International Business Environment (IBO-1) || Unit-1 INTRODUCTION TO INTERNATIONAL BUSINESS ENVIRONMENT

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International Business Environment (IBO-1)

 

Unit-1

Introduction to International Business Environment

 

Business can be defined as any economic activity on a continuous basis which involve production or purchase of goods for sale, transfer or exchange of goods, or supply of services for a purpose of earning

Business are classified into two groups

Domestic Business (within political boundary of own country)

International Business (Beyond political boundary of own country)

Environment refers to our surroundings. In the context of a business firm, environment can be defined as various external factors and forces that surround the firm and impact the outcome of its decisions and operations

Business environment are classified in to two groups

Micro Environment -It refers to such players whose decisions and actions have a directly affect the business activity. These activity includes middleman, transporters, warehouse, advertising, and marketing agencies, customers, competitors, general public.

 

Macro Environment- It consists of broader forces which effect the firm as well as the others actions in the firm’s micro environment. These includes such as geographic, economic, financial, social - cultural, political, legal, technological and ecological forces

 

International Business Environment

Domestic - Domestic environment refers to the factors and forces existing and operating within the political boundary of a country in which business firm is working. Domestic environment consists of the factors such as competitors, economic, conditions, political forces, and legal forces

International - International business refers to the factors and forces existing and operating in foreign country. Foreign environment consists of factors such as economic conditions, social and cultural values, political and legal forces, technology used in foreign country

Global - Global environment refers to the factors and forces existing and operating worldwide. Global environment consists of forces have worldwide or regional influences on business operations like international treaties, international financial system etc.

Analysis of the Components of International Environment

Geographic Environment

Economic and Financial Environment

Demographic Environment

Social  – Cultural Environment

Political Environment

Legal Environment

Ecological – Environment

 

Geographic environment refers to a country’s climate, topography, natural resources and people.

Geographical environment affects the supply and demand of the products equally

For example- Sugar industry is found in the regions where sugarcane is grown because of suitable climate and soil conditions

Demand of AC and refrigerators will be for more in tropical regions. There is no need of woolen clothes in tropical regions

 

Economic and Financial environment are closely related to each other

Economic environment

Expenditure pattern

Income

Infrastructure such as transport,

Communication, warehouse etc.

Financial environment

Fiscal Policy

Monetary Policy

Commercial Policy

Foreign Investment Policy

Balance of Payment Policy

 

Demographic environment involves people and since people constitute the market. Demographic trends in a particular country such as size and growth in population, age wise and gender wise composition of population etc.

Example - If the female population of any country is more comparison then the needs of female’s products is high. If the birth rate is high than it’s a symbol of big needs of toys.

It refers to social values prevailing in a country. Its consist of customs, habits, beliefs, values, languages etc.

 

Culture refers to that part of the total repertoire of human actions which is socially transmitted

Some elements of culture - Language, Aesthetics, Education, Religious and Superstitions, Material culture, Technology, Social groups and organizations, Business customs

 

Political Environment of the international business is the set of government institutions. Political parties and organizations that are the expression of the people in the nation of the world.

Following factors constitute the political environment of the country

Form of government and political party system

Political ideology and role of the government

Political stability

Political risk include nationalism, domestication etc.

Relationship with government

 

Legal Environment - Every business firm operates within the jurisdiction of legal system. The rules of home country is different in another country

Example –Rules of discount, Legal activities for operates business, required license and permission

 

Ecological Environment -It refers to pattern and balance of relationship plants, animals, people and their environment.

In many countries, with a view to protect environment, a number of law have passed.

The purpose of environment law s is to protect the purity of the environment and preserve the ecological balance.

Example- Rules related to mining, Rules related to cutting of trees, Rules and policies related to industrial waste