International Business Environment

December 11, 2017 | Author: Kartik | Category: International Business, Innovation, Economics, Interest Rates, Strategic Management
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INTERNATIONAL BUSINESS ENVIRONMENT PRESENTED BY : VAISHALI SHARMA LECTURER MBA-IB

ENVIRONMENT 

The fundamental basis for strategy formulation is the environmental analysis.

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Environment provides the opportunities to the business to produce & sell a particular product. For Ex: the present scenario the business environment provides the wide opportunity for Internet,touch screen mobile etc

INTERNATIONAL BUSINESS ENVIRONMENT 



Environment means surroundings.IBE means the factors/activities those surround / encircle the international business. In other words , business environment means the factors that affect or influence that MNC’s.

International Management

IB vs International Management 

The focus of IB is on international transactions , whereas IBM deals with managing such transactions within the boundary set by corporate strategy

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When a company decides to enter a foreign market that decision incorporates planning to establish the ways by which business functions – Marketing, Accounting, HRM & so on are to be managed in that distinct location.

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Managing the various functions & coordinating them with the parent company’s overall strategy is the task of IBM

International Business Enviornment

Internal Environment 

Internal environment factors influence /affect the business from within. They include:

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Production management.





Human resource Management

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Trade Unions

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Organization structure



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Management/leadershi p style.



Financial management

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Marketing management

External Environment

Micro External enviornment 

Competitors

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Customers

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Market intermediaries

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Suppliers of raw materials

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Bankers & other suppliers of Finance

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Shareholders

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Stakeholders of the business firm.

Macro External Enviornment 

Social & Cultural factors

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Technological factors

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Political factors

International factors

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Economic factors

Governmental factors

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Natural factors

STEPIN 

Factors that affect IB includes:

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Social & Cultural factors (S)

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Technological factors (T)

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Economical Factors (E)

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Political & Governmental factors (P)

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International factors & Natural factors (N)

Social & Culture 

Culture is a thought and behavior patterns that member of a society learns through language and other forms of symbolic interaction.

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Acquired knowledge that people use to interpret experience & generate social behavior. This knowledge forms values, creates attitudes & influence behavior.

Elem ent s of Cult ure

language

Values & Attitudes

Education

Verbal -written -oral Non-Verbal -Punctuality Physical Distance Kinesics

Aesthetics

Customs & Manners

Time Orientation -Relating with others -Attitudes & Posture -Gifts -Usage of Products

Social Structure

Religion

-Attitudes towards entrepreneurs -Holidays -Gifting -Role of women -Products & Services -Marketing Practices

Example 

Consumption of Alcoholic drinks is acceptable in the society. It alcoholic drinks is acceptable in the West however, it is not socially acceptable in India & it’s socially & legally unacceptable in Saudi Arabia.

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Life time employment policy in most of the companies in Japan.

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Masala Dosa & Hyderabadi Briyani have become popular in Europe & the USA whereas Pizzas have become popular in India.

Disney In France 

Disney with its success in park business & entertaining children in USA entered Japan in 1983 & became successful there too. Disney decided to enter Paris & France market too in 1986 owing to vocational advantage of Paris &availability of subsidies & incentives by French Govt. Disney had problems of negotiations with France Govt & also unwillingness of French people to accept Disney. despite these problems, Disney opened the park in 1992.Soon after the opening , French farmers drove their tractors & blocked the entrance. Later, there were a no. of operational deviations like Disney’s policy of serving



Later, there were a no. of operational deviations like :

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Disney’s policy of serving NO Alcohol

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Serving less quantity of breakfast

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Lunch timings

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Non-sutability of teamwork for the employees of Disneyland Paris.

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It result in the loss of $2 billion by the end of 1994

Social Environment 

It consists of religious aspects



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Language

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Eating habits

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Beliefs

Living habits

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Traditions

Social institutes

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Customs

Tastes & Preference

Dressing habits etc

Technological Enviornment 

One-up-on-a-time’s illusion is getting into reality because of technology.

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Technological changes enabled IB to take the shape transnational business through the concept of Global business. IB gained significance due to the amazing advancements of technology.

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Technology is the application of knowledge.

Technology feed for itself 

Technology makes more technology.

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It is self reinforcing.

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It brings the globe closer.

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It flows from the advanced countries to the developing countries through the MNC’s , JVs , technological alliances, licensing & franchising.

Major investor on Technology in Asia-Pacific regions in 2003  

COUNTRIES



Australia

% of Spending on Tech. to total investment 15

China

12

Japan

14

New-Zealand

13

Singapore

6

India

11

Investment I Technology 

Advanced countries spends considerable amount on R&D for further advancement of technology.



