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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.

 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

 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.

 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  Human resource


/affect the business Management
from within. They 
include:

 Trade Unions

 Production
management.  Organization structure
 

 Management/leadershi  Financial management


p style. 
  Marketing
 management

External Environment
Micro External enviornment
 Competitors

 Customers

 Market intermediaries

 Suppliers of raw materials

 Bankers & other suppliers of Finance

 Shareholders

 Stakeholders of the business firm.
Macro External
Enviornment
 Social & Cultural  Governmental factors
factors 
  International factors
 Technological factors 
  Natural factors
 Economic factors 

 Political factors

STEPIN
 Factors that affect IB includes:

 Social & Cultural factors (S)

 Technological factors (T)

 Economical Factors (E)

 Political & Governmental factors (P)

 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.

 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 Aesthetics Social Structure

Education Customs & Manners Religion

Verbal
-written -Attitudes towards entrepreneurs
-oral Time Orientation -Holidays
-Relating with others -Gifting
Non-Verbal -Attitudes & Posture -Role of women
-Punctuality -Gifts -Products & Services
Physical Distance -Usage of Products -Marketing Practices
Kinesics
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.

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

 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 :

 Disney’s policy of serving NO Alcohol

 Serving less quantity of breakfast

 Lunch timings

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

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

Social Environment
 It consists of religious  Tastes & Preference
aspects 

 Social institutes
 Language 
  Living habits
 Customs 
  Eating habits
 Traditions 
  Dressing habits etc
 Beliefs


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

 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.

 Technology is the application of knowledge.
Technology feed for itself
 Technology makes more technology.

 It is self reinforcing.

 It brings the globe closer.

 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 % of Spending on Tech.

to total investment
 Australia 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 SPENDING % R&D SPENDING% R&D
BUDGET ON BUDGET ON
GERMANY PRODUCT
50% PROCESS
50%
INNOVATION INNOVATION
JAPAN 30% 70%

USA 70% 30%


Technology and Economic
Development
 Technology is one of the significant factors which
determines the level of economic development of a
country.

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

 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 Process innovation In automobiles
, steel, telecommunications and
microelectronics
GERMANY Innovations in chemicals,
pharmaceuticals, automotive
engineering , medical instruments
& machine tools
ITLAY Innovations in textiles & leathers
Economic Environment
 The economic environment  Employment
of various countries 
mostly & directly
influences international  Income
business. 
  Inflation
 Totality of economic 
factors, such as  Interest rates

 Productivity

 Wealth

 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.

 Two ideologically opposing forms of government
are



 Dem ocracy Tot alit arianism
Democracy
Democracy
 Totalitarianism

 It is a system of  It is a system of
Government in which government by an
people , directly or individual or a political
indirectly through elected party with no
representatives , take participation in the
decision making by the
part in decision making. citizens.
 
 Right to freedom of  All the constitutional rights
expression , opinion & to the citizens under
organization ,fair democracy i.e freedom of
expression & regular
judiciary system
elections are denied to
them
Types of Totalitarianism

Com m unism Theocrat ic

Tribal 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 It is rule of a religious leader , party


or group.
IRAN & SAUDI ARABIA

TRIBAL A political party that represents the


interest of a particular tribe rules the
AFRICA country. That tribe need not be the
majority tribe in the country.

SECULAR The military controls the government


and makes decisions
IRAQ
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.

 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.


 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  Upper class


which individuals and 
groups are classified
on the basis of
 Middle class
esteem and prestige 
acquired mainly  Working class
through economic 
success and
accumulation of  Lower class.
wealth. Four
common social
classes (in their
descending order)
are:
NATIONALITY
Physical
Factors/Enviornment
 Geographic

 Natural resources