International%20Business%20Environment

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Chapter 3

• International Business Environment

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International Business Environment

• Environment- everything around us.
• Business environment Sum total of all the forces
  surrounding influencing the life and
  development of the firm.

Business Decision
Internal Environment Strengths Weakness of
the Org.
External Environment Business
Opportunity Threats to Business
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International Business Environment

• Business Dynamics to a large extent depends on
  the environmental dynamics.
• Environmental understanding becomes more
  important in the area of international business
  in which the environmental forces of the home
  country interact with the foreign environment.

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Environmental Characteristics

• Factors and Forces are external to the firm.
• Essentially uncontrollable.
• Environmental factors are dynamic-they
  continuously change over time.
• NEED ?
• Anticipate, respond and adapt to the complexity
  and rapid pace of various environmental forces
  changes globally.
• Being international environmental factors are
  given, the firms should adapt its business
  strategy to suit the environmental factors.

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Components of International Business Environment
Foreign Environment
Domestic Environment
Micro Environment
Internal Environment
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Internal Environment

• Represent firms business strategy and decision
  with regard to--
• Production
• Finance
• Marketing
• Human Resources
• Research Activities
• Firm can change them, but within the constraints
  of various environmental factors.

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Microenvironment

• Actors in the firms immediate environment which
  directly influence the firms decisions and
  operations. They are
• Potential of New Entrants
• Competition
• Power of Customers
• Power of Suppliers
• Potential of Substitute Products/Services
• Are Semi-Controllable.

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Macro Environment or Domestic environment

• Competitive Structure Economic climate
• Political Legal forces
• Uncontrollable
• IMPACT ?

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Macro Environment

• Political Legal forces
• Economic Conditions
• Social-Cultural Environment
• Technological Environment
• Ecological Environment
• Geographic

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Non-Economic Environment
Political Socio-Cultural Legal
Ecological Geographic
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Political
Form of Government Political Party
System Political Ideology Role of Government
Political Stability
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Socio-Cultural

• Language Education
• Aesthetics Religions Superstition
• Attitude values Social groups
  Organizations

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Macro Environment- Indicators
Economic Technological Political-legal Socio-cultural
-GDP trends -Interest rate -Money supply -Inflation rate -Unemployment -Wages/prices -Energy availability/cost -Disposable income -Total government spending for RD -Total industry spending for RD -Focus technological efforts -New products -New development in technology -Productivity through automation -Monopoly regulation -Environmental protection laws -Tax law -Special incentives -Attitudes toward foreign company -Laws on hiring and promotion -Stability of government -Lifestyle change -Career expectation -Regional shifts in population -Consumer behavior -Rate of family formation -Growth rate of population -Age distribution of population -Life expectancy -Birth rate
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Economic Forces

• Availability of credit
• Interest rate
• Inflation rate
• GDP trends
• Consumption patterns
• Unemployment level
• Wage and price control
• Demand shift for goods/services
• Imports/Export factors
• Income difference by region/customer
• Monetary policies
• Fiscal policy

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Technological Forces

• -Profound impact on organizations
• Computer
• Tele communications
• Internet
• eCommerce

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Technological Forces

• -Internet changes the nature of opportunities and
  threats
• Alters life cycle of products
• Increases speed of distribution
• Creates new products and services
• Eases limitations of geographic markets
• Alters economies of scale
• Changes entry barriers

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Political-Legal Forces

• -Key opportunities and Key Threats
• Antitrust legislation
• Tax rates
• Patent Laws
• Quota
• Lobbying efforts by International

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Political-Legal Forces

• -Key Political-Legal Variables
• Government regulation and deregulation)
• Tax law changes
• Special tariffs
• Changes in patent laws
• Environment protection laws
• Equal employment laws
• Level of government subsidies

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Social-Cultural-Demographic Forces

• -Key Variables
• Life expectancy rates
• Per capita income
• Average disposable income
• Attitude toward business
• Buying habits
• Ethical concerns
• Attitude toward saving

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Social-Cultural-Demographic Forces

• Monitor Key Variables
• Racial equality
• Average level of education
• Government regulation
• Attitude toward customer services
• Attitude toward product quality
• Social responsibility
• Waste management

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Global or Foreign Environment

• World Economic Condition
• International Financial Systems
• Working of WTO, IMF, WB..
• International Agreements
• Regional Economic Groupings
• World-wide Economic Recession
• Initiatives of Regional levels
• European Union (EU)
• North American Free Trade Association (NAFTA)
• Association of South East Asian Nations ( ASEAN)

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Differences Exist

• Between domestic foreign environments.
• Among the environments prevailing in different
  foreign markets.
• Business Strategies that are successful in one
  nation might fail miserably in another nation.

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Relevance of International Business Environment

• Central Issues in entering into international
  business -
• Which market (s) to select?
• How to enter into those markets?
• Decisions are strategic in nature and influenced
  by the environmental forces.
• Target markets should have enough market
  potential.

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Review

• How different political systems affect the
  international business?
• What are the implications of political,
  economical and legal differences among difference
  countries?
• Differentiate between socialism and
  individualism.
• Group discussion Reading case CAMBODIA and
  answer the question.