COUNTRY

JAPAN

SPENDING % R&D BUDGET ON PRODUCT 50% INNOVATION 30%

SPENDING% R&D BUDGET ON PROCESS 50% INNOVATION 70%

USA

70%

30%

GERMANY

Technology and Economic Development  Technology is one of the significant factors

which determines the level of economic development of a country.

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The difference between the nations is mostly reflected by the level of technology.

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India had vast natural resources , it remained as a major importing country due to its low level technology before 1991.Japan with its high level of tech. could export finished goods to India by importing the raw material from India itself. Thus though Japan is endowed with poor natural resources , the Japanese became reach & advanced due to technology.

Technology & international Competition 

Nations develop economically when they translate science into useful technology & in turn create wealth from innovations. Innovations is the useful adaption of science or knowledge including inventions of new products or processes.

JAPAN

GERMANY

ITLAY

Process innovation In automobiles , steel, telecommunications and microelectronics Innovations in chemicals, pharmaceuticals, automotive engineering , medical instruments & machine tools Innovations in textiles & leathers

Economic Environment 

The economic environment of various countries mostly & directly influences international business.

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Income

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Totality of economic factors, such as

Employment

Inflation

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Interest rates

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Productivity

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Wealth

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That influence the buying behavior of consumers and firms.

Factors Affecting the Economic Environment 

Inflation and deflation: Inflationary and deflationary pressures alter the purchasing power of money. This has a direct impact on consumer spending, business investment, employment rates, government programs and tax policies.



Interest rates: Interest rates determine the cost of borrowing and the flow of money towards businesses.



Exchange rates: This impacts the price of imports, the profits made by exporters and investors and employment levels (also through the impact on the tourism industry).



Monetary and fiscal policy: This helps in attaining full employment, price stability and economic growth. The economic environment is also influenced by various political, social and technological factors. These include a change in government and the development of new



Political /Government Environment 

It influences the way a firm conducts its business, domestically & internationally. It differs with each country. The IB manager should be aware of the political environment of the Host & Home country.

Political system 

By political system we mean the type of Govt. in the country.

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Two ideologically opposing forms of government are

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Dem ocracy

Tot alit arianism

Democracy Democracy





It

is a system of Government in which people , directly or indirectly through elected representatives , take part in decision making.

 

Totalitarianism





It

is a system of government by an individual or a political party with no participation in the decision making by the citizens.



Right to freedom of expression , opinion & organization ,fair judiciary system



All the constitutional rights to the citizens under democracy i.e freedom of expression & regular elections are denied to them

Types of Totalitarianism Com m unism

Tribal

Theocrat ic

Secular

Communism

Govt. owns all property & makes decisions regarding production & CHINA , LAOS, NORTH KOREA , distribution of goods & services. It CUBA & VIETNAM aims at equal distribution of wealth. THEOCRATIC IRAN & SAUDI ARABIA

TRIBAL AFRICA

SECULAR IRAQ

It is rule of a religious leader , party or group.

A political party that represents the interest of a particular tribe rules the country. That tribe need not be the majority tribe in the country. The military controls the government and makes decisions

International political relations 

The political relations between two countries also determines the nature & extent of trade between the countries .

Relations between the government and the business 

For the Host country government , permitting foreign firm to have business with the country or establishing operations in the country may be a means of achieving its objectives like increasing investments.

Political stability 

The major risk in political environment is political instability.

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The policies framed by a Govt may be set aside by a subsequent government.

Demographic environment 

Demographic factors of the market in which a firm operates, and which are used to segment the target population for effective marketing.

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Statistical socio-economic characteristic or variables of a population, such as age, Gender, education level, income level, marital status, occupation, religion, birth rate, death rate, average size of a family, average age at marriage. A census is a collection of the demographic factors associated with every member of a population.

Demographic Factors AGE STRUCTURE

GENDER

INCOME DISTRIBUTION

FAMILY SIZE

OCCUPATION

EDUCATION

SOCIAL CLASS

RELIGION

NATIONALITY

AGE STRUCTURE 

Categorization of the population of communities or countries by age groups.

GENDER 

Gender comprises a range of differences between men and women.

INCOME DISTRIBUTION 

In economics, income distribution is how a nation’s total economy is distributed amongst its population.

FAMILY SIZE

Nuclear

Joint

SOCIAL CLASS 

Status hierarchy in which individuals and groups are classified on the basis of esteem and prestige acquired mainly through economic success and accumulation of wealth. Four common social classes (in their descending order) are:



Upper class





Middle class





Working class





Lower class.

NATIONALITY

Physical Factors/Enviornment 

Geographic

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Natural resources

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