1.6 Contextual Elements of Business Communication

The functional activities of international business are carried out in three types of environments, i.e., domestic, foreign and international environment. It is of great necessity to analyze further these environments, because when communicating to carry out international business activities, the effectiveness and efficiency of communication are subject to the influence of environmental factors. Environmental analysis is to guarantee the communicators from international organizations to do right things right.

Environment is the sum of all the forces surrounding and influencing the life and development of a firm. These forces can be classified as external and internal. The external forces are commonly called uncontrollable forces, over which management has no direct control, such as economic, legal, political and social cultural factors etc. The elements over which management does have some command are internal forces, such as factors of production （capital, raw materials, and people） and the activities of the organizations （personnel, finance, production, and marketing）. These are the controllable forces that management must administrate in order to adapt to changes in the uncontrollable environmental variables. The domestic environment is composed of all the uncontrollable forces originating in the home country that surround and influence the life and development of the firm （Ball & McCulloch, 1993）.

1.6.1 Indirect Environmental Factors: International and Domestic Context

In the environment, political, economic, financial, technological and social-culture factors determine the effectiveness and efficiency of cross cultural business communication indirectly. Communicators can only control them indirectly.

Political Factor The political arena has a huge influence upon the regulation of businesses and the spending of consumers and other businesses. Elements of nation's political climates such as nationalism, forms of government, and international organizations may influence the communicating approaches indirectly. Political risks are those related to instability in national governments and to war, civil or international. National government instability creates multiple potential problems for internationally diversified firms. Economic risks come up as governments react to a variety of events, and can result in uncertainties in terms of: First, potential changes in government regulations, especially those affecting foreign-owned firms; Second, legal authority, specifically those affecting agreements signed with a previous administration or those currently under negotiation; Third, the potential for nationalization of private firms' assets. These uncertainties are significant because there is a threat of a change in governments and shifts in foreign investor policy. A number of national governments attempt to minimize political risk （to themselves） by requiring that a significant portion （or all） profits from investments be reinvested only in that country （to achieve economic stability, which can reduce the probability of political instability）. Foreign firms that invest in another country may have concerns about the stability of the national government and what might happen to their investments or assets because of unrest and government instability.

Economic Factors Economic factors influence the wealth of a population in the short term and long term. Economic variables such as GNP unit labor cost, and personal consumption expenditure influence a firm's ability to do business. Economic variables can lead to risks as well. Some economic risks are specific to international diversification. Foremost among the economic risks of international diversification are the differences and fluctuations in the value of different currencies. For example, differences and fluctuations in the value of the different currencies are a primary concern to internationally diversified firms. For example, Chinese RMB has been appreciated dramatically ever since July, 2005, from 1USD against round 8.8 RMB at that time to 1USD against 6.2RMB in April, 2014. The acceleration of RMB appreciation attracts much more capital flows into China, thus larger amount of capital to undertake Foreign Direct Investment will inflow into China, which deteriorates inflation. The macro economic situation has been overshadowed with serious inflation, whose index, i.e., CPI （Consumer Price Index） had reached 8.7% in February, 2008. The appreciation of RMB is supposed to continue until the last quarter of the year 2014. The effect of RMB appreciation has become obvious. The favorable balance of trade in January and February, 2008, has declined sharply by 10% to USD19.5 billion and USD8.6 billion respectively. Chinese macro economy will generate more uncertainties in 2008 due to interactions between RMB appreciations, high inflation expectation with high CPI, and governmental reforms indented to merge different governmental departments.

Inflation is another economic risk that a cross cultural business communicator has to pay attention to. World merchandise exports in dollar terms rose by 15.4 per cent to $11.76 trillion. About 40 per cent of this value change can be attributed to inflation. It is uncertain to what extent divergent relative price developments have contributed to the differences in the growth of merchandise and trade values of commercial services. Merchandise exports by region in dollar terms have been strongly affected again by price developments.

In addition, financial variables such as interest rates, inflation rates, and taxation can influence the business strategies and can be the content of international business communication. Recently global financial crises have deteriorated the global economic situations. Governments are working together to bail out and set aside large amount of capital to rescue the financial market. Economic and financial factors determine the international strategies of a multinational corporation and thus indirectly influence communication practice.

Technological Forces Technologies such as information technology influences production methods, and transportation influences market penetration and product costs. The technological skills and equipment affect the way the resources are converted to products. Technology determines the media choice of cross cultural business communication, such E-mail and video-conference.

Social Factor Religion, demographics, the age distribution of the population strongly impact product design and spending by consumers. Social cultural elements such as attitudes, beliefs, and opinions affect decision making process in cross cultural business communication. Culture can be referred to as software of mind and thus determines the way of thinking about elements of communication. Therefore, social culture decides the way of communication. It has immediate impact on effectiveness and efficiency of communication. Cultures are the immediate and direct environmental factors of cross cultural communication.

Legal Factors In cross cultural communication process, foreign laws may be applied to interpreting contracts （governing law）. So predicting problems and foreseeing consequences are more difficult than with domestic transactions. Legal forces such as product safety regulations and rules influence design and trading practices, and determine how business can be conducted in the market. Any kinds of foreign and domestic laws by which international firms operate must be followed and embodied in the whole process of cross cultural business communication. Legal systems also determine the content of communication and should be abided by communicators thus it is the direct factors of international communication. Legal factors are decisive and have to be adequately considered by both senders and receivers.

