International Business Environment: Introduction

Chapter No. 1 Page No. 2

International Business Environment
INTERNATIONAL BUSINESS CONSUMER PROTECTION IN INDIA
AND ITS ENVIRONMENT

“ALL INSTITUTIONS HAVE TO MAKE GLOBAL
COMPETITIVENESS A STRATEGIC GOAL.
NO INSTITUTION, WHETHER A BUSINESS,
A UNIVERSITY OR A HOSPITAL, CAN HOPE TO
SURVIVE, LET ALONE SUCCEED, UNLESS IT
MEASURES UP TO THE STANDARDS SET BY THE
LEADERS IN ITS FIELD, ANY PLACE IN THE WORLD.”
PETER DRUCKER

MANAGEMENT CHALLENGES FOR 21ST CENTURY


AND ITS ENVIRONMENT

GLOBALIZATION ENCOMPASSES:

DOING OR PLANNING TO EXPEND, BUSINESS GLOBALLY.

NO DISTINCTION BETWEEN THE DOMESTIC MARKET
AND FOREIGN MARKET AND DEVELOPING A GLOBAL
OUTLOOK OF BUSINESS.

IRRESPECTIVE OF NATIONAL BOUNDRIES, LOCATING
THE PRODUCTION AND OTHER PHYSICAL FACILITIES
ON GLOBAL BUSINESS DYNAMICS.

CONT….


AND ITS ENVIRONMENT

GLOBALIZATION ENCOMPASSES:

BASING PRODUCT DEVELOPMENT AND PRODUCTION
PLANNING ON THE GLOBAL MARKET CONSIDERATION.

GLOBAL SOURCING OF FACTORS OF PRODUCTION,
RAW MATERIAL, COMPONENTS, MACHINERY /
TECHNOLOGY, FINANCE etc. ARE OBTAINED
FROM THE BEST SOURCE ANYWHERE IN THE WORLD.

GLOBAL ORIENTATION OF ORGANIZATIONAL STRUCTURE
AND MANAGEMENT CULTURE.


AND ITS ENVIRONMENT

TYPES OF INTERNATIONAL BUSINESS:

TRADING.

MANUFACTURING AND MARKETING.

SOURCING AND MARKETING.

GLOBAL SOURCING FOR PRODUCTION.

SERVICES.

INVESTMENTS.


AND ITS ENVIRONMENT

INDICATORS OF GROWING IMPORTANCE OF
INTERNATIONAL BUSINESS

THE FOREIGN TRADE__ GDP RATIO HAS BEEN RISING
SIGNIFICANTLY, INDICATING THAT NATIONAL ECONOMIES
ARE BECOMING MORE AND MORE EXPORT AND IMPORT
DEPENDENT.

INTERNATIONAL INVESTMENT, BOTH DIRECT AND
PORTFOLIO, HAVE BEEN GROWING RAPIDLY.

A COROLLARY OF THE RAPIDLY GROWING INTERNATIONAL
INVESTMENT IS THE FAST GROWING INTERNATIONAL
PRODUCTION.

CONT….


AND ITS ENVIRONMENT

INDICATORS OF GROWING IMPORTANCE OF
INTERNATIONAL BUSINESS

A CONNOTATION OF THE GROWING EXPORT-GDP
RATIO IS THAT THE EXPORT INTENSITY OF
COMPANIES IN GENERAL ARE RISING.
(A RISING EXPORT INTENSITY MEANS THAT THE FOREIGN
BUSINESS IS GROWING FASTER THAN THE DOMESTIC
BUSINESS).
MANY FIRMS MAKE MOST OF THEIR BUSINESS, LIKE
THE LEADING IT FIRMS, THERE ARE COMPANIES
WHICH DO 100 PER CENT OF THEIR BUSINESS
ABROAD.


AND ITS ENVIRONMENT

IMPORTANCE OF INTERNATIONAL BUSINESS TO FIRMS

MOTIVATING OR PROVOKING FACTORS TO GO
INTERNATIONAL

PULL FACTORS: (PROACTIVE REASONS)
ATTRACTIVENESS OF THE FOREIGN MARKET,
INCLUDING RELATIVE PROFITABILITY AND GROWTH
PROSPECTS.
PUSH FACTORS: (REACTIVE REASONS)
COMPULSION OF THE DOMESTIC MARKET, LIKE
SATURATION OF THE MARKET, PROMPTING TO
INTERNATIONALIZE.


AND ITS ENVIRONMENT

IMPORTANT REASONS FOR GOING INTERNATIONAL

1. PROFIT ADVANTAGE:
INTERNATIONAL BUSINESS COULD INCREASE THE TOTAL
PROFIT.
THE AVERAGE COST OF PRODUCTION WILL BE THE
LOWEST IF THE PLANT IS OPERATED AT OPTIMUM
CAPACITY.
ADVANTAGE OF CHEAP LABOUR.
2. GROWTH OPPORTUNITIES:
IN A NUMBER OF DEVELOPING COUNTRIES INCOME AND
POPULATION ARE RAPIDLY INCREASING.
FOREIGN MARKETS PROVIDE ENORMOUS GROWTH
OPPORTUNITIES FOR THE DEVELOPING COUNTRY FIRMS.


AND ITS ENVIRONMENT


3. DOMESTIC MARKET CONSTRAINTS:
WHEN DOMESTIC MARKET IS DECLINING, FOREIGN
MARKETS MAY PROVIDE GROWTH OPPORTUNITIES.
TO TAKE ADVANTAGE OF THE SCALE ECONOMIES.
WHEN DOMESTIC MARKET IS VERY SMALL,
INTERNATIONALIZATION IS THE ONLY WAY TO ACHIEVE
GROWTH.
4. COMPETITION:
COMPETITION MAY BECOME A DRIVING FORCE.
THE STRATEGY OF COUNTER COMPETITION IS TO
PENETRATE THE HOME MARKET OF POTENTIAL FOREIGN
COMPETITOR.


AND ITS ENVIRONMENT


5. GOVERNMENT POLICIES AND REGULATIONS:
MANY GOVTS. GIVE INCENTIVES AND OTHER SUPPORT
TO EXPORT AND TO INVEST IN FOREIGN COUNTRIES.
TO EARN FOREIGN EXCHANGE TO FINANCE THEIR
IMPORTS.
GOVT. POLICIES WHICH LIMIT THE SCOPE OF BUSINESS
IN THE HOME COUNTRY.
6. MONOPOLY POWER:
FACTORS SUCH AS MONOPOLIZATION OF CERTAIN
RESOURCES, PATENTS RIGHTS, TECHNOLOGICAL
ADVANTAGE, PRODUCT DIFFERENTIATION, EXCLUSIVE
MARKET INFORMATION ARE THE PROACTIVE STIMULUS.


AND ITS ENVIRONMENT

7. SPIN-OFF BENEFITS:
INTERNATIONAL BUSINESS BECOMES A MEANS OF
GAINING BETTER MARKET SHARE DOMESTICALLY.
FOREIGN EXCHANGE EARNING MAY HELP TO IMPORT
CAPITAL GOODS, TECHNOLOGY etc.
ECONOMICS INCENTIVES OFFERED BY THE
GOVERNMENT.
8. STRATEGIC VISION:
THE URGE TO GROW, THE NEED TO BECOME MORE
COMPETITIVE, THE NEED TO DIVERSIFY AND TO GAIN
ADVANTAGE OF INTERNATIONALIZATION.
PLANNING IS DONE CONSIDERING THE ENTIRE WORLD
AS A SINGLE MARKET.


AND ITS ENVIRONMENT

AN OVERVIEW OF BUSINESS ENVIRONMENT

SWOT ANALYSIS IS ONE OF THE FIRST STEPS IN THE
STARATEGIC MANAGEMENT PROCESS.

BUSINESS DYNAMICS IS A DEPENDENT FACTOR

HENCE THE IMPORTANCE OF ENVIRONMENTAL
ANALYSIS.


AND ITS ENVIRONMENT

AN OVERVIEW OF BUSINESS ENVIRONMENT

i
INTERNAL EXTERNAL
BUSINESS
ENVIRONMENT ENVIRONMENT
DECISIONS

FACTORS INFLUENCING BUSINESS DECISIONS


AND ITS ENVIRONMENT

BUSINESS LEVEL ENVIRONMENT

INTERNAL ENVIRONMENT.

MICRO ENVIRONMENT / TASK ENVIRONMENT /
OPERATING ENVIRONMENT.

MACRO ENVIRONMENT / GENERAL ENVIRONMENT /
REMOTE ENVIRONMENT.


