International Business Analysis - The Top 5 Tools You Need

International business has become increasingly important in the contemporary world of business. The international business encompasses cross-border production as well as exchanges of goods, services, and resources between countries. Therefore, international business includes transfers of resources such as intellectual property, labor, and contractual liabilities or assets. Many multinational companies have expanded into international to benefit from various opportunities including the need to utilize cheap labor and capitalize on growing markets. A thorough analysis of the external environment is crucial for any firms before they start business operations in a foreign country. Part A of this report provides PESTEL analysis of five countries ACME is contemplating to expand to using the PESTEL framework. It will further examine cultural aspects likely to impact the business of ACME using Hofstede's cultural dimensions 

PESTEL Analysis of France 

There are many aspects of politics in France that will affect ACME business in France. As a developed country, France has a stable political environment such as political troubles and crisis, and civil war. The political environment is attractive to new businesses like ACME. However, there are some restrictions for foreign investors in France market. This includes a fixed limit of 1.5 million Euros for foreign enterprises interested to invest in Monaco, Saint Pierre, Mayotte, and Wallis and Futuna. For foreign exports, there are minimal restrictions to export products into France which the company can utilize to sell products and services in France (U.S Commercial Services, 2014a). Overall, the political factor presents more opportunities than threats to foreign business eying for France market. 

Economic elements affecting the performance of the foreign businesses in France include exchange rate fluctuations, interest rate, the level of employment and inflation, economic growth, and purchasing power of the population. France recorded an economic growth of 1.9% in 2017, an increase of 1.6% from the previous year, the GDP per capita was $43,600 in 2017 and positive economic reforms were initiated in May 2017 to boost economic growth. However, the increase in the unemployment rate from 7.8% to 9.0% between 2008 and 2017 respectively can have an adverse effect on business performance (U.S Commercial Services, 2014a). Considering the economic factors factor in France, it favorable for ACME to expand and sell products due to a good economic situation in the country 

France has a population of over 67 million of varied races and ethnicities. The main language in French and population growth is low at 0.39% as at 2017. The 80% of the population live in urban centers and lifestyle of French people is similar to those of the U.S and this will boost U.S exports in the country. However, the high level of dependency rate- 59% reduces disposable income and purchasing power of people (Central Intelligence Agency, 2018). Overall, the social environment is favorable to the U.S and other western countries due to similarities in culture and lifestyle. 

France is a high tech industrial country with large internet penetration and usage across the country. The country has a technological index of 4.65 and has an excellent technological and scientific innovation to support business process and performance (Central Intelligence Agency, 2018). Overall, the technological environment is supportive of business performance. 

There is increased public demand for environmental conservation, particularly by corporations. This also covers the packaging of products sold in France as well as conserving water and energy. As a result pressure from the public and other bodies, France has imposed a carbon tax on corporations to limit their emissions. Therefore, companies with an interest in France market must play to wish of the public and government and engaging in green practices. 

There are several laws governing the operations of the business in France. These include employment and labor laws, taxation laws, and environmental laws. However, FDI laws are favorable and this has boosted both inward and outward flow of capital. 

PESTEL Analysis of China 

Political factors cover government regulations and legal issues. The political force in China is still unsettled. Government regulations include rules including FDI rules a foreign investor must comply with to operate in China. It is mandatory for all foreign investors to have a local partner. However, the enforcement of some laws particularly intellectually property laws is poor and the development of e-commerce is still in early phases. The overall political and legal environment is moderately favorable and supportive for foreign investors. However, but there is a need to improve the legal system to make them supportive of foreign trade and investment particularly FDI and patent law enforcement to improve business relations with U.S firms. 

The economic factor is the main factor in attracting foreign investors into China. Many foreign investors are attracted by the size of the Chinese market, cheap labor, and high economic growth prospects. The country has persistently reported high economic growth over the past 5 years averaging 7% to surpass the U.S in 2014 to become the largest global economy, largest trading nation in 2013, and largest exporter in 2010 (Central Intelligence Agency, 2018). The continued growth and use of cryptocurrency support trading (Kelly, 2014). However, China has continued to pursue restrictive investment which has forced the U. S to impose restrictions on Chinese multinationals and some imports thus adversely affecting the bilateral relations between China and The U.S. Furthermore, the impressive growth rate can be affected by thehigh rate of inflation, fluctuating RMB, high property prices, and high lending rates. Overall, economic factors provide great opportunities and are favorable for foreign trade and investment. 

Socio-cultural factors are main factors hindering the performance of western enterprises in China. In contrast to individualist U.S, China is a collectivist society which makes it impossible to transfer U.S management styles to China. As a result, U.S firms such as ACME who are interested in Chinese must first understand Chinese culture and adopted appropriate management styles. However, cultural differences also present opportunities to American investors. These include high rates of literacy, high internet penetration, and several customary celebrations and events for selling products. 