This study summarizes the above factors as principles of SPELT Analyses in cross cultural business communication. All these factors affect interactions between the domestic environment forces and foreign environmental forces and between the foreign environment forces of two countries when an affiliate in one country does business with customers in another. These factors in domestic external environment, as well as in foreign countries interact with each other leading to even more complex communication process and high uncertainties of business activities. The cross cultural business communicators are faced with at least two types of similar factors in foreign countries as well as in their home countries. Factors in foreign environments are actually more uncontrollable forces operating outside the home country that surround and influence the firms. Business communication across cultures is thus operating differently in an even more complex context（Ball & McCulloch, 1993）.

1.6.2 Direct Environmental Factors—Organizational Context

Business strategies, culture and language are the direct factors influencing the effectiveness and efficiency of business communication. The business strategy of an organization is the initiator of communication while culture is the mindset for developing proper communication strategies. Moreover, language is a tool to encode and decode the messages and is an instrument as well as thinking framework to carry out business strategies and communication strategies. These direct factors are to be included in the conceptual paradigm for business communication across cultures, and will be discussed all through the whole book.

Business Strategies of an Organization

Cross cultural business communication is to carry out business strategies in all international business functional areas. If the communication is effective, it actualizes the strategic goals properly; if it is efficient, it realizes these strategic goals at minimized economic and time cost. Thus, the communicators have to understand business strategies as their starting point. Then they encode the message of communication in their native culture and language, and send it to the receivers. The receivers decode the message and properly understand it with their native cultures and languages and make relevant feedbacks. Therefore, business strategies are the start points of and reasons for cross cultural business communication. They have most immediate influence on communication strategies and elements selected. Business strategies are the benchmark to evaluate whether cross cultural business communication strategies are effective or efficient. For example, global strategies of an organization require integration and coordination across units （and across national boundaries） to realize economies of scale and efficiency. Instead, multidomestic strategies emphasize responsiveness to local market needs and preferences, providing the opportunity to meet customers' needs and preferences more effectively. Successfully balancing the need for local responsiveness and global efficiency implies that local responsiveness should facilitate competition based on an international differentiation strategy, while global efficiency should facilitate competition based on an international cost leadership strategy. Competing in many markets may enable the firm to achieve economies of scale because of the size of the combined markets, but only if customer preferences in multiple markets do not differ significantly. If customer preferences vary significantly among national markets, a firm might be better served to narrow its focus to a specific region. A regional focus may enable the firm to better understand cultures, legal and social norms, and other factors that may be important to achieving strategic competitiveness. Following global standardization or customization of the products, the communication strategies should be standardized or customized as well. Yet, such influences should never be of static nature, they are of dynamic nature.

The complexity of process in which all these external and internal factors in home and host countries make it difficult to successfully implement an international strategy. However, firms are challenged to do so because of two facts: More and more industries are experiencing global competition; there is an increasing demand for local responsiveness. In addition, regardless of the international corporate-level strategy that a firm pursues, the reality of global requirements may result in a blending of strategies such that firms apply a global strategy with some product lines and a multidomestic strategy with others for the following reasons: First, some global products require a degree of customization, either to meet government regulations or to satisfy customer tastes and preferences. Second, most multinational firms are interested in achieving some degree of coordination and resource sharing across national markets to cut down costs. Third, some products and industries may be better suited for international standardization than others.

Culture

In cross cultural business context, communication process is very complex because each element of communication can be endorsed with different meaning under difference cultural frameworks. Cultural gaps between countries may exist in terms of lifestyles, beliefs and values, religions, benefits sought, usage contexts of products, and so forth. Theses cultural gaps and differences affect encoding and decoding of ideas.

The idea itself does not really travel, only the code, the words, the patterns of sounds or print. The meaning that a person attaches to the words received will come from his/her own mind. His/her interpretation is determined by his/her own frame of reference, ideas, interests, past experience, etc.-just as the meaning of the original message is fundamentally determined by the sender's mind, his/her frame of reference. The fact is that organizations and the people who issue messages on their behalf operate from a set of culture priorities and meanings that cannot be assumed to exist in the receiving organization. The intercultural communicator has to be able to get the assumptions right. One way to improve chances of understanding the meanings of the other organization is to use a matrix of intercultural dimensions. When the receiver understands where a culture's priorities lie along the dimensions of value, he/she can begin to make informed guesses about what messages mean （Beamer & Varner, 2003）.

Language

Language is a thinking tool for encoding and decoding messages in communication. So language competence in encoding and decoding messages determines the effectiveness and efficiency of communication directly. It is the direct factors of cross cultural business communication. Language proficiency is a crucial factor to the success of an international business. A study shows that successful firms are likely to possess a particular“languages profile”（Knowles, Mughan &Lloyd-Reason, 2006）.

Language used in business communication is characterized by its functional purposes to carry out business transactions in cross cultural context. In cross cultural business communication, English is selected as a tool for international business communication, because it is used in overwhelming majority of business activities such as cross cultural negotiation, marketing and advertising, international trade and investment, international payment and settlement both in written correspondence and oral communication. Therefore, a study defines English as Business English. Business English is a dynamic language activity in the workplace concerned with pragmatically transmitting a fixed intention. And the business English study must be a systematic integration of current linguistic, commercial and legal research （Kameda, 2005）.

These factors from both domestic and foreign countries result in high risks for international business moves. Cross cultural business communication is sure to take on such responsibilities as to remove these risks and reduce uncertainties and thus make sure the business strategies can be effectively and efficiently executed in alien culture and lingual context.