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    Business Environments: Country Attractiveness: Country Attractiveness Is A Measure of A Country's

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    Dinar Hassan
    Country attractiveness is determined by evaluating political, economic, and cultural factors of a foreign country before investing. Politically stable countries with predictable economic conditions like low inflation and stable currency exchange rates are most attractive for business. Cultural factors that influence consumers like language differences, customs, and religious beliefs must also be considered to understand local markets and tailor business operations appropriately. International firms evaluate all these environmental factors to determine which countries pose the lowest risks and highest profit potential for investment.

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    Business Environments: Country Attractiveness: Country Attractiveness Is A Measure of A Country's

    Uploaded by

    Dinar Hassan
    57 views3 pages
    Country attractiveness is determined by evaluating political, economic, and cultural factors of a foreign country before investing. Politically stable countries with predictable economic conditions like low inflation and stable currency exchange rates are most attractive for business. Cultural factors that influence consumers like language differences, customs, and religious beliefs must also be considered to understand local markets and tailor business operations appropriately. International firms evaluate all these environmental factors to determine which countries pose the lowest risks and highest profit potential for investment.

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    Country attractiveness is determined by evaluating political, economic, and cultural factors of a foreign country before investing. Politically stable countries with predictable economic conditions like low inflation and stable currency exchange rates are most attractive for business. Cultural factors that influence consumers like language differences, customs, and religious beliefs must also be considered to understand local markets and tailor business operations appropriately. International firms evaluate all these environmental factors to determine which countries pose the lowest risks and highest profit potential for investment.

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    57 views3 pages

    Business Environments: Country Attractiveness: Country Attractiveness Is A Measure of A Country's

    Uploaded by

    Dinar Hassan
    Country attractiveness is determined by evaluating political, economic, and cultural factors of a foreign country before investing. Politically stable countries with predictable economic conditions like low inflation and stable currency exchange rates are most attractive for business. Cultural factors that influence consumers like language differences, customs, and religious beliefs must also be considered to understand local markets and tailor business operations appropriately. International firms evaluate all these environmental factors to determine which countries pose the lowest risks and highest profit potential for investment.

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    of 3

    Country attractiveness: Country attractiveness is a measure of a country’s

    attractiveness to the international investors. In international business, investment in


    foreign countries is the most important aspect and hence firms want to determine how
    suitable a country is in terms of its external business environments.
    International business firms judge the risks and profitability of doing business in a
    particular country before investing and starting a business there. This judgment
    includes studying the environmental factors to arrive at a decision.
    It is pretty clear that businesses prefer a country that is less costly, more profitable, and
    has fewer risks. Cost considerations are related with investment. Profitability is
    dependent on resources. Risks are associated with the environment and hence it is of
    prime concern.
    Risks may be of various types. However, the general consensus is that a country that
    is more stable in terms of political, social, legal, and economic conditions is more
    attractive for starting a business.

    Business Environments
    There are numerous types of business environments, however the political, the
    cultural, and the economic environments are the prime ones. These factors influence
    the decision-making process of an international business firm. It is important to note
    that the types of environments we discuss here are interlinked; meaning one’s state
    affects the others in varying dimensions.

    The Political Factors

    The political environment of a nation affects the legal aspects and government rules
    which a foreign firm has to experience and follow while doing business in that nation.
    There are definite legal rules and governance terms in every country in the world. A
    foreign company that operates within a particular country has to abide by the country’s
    laws for the duration it operates there.
    Political environment can affect other environmental factors −

     Political decisions regarding economy can affect economic environment.


     Political decisions may affect the socio-cultural environment of a nation.
     Politicians may affect the rate of emergence of new technologies.
     Politicians can exert influence in the acceptance of emerging technologies.
    There are four major effects of political environment on business organizations −
     Impact on Economy − The political conditions of a nation have a bearing on its
    economic status. For example, Democratic and Republican policies in the US
    are different and it influences various norms, such as taxes and government
    spending.
     Changes in Regulation − Governments often alter their decisions related to
    business control. For example, accounting scandals in the beginning of the 21st
    century prompted the US SEC turn more mindful on the issues of corporate
    compliance. Sarbanes-Oxley compliance regulations (2002) were social
    reactions. The social environment demanded the public companies to be more
    responsible.
     Political Stability − Political stability effects business operations of international
    companies. An aggressive takeover overthrowing the government could lead to
    a disordered environment, disrupting business operations. For example, Sri
    Lanka’s civil war and Egypt and Syria disturbances were overwhelming for
    businesses operating there.
     Mitigation of Risk − There are political risk insurance policies that can mitigate
    risk. Companies with international operations leverage such insurances to
    reduce their risk exposure.
    Note − You can check The Index of Economic Freedom. It ranks and compares the
    countries depending on how politics impacts business-decisions in those locations.

    The Economic Factors

    Economic factors exert a huge impact on international business firms. The economic
    environment includes the factors that influence a country's attractiveness for
    international business firms.
     Business firms seek predictable, risk-free, and stable mechanisms. Monetary
    systems that acknowledge the relative dependence of countries and their
    economies are good for a firm. If an economy fosters growth, stability, and
    fairness for prosperity, it has a positive effect on the growth of companies.
     Inflation contributes hugely to a country's attractiveness. High rate of inflation
    increases the cost of borrowing and makes the revenue contract in domestic
    currency. It exposes the international firms to foreign-exchange risks.
     Absolute purchasing power parity is also an important consideration. The ratio of
    exchange rate between two particular countries is identical to the ratio of the
    price levels. The law of one price states that the real price of a product is same
    across all nations.
     Relative purchasing power parity (PPP) is valuable for foreign firms. It asks how
    much money is needed to buy the same goods and services in two particular
    countries. PPP rates prompt international comparisons of income.

    The Cultural Factors

    Cultural environments include educational, religious, family, and social systems within
    the marketing system. Knowledge of foreign culture is important for international firms.
    Marketers who ignore cultural differences risk failure.
     Language − There are nearly 3,000 languages in the world. Language
    differences are important in designing advertising campaigns and product
    labels. If a country has several languages, it may be problematic.
     Colors − It is important to know how people associate with colors. For example,
    purple is unacceptable in Hispanic nations because it is associated with death.
     Customs and Taboos − It is important for marketers to know the customs and
    taboos to learn what is acceptable and what is not for the marketing programs.
     Values − Values stem from moral or religious beliefs and are acquired through
    experiences. For example, in India, the Hindus don’t consume beef, and fast-
    food restaurants such as McDonald's and Burger King need to modify the
    offerings.
     Aesthetics − There are differences in aesthetics in different cultures. Americans
    like suntans, the Japanese do not.
     Time − Punctuality and deadlines are routine business practices in the U.S.
    However, Middle East and Latin American people are far less bound by time
    constraints.
     Religious Beliefs − Religion can affect a product’s labelling, designs, and items
    purchased. It also affects the consumers' values.
    Cultural Differences
     Ireland’s evening meal is called tea, not dinner.
     If you nod in Bulgaria, it means "no" and moving the head from one side to the
    other means "yes".
     Pepsodent toothpaste did not sell well in Southeast Asia, as it promised white
    teeth. Black or yellow teeth are symbols of prestige there.

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