International Business Environment

The research focuses On NAFTA (North American Free Trade Agreement) with the intention of understanding diverse dimensions in its operations and engagement among the member states. The study will concentrate on the provision of a detailed analysis of the international business environment of the major member nations of NAFTA. International business environment entails the environment in diverse sovereign nations, with factors exogenous to the home environment of the institution, which influences decision-making on resource exploitation and capabilities. The international business environment of the nations will examine social, political, economic, regulatory, cultural, legal tax, and technological aspects, as well as environmental issues.

Overview of NAFTA

North American Free Trade Agreement (NAFTA) is a regional trade agreement between the United States, Canada, and Mexico, which came into existence on January 1, 1994. The agreement has three major headquarters: Mexico City, Mexico, Ottawa, Canada, and Washington D.C, United States. The purpose of the agreement is to establish a trilateral trade bloc in North America. The trade agreement has three major members: the United States, Canada, and Mexico, which are vital for the completion of the study (Caliendo & Parro, 2012). The agreement has been critical in the elimination of tariffs between the three nations, which is ideal in reduction of the inflation, as well as decrease of the costs of imports. In addition, NAFTA has been vital in the creation of agreements on international rights for the investment, thus provision of the perfect platform for the reduction of the cost of trade. The agreement creates the ability of the institutions of the member nations to bid on different government contracts. Similarly, the regional trade agreement provides substantial protection to the intellectual properties in relation to operations and technological advancements in Mexico, the United States, and Canada (Caliendo & Parro, 2012).

The United States

Globally, the United States is ranked as third most populous nation. In addition, it is the fourth largest nation in relation to the total area. The population of the nation is over 318 million, which plays a critical role in the ethnic diversity of the nation with the largest economy in the world. After the 9/11 attacks, the United States growth was slowed down. The trend was also evident in the recession in 2009, which was critical for the significant contraction of the economy. Nevertheless, the United States economy is currently moving on a steady course because of the massive increase in the business investment, customer expenditure, and substantive decrease in unemployment.

Political Assessment

From a political perspective, the United States seems to have one of the strongest democratic setups and effective rule of law in the world. Most of the elections in the United States tend to be transparent and fair. The United States tends to enjoy substantive economic and political influence over both national and policymaking in the global aspect. It comes out as the leading superpower. Nevertheless, the United States encounters international criticism of the foreign policies concerning the ‘War on Terror’ (Schaffer, Agusti, & Dhooge, 2014). The foreign or international political policies of the United States have substantial implications for souring foreign relations, thus massive increase in the threat of terrorism.

Economic Assessment

Economically, the United States has the largest economy across the globe with a GDP of over $16.760 trillion. The economic system is effective and efficient with the tendency of depending on services and manufacturing industries. The economy contended with the adverse effects of the recession in 2009, which relates to the rapid increase in the unemployment rates. The economy of the nation bounced back with a substantial growth of approximately 4 percent during the third quarter of 2014. This relates to the massive increase in customer and business spending. Nevertheless, the United States continues to encounter implications of the increasing budget deficits such as economic prosperity and debt (Schaffer, Agusti, & Dhooge, 2014).

Socio-Cultural Assessment

The United States tends to face diverse challenges with reference to an aging population leading to adverse labour shortage, as well as increase in the tax rates in the future platforms. In spite of these sociological issues, the United States has the leading educational and healthcare systems. The nation’s majority has a liberal mindset to counter the rising racial intolerance. Moreover, the nation seems to suffer from illegal immigration with approximately 11.7 million people and above living in the United States against the law. The aspect provides substantial context of the increase in the risk of racial discrimination (Schaffer, Agusti, & Dhooge, 2014).

Technological Assessment

The economy of the United States tends to benefit and depend on innovation and technological advancements. The nation comes out as one of the leading entities in adaptation and implementation of technology. However, the nation faces adequate competition from rising economies, hence the need to invest on technological advancements to achieve competitive advantage and technological leadership. The United States embraces development of environmental technology, nanotechnology, and biotechnology, which are ideal in the provision of adequate opportunities for the operational entities. In addition, the United States faces substantial competition from nations such India and China.

Environmental Assessment

The United States engages in diverse environmental protection mechanisms under the influence of the Environmental Protection Agency (EPA). Some of the environmental approaches include recycling and usage of recycled materials, implementation of laws to regulation environmental pollution, educational program of climate change, and utilization of other sources of energy rather than exploitation of the oil or fossil products (Schaffer, Agusti, & Dhooge, 2014).

Legal Assessment

The United States tends to have substantive legal system for effectiveness and efficiency in transactions with other nations, as well as business entities. Some of the legal systems in the case of the United States include discrimination laws, anti-trust regulations, employment laws, health and safety regulations, data protection rules, legal cases, and intellectual property laws (Schaffer, Agusti, & Dhooge, 2014). These regulations are critical to improving effectiveness and efficiency in handling different aspects in the United States.

Canada

The second major member of the NAFTA regional agreement is Canada. The nation is one of the largest and fastest growing economies across the world. It is critical to utilize PESTEL analysis tool in the assessment of the international business environment of Canada.

Political Assessment

The nation seems to demonstrate a democracy with a parliamentary government system, which provides for three parts of the government: federal, provincial, and municipal aspects. The political situation of the nation is ideal for the foreign and internal investment, thus the massive growth in diverse sectors (Wheelen & Hunger, 2011). The political environment of Canada depends on the effectiveness and efficiency of the government policies in accordance with social, economic, and technological developments.

