There are five stages, namely y Domestic company. y International company. y Multinational company.

y Global company, and y Transnational company. Domestic company: The domestic company never thinks of growing globally. Because it limits its operations, mission and vision to the national political boundaries. The company analyzes the national environment of that country and not selects the strategy of expansion into the international markets. International company: A few domestic companies which grow beyond their production extends the wings to the foreign countries in other words these companies extend the domestic product, domestic price, promotion and other business practices to the foreign markets. Multinational company: The international companies learn that the extension strategy which will not work all times. Example: Toypet cars, produced in Japan to the U.S.A. but Toypet was met successfully in the U.S.A. so the international companies turn into multinational companies when they start responding to specific needs of the different countries markets regarding product, price, and promotion. Global Company: A global company is one which follows all the following conditions: -has a global strategy -treats all its activities in the context of a whole-world system -serves global customers with excellence -has a business delivery system highly sensitive to local customers needs -serves local customers with excellence Transnational company: This type of company produces, markets, invests and operates across the world. It links global resources with global markets for profit.

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INTERNATIONAL BUSINESS ENVIRONMENT Introduction: The fundamental basis for strategy formulation is the environmental analysis. Because environment provide the opportunities to the business to produce and sell a particular product. For example: Present business environment provides wide opportunity for internet similarly European climate condition provides opportunity for woollen and leather garments. Sometimes environment poses threats and challenges to business. Business should enhance its strengths in order to face the challenges posed by environment. Example: China dumped steel at low prices in the Indian markets and posed or caused a threat to Indian steel industry then Indian steel industry improved its technology in order to meet the challenges and dumped its steel in U.S. markets. Thus, the environment plays a key role in the business market. Meaning of international business environment: Environment means surrounding. Business environment means the factors which influence the MNCs and transnational companies. Factors that affect international business include: (STEPIN): S-Social & cultural factors, T-Technological factors, E-Economic factors, P-Political factors, I-International factors, N-Natural factors. Factors are broadly divided into internal environment factors and external environment factors. Internal factors affect the business within organisation. They include HR, trade unions, organisation structure, financial management, marketing management, production management, leadership style. External factors are divided into micro & macro environmental factors. y Micro external environment factors include, competitors, customers, suppliers, bankers and share holders. y Macro external environment factors include, STEPIN. Which are followed by SWOT analysis.
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A) Economic Environment Factors: The economic environment of various countries directly influences international business. Global economic has undergone some changes during the last 50years. Those changes resulted the emergence of global markets, establishment of WTO, business houses global competitors rather than local competitors. The major changes include: y Capital flow rather than trade or product flow across the globe. y Establishment of production facilities in various countries. y The contest between capitalization and communism is over. Capitalism succeeded over the communism/socialism as a model for the Organisation of economic activity. Types of economic system: There are three types of economic systems, namely;  Capitalistic economy,  Communistic economy,  Mixed economy. Capitalistic economic system: Under this system the major factors of production and distribution are owned, managed and controlled by private ownership rather than state. The govt. of state introduce the welfare concept which includes work mens compensation law, provision for social security, agriculture, medical, food, transportation, communication, education, water, power supply and so on. Examples: U.S.A, U.K, Japan etc. Communistic economic system: According to this system private property and property rights to income are abolished. The govt. owns all the factors of production and distribution. Lenin set up communist state in Russia after the great Oct revolution of 1917. Later this concept or idea spread to china, Rumania, Poland, Sweden, Cuba etc. every product rights under control of the govt. The major limitations of this system as follows:  It reduces individual freedom of choice due to restrictions on items to be produced.  It imposes many restrictions on MNCs & FDI.  It fails to get total commitment of people to work for countrys welfare.  It failed to achieve economic growth.  It could not achieve equality.  It produces less scope for FDI & business. Because of those reasons communism collapsed in the USSR the main reason is privatization. Mixed economic system: Under this system the major factors of production and distribution are owned, managed, controlled by the govt. The main purpose is to provide the benefits to the public more or less on equity basis. The other factors of mixed economic system are development of strong public sector, control over the private wealth, regulation of private investment etc. But due to globalization all developing countries move towards privatization. Thus every economic system is established to satisfy human needs/wants at the same time it influenced global business. Comparison among three economic systems:

