Question

Discuss the political, cultural, and legal factors of global expansion. Identify and explain three ways an organization can ensure that they are abiding by the political, cultural, and legal rules of the country in which they intend to expand? Explain the roles of formal and informal institutions in global expansion.

Answer 1

Global expansion:

It means taking company's business operations into new , overseas markets.

Political factors:

These factors that affect company's growth while globalizing include:

• General state of political development
• Political stability
• Political ideology
• Practices of ruling party
• Level of political morality...etc

Cultural factors:

It includes Ethnic Mix that refers to Cultural Composition of the population. Organisation need to analyse some issues which include:

• Need for change in service design & delivery ,(i.e. Ex: introducing drones for delivery)
• Need for new products & services and modifications for existing products
• Manager's preparedness to manage a more culturally diverse workforce
• Taking advantage of increasing heterogeneity in workforce.  

Legal Factors:

It includes factors considering laws,rules & regulations of target country

• Law and order situation
• Specific legal enactments & framework
• effectiveness with which laws are implemented
• Government policies like fiscal , monetary , industrial,labor.......etc

How companies ensure it survives these ?

1.First companies need to evaluate nature & scope of these factors and how it affects to their products/ services.

2.Next they need to make strategies , how to overcome if these factors adversely affects the organisation. If companies don'n know if they are adverse or not then the situation of "save what can be saved" is the best option.

3.Adoption of latest technology helps the organisation to survive in adverse situations.

Formal institutions includes

• Local regulations of business
• laws of investment
• involving in the judicial system of that country
• trade barriers like tariff & non-tariff
• managerial implications...etc

Informal institutions includes cultures, ethics, and norms.

Both formal & informal have an effect on business. Formal institutions vary from place to place and informal institutions are more difficult to measure how they affect business.