Development of B2C sector in the online payment system is the main technological problem in China. This problem is strengthened by the cultural dimension of long-term orientation and high uncertainty avoidance culture of Chinese. Credit card penetration is significantly low indicating a minimal use of electronic payment systems. However, this is attributed to the insecure and unstable online credit system within China. 

One main environmental factor impacting business performance in China is the increased public awareness of environmental conservation. This promotes the use of e-commerce since they restrict environmental damages and cause minimal pollution. Business interested in this market must focus engaged in environmentally friendly activities such as corporate social initiatives that reduce pollution and promote environmental protection. 

PESTEL Analysis of India 

The political environment of India is moderately stable which is making it favorable for business performance. The government is stable but long-standing conflicts with Pakistan over border disputes increases market uncertainty. The tax structure is well developed along three tiers namely the Federal, the state authority, and local governments. Government interference is minimal and this improved efficiency and productivity (U.S Commercial Services, 2014b). However, the political connection is important for business growth and performance of business entities and works against fair playing ground. The political stability and excellent tax structure have ensured long-standing positive relations with the U.S and their firms. 

India has developed into an open-market economy following economic liberalization and reduced control over foreign trade and investment. However, caps on FDI introduced in the recent years are hampering foreign investment. The average economic growth is 7% over the past two decades (Central Intelligence Agency, 2018). However, despite impressive economic growth, India's per capita income is lower than the global average partly due to high population. The value of Indian Rupee depreciated since 2016 against major world currencies and poorly targeted subsidies are affecting the growth. The prospect for growth is moderately positive and this is boosted by healthy savings and investment. Overall, the economic environment is not conducive and attractive to foreign investors. 

Social factors hindering investment in India include gender discrimination and the caste system, limited non-agricultural employment, inadequate power generation and distribution, lack of quality education, inability to accommodate rural-urban migration (U.S Commercial Services, 2014b). However, the high population, English as a subsidiary language commonly used in business and political communication, and low dependency are social factors promote business performance in India. 

India is technologically advanced and a major exporter of IT and business outsourcing services, as well as software workers. It is the second country worldwide in terms of mobile subscribers estimated at 1.1 billion and 397 million internet users. Overall, technological factors are supportive of business operations in creating innovative products and services as well as business processes and models for entrepreneurs. 

The main environmental factors are connected to increased awareness of environmental protection. Firms are compelled in green business practices to attract the growing market of environmentally conscious customers in India. The main legal aspect affecting foreign investors and relation with the US include strict FDI laws and inability to enforce intellectual property rights. This needs to improve to attract foreign investors in the Indian market. 

PESTEL Analysis of Vietnam 

The political climate in Vietnam is relatively stable due to a few protect which are often dismissed by the state. However, human rights freedom is poor and remains a major issue in the country which has adversely affected relations with the U.S and other western powers. The media I controlled and censored by the government (Human Rights Watch, 2014). The level of bureaucracy in business registration and corruption is significantly high. These are other political factors which makes Vietnam unfavorable and unattractive destination for foreign investors such as ACME. 

Economic factors include a relatively low economic growth, low rate of inflation, and stable currency as well as a strong manufacturing sector and strong FDI inflows. It recently joined economic blocks including WTO and government has initiated a series of economic reforms to spark economic growth. This has generated positive relation with the U.S and other western countries interested in the Vietnam markets. The purchasing power of the Vietnamese is relatively high with GDP per capita of $6,900 per annum (Central Intelligence Agency, 2018; General Statistics Office, 2014). These reforms have improved relations with the U.S and E.U and are boosting FDI inflows into Vietnam. Overall, economic factors are attractive to foreign enterprises such as EMC who have interest in Vietnam market. 

Social factors include a dense population totaling 96 million mainly the young population to offer abundant labor to businesses. The working age population accounts for more than 50 of the total population. It, therefore, makes great sense to locate ACME factory in Vietnam to take advantage of these cheap labor. However, the majority of workers lack technical and behavioral skills (Vietnam Briefing, 2014). Most people still live in rural areas with only 33 percent living in urban areas. This reduces their access to foreign products and services which are largely concentrated in urban areas. 

Most people have access to mobile subscription, but very few have access to internet technology- about 37% have access to the internet (U.S Commercial Services, 2014c). The growth of IT is still in the infancy stage, but it is growing rapidly and this is a plus for foreign products and services by increasing the number of online purchases. The state has taken measure to increase internet penetration and this will boost access and sales of foreign products. 

Environmental issues related to pollution of the environment due to high population density in cities such as Hanoi. This a major problem for the government that still remains unresolved amid the growing public concern about environmental pollution. The legal climate in Vietnam is considered complex by foreign businesses because severely lacks dependability, consistency, and transparency, and is marred with a lot of bureaucracy and corruption (U.S Commercial Services, 2014c). The unpredictable nature of the legal framework is the topmost concern for investors interested in the Vietnam market and also a concern for the U.S government. 