Economic Assessment

Canada has one of the largest economies across the globe. In 2010, the inflation rate (CPI) was approximately 1.6 percent. About 8 percent of the Canadian population live below the poverty line. The Canadian economy provides employment opportunities to more than 18.53 million individuals. The major industry in accordance with employment opportunities is the service industry. Other key industries include agriculture, manufacturing, construction, petroleum and natural gas, chemicals, and transportation equipment (Wheelen & Hunger, 2011). According to efficiency in business operations rank, Canada is 13th in the global context.

Socio-Cultural Assessment

Canadian tends to have substantial sense of belonging to their community and nations through participation in civic, volunteer, and communal activities. In addition, there are adequate social and family relationships among the Canadians, which is vital in the expression of the existence of a social safety net for all citizens. Canada tends to suffer from the issue of aging the population, which contributes to prospective labour shortage in the future.

Technological Assessment

The usage of internet technology is one of the technological advancements in the case of Canada with the nation seeking to achieve competitive advantage in the market and industry of engagement. Canadians tend to use information and communication technologies at home and learning institutions. Business entities also implement such advancements to enhance their chances of competing effectively and efficiently in the market and industry of interest (Wheelen & Hunger, 2011). There are also rapid technological investments in mining and agricultural sectors to enhance the GDP of the nation and annual economic growth, as well as the creation of employment opportunities.

Environmental Assessment

Canada is one of the nations on the forefront seeking to adopt and implement environmental policies to protect the environment against climatic changes. This is evident in the adoption and integration of laws on climate change, energy utilization, recycling of products, elimination of pollution, and conservation of the environment.

Legal Assessment

The constitution is the supreme law in the case of Canada. The adoption and implementation of other laws must be consistent with the illustrations of the constitution (Wheelen & Hunger, 2011). Some of the legal aspects of the Canadian context include discrimination laws, anti-trust regulations, employment laws, health and safety regulations, data protection rules, legal cases, and intellectual property laws.

Mexico

Mexico exists in the southern portion of North America. The nation is known for activities such as socialization, sports, recreation, fashion, eating, and recipes. It is critical to integrate PESTEL analysis tool to the assessment the international business environment of Mexico.

Political Assessment

The political environment of Mexico offers substantial opportunities for the foreign and internal business investments. Regulations relating to many business practices differ from one state to another. Local governments focus on utilization of different political regulations in determination of the platform for operations of foreign and internal business entities. Engagement in the NAFTA activities has been ideal in the utilization of the political environment of Mexico in attempts to maximize the opportunities while minimizing threats (Harrison, 2013).

Economic Assessment

Mexico has more than $ 1trillion GDP with per capita GDP of approximately $13,542. The annual growth rate of Mexico is about 5 percent, which is an illustration of the massive implications of NAFTA in pursuit of economic gains for the Mexicans (Harrison, 2013). Some of the economic factors affecting the operations of Mexico in the international context include balance of payments, the state of the business cycle, distribution of income, and monetary, as well as fiscal policies. The economic implications tend to differ from one industry to another in pursuit of improved economic growth and profitability of the nation. Mexico comes out on the second-largest export market, as well as the third-largest trading partner of the United States.

Socio-Cultural Assessment

Socio-cultural assessment is critical in understanding the demographics of the customers with reference to income distribution, segmentation, educational systems, healthcare approaches, and so on. Mexico continues to make substantive strides in improving accessibility to education and healthcare products in the past few decades. The nation seems to investment in recreational activities and sporting features, as well as an entertainment industry with the intention of improving its economic performance in comparison to the global entities and institutions (Harrison, 2013).

Technological Assessment

Technology is one of the effective factors of production in the global economy. Technology improves efficiency in the manufacturing and delivery of commodities in accordance with the expectations of the customers in the local and international markets. These attributes continue to enhance investments in research and development to improve innovation and delivery of products and services (Harrison, 2013). Technological advancements are critical in the entertainment industry with reference to the case of Mexico.

Environmental Assessment

Environmental conservation is one of the major components in relation sustainable development in the global and internal contexts. Mexico continues to invest heavily in environmental protection with the intention of aiding its attempts to achieve sustainable development. Some of the environmental regulations include recycling of diverse products, conservation of the environment, usage of renewable energy sources, and limitation of environmental pollution.

Legal Assessment

Mexico has been on the forefront in exploitation of the regulations such as discrimination laws, anti-trust regulations, employment laws, health and safety regulations, data protection rules, legal cases, and intellectual property laws. These regulations tend to adhere and comply with the NAFTA regulations to facilitate effective transactions between the three major members of the regional agreement bloc. In addition, the political institution focuses on the development of laws in accordance with the demands of the constitutions.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

References

Caliendo, L., & Parro, F. (2012). Estimates of the Trade and Welfare Effects of NAFTA (No.         w18508). National Bureau of Economic Research.

Harrison, A. (2013). Business environment in a global context. Oxford University Press.

Schaffer, R., Agusti, F., & Dhooge, L. (2014). International business law and its       environment. Cengage Learning.

Wheelen, T. L., & Hunger, J. D. (2011). Concepts in strategic management and business     policy. Pearson Education India.