AND ITS ENVIRONMENT

INTERNAL ENVIRONMENT:

VALUE SYSTEM.
i
MISSION AND OBJECTIVES.

MANAGEMENT STRUCTURE AND NATURE.

INTERNAL POWER RELATIONSHIP.

HUMAN RESOURCES.
CONT…..


AND ITS ENVIRONMENT

INTERNAL ENVIRONMENT:

COMPANY IMAGE AND BRAND EQUITY.

OTHER FACTORS:
PHYSICAL ASSETS AND FACILITIES.
R&D AND TECHNOLOGICAL CAPABILITIES.
MARKETING RESOURCES.
FINANCIAL FACTORS.


AND ITS ENVIRONMENT

MICRO ENVIRONMENT:

SUPPLIERS.

CUSTOMERS.

COMPETITORS.

MARKETING INTERMEDIARIES.

PUBLICS.


AND ITS ENVIRONMENT

ENVIRONMENT OF INTERNATIONAL BUSINESS

A FIRM IN INTERNATIONAL BUSINESS ENCOUNTERS
THREE DIFFERENT SETS OF EXTERNAL ENVIRONMENT

DOMESTIC ENVIRONMENT.

FOREIGN ENVIRONMENT.

GLOBAL ENVIRONMRNT.


AND ITS ENVIRONMENT

BUSINESS ENVIRONMENT AND STRATEGIC DECISIONS
IN INTERNATIONAL BUSINESS

INTERNATIONAL BUSINESS DECISION:
THIS IS THE FIRST DECISION, BASED ON
PRESENT AND FUTURE OVERSEAS OPPORTUNITIES.
PRESENT AND FUTURE DOMESTIC MARKET
OPPORTUNITIES.
COMPANY OBJECTIVES AND RESOURCES.
MARKET SELECTION DECISION:
THOROUGH ANALYSIS OF THE POTENTIALS AND OVERSEAS
MARKET ENVIRONMENT IS ESSENTIAL.
CONT……


AND ITS ENVIRONMENT

ENTRY AND OPERATING DECISIONS:( STRATEGIES)
LICENSING, FRANCHISING, EXPORTING , COUNTER -
TRADE, ESTABLISHING ABROAD ASSEMBLY FACILITIES,
MANUFACTURING FACILITIES, WHOLLY OWNED /
JOINT VENTURE / CONTRACT MANUFACTURING.
MARKETING MIX DECISION:
ELEMENTS OF MARKETING MIX SHOULD BE SUITABLY
DESIGNED.
INTERNATIONAL ORGANIZATION DECISION:
TO DECIDE ABOUT ITS ORGANIZATION STRUCTURE FOR
EFFECTIVELY CONDUCTING THE BUSINESS.


AND ITS ENVIRONMENT

IMPLICATIONS OF DIFFERENCES IN
BUSINESS ENVIRONMENT

IT IS INDEED THE DIFFERENCES IN THE BUSINESS
ENVIRONMENT THAT HAVE GIVEN RISE TO A
SPECIALIZED FIELD OF STUDY, INTERNATIONAL
BUSINESS.WHAT MAKES A BUSINESS STRATTEGY
WHICH IS SUCCESSFUL IN ONE MARKET A FAILURE
IN ANOTHER MARKET IS OFTEN THE DIFFERENCES
IN THE BUSINESS ENVIRONMENT.


AND ITS ENVIRONMENT

IMPLICATIONS OF DIFFERENCES IN
BUSINESS ENVIRONMENT
THE KEY TO SUCCESSFUL INTERNATIONAL BUSINESS IS
ADAPTION TO THE DIFFERENCES IN THE ENVIRONMENT
THAT USUALLY EXIST FROM ONE MARKET TO ANOTHER.

ADAPTION IS NOT A PASSIVE PROCESS BUT A
CONSCIOUS EFFORT ON THE PART OF THE
INTERNATIONAL MARKETER TO ANTICIPATE THE
INFLUENCES OF BOTH THE FOREIGN AND DOMESTIC
UNCONTROLLABLE ENVIRONMENTS ON A MARKETING
MIX AND THEN TO ADJUST THE MARKETING MIX TO
MINIMISE THEIR EFFECTS. = CATEORA AND KEAVENEY


AND ITS ENVIRONMENT

NATURE OF THE ECONOMY

A WIDELY USED METHOD OF CLASSIFICATION OF THE
ECONOMIES IS ON THE BASIS OF THE PER CAPITA
INCOME. ACCORDINGLY COUNTRIES ARE CLASSIFIED AS

LOW INCOME ECONOMIES.

HIGH INCOME ECONOMIES.

THE MIDDLE INCOME ECONOMIES.

DEVELOPING AND DEVELOPED ECONOMIES /COUNTRIES.


AND ITS ENVIRONMENT


CLASSIFICATION BY INCOME DOES NOT NECESSARILY
REFLECT DEVELOPMENT STATUS.
IN THE GROUP OF THE HIGH INCOME ECONOMIES, THE
INDUSTRIAL ECONOMIES ARE DEVELOPED ECONOMIES.

BESIDES INCOME, THE CRITERIA SUCH AS SECTORAL
DISTRIBUTION ON THE INCOME AND EMPLOYMENT
GENERATION, SOCIAL DEVELOPMENT INDICATORS ARE
APPLIED TO CONSIDER WHETHER AN ECONOMY IS
DEVELOPED OR DEVELOPING ONE.


AND ITS ENVIRONMENT

( CHARACTERISTICS OF DEVELOPED ECONOMIES )

WIDESPREAD USE OF MODERN AND SOPHISTICATED
TECHNOLOGY.
CONTINUOUS INNOVATIONS.
FAST DIFFUSION OF NEW IDEAS AND TECHNOLOGIES.
MARKET FRIENDLY ECONOMIC POLICIES.
COMPARATIVELY OPEN TRADE AND INVESTMENT
POLICIES.
COMPETITION AND CONSUMER CHOICE. etc.


AND ITS ENVIRONMENT

( LEAST DEVELOPED ECONOMIES )

VERY LOW GNP PER CAPITA INCOME.

LAND LOCKED REMOTE INSULARITY.

DESERTIFICATION AND EXPOSURE TO NATURAL
DISASTERS.

BANGLA DESH, BHUTAN, NEPAL, MALDIVES, MALI,
UGNADA, MYANMAR, SUDAN ZAMBIA, ZIMBABVE,AND
YEMEN ARE THE EXAMPLES.


AND ITS ENVIRONMENT

( ECONOMIC GROWTH / ECONOMIC DEVELOPMENT )

AN INCREASE IN INCOME IS AN INDICATION OF
ECONOMIC GROWTH.
QUALITATIVE DIMENSIONS OF ECONOMIC DEVELOPMENT
BESIDES GROWTH ARE:
DISTRIBUTION OF INCOME.
STANDARD OF LIVING.
COMPOSITION OF OUTPUT.
CHARACTER OF WORKING CONDITIONS.
OVER ALL IMPROVEMENT IN ECONOMIC WELFARE.


AND ITS ENVIRONMENT

REGION STATES

WHEN THE DIFFERENT REGIONS OF A NATIONAL
ECONOMY SHOW GREAT DIVERSITY, IT MAY NOT BE
APPROPRIATE TO REGARD IT AS SINGLE ECONOMIC
UNIT.

NATION STATES ARE NO LONGER MEANINGFUL UNITS IN
WHICH TO THINK ABOUT ECONOMIC ACTIVITY.

IN A BORDERLESS WORLD, THEY COMBINE THINGS AT
THE WRONG LEVEL OF AGGREGATION.

THE UNITS THAT MAKE SENSE ARE REGION STATES.

THEY MAY OR MAY NOT FALL WITHIN THE BOUNDARIES
OF A PARTICULAR NATION. =KENICHI OHMAE


AND ITS ENVIRONMENT

REGION STATES

THE MOVEMENT OF BOTH INVESTMENT AND INDUSTRY
HAS BEEN GREATLY FACILITATED BY INFORMATION
TECHNOLOGY WHICH NOW MAKES IT POSSIBLE FOR A
COMPANY TO OPERATE IN VARIOUS PARTS OF THE
WORLD WITHOUT HAVING TO BUILD UP AN ENTIRE
BUSINESS SYSTEM IN EACH OF THE COUNTRIES WHERE
IT HAS A PRESENCE.


AND ITS ENVIRONMENT

INTERNATIONAL ECONOMIC GAP

THE WIDENING OR THE PERSISTENCE OF THE
INTERNATIONAL ECONOMIC GAP HAS BEEN CAUSED BY
FACTORS SUCH AS:

DIFFERENCES IN THE GROWTH RATE.

