What is Business Environment?

A business organization does not exist in a vacuum. It exists in a world of concrete places and things, natural resources and living persons. The sum of all these factors and forces is called the Business Environment. Business Environment consists of both Internal and External factors. Business Environment in the present era of LPG is becoming increasingly complex. Business Environment can be further classified into two major categories: the economic environment and the non-economic environment. The economic environment includes factors like the Fiscal Policy, the Monetary Policy, the Industrial Policy, the price and Income equation, Nature of the Economic System, the pace of Economic Development etc. The Non-economic environment includes factors like social, cultural, political, legal, technological factors etc.

Leading determinants of the Environment for Business

The state of the World Economy and Distribution of World Output. International Economic Cooperation. Role of Multilateral Economic Institutions. International Economic Laws, Treaties, Agreements, Practices. Political system and conditions in different countries. Cultural factors across countries. Growth and spread of Multinational Corporations. Technology growth and Transfer. Corporate Governance standards and ethical practices across countries. International market structure and competition. Barriers to International Trade and Investment. National Economic policies of different countries.

Meaning of International Business (cont d)

Multinational business: one that has a worldwide marketplace from which it buys raw materials, borrows money, and manufactures its products and to which it subsequently sells its products.

Global business: a business that transcends national boundaries and is not committed to a single home country.

The Meaning of International Business

Domestic business: a business that acquires all its resources and sells its products or services within a single country.

International business: a business that is primarily based in a single country but acquires some meaningful share of its resources or revenues (or both) from other countries.

International Business is all business transactions that involve two or more countries.

International Business comprises a large and growing portion of the world s total business.

International Business usually takes place within a more diverse external environment.

Why Companies Engage in International Business.

A) To Expand Sales: companies sales are dependent on two factors: the consumers interest in their product or services and the consumers ability and willingness to buy them.
B)

B) Acquire Resources: products, services, technology, and information

C) Diversify Sources of Sales and Supplies

D) Minimize Competitive Risk: companies move internationally for defensive reasons. Profits from one market can be used to expand operations in other markets.

Reasons for Recent International Business Growth

Expansion of Technology: transportation, telecommunications; Transportation and telecommunications costs are more conducive for international operations. Liberalization of Cross-Border Movements: goods, services, labour, Capital CrossDevelopment of Supporting Institutional Arrangements: development by business and governments of institutions that enable us to effectively apply that technology. Increase in Global Competition: new products become global; Globalization of production

Environmental Challenges of International Business Management

External Factors

Tariff: a tax collected on goods shipped across national boundaries. Quota: a limit on the number or value of goods that can be traded. Export restraint agreements: accords reached by governments in which countries voluntarily limit the volume or value of goods they export and import from one another.
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