Business 101: Principles of Management

Managing in international companies takes a special breed of person. The reason for that is that not only do managers have to have an understanding of how to conduct business, but they also must deal with several other factors that are present in the international arena.

Working in International Environments

When we talk about managers working in international companies and environments, I would like you to picture a juggler. Now, this is no ordinary juggler, because he is not juggling balls, oranges or even chainsaws. No, this one is juggling something much more serious - all the aspects present in the international environment.

The main areas a manager must deal with are:

• Political
• Legal
• Sociocultural
• Economic
• Technical environments

Each of these areas impact managing in an international setting and have their own unique set of circumstances.

Political and Legal

It is important to understand that the political and legal aspects of international business are two separate areas, but it has been my experience that they are very closely linked since the political environment will drive the structure of the legal environment.

The political environment consists of the government and its actions. The legal environment is the court systems and laws that are present in a foreign country. So it's easy to see how these two areas are closely linked.

The political environment is what makes a country feel stable or unstable based on the performance of the political leaders. Just like in the U.S., if our president is strong and our political system is stable, companies can feel more comfortable conducting business. If the political system is not stable, you can see how managers might be more conservative and potentially pull back on investing.

Similar to this is the legal environment, which is driven by the political system present in the market. A manager for an international business must stay in touch with the laws of that country, which could be totally different than what they might be used to in the U.S.

Should a legal issue arise, a manager must deal with that issue within the laws of that country. This could impact employee law, business law and even the monetary actions of the company.

Sociocultural

To understand how managers have to deal with sociocultural issues, we have to understand what 'sociocultural' means. It is defined as 'the blending of social and cultural aspects in a country.' As an example, we could say that in the U.S., our society is one of freedom of speech, and part of our culture is to challenge our political leaders if we do not agree with them. For some, that would seem very odd depending on their society and culture. Think of someone coming from Saudi Arabia, where there are kings that would never be challenged openly and women have limited freedoms. Thus, if you are managing in that culture, you have to take all that into account so you do not make mistakes.

Economic

Economic environment is the economy and the economic system present in a country. The economy could be weak and the system might not be stable, which would impact how a manager would manage his or her operations in a foreign market. It is apparent why a manager needs to stay close to this area, as it will impact their business directly.

Is the economy growing? Is the economy stable, or is it shifting around so a manager cannot get a clear picture of what is happening or what the future looks like? Issues like this will impact how a manager makes decisions in a market.

Technical

The technical aspect of managing internationally has a unique twist that you might not be aware of. Here we're talking about technology that is present in a market. To help you understand this, let us use China as an example. In China, the government regulates and censors the Internet; thus, they control information. This technology (the Internet) has developed into something every company relies on, but in China, this technology is not freely available. Another aspect is that just because we have the technology here (good phone lines, for example), it does not mean that the same technology will be in a foreign country (India, for example).

Lesson Summary

Back to that juggler now, we can see that he is juggling:

• Political - The government present in a market that a manager must deal with and understand
• Legal - The laws in a culture as well as the political system
• Sociocultural - The culture and society present in a market
• Economic - The strength or weakness of the economy
• Technical - The available technology in a market

Pretty tough juggling act if you ask me.