Demographics is a factor to consider
whilst conducting international business. The “study of human population in
terms of size, density, location, age, gender, race, occupation and other
statistics” (P. Neelankavil, 2015). As the world population is rapidly on an
increase (6 billion people on earth) this will have an effect on international
business because some areas are more congested. Depending on the size and
population of the country will determine whether a business will want to invest
into a foreign market as they will want to view how economically active the
country is. For instance, “1 billion inhabitants in China to less than 1
million in Luxembourg” (P. Neelankavil, 2015).
This indicates that there are more business opportunities available in
China due to the fact that there is a wider target market and people are more
economically active, implying more people are ready to work and spend their
National laws affect how businesses
carry out their day-to-day activities and this could have an effect on the
organisations overall performance. Legal factors are vital for an organisation that
wants to establish longevity, especially for countries that want to expand
globally. Therefore, businesses have to consider legal acts such as health and
safety, equal pay, child labor etc. The government can put in legislations in
place, for instance to pay men and women the same amount per hour of work. Also, there are specific laws that cater to
international businesses, for instance “investment of capital and repatriation
of earning” (P. Neelankavil, 2015).
Additionally, different countries have different forms of law, United
Kingdom follows a common law, France follows civil law and theoretic law for
countries that follow a religion such as Saudi Arabia. The importance of
understanding the difference between country law is crucial for a business’s
trying to expand internationally as they would have to abide by laws of the
country they’re in. For instance, in Saudi Arabia, women have to keep their
modesty in public and cover themselves head to toe, whereas in France, it is
banned to wear a hijab in public.
A crucial aspect that countries must
evaluate before doing business internationally is the condition of the market.
Certain markets have no space for new businesses to co-exist as there are
presently too occupied, therefore no opportunities for new businesses to
flourish. Kokemuller, 2007 explains the limitations that may occur from
entering a business that is too saturated. The issues are that it may restrict
the profitability of the business, as there are too many businesses operating
in the current market and therefore there may be a little customer left, which
may construct the businesses aim of profitability. Additionally, another issue
is the potential to grow within a market. If a market is already overly
saturated, there will be no space for new business to flourish and grow.
international businesses brings risks such as language barriers, exchange rates
and legal requirements, however, it creates opportunities like integration of
economies, increase profitability and brand notoriety.