needs and interests of the consumer, which might be different in a foreign market than in their domestic market. Sword also pays attention to each country's regulations in order to comply with national standards.

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