International Business Environment Objective: The objective of this subject is to

study and learn about nature and scope and structure of international business and understand the influence of various environment al factors on international business operation.

Business Business may be understood as the organized efforts of enterprises to supply consumers With goods and services for a profit. Business may be small or big but all of them aim at making profit. Ex: 2-5 10-20 100 1 Lack people -- At home (SSE) people -- Store or Shop People -- A factory people -- Multiple Organization All of them aim to make profit.

ENVIRONMENT Environment refers to all external forces which exists in our surrounding. Business Environment Business Environment consists of all those factors that affect or influence the business. Factors influencing Business Decisions
Internal environment-Business Decision-External Environment (Controllable) (Uncontrollable)

External Environment
Micro
-Investors -Suppliers -Competitors -Market Intermediaries -Public

Macro
-Economic -Socio-cultural -Politio-Legal -Technological -Global

SOCIAL-CULTURAL ENVIRONMENT Elements of Socio-Cultural Environment of Business Social Institutions and System Education and Culture The Social Responsibility of Govt. Social Cultural Variables POLITICAL-LEGAL ENVIRONMENT OF BUSINESS Elements of Political-Legal Environment of Business The form and structure of the govt. The strength of opposition in Legislature The role and responsibility of bureaucracy Socio-economic legislation The Political-Legal Institution

Technological factors

Technology is considered to be one of the most important factors of business environment. That is why the govt., in its industrial policy resolutions, industrial licensing policies, MRTP,FERA regulations, and even in liberalization policies, assigned great importance to sophisticated technology and technology transfer. FDI up to 100% is allowed in industries with sophisticated technology.

Dimensions of International Business

Globalisation in its true sense is a way of corporate life necessitated, facilitated and nourished by the trasnationalisation of the world economy and developed by corporate strategies. Globalisation encompasses the following: Doing and planning to expand, business globally.

Giving up the distinction between domestic and global market and developing a global outlook of the business.

 Locating the production and other facilities on a consideration of the global business dynamics, irrespective of national considerations.

Basing product development and production planning on the global market consideration.
Global sourcing of factors of production, i.e., raw materials, components, machinery / technology finance etc. are obtained from the best resource anywhere in the world. Global orientation of organisational structure and management culture

TYPES OF INTERNATIONAL BUSINESS Trading

Manufacturing and Marketing

Sourcing and Marketing Global Sourcing for Production Services Investments

ENVIRONMEN T AND INTERNATIONAL BUSINESS A firm in International Business encounters three different sets of external environment: Domestic Environment Foreign Environment Global Environment

BUSINESS i ENVIRONMENT AND STRATEGIC DECISIONS IN INTERNATIONAL BUSINESS International Business Decision Market Selection Decision Entry and Operating Decisions Marketing Mix Decision

International Organisation Decision

FEATURES OF NEW PHASE OF GLOBALISATION New Markets

New Actors-MNCs, WTO

New Rules and Norms New (Faster and Cheaper) Tools of Communication

ESSENTIAL CONDITIONS FOR GLOBALISATION Business Freedom

Facilities
Government Support Resources Competitiveness Orientation

FOREIGN MARKET ENTRY STRATEGY Exporting

Licensing/Franchising
Contract Manufacturing Assembly Operations Fully Owned Manufacturing Facilities Joint Venturing

Mergers and Acquisitions Strategic Alliance

Third Country Location

Exporting: Exporting is the most traditional mode of entering the foreign market, is quite a common one even now.

Conditions: 1) Cost of production in foreign market is high. 2) There are political or other risks of investment in the foreign market. 3) Foreign investment is not favoured by the foreign country concerned. 4) The volume of foreign business is not large enough. 5) Licensing and contract manufacturing is not a better alternative.

Licensing/Franchising Under international licensing, a firm in one country(the licensor) permits a firm in another country(the licensee to use its intellectual property (such as patents, trade marks, copyrights, technology, marketing skills or some other specific skills). The monetary benefit to the licensor is the royalty or fees which licensee pays. In many country, such fees or royalties are regulated by the government. Franchising is a form of licensing in which a parent company(the franchiser) grants another independent entity(the franchisee) the right to do business in a prescribed manner. This right can take the form of selling the franchisors products, using its name, production and marketing techniques, or general business approach.

Contract Manufacturing
Under contract manufacturing , a company doing international marketing contracts with firms in foreign countries to manufacture the product while retaining the responsibility of marketing the product. Advantage: 1) The company does not have to commit resource for setting up production facilities. 2) It frees the company from the risks of investing in foreign countries. 3) In many cases, the cost of the product obtained by contract manufacturing is lower than if it were manufactured by the international firm. 4) Contracting manufacturing is a less risky way to start with. If the business does not pick up sufficiently, dropping it is easy.

Wholly Owned Manufacturing Facilities

Companies with long term and substantial interest in the market normally establish fully owned manufacturing facilities there. A number of factors like trade barriers, differences in the production and other costs, government policies etc. encourage the establishment of production facilities in the foreign market.

Assembly Operation