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2-1 ExcelBooks Export and Import Management Aseem Kumar Copyright © 2007, Aseem Kumar International Business Environment C hapter International Business Environment
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Copyright © 2007, Aseem Kumar
Copyright © 2007, Aseem Kumar
Any company operating in international markets across its national
borders
actually deals with five sets of environments: domestic internal,
domestic
external, foreign internal, foreign external and the international
business
environment comprising of treaties, agreements and conventions. The
dynamics
of the global marketplace are governed by the interplay of all
five.
The major difference between domestic and international trade lies
in the
different operating environments.
Copyright © 2007, Aseem Kumar
Economic Factors
The growing economic interdependence among nations, coupled with
rapid
industrialisation of business and globalisation of markets have
contributed greatly
to blur the lines between international trade and foreign
investment, between
domestic and foreign trade policies, and between foreign and local
firms and
products. The results have been seen in terms of growing
cooperation and
competition. Growing economic interdependence among nations has
given
importance to supportive global economic institutions. These
institutions in turn
have greatly influenced the economic and trade scenario
worldwide.
Cont….
Copyright © 2007, Aseem Kumar
Social and Cultural Factors
Dealing with different expectations of people is the crux of
cross-cultural
management and to be effective in this area, a company will need to
develop a
broader understanding of the socio-cultural landscapes of its
different markets. A
company working in an international business environment has to be
in constant
touch with the tastes and preferences of its customers and must
keep adapting its
products and marketing styles to match the same.
Languages, symbols, colours, signs and timings all vary in various
parts of the
world. Care needs to be exercised to ensure their proper usage,
which is in
keeping with the place. A firm has to understand the local culture
of its market and
translate the same into its products and services, so as to reach
out effectively to
its target customers. Many firms have failed in foreign markets,
not because they
did not have good products but because they failed to connect with
the local
sentiments of the customers. Cont….
Copyright © 2007, Aseem Kumar
Legal and Political Factors
Both political and legal systems of a country influence the conduct
of business at
home and abroad. Any exporting company operating in different
countries must
face different political and legal conditions. For this company to
succeed, its
management must carefully study to analyse whether its corporate
policies will fit
a different political and legal environment. Political stability is
another major
issue. A company has to assess the political risk in any country of
its business
operations. The legal framework comprising of various laws and
rules is another
dimension of the external environment that influences business.
Legal changes
need to be anticipated and their impact studied. This will lend an
edge to
business by allowing sufficient time to consider its reactive
moves. Even when a
company is considering entry into a new foreign market, it must
have its legal
backup ready.
Copyright © 2007, Aseem Kumar
International Business Environment
Technological Factors Technology is the prime pulling force for the
global business. The state of
technological development differs in different countries and
accordingly
infrastructure levels are in different stages of readiness. Global
competition uses
technology as a distinct advantage to score over each other in
areas of efficiency
maximisation, cost reduction, better service to the customers and
other
stakeholders, new and better products and service delivery, etc.
Working in more
than one country usually means working with different technologies
or at least
different levels of technological states; therefore, the biggest
challenge is how to fill
this technological divide? A global company's effectiveness to deal
with these
challenges will determine its business prospects in the long run.
Companies need
to anticipate technological change and develop a mechanism to
upgrade to
required levels so as to succeed in a complex and rapidly evolving
environment.
Most global companies are forced to work in multi-technological
environments.
This is in keeping with the‘Think Global Act Local ’ scenario.
The development
of new technology and its useful applications is a technical
pursuit, but its
seamless introduction across national boundaries is a management
challenge.
Copyright © 2007, Aseem Kumar
GATT (General Agreement on Tariffs and Trade)
The General Agreement on Tariffs and Trade (GATT) was first signed
in 1947. It
was designed to provide an international forum that encouraged free
trade
between member states by regulating and reducing tariffs on traded
goods and by
providing a common mechanism for resolving trade disputes. India
was one of the
23 founding members of GATT.
GATT's main goal was to ensure that its member countries' relations
in the field of
trade and economic endeavour be conducted with a view to:
Raising standards of living
Ensuring full employment
A large and steadily growing volume of real income and
effective demand
Developing full use of resources of the world
Expanding production and exchange of goods
Copyright © 2007, Aseem Kumar
WTO (World Trade Organisation)
World Trade Organisation (WTO) is the global body dealing with the
rules of trade
between nations. At its heart are WTO agreements, negotiated and
signed by
bulk of the world's trading nations and ratified in their
parliaments. The goal is to
help producers of goods and services, exporters, and importers
conduct their
business. (www.wto.org). WTO is a successor to GATT.
WTO's primary objective is to help international trade flow
smoothly, freely, fairly
and predictably. It aims to achieve this free trade between nations
by:
Administering trade agreements
Settling trade disputes
assistance and training programmes
Copyright © 2007, Aseem Kumar
International Business Environment
WTO works on the following basic principles that serve as the
foundation of the
multilateral trading system it supports.
1. Without discrimination- a country should not discriminate
between its
trading partners.
3. Predictable- foreign companies, investors and governments
should be
confident that trade barriers (including tariffs and non-tariff
barriers) should
not be raised arbitrarily and tariff rates and market-opening
commitments
are ‘bound’ in the WTO.
4. More competitive- discouraging ‘unfair’ practices such as
export subsidies
and dumping products at below cost to gain market share.
5. More beneficial for less developed countries- giving them
more time to
adjust, greater flexibility, and special privileges.
Copyright © 2007, Aseem Kumar
2. Disputes are handled constructively
3. Rules make life easier for all
4. Freer trade cuts the costs of living
5. It provides more choice of products and qualities
6. Trade raises incomes
8. The basic principles make life more efficient
9. Governments are shielded from lobbying
10. The system encourages good government