Question

Explain the implications the international environment has on the strategic planning process.

Answer 1

Every business is likely to be affected by the external environment, so is the case with the strategy adopted by the organization. The strategy planning must be done in such a way that the local as well as the international factors are also taken into consideration. This is more important in the case of international firms, which has its market and bases across the globe. An analysis using the PESTLE framework helps in identifying the opportunities and overcoming the risks through proper and efficient strategic planning. The ways in which an external international environment affects the strategy and its planning are as follows:

• The growth of the firm can be made into the direction that has potential in the future. For example, in the automobile industry, if there is a boom that is expected in the electric vehicles, that trend will be evidently sprouting in the international business scenario. Understanding this, the resources can be redirected and the strategy can be formulated in that direction.

• If there is a competitor brand out there in the global market, planning can be done to include more marketing activities like advertisement campaigns, sales promotion, etc. These are also vital components of the strategic planning.

• If there is a negative growth in the economy, plans like an expansion of business, diversification, etc. can be postponed to a better time when the economy becomes stable. This decision can be made as a result of the international environment analysis.

• The legal regulations of the country might vary from place to place. What is legal in Italy might not be an acceptable norm in the USA. Thus, a clear and detailed study of the legal environment through analysis is necessary while taking every single step.

• The social conditions of different countries have great difference and so does the cultural context. A very efficient international environment analysis can help in understanding the society, the workforce there and the scope of starting a new business in a different country, which comes as a part of the international environment.

• Environmental issues must be addressed as it gains great momentum these days. Many countries have strict environmental regulations and sustainable practices when it comes to manufacturing and business operations. Any change in these norms must be immediately updated and the change in the strategy needs to be done in order to ensure the smooth conduction of business.

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