QS Study

Environment for Multinational Business

A multinational business organization is a company which has its headquarters in one country but has assembly or production facilities in other countries. When thinking about the international business environment, concerns over economic, political, cultural, technological and regulatory conditions of your target markets will always crop up.

There is some responsibility to multinational businesses for the environment that are given below:

(a) Social environment: The most evident and widespread factor in the social environment is the variation in culture among peoples. There are some social factors that are:-

  • Social overhead cost: The social overhead cost is a public and private investment. Which are necessary to prepare the environment for effective operation of a new business unit? The whole system must be upgraded and this action takes substantial social overheat cost as well as additional start-up time.
  • Public visibility: Not only must a multinational business live up to different standards in each country but it also must be prepared to meet these standards with more perfection that national business is expected to do. The public visibility is greater than that of local business.
  • Joint ownership with government: The government will insist on being a partial owner in a foreign business. Which it admits, Businessmen in these nations have to be actively interested in government affairs in order to operate successfully.
  • Expropriation as a special political risk: The risk of expropriation is a strong deterrent to investment in nations. When it occurs an equal or greater loser tends to be the private managerial skill, Technical know-how, international markets, Multinational business offers a developing nation.

(b) Economic environment: Business involved in the economic life a nation that is an international economic environment of business. A high level of inflation creates so much instability & social unrest.

(c) The farmer-Richman model of environmental constraints: Farmer and rich man have developed a model for comparing environmental constraint score indicates that external constraints are giving high support to efficient business.

(d) The law of persistent underdevelopment: The many constraints on a productive enterprise in developing nations lead to the general conclusion that an underdeveloped nations cultural factors operate in an interacting. System suppresses both social and economic growth.