1. International Business Environment
Chapter 3
International Business Environment

2. 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

3. 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.

4. 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.

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

7. Competitive Structure
Domestic Environment
( Uncontrollables)
Competitive Structure
(Controllable)
International Business
Decision
Production
Finance
Human Resource
Marketing
( Uncontrollable)
Political and Legal Forces
Economic Climate
Foreign Environment ( Uncontrollable)
Geographic Environment
Economic and Financial
Environment
Social-Cultural
Political Environment
Legal Environment
Ecological Environment
Global Environment ( Uncontrollables)
International Economic Environment
International Financial Institutions
and System
International Trade Organization and Agreements
Regional Economic Groups and Agreement

8. Internal Environment
Represent firm’s 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.

9. Are Semi-Controllable.
Microenvironment
Actors in the firm’s immediate environment which directly influence the firm’s decisions and operations. They are:
Potential of New Entrants
Competition
Power of Customers
Power of Suppliers
Potential of Substitute Products/Services
Are Semi-Controllable.

10. Macro Environment or Domestic environment
Competitive Structure Economic climate
Political & Legal forces
Uncontrollable
IMPACT ?

11. Macro Environment Political & Legal forces Economic Conditions
Social-Cultural Environment
Technological Environment
Ecological Environment
Geographic

12. Non-Economic Environment
Political Socio-Cultural Legal
Ecological Geographic

13. Political Form of Government Political Party System
Political Ideology Role of Government
Political Stability

14. Socio-Cultural Language Education Aesthetics Religions & Superstition
Attitude & values Social groups & Organizations

15. 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 R&D
-Total industry spending for R&D
-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

16. 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

17. -Profound impact on organizations
Technological Forces
-Profound impact on organizations
Computer
Tele communications
Internet
eCommerce

18. -Internet changes the nature of opportunities and threats
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

19. Political-Legal Forces
-Key opportunities and Key Threats
Antitrust legislation
Tax rates
Patent Laws
Quota
Lobbying efforts by International

20. 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

21. 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

22. 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

23. 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)

24. 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.

25. 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.

26. 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.