UNEQUAL ACCESS.

POPULATION EXPLOSION IN DEVELOPING COUNTRIES.

NEGLIGENCE BY THE DEVELOPED COUNTRIES OF THE
HUMANITARIAN NEEDS OF THE DEVELOPING COUNTRIES.


AND ITS ENVIRONMENT


THE WORLD’S 200 RICHEST PEOPLE MORE THAN
DOUBLED THEIR NET WORTH IN THE FOUR YEARS
TO1998, TO MORE THAN $ 1 TRILLION.

THE ASSETS OF THE TOP THREE BILLIONAIRES ARE
MORE THAN COMBINED GNP OF ALL LEAST
DEVELOPED COUNTRIES AND THEIR 600 MILLION
PEOPLE.


AND ITS ENVIRONMENT


IN 1993 JUST 10 COUNTRIES ACCOUNTED FOR
84 PER CENT OF GLOBAL RESEARCH AND
DEVELOPMENT EXPENDITURE AND CONTROLLED
95 PER CENT OF THE U.S. PATENTS OF THE PAST
TWO DECADES.

MOREOVER, MORE THAN 80 PER CENT OF PATENTS
GRANTED IN DEVELOPING COUNTRIES BELONG TO
RESIDENTS OF INDUSTRIAL COUNTRIES.


AND ITS ENVIRONMENT


DETERIORATED TERMS OF TRADE PUT DEVELOPING
COUNTRIES INTO SUBSTANTIAL LOSS.
TRADE RESTRICTIONS REDUCE DEVELOPING COUNTRIES
GNP BY 3 PER CENT--- AN ANNUAL LOSS OF $ 75 BILLION.
GLOBAL MARKET RESTRICTIONS AND UNEQUAL
PARTNERSHIP ARE ESTIMATED TO COST THE
DEVELOPING COUNTRIES ABOUT $500 BILLION-- AROUND
20 PER CENT OF THEIR GNP AND MORE THAN SIX TIMES
OF WHAT THEY SPEND ON HUMAN DEVELOPMENT
PRIORITIES, SUCH AS BASIC EDUCATION, PRIMARY
HEALTH CARE, SAFE DRINKING WATER, AND
ELIMINATION OF MALNUTRITION.
= WORLD BANK STUDY


AND ITS ENVIRONMENT


IF GLOBAL OPPORTUNITIES ARE NOT SHARED BETTER,
THE FAILED GROWTH OF THE LAST DECADE WILL
CONTINUE.

MORE THAN 80 COUNTRIES STILL HAVE PER CAPITA
INCOMES LOWER THAN THEY WERE A DECADE OR MORE
AGO.

40 COUNTRIES HAVE SUSTAINED AVERAGE PER CAPITA
INCOME GROWTH OF MORE THAN 3 PER CENT.

55 COUNTRIES MOSTLY SUB-SAHARAN AFRICA AND
EASTERN EUROPE AND CIS HAVE HAD DECLINING
PER CAPITA INCOME.


AND ITS ENVIRONMENT


THE GLOBAL LABOUR MARKET IS INCREASINGLY
INTEGRATED FOR THE HIGHLY SKILLED:
CORPORATE EXECUTIVES.
SCIENTISTS.
ENTERTAINERS.
OTHERS WHO FORM THE GLOBAL PROFESSIONAL ELITE
WITH HIGH MOBILITY AND WAGES.
BUT THE MARKET FOR:
UNSKILLED LABOUR IS HIGHLY RESTRICTED BY
NATIONAL BARRIERS.


AND ITS ENVIRONMENT


NEW INTERNATIONAL ECONOMIC ORDER (NIEO)
ENCOMPASSES MOSTLY A DEMAND FOR:

1. IMPROVED ACCESS INTO THE MARKETS OF THE
INDUSTRIALIZED NATIONS FOR MANUFACTURED
EXPORTS FROM THE SOUTH.

2. CHANGES IN THE MARKETING STRUCTURE AND
PRICING MECHANISM OF PRIMARY COMMODITIES.
CONT….


AND ITS ENVIRONMENT


NEW INTERNATIONAL ECONOMIC ORDER (NIEO)
ENCOMPASSES MOSTLY A DEMAND FOR:

3. REFORM IN THE INTERNATIONAL MONETARY
SYSTEM.

4. ACCESS BY THE SOUTH TO THE TECHNOLOGY AND
CAPITAL MARKETS OF THE NORTH.

5. AN INCREASE IN FOREIGN AID OR OTHER FORMS OF
RESOURCE TRANSFERS TO THE SOUTH.


AND ITS ENVIRONMENT

STRUCTURE OF THE ECONOMY

FACTORS SUCH AS CONTRIBUTION OF DIFFERENT
SECTORS LIKE :
PRIMARY(MOSTLY AGRICULTURAL)
SECONDARY(INDUSTRIAL) AND
TERTIARY (SECONDARY) SECTORS
LARGE, MEDIUM, SMALL AND TINY SECTORS TO THE
ECONOMY, AND THEIR LINKAGES, INTEGRATION
WITH THE WORLD ECONOMY etc. ARE IMPORTANT
TO BUSINESS.


AND ITS ENVIRONMENT

STRUCTURE OF THE ECONOMY

IN MOST OF THE COUNTRIES THE SERVICE SECTOR
IS THE LARGEST AND FASTEST GROWING SECTOR.

THE SERVICE SECTOR NOW CONTRIBUTES MORE
THAN 60 PER CENT OF THE WORLD GDP.

THE SHARE OF SERVICES IN THE GDP OF INDIA
INCREASED FROM 39 PER CENT IN 1980 TO
48 PER CENT IN 2001.

THE GROWTH RATE OF TRADE IN SERVICES HAS
BEEN FASTER THAN THAT OF GOODS.


AND ITS ENVIRONMENT

ECONOMIC POLICIES

IMPORTANT ECONOMIC POLICIES :

INDUSTRIAL POLICY.
TRADE POLICY.
FOREIGN EXCHANGE POLICY.
MONETRAY POLICY.
FISCAL POLICY.
FOREIGN INVESTMENT AND TECHNOLOGY POLICY.


AND ITS ENVIRONMENT

INDUSTRIAL POLICY

DEFINES THE SCOPE AND ROLE OF DIFFERENT SECTORS
LIKE :
PRIVATE, PUBLIC, JOINT AND COOPERATIVE
LARGE, MEDIUM, SMALL AND TINY.
IT MAY INFLUENCE :
THE LOCATION OF INDUSTRIAL UNDERTAKINGS
CHOICE OF TECHNOLOGY
SCALE OF OPERATION
PRODUCT MIX ETC.


AND ITS ENVIRONMENT

TRADE POLICY

TRADE POLICY IS OFTEN INTEGRATED WITH INDUSTRIAL
POLICY.

DUE TO ECONOMIC LIBERALIZATION AND WTO
COMPLIANCE, INDIA HAS SUBSTANTIALLY LIBERALIZED
IMPORTS.

INDIAN FIRMS FACE A GROWING INTERNATIONAL
COMPETITION IN THE DOMESTIC TURF.

FIRMS WHICH DO NOT COME UP TO THE INTERNATIONAL
STANDARDS IN QUALITY, COST, MARKETING,AND AFTER
SALES SERVICE etc. WILL NOT BE ABLE TO SURVIVE.


AND ITS ENVIRONMENT

FOREIGN INVESTMENT AND TECHNOLOGY POLICY

RESTRICTIONS ON CAPITAL AND TECHNOLOGY
CONSTRAINED NOT ONLY THE FOREIGN FIRMS BUT ALSO
THE DOMESTIC FIRMS BECAUSE IT MAY COME IN THEIR
WAY OF ACQUIRING THE TECHNOLOGY OF THEIR CHOICE
FROM THE BEST SOURCE.

RESTRICTIONS ON FOREIGN CAPITAL MAY AFFECT THE
GROWTH PLANS OF FIRMS, INCLUDING ESTABLISHMENT
OF JOINT VENTURES.

INDIA HAS RESTRICTIONS ON FOREIGN INVESTMENT BY
INDIAN COMPANIES.


AND ITS ENVIRONMENT

FISCAL POLICY

GOVERNMENT’S STRATEGY IN RESPECT OF PUBLIC
EXPENDITURE AND REVENUE CAN HAVE SIGNIFICANT
IMPACT ON THE BUSINESS.

THE PATTERN OF PUBLIC EXPENDITURE MAY AFFECT
THE DEVELOPMENT OF VARIOUS REGIONS, SECTORS
AND / OR INDUSTRIES DIFFERENTLY

GOVT. OFTEN USE TAX INCENTIVES OR DISINCENTIVES
TO ENCOURAGE OR DISCOURAGE CERTAIN ACTIVITIES.


