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Environmental Factors
of Business
Economic Environment
Economic System (Centrally Planned,
Capitalist & Mixed Economy)
Per Capita Income (Purchasing Power
Capacity)
Market Size (Large Population &
Age factor)
Inflation (Cost of Production is high,
consumers’ income is reduced)
Economic Environment in India
Indian Companies are embracing new
opportunities and challenges. Because:
Changing in India
Getting Credit 36 84 84 84 7
Protecting Investors 33 83 83 64 5
Example :
After second world war, Japan had almost nothing except for a
pool of skilled and educated human resources. Postwar
economic success of Japan based on education system.
Culture and Workplace
Work Place culture is also determined by the culture
which affects operations of MNC’s in different countries.
Greet Hofsteed had identified 5 dimensions related
workplace based on culture of that country.
Example :
A and B two locations are given. Both are characterized by low
labour costs, same population size and at similar stage of
economic development.
In country A the education system is under-developed, there are
six major linguistic groups.
In country B, education system is well developed, there is only
one linguistic group.
Which country is best investment site ?
Culture and Business Ethics
Generally ethical principles are universal but some are
culturally bound. If this is the case, International business
may be confronted with difficult ethical dilemmas.
Example :
Chinese culture is based on “guanxi”, which is based on
networking and supported by the idea of gift giving.
On the other hand western culture assumed it as bribery.
Murabaha Contract :