ppt

1. CH. 2
INTERNATIONAL
BUSINESS
ENVIRONMENT

2. IMPORTANCE OF INTERNATIONAL
BUSINESS
• It comprises a large & growing portion of the
world’s total business.
• Every company is affected by global events &
competition
• Earns foreign exchange which in turn helps to
strengthen the economy

3. • Makes optimum utilization of resources
• Spreads its business risk
• Expands & diversify its activities
• Produces high quality goods at low cost

4. DIFFICULTIES OF INTERNATIONAL BUSINESS
• Cultural Differences
• Differences in Currency Units
• Differences in Language
• Differences in Marketing Infrastructure
• Differences in Trade Practices

5. • Economic Differences
• High Transportation Costs
• Managing Proper Relationship
• Managing global diversity
• Managing good corporate governance
• Managing government trade & regulations
• Political & Legal differences
• Trade Restrictions

6. PEST FACTORS
• It is concerned with the important external
environmental influences on a business.
• PEST stands for Political, Economic, Social &
Technological analysis.
• It could affect the strategic development of a
business.
• Identifying PEST influences is a useful way of
summarizing the external environment in which a
business operates.

7. POLITICAL ENVIRONMENT
• All business firms are directly affected to a greater
extent by the government & its programmes.
• Political forces will choose the nature of business,
programmes & projects to be undertaken for the
progress of the country.
• These political forces can be classified as:
• Long Term Forces: It denotes the secular changes
in business activities due to political conditions
prevailing & the adoption of particular line of
policy in business

8. • Rapid Changes: It consists of unexpected political
changes due to army coup or revolt or capturing of
the government machinery by the rebel group.
• Business in a country can be started & nurtured to
grow into big business only within the legal system
of the country.
• All countries of the world have a separate set of
laws for the control & direction of business.
• The business law of a country is a complex system
of regulations & intervention that form the legal
environment of the business.
• All business managers should have the knowledge
of business law for taking management decisions.

9. DIMENSIONS OF POLITICAL
ENVIRONMENT
• Nature of the policy – Democracies & Autocracies
• Nature of Constitution of Country – law passed by
the parliament is significant. Parliament is supreme,
it can help any project which gets its approval
• Political System – India has representative
democracy based on adult authorization.
• Political Awareness of the People & the Govt. –
people should be aware of their rights & duties in
the smooth functioning of a democracy
• Laws Passed by the Govt. – any law that is
contradictory can be repealed

10. ECONOMIC FACTORS
• The business enterprise is affected by a variety of
economic forces that cannot be controlled by the
business. These economic forces are Demand Force
& Competitive Force.
• For a business firm to survive & flourish, it should
have adequate demand for its products, & at the
same time, the firm has to compete with the rival
firm producing alike products or alternate products.

11. • Economic Forces Affecting demand:
For customers to buy the commodity of the firm,
they should have the capacity to buy & readiness to
buy. The ability to purchase a commodity depends
on the disposable income of the customer. Out of
the entire income, the individual has to pay taxes &
the disposable income will be less if the taxes are
high. On the other hand, if the individual wants to
save, the amount for expenditure will be less. The
attitude of saving will affect the demand. A change
in price of the commodity will also affect the
demand.

12. • Economic Forces Affecting Competitive Forces:
a. Price Cutting: It is a method which had to be
adopted very carefully, as it may eventually lead to
price-war between firms contending, resulting in
reduction of profits.
b. Advertisement: Advertisements in recent days
have become a very commanding tool in persuading
the consumers to a particular brand. In
monopolistic competition, a great share of the
market is well-established by firms making effective
& aggressive advertisement.

13. c. Product Differentiation: A tries to get
competitive strength by differentiating its
product from those of its rivals. By having special
design, color, packing & features, the firm tries to
get competitive edges.
d. Marketing Strategies & Consumer Service: New
firm adopt a variety of types of marketing
strategies to create market for their products, for
e.g. installment system, credit system, hire-
purchase etc. Customer service like, free door
delivery, quick service, after sales service,
guarantee from defects are adopted to have
more & more demand for their commodities

14. Economic Policies of the Govt.
• Industrial Policy
• Fiscal Policy
• Monetary Policy
• EXIM Policy
• Public Sector & Economic Development

15. SOCIO-CULTURAL ENVIRONMENT
• Social & Cultural attitudes of a region influence the
business organizations of the region in many ways.
• Every society develops its own culture which means
how the members of that society behave & interact
with each other in society, as well as outside
society.
• The term culture includes values, norms, customs,
ethics, goals & other accepted behavior patterns.

16. • The socio-cultural fabric is an imperative
environmental factor that should be analyzed while
formulating business strategies.
• The cost of ignoring the customs, traditions, taboos,
tastes & preferences of people could be extremely
high.
• The buying & consumption habits of the people,
their language, beliefs & values, customs &
traditions, tastes & preferences, education are all
factors that have an effect on business.

17. • For a business to be successful, its policy
should be the one that is appropriate in the
socio-cultural environment.
• The marketing mix will have to be so designed
as most excellent to suit the environmental
characteristics of the market.

18. Factors of Culture Affecting
International Business
• Social Stratification System
• Motivation
• Relationship Preference
• Risk Taking Behavior
• Information & Task Processing

19. Levels of Culture in Multinational
Management
• National Culture
• Business Culture
• Occupational & Organizational Culture

20. TECHNOLOGICAL ENVIRONMENT
• Technology means “the systematic knowledge of
the industrial arts”.
• Technique denotes the method of performance.
• These are increasingly used in modern literature
on industrial production.
• The present age is the age of technology.
• Technology affects the business in two ways:
1. Impact on the society
2. Impact on business operations

21. Impact of Technology on Business Unit
• Production & Product Progress
• Employment Practices
• Marketing
• Information Processing

22. International Technology Issues
• Technology Acquisition
• Choice of Technology
• Terms of Technology Transfer
• Creating Local Capability

23. LEGAL ENVIRONMENT IN
INTERNATIONAL BUSINESS
• It refers to the rules & laws that regulate behavior
of individuals & organizations
• Failure to comply with the laws will result into
penalty depending on the seriousness of the
offence
• International Law for Business aims at providing the
regulations required for execution of international
transactions involving more than one nation

24. • Every country has its own set of laws for regulating
business, therefore, it has to comply with provisions
of both, domestic as well as international law.
• The most important aspect of international law is
jurisdiction.
• The growth of business depends on the legal system
of the country.
• All business managers should have the knowledge
of business law for taking management decisions.

25. ROLE OF GOVERNMENT IN
INTERNATIONAL TRADE
• As the business has to fulfill certain
responsibilities towards the government, in the
same way the government has to fulfill several
responsibilities towards the business.
• Government is the most influential & sovereign
authority in the country.
• The government can use that power to regulate
& to stimulate business.

26. RESPONSIBILITIES TOWARDS
BUSINESS
• Awarding patent rights & copy rights
• Basic Research
• Building Infrastructure
• Controlling the growth of monopolies &
preserving competition
• Maintenance of Law & Order
• Protections
• Providing Information
• Providing Money & Credit
• Reservation of fields of production

27. RESPONSIBILITIES TOWARDS
GOVERNMENT
• Active participation in politics
• Government Contracts
• Government Services
• Payment of Taxes
• Providing inputs to the Government
• Social Responsibility
• Obey Laws