Introduction to International Business Environment

Meaning of International Business Environment

Environment means surrounding. International business environment means the factors/activities those surround/encircle the in international business . In other words , business environment means the factors that affect or influence the MNCs and transactional companies. Factors that affect the international business environment include Social and cultural factors Technological factors Economic factors Political and government factors International factors National factors

Contd..
According to William F. Glueck the term Environmental analysis as the process by which strategists monitor the economic , governmental/legal, market/competitive ,supplier/technological ,geographic and social settings to determine opportunities and threats to their firms.

TYPES OF ENVIRONMENT
Business environment is further divided into two types Internal factors External environment

INTERNAL ENVIRONMENT
The internal environment is the environment that has a direct impact on the business. Here there are some internal factors which are generally controllable because the company has control over these factors. It can alter or modify such factors as its personnel, physical facilities, and organization and functional means, like marketing, to suit the environment.

External Environment
It refers to the environment that has an indirect influence on the business. These factors are uncontrollable by the business. There are two types of external environment:

Micro Environment Macro Environment

Difference between Domestic and international business environment

We can say that international business is distinguishable from domestic business One can easily say that the difference is mainly about location; domestic businesses exist and do business within a nation while international businesses exist and do business beyond those national boundaries. An individual or organisation going to do business in a different land will be face with many issues such as: Unique systems of government. Laws of different countries. Cultural differences. Language Issue.

Major differences
S.No 1 International Business Difference is customs, cultural factors 2 3 4 Domestic Business No such difference. In a large countries languages likeIndia, we have many languages. Working environment and management No such changes are necessary practices change to suit local conditions. Will have to face restrictions in trade These have little or no impact on practices, licenses and government rules. Domestic trade. Currency, interest rates, taxation, Currency, interest rates, taxation, inflation and economy have impact on inflation and economy have little or no trade. impact on Domestic Trade. MNCs have perfected principles, No such experience or exposure. procedures and practices at international level MNCs take advantage of location No such advantage once plant is built it economies wherever cheaper resources cannot be easily shifted. available. High Volume cost advantage. Cost Advantage by automation, new methods etc. Global Standardization and Global No such advantage business seeks to create new values and global brand image. Can Shift production bases to different No such advantage and get competition countries whenever there are problems from some spurious or SSI Unit who get in taxes or markets patronage of Government.

7 8

Contd..
In end I would like to say doing business is a lot more complex when in foreign land than when at home country. There is no doubt that entry into international business has become easier for organisations due to a more wide spread liberalisation and relaxation of trade laws, and of course, immense advancement in high tech. However, an organisation desirous of entering into international business has more environmental issues to contend with in addition to issues of actually running the business. Entering into international market is very delicate and organisations will need to take into consideration virtually all issues in their desired location. In other words, no stone can left unturned or ignored as doing so will risk their chances of success.