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