AND ITS ENVIRONMENT

ECONOMIC CONDITIONS

EXPORTS AND IMPORTS OF A COUNTRY ARE
GENERALLY AFFECTED BY A NUMBER OF
DOMESTIC AND INTERNATIONAL ECONOMIC
CONDITIONS.

THEY INCLUDE :
A SET OF EXTERNAL FACTORS.
A SET OF INTERNAL FACTORS.
THE REAL EXCHANGE RATE.
CONT….


AND ITS ENVIRONMENT

ECONOMIC CONDITIONS

EXTERNAL FACTORS:

THE RATE OF GROWTH OF THE ECONOMIES OF THE
IMPORTING COUNTRIES.
THE RATE OF GROWTH OF THE WORLD TRADE.
THE RATE OF CHANGE IN THE PRICE LEVEL IN THE
IMPORTING COUNTRY.

THE INTERNAL FACTORS:

THE RATE OF GROWTH OF THE INDIAN ECONOMY.
THE RATE OF CHANGE IN THE DOMESTIC PRICE LEVEL.


AND ITS ENVIRONMENT

ECONOMIC ENVIRONMENT AND BUSINESS

PRODUCTS WHICH ARE REGARDED AS ESSENTIAL
IN ADVANCED ECONOMIES ARE REGARDED AS
LUXURIES IN THE LOW INCOME ECONOMIES.

IMPORT OR PRODUCTION OF SUCH ITEMS MAY NOT
BE ALLOWED OR ENCOURAGED BY THE
GOVERNMENT OF THESE COUNTRIES.

THE PRICE AND CONSEQUENTLY THE DEMAND FOR
THEM MAY BE AFFECTED BY HIGH TAXES ON THEM
BECAUSE OF THEIR CATEGORIZATION AS LUXURIES.


AND ITS ENVIRONMENT


DEVELOPING COUNTRIES HOLD GOOD PROSPECTS
FOR BUSINESS.

REASONS:

A STEADY INCREASE IN POPULATION.
INCREASE IN INCOME.
GROWING DEMOCRATIZATION AND INDIVIDUAL
FREEDOM.


AND ITS ENVIRONMENT


REDUCTION IN COST CAN BE ACHIEVED BY:

MANUFACTURING THE PRODUCT IN DEVELOPING
COUNTRY WHERE THE LABOUR COST IS LOW.
REDUCING PACKAGING COST.
MODELS WITHOUT FRILLS.
SMALL SIZE PACKAGES.


AND ITS ENVIRONMENT

AS REPLACEMENT DEMAND IS THE
MAJOR COMPONENT OF
THE DEMAND FOR
MANY CONSUMER DURABLES IN THE
DEVELOPED COUNTRIES, COMPANIES
OFTEN RESORT TO THE STRATEGY
OF PLANNED OBSOLESCENCE
OF PRODUCTS
TO KEEP UP THE DEMAND.


AND ITS ENVIRONMENT

POLITICAL AND REGULATORY ENVIRONMENT

IMPORTANT ECONOMIC POLICIES ARE OFTEN
POLITICAL DECISIONS WHICH INCLUDE:

INDUSTRIAL POLICY
POLICY TOWARDS FOREIGN CAPITAL AND
TECHNOLOGY.
FISCAL POLICY.
EXPORT - IMPORT POLICY.


AND ITS ENVIRONMENT

ECONOMIC ROLES OF GOVERNMENT

GOVERNMENTS NORMALLY PLAY FOUR IMPORTANT
ROLES IN AN ECONOMY

1. REGULATION.
2. PROMOTION.
3. ENTREPRENEURSHIP.
4. PLANNING.


AND ITS ENVIRONMENT

REGULATORY ROLE

GOVERNMENT REGULATION MAY EXTEND FROM
ENTRY INTO BUSINESS TO THE FINAL RESULTS OF A
BUSINESS.
RESERVATION OF INDUSTRIES TO SMALL SCALE,
PUBLIC AND COOPERATIVE SECTOR, LICENSING
SYSTEM.
REGULATION OF PRODUCT MIX AND CONDUCT OF
BUSINESS.
REGULATION AS CEILINGS ON PROFIT MARGINS,
DIVIDEND etc.
CONT….


AND ITS ENVIRONMENT

REGULATORY ROLE

GOVERNMENT REGULATION OF THE ECONOMY MAY
BE BROADLY DIVIDED INTO:
DIRECT CONTROL:
ADMINISTRATIVE OR PHYSICAL CONTROLS ARE
MORE DRASTIC IN THEIR EFFECT. IT IS
DISCRETIONARY IN NATURE AND CAN BE APPLIED
SELECTIVELY.
INDIRECT CONTROL:
EXERCISED THROUGH VARIOUS FISCAL AND
MONETARY INCENTIVES, DISINCENTIVES OR
PENALTIES.


AND ITS ENVIRONMENT

PROMOTIONAL ROLE

TO BUILD UP AND STRENGTHEN THE NECESSARY
DEVELOPMENT INFRASTRUCTURE LIKE POWER,
TRANSPORT, FINANCE AND MARKETING.

INSTITUTION FOR TRAINING AND GUIDANCE .

TO MAKE PROVISION FOR VARIOUS FISCAL, MONETARY
AND OTHER INCENTIVES, INCLUDING MEASURES TO
COVER CERTAIN RISKS, FOR THE DEVELOPMENT OF
CERTAIN PRIORITY SECTORS.


AND ITS ENVIRONMENT

ENTREPRENEURIAL ROLE

STATE, ESTABLISHING AND OPERATING BUSINESS
ENTERPRISES AND BEARING RISK.
FACTORS SUCH AS:
SOCIO-POLITICAL IDEOLOGIES, DEARTH OF PRIVATE
ENTREPRENEURSHIP, NEGLECT OF CERTAIN SECTORS,
LIKE THE UNPROFITABLE SECTORS, BY THE PRIVATE
ENTREPRENEURS, ABSENCE OF OR INADEQUATE
COMPETITION IN CERTAIN SEGMENTS AND THE
RESULTANT EXPLOITATION OF CONSUMERS, etc. HAVE
CONTRIBUTED TO THE GROWTH OF STATE OWNED
ENTERPRISES IN MANY COUNTRIES.


AND ITS ENVIRONMENT

PLANNING ROLE

ESPECIALLY IN THE DEVELOPING COUNTRIES, THE
STATE PLAYS A VERY IMPORTANT ROLE AS A PLANNER.
“THE TIME ELEMENT IS IMPORTANT AND THE QUESTION
IS HOW TO USE OUR RESOURCES TO THE BEST
ADVANTAGE. IF OUR RESOURCES ARE ABUNDANT IT
WILL NOT MATTER HOW THEY ARE USED. THEY WILL GO
INTO A COMMON POOL OF DEVELOPMENT. BUT WHERE
ONE’S RESOURCES ARE LIMITED, ONE HAS TO SEE THAT
THEY ARE DIRECTED TO THE RIGHT PURPOSE SO AS TO
HELP TO BUILD UP WHATEVER ONE IS AIMING AT.
= JAWAHARLAL NEHRU


AND ITS ENVIRONMENT

ECONOMIC SYSTEMS

FREE MARKET ECONOMIES OR CAPITALIST ECONOMIES.

CENTRALLY PLANNED ECONOMIES OF COMMUNIST
COUNTRIES.

MIXED ECONOMIES.

THE ECONOMIC SYSTEM IS A VERY IMPORTANT
DETERMINANT OF THE SCOPE OF PRIVATE BUSINESS.


AND ITS ENVIRONMENT

INTERNATIONAL LEGAL ENVIRONMENT

IN MANY COUNTRIES THERE ARE LAWS AND
REGULATIONS TO:
o THE USE OF MEDIA.
o CONTROL ON INVESTMENTS AND RELATED MATTERS.
o THE CONDUCT OF BUSINESS. (STANDARD OF PRODUCT,
PACKAGING, PROMOTION, ETHICS, ECOLOGICAL
FACTORS etc.)
o PROTECT THE PURITY OF THE ENVIRONMENT.
o PROHIBIT THE MARKETING OF CERTAIN PRODUCTS.
o COMPETE IN THE PUBLIC INTEREST.


