Chapter1 - Intt Business

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ENVIRONMENT

STUDY

International Business&



GLOBA LISATION

y More than $1.2 Billion Foreign transaction every day.

y Trade in goods and services $4Trillion per year.

y Global Culture likeMcDonald¶s , Coca Cola, Sony,

Disney Films etc.



Factors for Globalization

y Technology

y Government

y Institutions

y Consumers

y Competition

y Political

y Countriesy Cross-National co-operation agreements.



The Global Business Environment

Collapse of communist economies.

Economic power of western nations.

Rise of newly industrialized nations.

Free market economies.

Belief in open markets, trade and foreigninvestments as the road to economic development.



The Global Business Environment

Trade Agreements and stabilization of tradepolicies.

Regional trade blocks.

FreeM

arket Economie. Measures to facilitate trade. Globalization of Markets. Big EmergingMarkets.

The internet.



The Global Bus. Env. - FreeMarket Economies

Privatization and deregulation.

Especially in financial services, transportation andcommunications.

Lower barriers to trade.



Challenges For Globalization

1. Socio-Cultural Factors like Taste, Preferences etc.

2. Competitive Advantage.

3. Closer Look to the Economy.



International Business

International Transactions - export-import trade, directforeign investment - wholly owned subsidiaries, joint

ventures; licensing, franchising, outsourcing, andmanagement contracts.

More than one set of environmental variables.

Interactions between countries - Trade and foreign policies,Tariffs and other barriers, and Exchange rates.

Variables which are Especially Important- Infrastructure,Market structure, and Socio/cultural variables.



Types of International Business

y Trading

y Manufacturing and Marketing

y Sourcing andMarketing

y Global Sourcing of Production.



External Environment

y Economic Environment.

y Political Environment.

y Human Cultural Environment.

y Technological Environment.

y Legal Environment.



Economic Environment

y Money- Important Economic Dimension

y The World Economy ± An O verview Economic Integration

Ù10% in beginning of 20th Century

Ù50% today

ÙEU and N AFTA



Business Success Visa versaNew Reality of Changing World like:-

A. Capital Movements

� Trade $4trillion per year

� Foreign Exchange transaction $1trillion per day

B. Productivity and Employment� Employment Declining but Production Increasing

� Manuf. Constitute 23%to 24% of GNP

C. Emerging World Economy as Dominant Economy

� Real Success -Germany and Japan- Businessleader focus on Economy



Economic System

Types of Economic System

y Market Allocation- Delivering the goods andServices that people need. Exam-U.S , Japan

y Command Allocation -State has broad powers toserve public interest.Marketing mix is not strategic

variable. Exam- China, Former USSR, India.

y Mixed System : This is combination of both

Market and command allocation.



Stages of Mkt. Development

y Low income Countries.(Pre Industrial Countries)

Income Less than $786 Per capita.

y Low middle income countries(Less Developed

Countries).Income between $786 to $3125

y UpperMiddle Income (Unindustrialized Country).

Income From $3125 to $9655.



Stages of Mkt. Development Cont.

y High Income countries(Advanced Countries).

Income above $9655.

y Basket Cases(Low In come, No Growth)



Location of Population

y 72% world income in Triad ( North America/EU/Japan).

y World Population 6 Billion

y 10 countries Account 59% of World Income

y Negative co-relation Between Population, Growthrate and Income per capita.



Mktg and Economic Development.

y Industrialized Countries.

Satisfaction of dynamic market Place.

y Less developed countries.

Production/Output.

No customer needs & wants.



Role of Mktg.

y To identify people Needs & Wants.

y To focus individual & organization efforts to respond

to these needs & Wants.

y Comparison in low & high income countries.



Economic Risk.

y Economic Development

y Economic change effect

y Gratuity of economic disorder.

y Stagnation to depression.

y Few consumer buyer.

y Market Adjustment.



Balance of Payment.

y Current Account.

Recurring trade in mercendise & service.

Private Gift.

Public Aid Between countries.

y Capital Account.

Long term Derived investment.

PortfolioMgmt.Short/Long Capital Flow.



Trade Pattern

y FDI Increase 5 times than World Trade.

y FDI Increased 10 times than GNP.

y Merchandise Trade. 75% World Export-Industralized countries.

y Service Trade

Copyright, Patent Acts Enforced.

y Economic Co-operation



Human cultural Environment.

y Culture.

y Language of Friendship.

y Cultural Universal.

y Social institution.

y Human & the universe belief system.

y Aesthetics/Graphics/Plasticart/Folkbre/Music/Dra

ma/Dance.y Language.



Culture

y Conscious and Unconscious

y Characterstic of Culture:-

ÙCulture is Prescriptive

Ù

Culture is socially sharedÙCulture Facilitate communication

ÙCulture is Learned

ÙCulture is Subjective

ÙCulture is Enduring

ÙCulture is Cumulative

ÙCulture is Dynamic



Technological environment.

y Types of technology in use.

y Level of technology developments

y Speed of new technology adoption.

y Problems of technological Environment.Labour intensive vs Technology.

Time lack.



Political Environment.

Global marketer must attempt to comply with each setof national and in some instance regionalconstraints.

Any company doing business outside the homecountry must go through the government policy andanalyze the political problem.

Example: The German Packaging.



Types Of Government.

Political System

Parliamentary(open).

All democratic .

Absolutist (closed).

All Monarchies & Dictatorship.



Classification of Political Parties.

y Two parties.

U.S. and U.K.

y Multiparty System

Germany and Israel

y Single Party System

Egypt

y

DominatedO

ne Party.Cuba and Libya



Political risk

y Confiscation

y Expropriation

y Nationalization

y Domestication

y Creeping Ex-expropriation

y General Instability risk.

y O wnership/Control risk.y Operation Risk.

y Transfer risk.



Legal Environment

y Legal System

Common Law

Statute Law.

Common Vs Code Law.

Statutory Law.



Side stepping Legal Problems

y Establishmenty Jurisdictiony TheMultilateral Agreement on Invt.y Intellectual Property-Patents and trade mark.

y Counterfeiting.y Antitrust.y Licensing and Trade secrety Copyrighty

Branch Vs Subsidiary y Gray Markety Conflict resolution.



World Trade Organization

ò Created at the conclusion of the last G.A.T.T.agreement.

ò

149 countries (as of December 2005)

ò Functions:y Administering WTO trade agreements

(Exam-G ATT,

G ATS, TRIPS)y Forum for trade negotiations.

y Handling trade disputey Monitoring national trade policies



y Ethical Issue.

y U.S.Laws and Exports:

y Nuclear Nonproliferation Treaty:

y Human Rights Policy.

y Antiboycott Regulations.

y Foreign Corrupt Practices Act(FCPA).

y Healthy, safety and Environmental Regulations.y Antitrust.



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Chapter1 - Intt Business