Characteristics Economic markets Individual incentives Labour Capital

Capitalism U.S.A Right to invest. Profit and wage given ones ability Have freedom to select an occupation Invested by owners.
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Communism Russia No right to invest Profit not allowed

Socialism India Limited invest Fine wage to efforts

State decide ones Allowed to select any occupation occupation State provides all Obtained from owners

Managers Manager from party freedom B) Political factors: Political ideology is the body of complex , theories, and objectives. Most of the countries will have different people having various ideologies due to variations in culture, tribal groups, community groups, religious groups and economic groups. These variations caused for the different political parties. That is why company managers should balance all factors with the ideologies of the political parties. The political system of the country should hold all the groups with different ideologies together. Otherwise it leads to splits of the countries like India & Pakistan in 1947, the former U.S.S.R etc. International business managers should understand this difference and existence of various groups in host country is order to foresee the possible political tensions and instabilities. Political relations and international business: Political friendly-diplomatic relations result in the growth of bilateral or multilateral trade. Example: Relations between India and Russia helped a lot to the Indian companies similarly having diplomatic relations between Pakistan and U.S.A. helped Pakistan companies to have close business linkages with the U.S.A. Political parties playing key role to move the international business. Types of political system: By knowing the types of political systems international managers will get an idea whether they have to start business or not in the concerned political system countries. Govt. may be classified as:  Two-party system (U.S.A and the U.K)  Multi-party system (Germany, France, India)  Single-party system (Egypt, often India) Analysis of party system managers come to know the rules and regulations of government of concerned country. Thus political parties influence the international business from time to time. C) Legal environment factors: It is also one of the external factors. International managers should be aware of the legal system. There will be different forms of laws like the common law, civil law, contract law, criminal law, etc. are vary from country to country. Kinds of laws: Legal systems are classified into the common law, civil laws, contract law and theoretical laws.  Common law: Traditions, customs, culture are the bases for common law. Courts interpret the law according to the situations and incidents. These laws are in force in various countries viz.. The U.S.A, the U.K and Hong Kong.  Civil law: Detailed set of laws which make-up a code is the basis for civil laws. Germany, France and Japan follow civil law. International managers should understand the type of law that a country is following before entering the market.  Theoretical law: This law is based on religious percepts like the Islam law, Hindu law; some of the religious counties follow this type of law to maintain law and order.  World Trade Organisation: W.T.O is enforcing the intellectual property regulations to safeguard business people is patent, copyrights, and trademark rights. By formulating laws or amending the existing laws some of the countries and independent bodies will protect the intellectual property rights.  International Labour Organisation: I.L.O protects the labour rights and settles the doctorial disputes to enhance the international business. Thus legal factors influence the international business all over the globe. D) Social And Cultural factors: It is also one of the major factors which can influence the international business. These factors include attitude of the people to work, attitude to wealth, marriage, religion, education, ethics, human relations and social responsibilities. Culture is behavior patterns of members of a society learn through language and other forms of symbolic interaction. Their customs, habits, beliefs and values which bind them together as a social unit.
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Cultural attitude and international business: Dressing habits, living styles, eating habits and other styles are influenced by culture. These habits are different from one country to another country. Example: Wearing saree by Indian women is influenced by the culture. At the same time Japanese eat uncooked sea food where as Indians eat pure vegetarian food. The international businessmen should eliminate the social, religion and cultural effect in order to understand the foreign culture as they have to carry on business under the existing cultures. E) Social Environment: It consists of religious aspects, language, customs, traditions, beliefs, tastes, social institutions, living habits, eating habits, dressing habits, social influences, and the level of consumption. Example: The consumption level of French people is more than of German people having the same culture. Hence social environment helps in deciding on the type of product market. Religion: Major religions that effects international business are namely,  Christianity,  Islam,  Hinduism,  Buddhism. Every religion will have its own moral values: Examples: 1. Islam prohibits the payment or receipt of interest. 2. Christianity beliefs that hard work and creation of wealth. Caused for the capitalism and economic development in Western Europe, later on in the U.S.A. 3. Hindus beliefs dharma, karma, nirvana. Which protect the morals of the society and work is worship. 4. According to Buddhism which follows the noble eight fold paths like right seeing, thinking, speech, action, living, effort, meditation. It gives importance to spiritual achievement rather than material achievement. The above all religions directly and indirectly influence the international business from long period.