AND ITS ENVIRONMENT

KINDS OF LEGAL SYSTEM

THE LEGAL SYSTEMS THAT EXIST IN DIFFERENT
COUNTRIES OF THE WORLD MAY BE CALSSIFIED
INTO THREE CATEGORIES:

1. COMMON LAW.

2. CIVIL LAW OR CODE LAW.

3. THEOCRATIC LAW.


AND ITS ENVIRONMENT

KINDS OF LEGAL SYSTEM

COMMON LAW : BASIS IS TRADITION,PAST PRACTICES,
AND LEGAL PRECEDENTS SET BY THE COURTS
THROUGH INTERPRETATIONS OF STATUTES, LEGAL
LEGISLATION, PAST RULINGS.

CIVIL LAW OR CODE LAW: BASED ON ALL INCLUSIVE
SYSTEM OF WRITTEN RULES OF LAW. THE LEGAL
SYSTEM IS DIVIDED INTO THREE SEPRATE CODES
COMMERCIAL, CIVIL, AND CRIMINAL.
THEOCRATIC LAW: BASED ON RELIGIOUS PRECEPTS.
THE BEST EXAMPLE OF THIS SYSTEM IS ISLAMIC LAW,
WHICH IS FOUND IN MUSLIM COUNTRIES.


AND ITS ENVIRONMENT

CATEGORIES OF LAWS

BROADLY THERE ARE THREE SETS OF LAWS AND
REGULATIONS RELEVANT TO INTERNATIONAL
BUSINESS:

INTERNATIONAL LAWS, TREATIES, CONVENTIONS etc.
LAWS OF FOREIGN COUNTRIES.
LAWS OF HOME COUNTRY (i.e. INDIA), RELATED TO
FOREIGN TRADE.


AND ITS ENVIRONMENT

INCOTERMS

THESE ARE COMMON SALE OR TRADE TERMS USED
IN INTERNATIONAL TRADE TO EXPRESS THE SALE
PRICE AND THE CORRESPONDING RIGHTS AND
RESPONSIBILITIES OF THE SELLER AND THE BUYER.
BROUGHT OUT BY THE INTERNATIONAL CHAMBER OF
COMMERCE.


AND ITS ENVIRONMENT

SETTLEMENT OF DISPUTES

DISPUTES ARE SETTLED BY THE:

1. WTO OR IN ACCORDANCE WITH WTO PRINCIPLES.
2. JUDICIAL DISPUTES SETTLEMENT.
3. EXTRA –JUDICIAL DISPUTE SETTLEMENT.


AND ITS ENVIRONMENT

REGULATION RELATED TO PRODUCTS

PRODUCT STANDARDS: MANY COUNTRIES HAVE
ESTABLISHED STANDARDS OR SPECIFICATIONS FOR
MANY PRODUCTS.
DISCLOSURES: MANY COUNTRIES HAVE MADE IT
MANDATORY TO MAKE CERTAIN DISCLOSURES LIKE THE
INGREDIENTS, POTENCY, SHELF LIFE, ADVERSE EFFECTS
etc.
ENVIRONMENTAL LAWS: REGULATIONS RELATED TO
ENVIRONMENTAL PROTECTION ARE GROWING IN MANY
COUNTRIES.
PRODUCT LIABILITY: IF ANY PERSON SUFFERS ANY
DAMAGE BECAUSE OF THE PRODUCT THEN THE
PRODUCER IS LIABLE FOR THE CONSEQUENCES.


AND ITS ENVIRONMENT

PACKING AND LABELING REGULATIONS

ON
PACKAGING MATERIALS.
METHOD OF PACKAGING.
PACKAGING STANDARDS.
CERTAIN MANDATORY DISCLOSURES TO BE MADE.
LABELING IN LOCAL LANGUAGE IS COMPULSORY IN
SOME COUNTRIES.


AND ITS ENVIRONMENT

REGULATION OF PROMOTION

IN MOST OF THE COUNTRIES , PRODUCT PROMOTION IS
SUBJECT TO VARIOUS TYPES OF CONTROLS.
PRODUCT COMPARISON ADVERTISEMENTS ARE NOT
PERMITTED.

USE OF SUPERLATIVES LIKE BEST, BETTER OR
EXCELLENT IS PROHIBITED IN SOME COUNTRIES.

SOME COUNTRIES HAVE RESTRICTIONS ON
ILLUSTRATIONS AND USE OF PHOTOGRAPHS OF WOMEN
IN ADVERTISEMENTS. CONT…..


AND ITS ENVIRONMENT

REGULATION OF PROMOTION

IN INDIA, DOOR DARSHAN DOES NOT ENTERTAIN
ADVERTISEMENTS OF CERTAIN PRODUCTS LIKE
ALCOHOLIC DRINKS, CIGARETTES, BEEDIS, PAN MASALA
BABY FOOD etc.

IN MANY COUNTRIES INCLUDING INDIA PACKAGE AND
ADVERTISEMENT OF CIGARETTES SHALL CARRY
STATUTORY WARNING.

BABY FOOD MARKETERS ARE NOT ALLOWED TO
PROMOTE THE PRODUCT AS A SUBSTITUTE FOR BREAST
FEEDING.


AND ITS ENVIRONMENT

INDIAN LAWS
THE OBJECTIVE OF THE FOREIGN TRADE (DEVELOPMENT
AND REGULATION)ACT1992, IS TO PROVIDE FOR THE
DEVELOPMENT AND REGULATION OF FOREIGN TRADE
BY FACILITATING IMPORTS AND AUGMENTING EXPORTS
FROM INDIA AND MATTERS CONNECTED THEREWITH OR
INCIDENTAL THERETO.
THE ACT EMPOWERS THE CENTRAL GOVT. TO:
(i) MAKE PROVISIONS FOR THE DEVELOPMENT AND
REGULATION OF FOREIGN TRADE BY FACILITATING
IMPORTS AND INCREASING EXPORTS AND
(ii) MAKE PROVISIONS FOR PROHIBITING, RESTRICTING OR
OTHERWISE REGULATING THE IMPORTS AND EXPORTS
OF GOODS.


AND ITS ENVIRONMENT

INDIAN LAWS
SOME LAWS WHICH CONTROL THE TRADE IN CERTAIN
ITEMS e.g.
THE EXPORT OF ANTIQUITIES IS REGULATED UNDER THE
ANTIQUITIES AND ART TREASURE ACT,1972.
EXPORT OF COFFEE IS REGULATED BY THE COFFEE
BOARD UNDER THE INDIAN COFFEE ACT,1942.
EXPORT OF TEA IS REGULATED UNDER THE TEA
ACT.1953.
NO EXPORT OF ANY GOODS CAN BE MADE WITHOUT
OBTAINING CUSTOMS CLEARANCE UNDER THE
CUSTOMS ACT 1962.
LEGISLATIONS FOR EXPORT REGULATION IS THE
EXPORT (QUALITY CONTROL AND INSPECTION) ACT 1963.


AND ITS ENVIRONMENT

DEMOGRAPHIC ENVIRONMENT
DEMOGRAPHIC FACTORS SUCH AS:
SIZE OF THE POPULATION.
POPULATION GROWTH RATE.
AGE COMPOSITION.
ETHNIC COMPOSITION.
DENSITY OF POPULATION.
RURAL – URBAN DISTRIBUTION.
FAMILY SIZE.
INCOME LEVEL.
HAVE VERY SIGNIFICANT IMPLICATIONS ON BUSINESS.


AND ITS ENVIRONMENT

FALLING BIRTH RATE AND CHANGING AGE STRUCTURE

DECLINING BIRTH RATE POSES A PROBLEM FOR MANY
BUSINESSES.
THE MARKET FOR BABY PRODUCTS HAS SHRUNK.
COMPANIES HAVE REPOSITIONED THEIR PRODUCTS.
ON THE OTHER HAND
DECLINING BIRTH RATE HAS, HOWEVER BEEN A BOON
TO INDUSTRIES LIKE HOTELS, AIRLINES AND
RESTAURANTS BECAUSE CHILDLESS YOUNG COUPLE
HAVE MORE TIME AND INCOME TO TRAVEL AND DINING
OUT. SMALL FAMILIES HAVE THE SIMILAR ADVANTAGES
WHEN COMPARED WITH LARGE FAMILIES.


AND ITS ENVIRONMENT


DRUCKER POINTS OUT:
THE COLLAPSING BIRTH RATE MAY BE AN
OPPORTUNITY.
IT IS CONCEIVABLE THAT HAVING FEWER CHILDREN
MEANS THAT THE CHILD BECOMES MORE AND
MORE PRECIOUS.
LARGE SHARE OF DISPOSABLE INCOME IS SPENT
ON IT.