Hofstede's Country Comparison 

The United States and China 

Based on Hofstede's cultural dimensions, the U.S is an individualistic society while China is a collectivist society. This implies that Americans value individual efforts and success as opposed to group efforts in the Chinese society. China is a high power distance society at 80 while the U.S is a low power distance country ranked at number 40 globally. This indicates that the Chinese accept inequalities amongst people, while on the contrary, the U.S society believes that all people are equal (Mind Tools, 2018). China is also ranked high on long-term orientation whereas the U.S is ranked low on this cultural dimensions. This implies that Chinese people value tradition and would maintain status quo while U.S managers are ready and willing to execute change and accept innovative ideas. Both countries are ranked below average on the uncertainty avoidance dimension. At 30 and 46 uncertainty avoidance scores for China and the U.S, these countries are less threatened by an ambiguous situation and receptive to new ideas and are willing to try something different or new innovative products, technology, or business process or models ( Hofstede, 2011) . Low indulgence ranking for China is an indication of a restrained society characterized by pessimism and little love for personal leisure ( Hofstede, 2011) . On the contrary, the U.S is ranked high on this score which points to a prudish society. 

The United States and France 

Both the U.S and France are highly individualistic societies with a respective score of 91 and 71 on this dimension. However, in contrast to the U.S, France is ranked above average on power distance, uncertainty avoidance, and long-term orientation. High power distance indicates that French people accept inequality amongst people and have regard for authority that Americans (Mind Tools, 2018). At 86 score on uncertainty avoidance, French investors are also risk-averse than Americans and would delay making a business decision in risky and uncertain situations. A high score of 63 on long-term orientation implies that French managers are less receptive to new idea and innovations and prefer maintaining the status quo. In further contrast to the U.S, France score below average on indulgence and masculinity at 48 and 43 respectively. Overall, the French and American societies differ significantly on all cultural dimensions with exception of individualism dimension. Therefore, a different style of management should be adopted by U.S firms interested in France market. Furthermore, differences in culture also present both threats and opportunities for the U.S firms in France ( Hofstede, 2011) . For example, in the fast-changing business environment, the U.S manager can take advantage of high uncertainty avoidance by making quick decisions to exploit emerging opportunities in the market earlier than their local counterparts. 

The United States and India 

India and the U.S scored above average on the masculinity dimension indicating they are driven by competition, achievement, and success. They both scored below average on the uncertainty avoidance dimension which indicates their risk-taking ability. They, however, differ on the remaining cultural dimensions. In contrast to the U.S, Indian society exhibit high power distance and long-term orientation implying a high regard for authority figure and tradition (Mind Tools, 2018). The high power distance score is a clear demonstration of high-level class inequality and men superiority in this society. It also scored below average on individualism, indulgence, and uncertainty avoidance cultural dimensions. This means that India is a collectivist and restrained society but similar to the U.S, Indian are risk takers and would not hesitate to make risky decisions to capitalize on emerging business opportunities in the market ( Hofstede, 2011) . This cultural analysis reveals that direct transfer of U.S style of management is unlikely to work in India without modification to conform to Indian culture. The U.S entrepreneurs can capitalize on cultural opportunities such as collectivism culture to organize employees into work groups. 

Part 2: Risk and Reward 

Trade Barriers 

Trade barriers are different measures taken by the government to limit imports into the country. The common trade barriers include tariffs, import quotas, licensing, local content requirements, and voluntary export restraints (Radcliffe, 2018). 

Tariffs  

Tariff is a tax imposed on goods and services imported into the country ( Radcliffe, 2018) . This tax increases the cost of imported goods against locally manufactured products. 

Imports and Exports 

Imports are goods and services coming to the country from a foreign country for domestic consumption. Exports are goods and services a country sells to foreign markets. 

Exchange Rates 

Is the rate of buying and selling currencies of different countries. It is the comparison of currencies of two countries. 

1 USD = XX Chinese RMB 

1 USD = xx France Franc 

1USD = xx Indian Rupee 

Trading Partnerships 

This refers to countries that exchange goods and services with each other through trade. 

Labor 

Labor refers to human capital used in the production of goods and services. It increases the cost of products and services. Most multinationals are moving their manufacturing plants into cheap labor countries such as Vietnam to reduce the cost of production. 

Resources 

This refers to the tangible and intangible assets at the disposal of the company which is utilized in business activities to generate returns on investment. 

