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MODULE 2

Sep 29, 2015

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International Business

MODULE 2 INTERNATIONAL BUSINESS ENVIRONMENT Globalization of business WTO and trade liberalization emerging issues implications for India Regional Trade Blocks Inter regional trade amongregional groups.1.What do you mean by international business environment?INTERNATIONAL BUSINESS ENVIRONMENTKeegan observes by 1990s the concept of marketing is outdated and that time demanded a strategic concept. The strategic concept of marketing shifted focus on marketing from product to customer in the context of broader external environment. To succeed marketers must know customer in a context including competition, government policy regulation and economic, social, political macro forces that shape evolution of market. the difference in domestic and foreign environment need different strategies. What makes a business strategy successful in one market is a failure in another market. Environment plays a major role in international business.14. What are the different sets of environment in international business?There are 2 different environments in IB. 1.Internal environment 2.External environment1. INTERNAL ENVIRONMENTThe internal environment of the firm is also important. The competence of firm to do international business depends on number of internal factors as1. Mission and vision of firm, 2. Attitudes, 3.capabilities, and entire people in organization. 2. EXTERNAL ENVIRONMENTA firm in international business has 3 different set of external environment.1. Domestic environment 2.foreign environment 3.global environment- The diagram shows different environment of international International businessforigenglobalDomesticInternal environment

A company which wants to do business abroad should be having a relevant internal environment. Some government policies or regulations will be there in case of companies who do foreign business abroad. For those companies who do not outsource anything or dont produce anything domestically, dont have to bother about micro and macro environment.Foreign environment refers to environment of the relevant foreign market. The nature of business environment will be different for different market.The global environment refers to global factors which are relevant to business such as WTO principles and agreement. Similarly there are certain development like a hike in crude oil price which have global impact.As Cateora and Keaveney points out that the key to successful international business is adaption to the difference in environment that usually exist from one market to other. there are number of example of very prominent MNCs who burn their hand because of non adaption to the environment.P& G entered the Japan market with its US strategies in 1973 lost their business in 1987 ,but later with the adoption to the business environment in Japan it made huge profit. Apple computers and Colgate Palmolive products are also among those which failed in Japan.MICRO AND MACRO ENVIRONMENT OF INTERNATIONAL BUSSINESSMicro factors-actors in firms immediate environment which directly influence firms decision. For ex suppliers, markets, intermediaries, financial institution, middleman ,competitors Macro environment-it means that those environment outside the industries like cultural, economic, social, political, legal, technological.IMPACT OF CULTURAL ENVIRONMENT IN INTERNATIONAL BUSINESSAs Geert Hofstede a noted Dutch writer has put it, culture is the software of the mind. Kluckhohn has defined culture in simple terms as total life way of people. Culture refers to the learned, shared,and enduring orientation patterns in a society. People demonstrate their culturethrough values, ideas, attitudes, behaviors, and symbols. Culture affects even simple greetings and partings. For example, in China, friends express thoughtfulness by asking each other whether they have had their meal yet. In Turkey, a typical greeting is What is new with you? The Japanese, who still exercise formal greeting and parting rituals, routinely apologize to the other party just before ending a telephone conversation.culture include both material and non material culture. Material culture involves man made things and man made alternation in the environment. Non material culture include factors such as language, ideas ,beliefs, values music. 1.cultural risk Cross-cultural risk is defined as a situation or event where a cultural miscommunication puts some human value at stake. Cross-cultural risk arises routinely in international business because of the diverse cultural heritage of the participants. Unlike political, legal, and economic systems, culture has proven very difficult to identify and analyze. Its effects on international business are deep and broad. In cross-border business, some time companies step into different cultural environments characterized by unfamiliar languages and unique value systems, beliefs, and behaviors2. Negotiating goalNegotiators from different cultures may tend to view the purpose of a negotiation differently. For deal makers from some cultures, the goal of a business negotiation, first and foremost, is a signed contract between the parties. Other cultures tend to consider that the goal of a negotiation is not a signed contract but rather the creation of a relationship between the two sides. Although the written contact expresses the relationship, the essence of the deal is the relationship itself.3. CommunicationCulture can affect communication in different ways .but 2 aspects found different than others. First is the extent to which context affect what is said or how it is said. High context culture and low context culture are there .individual from high context culture view low context culture behaviors as sign of immaturity or lack of sophistication. Second dimension of communication that can vary by culture is the extend which communication is explicit or implicit. In explicit communication the burden of effective communication is on speakers.on the other hand in implicit communication the burden on both speaker and listener.4.Advertisement Culture affects the effectiveness of advertising. Advertising, for instance, is strongly influenced by language, which is one of the key elements of culture. Moreover, advertising budget and structure are based on buying habits and consumption style. 5.Cultural exchangeCultural exchange is very prominent now a days.contemporary China illustrate this point. For instance, it was widely believed that gender identity might affect consumption behavior. However, a recent study of masculinity appeal demonstrated that American respondents and Chinese respondents act the same when presented with such appeals, in other words, the masculinity appeal is not as effective as they expected. A possible explanation for this could be that the gender status in Chinese traditional culture has changed. 6.TimePeople from Britain and Germany are keen on following a time-bound schedule. The different 'time-cultures' might be the reason behind clashes, between people from diverse cultures..

With today's businesses entering a 'globalized' world, the interaction between different cultures is bound to happen. Merely learning different languages won't be enough. It is necessary for corporate houses to understand the social conditions of different countries, to successfully tap the respective markets . Culture influences a range of interpersonal exchange as well as value-chain operations such as product and service design, marketing, and sales. Managers must design products and packaging with culture in mind, even regarding color. While red may be beautiful to the Russians, it is the symbol of mourning in South Africa. What is an appropriate gift for business partners also varies around the world. While items such as pens are universally acceptable, others may not be appropriate. Examples include sharp items such as knives or scissors, which imply cutting off the relationship or other negative sentiments, chrysanthemums, which are typically associated with funerals, and hand-kerchiefs, which suggest sadness. Most companies want their employees to learn about other cultures and acquire a degree of cross-cultural proficiency. In Californias Silicon Valley, where IT firms are concentrated, Intel offers a seminar to its staff called Working with India. The seminar aims to help employees work more effectively with the estimated 400,000 Indian nationalsin the valley. Several other Silicon Valley firms offer similar training. Another computer firm, AMD, flies IT workers from India to its facilities in Texas for a month of cultural training with U.S. managers. Workers role-play, pretending to be native Indians, and study subjects like Indian political history, Indian movies, and the differences between Hinduism and other Indian religions. IMPACT OF POLITICAL ENVIRONMENT IN IB

Despite the globalization of business, firms must abide by the local rules and regulations of the countries in which they operate. Until recently, governments were able to directly enforce the rules and regulations based on their political and legal philosophies. The internet has started to change this, as sellers and buyers have easier access to each other. global businesses monitor and evaluate the political and legal climate in countries in which they currently operate or hope to operate in the future.The study of political systems is extensive and complex. A political system is basically the system of politics and government in a country. It governs a complete set of rules, regulations, institutions, and attitudes. PROBLEMS IN POLITICAL ECONOMY IN IB.A main differentiator of political systems is each systems philosophy on the rights of the individual and the group as well as the role of government. Anarchism, which contends that individuals should control political activities. At the other extreme is