AND ITS ENVIRONMENT

LABOUR SHORTAGE AND RISING WAGES ENCOURAGED
THE GROWTH OF LABOUR INTENSIVE METHODS OF
PRODUCTION.
CAPITAL INTENSIVE TECHNOLOGIES, AUTOMATION AND
RATIONALIZATION ARE OPPOSED BY LABOUR AND MANY
SOCIOLOGISTS, AND ECONOMISTS IN DEVELOPING
COUNTRIES.
CHEAP LABOUR AND GROWING MARKET HAVE
ENCOURAGED MANY MULTINATIONALS TO INVEST IN
DEVELOPING COUNTRIES.
MANY COMPANIES OF DEVELOPED COUNTRIES HAVE
RELOCATED THEIR PRODUCTION FACILITIES IN THE
DEVELOPING COUNTRIES TO REDUCE THE LABOUR COST


AND ITS ENVIRONMENT

FOR THE NEXT TWENTY OR THIRTY YEARS DEMOGRAPHICS
WILL DOMINATE THE POLITICS OF ALL DEVELOPED
COUNTRIES. IMPORTANT ISSUES INCLUDE THE
RETIREMENT AGE AND IMMIGRATION.
NO DEVELOPED COUNTRY IS LIKELY TO HAVE A STABLE
GOVERNMENT.
IT IS LIKELY THAT THE TREND TOWARDS EARLY
RETIREMENT WILL CONTINUE. BUT IT WILL NO LONGER
MEAN THAT THE PERSON STOPS WORKING.
IN ALL DEVELOPED COUNTRIES THE PRODUCTIVITY OF ALL
WORKERS –WHETHER FULL TIME OR PART TIME , WILL
HAVE TO INCREASE RAPIDLY.
= PETER DRUCKER


AND ITS ENVIRONMENT

MIGRATION AND ETHNIC ASPECTS

POPULATION WILL BE DECLINING IN MANY DEVELOPED
COUNTRIES, LEADING TO LABOUR SHORTAGE.
POPULATION PRESSURE WILL BE MOUNTING IN
DEVELOPING COUNTRIES.
RESPONSE TO IMMIGRATION WILL DIFFER BETWEEN
COUNTRIES.
IMMIGRATION WILL, LIKELY BE A HOT POLITICAL ISSUE.
NOW THE U.S. IS CALLED A SALAD BOWL SOCIETY WITH
ETHNIC GROUPS, MAINTAINING ETHNIC DIFFERENCES,
NEIGHBORHOOD AND CULTURE.
MARKETERS MUST BE CAREFUL NOT TO OVER
GENERALIZE ABOUT ETHNIC GROUPS.


AND ITS ENVIRONMENT

SOCIAL / CULTURAL ENVIRONMENT

CULTURE IS A VERY INTRIGUING AND COMPLEX AND A
CRITICAL COMPONENT OF BUSINESS ENVIRONMENT.
PROPER UNDERSTANDING OF THE CULTURAL
DIMENSIONS IS VERY IMPORTANT FOR :
PRODUCT DEVELOPMENT.
PROMOTION.
BUSINESS NEGOTIATION.
HUMAN RESOURCE MANAGEMENT.
MANAGEMENT OF THE SOCIAL AND POLITICAL
ENVIRONMENT.


AND ITS ENVIRONMENT

SOCIAL / CULTURAL ENVIRONMENT

MANY MULTINATIONAL BUSINESSMEN AGREE THAT,
“CULTURAL DIFFERENCES ARE THE MOST
SIGNIFICANT AND TROUBLESOME VARIABLES
ENCOUNTERED BY THE MULTINATIONAL COMPANY.
THE FAILURE OF MANAGERS TO COMPREHEND
FULLY THESE DISPARITIES HAS LED TO MOST
INTERNATIONAL BUSINESS BLUNDERS.”


AND ITS ENVIRONMENT

MEANING OF CULTURE
(CONCEPT OF CULTURE BY FRANCIS MERILL )

CULTURE :
IS THE CHARACTERISTICALLY HUMAN PRODUCT OF
SOCIAL INTERACTION.
PROVIDES SOCIALLY ACCEPTABLE PATTERNS FOR
MEETING BIOLOGICAL AND SOCIAL NEEDS.
IS CUMULATIVE FOR, IT IS HANDED DOWN FROM
GENERATION TO GENERATION.
IS MEANINGFUL TO HUMAN BEINGS BECAUSE OF ITS
SYMBOLIC QUALITY.
CONT…..


AND ITS ENVIRONMENT

MEANING OF CULTURE
(CONCEPT OF CULTURE BY FRANCIS MERILL )

CULTURE :

IS LEARNED BY EACH PERSON IN THE COURSE OF HIS
DEVELOPMENT IN A PARTICULAR SOCIETY.

IS, THEREFORE, A BASIC DETERMINANT OF
PERSONALITY.

DEPENDENT FOR ITS EXISTENCE UPON THE CONTINUED
FUNCTIONING OF SOCIETY BUT IS INDEPENDENT OF ANY
INDIVIDUAL OR GROUP.


AND ITS ENVIRONMENT

ELEMENTS OF CULTURE

KNOWLEDGE AND BELIEFS:
IT REFERS TO A PEOPLE’S PREVAILING NOTIONS OF
REALITY, INCLUDES MYTHS AND METAPHYSICAL
BELIEFS AS WELL AS SCIENTIFIC REALITIES.
IDEALS:
IT REFERS TO THE SOCIETAL NORMS WHICH DEFINE
WHAT IS EXPECTED,CUSTOMARY,RIGHT OR PROPER IN
A GIVEN SITUATION.
PREFERENCES:
IT REFERS TO THOSE THINGS IN LIFE WHICH ARE
ATTRACTIVE OR UNATTRACTIVE AS OBJECTS OF DESIRE.
PREFERENCES MAY DIFFER IN BETWEEN CULTURES.


AND ITS ENVIRONMENT

ORGANISATION OF CULTURE

ORGANISATION OF CULTURE REFERS TO THE SOCIAL
STRUCTURE AND THE INTEGRATION OF TRAITS,
COMPLEXES AND PATTERNS THAT MAKE UP THE
CULTURAL SYSTEM.

SOCIAL STRUCTURE IS THE “WEB OF ORGANIZED
RELATIONSHIPS AMONG INDIVIDUALS AND GROUPS
THAT DEFINES THEIR MUTUAL RIGHTS AND
LIABILITIES.”—TOGETHER WITH TRAITS, COMPLEXES
AND PATTERNS, REFLECTS THE ORGANISATION OF A
CULTURE.


AND ITS ENVIRONMENT

ORGANISATION OF CULTURE

IMPORTANT COMMON INSTITUTIONS OF MODERN
CULTURES ARE:
ECONOMIC SYSTEM.
POLITICAL ADMINISTRATIVE SYSTEM.
EDUCATIONAL SYSTEM.
RELIGION.
FAMILY.
EXPRESSIONISTIC, AESTHETIC AND RECREATIONAL
INSTITUTIONS.
SUCH INSTITUTIONS HAVE BEEN ESTABLISHED TO MEET
SOCIETY'S COMMON NEEDS.


AND ITS ENVIRONMENT

CULTURAL ADAPTATION

IT IS OFTEN NECESSARY TO KNOW THE PROCESS AND
NATURE OF THE CULTURAL ENVIRONMENT FOR THE
SUCCESSFUL FORMULATION OF BUSINESS STRATEGIES.
WHILE INTRODUCING:
NEW IDEAS, TECHNIQUES, PRODUCTS, SEGMENTING THE
MARKET, FORMULATING THE PRODUCT AND PROMOTION
MIX STRATEGIES
ONE SHOULD CONSIDER THE EXTENT TO WHICH
DIFFERENT CATEGORIES OF CONSUMERS ADAPT TO THE
NEW THINGS OR ENVIRONMENT AND THE FACTORS
FAVORING OR DISFAVORING ADAPTATION.


AND ITS ENVIRONMENT

CULTURAL SHOCK

ENVIRONMENTAL CHANGES SOMETIMES PRODUCE
CULTURAL SHOCK.
A FEELING OF CONFUSION, INSECURITY AND ANXIETY
CAUSED BY THE STRANGENESS OF THE NEW
ENVIRONMENT.
EXECUTIVES AND OTHER EMPLOYEES ON FOREIGN
ASSIGNMENTS MAY EXPERIENCE CULTURAL SHOCK IN
ALIEN ENVIRONMENT.
THIS ALSO HIGHLIGHTS THE IMPORTANCE OF THE
SELECTION OF PEOPLE FOR THE FOREIGN MARKETS.