Conclusion 

This report contains a detailed analysis of external environment factors in France, China, India, and Vietnam that impact business performance. According to this analysis, economic factors are favorable to the performance of ACME products in the Chinese market. However, restrictive investment regimes, poor enforcement of intellectual property rights, insecure online transaction systems, and cultural differences between China and the U.S are the main barriers to entry of ACME products into the country. In France, political, technological, and economic factors present more opportunities than threats to foreign business eying for France market. The political and legal environment in India is supportive of the entry of foreign firms, but the uncertain economic environment is a hindrance to foreign investors. This make makes Indian unfavorable for ACME expansion. Vietnam offers a cheap labor and relatively stable political climate for investors. The country has developed business sound relations U.S government and firms in the recent years. Therefore, despite unpredictable legal environment and high rate of corruption and bureaucracy, the country is favorable for entry of foreign companies. In regard to cultural dimensions, U.S culture differs to great extent by that of India, China, and France. Therefore, modification in the style of management and business practices is necessary for ACME to operate successfully in these markets. 

References 

Central Intelligence Agency. (2018). World Fact Book. Retrieved from https://www.cia.gov/library/publications/the-world-factbook/ 

General Statistics Office.(2014). Statistical Handbook of Vietnam. Hanoi : Statistical Publishing House. 

Hofstede, G. (2011). Dimensionalizing Cultures: The Hofstede model in context.    Online readings in psychology and culture ,    2 (1), 8. 

Human Rights Watch.(2014). Vietnam. [Referenced 11 April 2015]. Available on Human Rights Watch's website: http://www.hrw.org/world-report/2014/countrychapters/vietnam 

Kelly, B. (2014). The Bitcoin Big Bang: How Alternative Currencies Are About to Change the World. Hoboken . New Jersey: John Wiley & Sons, Inc. 

Mind Tools. (2018). Hosfetede’s Cultural Dimensions. Understanding workplace values around the world. Retrieved from https://web.archive.org/web/20150109062431/http:/www.mindtools.com/pages/article/newLDR_66.htm 

Radcliffe. B. (2018, 24 July). The Basics of Tariffs and Trade barriers. Retrieved from https://www.investopedia.com/articles/economics/08/tariff-trade-barrier-basics.asp 

U.S Commercial Services. (2014). Doing Business in China: 2104 Country Commercial Guide for U.S. Companies. Retrieved from https://2016.export.gov/china/build/groups/public/@eg_cn/documents/webcontent/eg_cn_078667.pdf 

U.S Commercial Services. (2014a). Doing Business in France: 2104 Country Commercial Guide for U.S. Companies . Retrieved from http://cfaresources.s3.amazonaws.com/Converted_PDF/RES-0024901%20Doing%20Business%20in%20France.pdf 

U.S Commercial Services. (2014b). Doing Business in India: 2104 Country Commercial Guide for U.S. Companies . Retrieved from http://cfaresources.s3.amazonaws.com/Converted_PDF/RES-0024900%20Doing%20Business%20in%20India.pdf 

U.S Commercial Services. (2014c). Doing Business in Vietnam: 2104 Country Commercial Guide for U.S. Companies . Retrieved from http://cfaresources.s3.amazonaws.com/Converted_PDF/RES-0026186%20Doing%20Business%20in%20Vietnam.pdf 

Vietnam Briefing. (2014). Foreign Companies Report Labor and Skills Shortage in Vietnam. [Referenced 13 April 2015]. Available on Vietnam Briefing website: http://www.vietnam-briefing.com/news/foreign-companies-report-labor-skillsshortage-vietnam.html/ 

Video Document: 

Hello Ladies and gentlemen, 

The purpose of this video presentation is to explain three major components of the international trade covered in my report. These include trade barriers, foreign exchange, and labor. It is true that trade barriers will affect the entry and competitive of ACME products in some countries of interest. The main trade barrier in exporting to China is the specific tariff imposed on the product from the U.S. This means that export of ACME products will be subjected to a specific tariff on each unit, and this increases the cost of production. The company will be forced to pass this cost to consumers in the form of high price and this will make ACME products less competitive with locally produced products. I have believed that the quality aspect attached to the U.S product will enable the product to sell at a premium price in this market. However, export the products from Vietnam will attract no specific tariff on ACME products. 

The exchange is an important factor likely to affect the financial performance of ACME in the international market. The U.S dollar has been appreciating in the recent past in the post-recession period. This means that U.S exports will be expensive in foreign countries and this will reduce their competitiveness n international market. This is particularly the case in China and India due to declining RMB and Rupee against the U.S dollar. 

Finally, labor is an important cost component which affects the price of products and competitiveness of ACME products in international market. The analysis has shown that Vietnam has a cheap labor that can be utilized in the production of ACME products. This makes Vietnam an ideal location for ACME manufacturing plan. The company will be able to incur the low cost of labor and offer products at a competitive price in the international market. In conclusion, based on analysis of these components, I recommend that ACME sets up manufacturing plants in Vietnam to take advantage of cheap labor, Secondly, the company will be able to export their products into China and India without incurring high freight and higher charges. This will make the products competitive in the market.