AND ITS ENVIRONMENT

CULTURAL TRANSMISSION

CULTURAL TRANSMISSION CAN TAKE PLACE BY :

SYMBOLIC COMMUNICATION.
LANGUAGE.
LITERATURE.
FILM.
TELEVISION AND SOME OTHER ELECTRONIC GADGETS.
SOCIAL INSTITUTIONS.
ADVERTISING AND MARKETING TECHNIQUES.


AND ITS ENVIRONMENT

CULTURAL TRANSMISSION

CULTURAL TRANSMISSION AND DIFFUSION IN A SOCIETY
IS IMPORTANT TO BUSINESS DECISION –MAKING.
TO FORMULATE A PROMOTIONAL POLICY FOR A
PRODUCT, A SERVICE OR AN IDEA IT IS IMPORTANT…..
TO IDENTIFY THE RELEVANT ELEMENT OF
TRANSMISSION TO EVALUATE THE RELATIVE
EFFECTIVENESS OF ALTERNATIVE COMMUNICATION
MEDIA.
TO IDENTIFY THE REFERENCE GROUPS AND THE EXTENT
OF THEIR INFLUENCE.
TO IDENTIFY THE CHANNEL OF INFLUENCE ON THE
REFERENCE GROUP.


AND ITS ENVIRONMENT

CULTURAL CONFORMITY

A KNOWLEDGE OF THE NATURE AND EXTENT OF
CULTURAL CONFORMITY AND DEVIANCE WILL
SOMETIMES BE HELPFUL IN BUSINESS DECISION-
MAKING.
IF A SOCIETY IS CHARACTERIZED BY BLIND
CONFORMITY, IT WILL BE VERY DIFFICULT TO MARKET
NEW REVOLUTIONARY IDEAS.
SPECIAL EFFORTS MAY BE REQUIRED IN SUCH A
SOCIETY TO CHANGE THE ATTITUDES OF THE PEOPLE IN
FAVOR OF UNCONVENTIONAL IDEAS. IT IS ALSO
IMPORTANT TO UNDERSTAND THE EXTENT AND EFFECT
OF INITIAL DEVIATION.


AND ITS ENVIRONMENT

LOW-CONTEXT AND HIGH-CONTEXT CULTURES

A LOW-CONTEXT CULTURE, ASSUMES A HIGH
DEGREE OF SHARED KNOWLEDGE ON THE BEHALF
OF A TRANSACTION PARTNER AND THUS DEALS
ONLY IN SUCH TANGIBLE ASPECTS OF THE DEAL AS
FACTS, FIGURES AND PERFORMANCE.

A HIGH-CONTEXT CULTURE IS ONE THAT PLACES
GREAT VALUE ON THE INTANGIBLE ASPECTS OF A
NEGOTIATION OR BUSINESS DEAL.


AND ITS ENVIRONMENT

UNIVERSALISM VS. PARTICULARISM

UNIVERSALISM:
HERE THE FOCUS IN MORE ON RULES THAN ON
RELATIONSHIP.

PARTICULARISM :
HERE THE FOCUS IS ON RELATIONSHIP AND TRUST ,
LEGAL CONTRACTS OFTEN ARE MODIFIED, AND AS THE
PEOPLE GET TO KNOW EACH OTHER BETTER, THEY
OFTEN CHANGE THE WAYS IN WHICH DEALS ARE
EXECUTED.


AND ITS ENVIRONMENT

UNIVERSALISM VS. PARTICULARISM

TROMPENAARS RECOMMENDS:

WHEN PARTICULARIST CULTURES DO BUSINESS WITH
UNIVERSALIST CULTURE THEY SHOULD BE PREPARED FOR
RATIONAL, PROFESSIONAL RGUMENTS AND A “LET’S GET
DOWN TO THE BUSINESS “ ATTITUDE.

WHEN UNIVERSALIST CULTURES DO BUSINESS IN A
PARTICULARIST ENVIRONMENT THEY SHOULD BE
PREPARED FOR PERSONAL MEANDERING OR
IRRELEVANCIES THAT SEEM TO GO NOWHERE AND
SHOULD NOT REGARD PERSONAL.


AND ITS ENVIRONMENT

INDIVIDUALISM VS. COMMUNITARIANISM


WHEN INDIVIDUALISM DEALS WITH COMMUNITARIANISM
CULTURE, THEY SHOULD HAVE PATIENCE FOR THE TIME
TAKEN TO CONSENT AND TO CONSULT AND THEY SHOULD
AIM TO BUILD LASTING RELATIONSHIPS.
WHEN COMMUNITARIANISM DEAL WITH THOSE FROM
INDIVIDUALIST CULTURE, THEY SHOULD BE PREPARED TO
MAKE QUICK DECISIONS AND COMMIT THEIR
ORGANIZATION TO THESE DECISIONS, AND ALSO SHOULD
REALIZE THAT THE PERSON THEY ARE DEALING WITH IS A
RESPECTED PERSON BY THE ORGANIZATION AND HAS
AUTHORITY.


AND ITS ENVIRONMENT

NEUTRAL VS. EMOTIONAL


WHEN INDIVIDUALS FROM EMOTIONAL CULTURE DO
BUSINESS IN NEUTRAL CULTURE THEY SHOULD PUT AS
MUCH AS THEY CAN ON PAPER AND SUBMIT IT. THEY
SHOULD REALIZE THAT LACK OF EMOTION DOES NOT
MEAN DISINTEREST.

WHEN NEUTRAL CULTURES DO BUSINESS IN EMOTIONAL
CULTURE, THEY SHOULD TRY TO RESPOND WARMLY TO
THE EMOTIONAL AFFECTIONS OF THE OTHER GROUP.


AND ITS ENVIRONMENT

SPECIFIC VS. DIFFUSE


WHEN SPECIFIC CULTURES DO BUSINESS IN DIFFUSE
CULTURES, THEY SHOULD RESPECT A PERSON’S TITLE,
AGE AND BACKGROUND CONNECTIONS.

WHEN DIFFUSE CULTURE DO BUSINESS IN SPECIFIC
CULTURES THEY SHOULD TRY TO GET TO THE POINT AND
BE EFFICIENT, LEARN TO STRUCTURE MEETINGS WITH THE
JUDICIOUS USE OF AGENDA.


AND ITS ENVIRONMENT

ACHIEVEMENT VS. ASCRIPTION


WHEN ACHIEVEMENT CULTURES DO BUSINESS IN
ASCRIPTION CULTURE, THEY SHOULD MAKE SURE THAT
THEIR GROUP HAS OLDER, SENIOR AND FORMAL
POSITION-HOLDER WHO CAN IMPRESS THE OTHER SIDE.

WHEN ASCRIPTION CULTURE DO THE BUSINESS IN
ACHIEVEMENT CULTURE, THEY SHOULD MAKE SURE THAT
THEIR GROUP HAS SUFFICIENT DATA, TECHNICAL
ADVISORS, AND KNOWLEDGABLE PERSONS TO CONVINCE.


AND ITS ENVIRONMENT

RELIGION

DIFFERENT PEOPLE HAVE THEIR OWN RELIGIOUS
CONVICTIONS, BELIEFS, SENTIMENTS, CUSTOMS,
RITUALS, FESTIVALS etc.

THE COST OF IGNORING CERTAIN RELIGIOUS
ASPECTS COULD BE VERY HIGH, SOME TIMES EVEN
FATAL, IN INTERNATIONAL BUSINESS.


AND ITS ENVIRONMENT

RELIGION

MANY RELIGIOUS GROUP CONSIDER CERTAIN DAYS OR
CERTAIN PERIODS AS AUSPICES FOR LAUNCHING NEW
VENTURE.
THE CUSTOMS OF MARRIAGE, NAMING CEREMONY OF THE
CHILD, FESTIVALS etc. VARY SIGNIFICANTLY BETWEEN
RELIGIONS. THESE HAVE IMPLICATIONS FOR MANY TYPES
OF BUSINESS LIKE TEXTILE, JEWELLERY, CATERING etc.
THE INFLUENCE OF RELIGION IS ON INCREASE IN THE
POLITICS.
IN A NUMBER OF COUNTRIES RELIGION AND GOVERNMENT
ARE INSEPARABLY UNITED.
MANY BUSINESS DECISIONS IN INDIA AND IN SEVERAL
OTHER COUNTRIES ARE BASED ON ASTROLOGICAL
ADVICES.


AND ITS ENVIRONMENT

RELIGION

THE ISLAMIC HOLY BOOK KORAN PROHIBITS PAYMENT
ACCEPTANCE OF INTEREST.

ISLAMIC BANKS DO NOT PAY REGULAR PREDETERMINED
INTEREST TO DEPOSITORS NOR DO THEY CHARGE
PREDETERMINED INTEREST RATES TO BORROWERS.

BANKS TAKE A SHARE OF THE PROFITS OR LOSS WHICH
ARE AGAIN SHARED WITH DEPOSITORS.

EVEN SOME LARGE WESTERN BANKS NOW HAVE
ISLAMIC BRANCHES.


AND ITS ENVIRONMENT

ETHNO DOMINATION

IN MANY COUNTRIES ONE OR OTHER INDUSTRY OR
TRADE IS DOMINATED BY CERTAIN ETHNIC GROUPS.

THIS IS PARTICULARLY TRUE OF TRADE.

THE CONTROL IS MANIPULATED THROUGH THE FAMILIAR
COERCIVE AND COLLUSIVE PRACTICES.

CONT….


AND ITS ENVIRONMENT

ETHNO DOMINATION

A STRANGER OR SOJOURNER MINORITY, SELECTING OR
HAPPENING INTO A TRADE OPPORTUNITY IN A
PARTICULAR COMMODITY.

MEMBERS OF THE ETHNIC GROUP THEN MASTER THE
INTRICACIES OF SUPPLY AND DEMAND IN WORLD
MARKET FOR THAT COMMODITY.

IT WOULD BE BENEFICIAL FOR THE INTERNATIONAL
MARKETER TO CO-OPT RATHER THAN COMPETE WITH
THE DOMINANT ETHNIC GROUP.


AND ITS ENVIRONMENT

LANGUAGE

DIFFERENCES IN LANGUAGE IS A VERY IMPORTANT
PROBLEM AREA IN BUSINESS.
EVEN SOME OF THE SAME WORDS OF THE SAME
LANGUAGE HAVE DIFFERENT MEANINGS OR
CONNOTATIONS IN DIFFERENT PLACE.
BESIDE 18 OFFICIALLY RECOGNIZED LANGUAGES IN
INDIA, 33 ARE SPOKEN, WHERE AS 1652 ARE MOTHER
TONGUES LISTED BY THE CENSUS.
PROBLEMS CAUSED BY LANGUAGES INCLUDES, THOSE
RELATED TO BRAND NAMES AND OTHER NAMES,
MARKETING COMMUNICATION.
CONT….


AND ITS ENVIRONMENT

LANGUAGE

THERE ARE TWO PROBLEMS FOR THE TRANSLATION OF
ADVERTISEMENTS etc. ONE, THE APPROPRIATE WORD IS
NOT THERE IN SOME LANGUAGES AND SECONDLY,THE
LITERAL TRANSLATION MANY A TIME DO NOT CONVEY
THE RIGHT MEANING.
NONVERBAL COMMUNICATIONS ALSO CREATE
PROBLEMS.
BODY LANGUAGE HAS DIFFERENT INTERPRETATIONS IN
DIFFERENT CULTURES.
THE SAME SYMBOL AND GESTURE MAY MEAN
DIFFERENT IN DIFFERENT COUNTRIES / REGIONS OF THE
SAME COUNTRY.


AND ITS ENVIRONMENT

CULTURE AND ORGANISATIONAL BEHAVIOUR

THE CULTURAL IMPACT ON INTERNATIONAL
MANAGEMENT IS REFLECTED BY SEVERAL BASIC
BELIEFS AND BEHAVIORS:

CENTRALIZED VS. DECENTRALIZED DECISION MAKING.

SAFETY VS. RISK.

INDIVIDUAL VS. GROUP REWARD.
CONT….


AND ITS ENVIRONMENT

CULTURE AND ORGANISATIONAL BEHAVIOUR

INFORMAL VS. FORMAL PROCEDURE.

HIGH VS. LOW ORGANISATIONAL LOYALTY.

COOPERATION VS. COMPETITION.

SHORT–TERM VS. LONG TERM HORIZON.

STABILITY VS. INNOVATION.


AND ITS ENVIRONMENT

CONSUMER PREFERENCES, HABITS AND BELIEFS

LIKING OF THE PEOPLE OF ONE CULTURE MAY NOT BE
THE SAME AS THAT OF THE OTHER CULTURE.

WHEN PEOPLE OF THE DIFFERENT CULTURES USE THE
SAME PRODUCT, THE MODE OF CONSUMPTION,
CONDITIONS OF USE, PURPOSE OF USE OR THE
PERCEPTIONS OF THE PRODUCT ATTRIBUTES MAY VARY
SO MUCH SO THAT THE PRODUCT ATTRIBUTES, METHOD
OF PRESENTATION, POSITIONING, OR METHOD OF
PROMOTING THE PRODUCT MAY HAVE TO BE VARIED TO
SUIT THE CHARACTERISTICS OF DIFFERENT MARKETS.


AND ITS ENVIRONMENT

CONSUMER PREFERENCES, HABITS AND BELIEFS

PRODUCT PLANNING FOR AN INTERNATIONAL MARKET
INVOLVES ANTICIPATING THE NEEDS AND WANTS OF
CONSUMERS IN ENTIRELY DIFFERENT CULTURES, AND
ONE MAY HAVE TO ANSWER THE QUESTIONS SUCH AS :

WHO USES THE PRODUCT?

HOW AND WHEN IS THE PRODUCT USED?

WHERE AND HOW OFTEN IS IT PURCHASED?

DETERMINING THE VALUE AND IMPORTANCE OF THE
VARIOUS PRODUCT FEATURES ARE VERY IMPORTANT.


AND ITS ENVIRONMENT

ETIQUTTES

THE WAYS OF MEETING AND GREETING PEOPLE.
EXPRESSION OF APPRECIATION OR DISAPPROVAL.
METHODS OF SHOWING RESPECT.
WAYS OF CONDUCTING MEETINGS AND FUNCTIONS.
TABLE MANNERS.
LAUGHTER AND SMILE.
VARY QUITE WIDELY BETWEEN CULTURES.


AND ITS ENVIRONMENT

ETIQUTTES

GIFT GIVING HAS ITS OWN PLACE IN MOST CULTURES.
WHAT IS AN APPROPRIATE GIFT. TO WHOM SHOULD IT
BE GIVEN, WHEN SHOULD IT BE GIVEN.
FAILURE TO TAKE METICULOUS CARE OF THESE
FACTORS CAN SOME TIMES PRODUCE NEGATIVE
EFFECTS.
SOMETIMES GIFTS ARE EXPECTED AND FAILURE TO
SUPPLY THEM IS SEEN INSULTING.
THE WAY THE GIFT IS PRESENTED IS ALSO VERY
IMPORTANT.


AND ITS ENVIRONMENT

GEOGRAPHICAL ENVIRONMENT

GEOGRAPHICAL AND ECOLOGICAL FACTORS, WHICH
ARE RELEVANT TO BUSINESS ARE :

NATURAL RESOURCES ENDOWMENTS.
WEATHER AND CLIMATIC CONDITIONS.
TOPOGRAPHICAL FACTORS.
LOCATION ASPECTS IN THE GLOBAL CONTEXT.
PORT FACILITIES etc.


AND ITS ENVIRONMENT

GEOGRAPHICAL ENVIRONMENT

ECOLOGICAL FACTORS HAVE RECENTLY ASSUMED
GREAT IMPORTANCE.
THE DEPLETION PF NATURAL RESOURCES,
ENVIRONMENTAL POLLUTION AND DISTURBANCE OF THE
ECOLOGICAL BALANCE HAVE CAUSED GREAT CONCERN.
GOVT. POLICIES AIMED AT PRESERVATION OF
ENVIRONMENTAL PURITY AND ECOLOGICAL BALANCE,
CONSERVATION OF NON-REPLENISHABLE RESOURCES
etc. HAVE RESULTED IN ADDITIONAL RESPONSIBILITIES
AND INCREASING THE COST OF PRODUCTION AND
MARKETING.

“Like” us on Facebook:
p // /
http://www.facebook.com/welearnindia

“Follow” us on Twitter:
http://twitter.com/WeLearnIndia
http://twitter com/WeLearnIndia

Watch informative videos on Youtube:
http://www.youtube.com/WelingkarDLP

International Business Environment: Introduction

Recommandé

Recommandé

Contenu connexe

Tendances

Tendances (20)

En vedette

En vedette (8)

Similaire à International Business Environment: Introduction

Similaire à International Business Environment: Introduction (20)

Plus de We Learn - A Continuous Learning Forum from Welingkar's Distance Learning Program.

Plus de We Learn - A Continuous Learning Forum from Welingkar's Distance Learning Program. (20)

Dernier

Dernier (20)

International Business Environment: Introduction