UNIT-I: Business its Environment: nature, scope and characteristics of contemporary

business; objectives of business: Nature of globalization and strategies of globalization.

What is Environment?
Environment refers to all external forces which have a bearing on the functioning of business.
Environment mainly refers to external forces that impact business. Such forces include
political-legal, technological, cultural, economic and physical.

Environmental Factors and their Features

Source: Business and its Environment-An introduction, Himalaya Publishing House, Pg.17
Internal and external factors of business environment
Source: Business and its Environment-An introduction, Himalaya Publishing House, Pg.17

NATURE OF GLOBALIZATION

Globalization is the integration of markets across the globe.

➢ Globalization, also called internationalization, means several things to several

people.
➢ For developing countries, it means integration with the world economy.
➢ A company which has gone global is called a Multinational Corporation (MNC).
An MNC is therefore, one that, by operating in more than one country, gains
through Research and Development (R&D), leading to substantial (large)
production.

To be specific, a global company has six characteristics:

1. It is located in different parts of the globe.
2. Multiple units draw on a common pool of resources such as money, credit,
information, patents, tradenames and control systems.
3. The units respond to some common strategy.
4. Product presence in different markets of the world.
5. Human resource contains high diversity (variety).
 6. Transactions involving intellectual properties such as copyrights, patents,

trademarks, and process technology across the globe.

Dimensional construct of globalization:

Globalization of
Capital

Globalization of
Corporate Mindset

Globalization of
Globalization of
Supply Chain
Markets &
Presence

Drivers of Globalization
➢ Rapidly developing economies
➢ MNCs are locating their subsidiaries in low wage and low cost countries
➢ Regional Trading Blocks, WTO (World Trade Organization), EU (European
Union), NAFTA (North American Free Trade Agreement), FTAA (Free Trade
Area of Americans)
➢ Declining trade and investment barriers

Players in international business

Every firm which conducts business across borders is a player in international business.
Viewing from this perspective, an individual, a proprietary firm, a cooperative society,
or limited company is a player in global business. But one special type of organization
engaged in global business is the Multi National Corporation (MNC).

An MNC is an organization that engages in production or service activities through its

own affiliates in several countries, maintains control over the policies of those
affiliates, and managers from a global perspective, tope managers allocate resources
and coordinate activities to take the best possible advantage of favourable business
conditions throughout the world. More specifically, a multinational enterprise passes
through the following stages:

1. Exports products to foreign countries

2. Establishes sales organizations abroad.
3. Licenses use of patents and technology to foreign firms that make and well
the MNC’s products.
4. Establishes foreign manufacturing facilities, but important decisions about
such matters as product design, marketing, and finance are made of the home
office.
5. Gives foreign production facilities substantial autonomy but still reserves
some important decisions for the home office.
6. Decentralizes authority throughout the company so that functions at home
and abroad are done by executives from different countries.

THE WORLD’S LARGEST CORPORATIONS

List of the richest companies in the world for 2019.

1. Walmart – $514.4 billion revenue in 2019

2. Sinopec Group – $414.6 billion revenue in 2019
3. Royal Dutch Shell – $396.5 billion revenue in 2019
4. China National Petroleum – $392.9 billion revenue in 2019
5. State Grid – $387 billion in revenue in 2019
6. Saudi Aramco – $355.9 billion revenue in 2019
7. BP – $303.7 billion revenue in 2019
8. Exxon Mobil – $290.2 billion revenue in 2019
9. Volkswagen – $278.3 billion revenue in 2019
10. Toyota Motor – $272.6 billion revenue in 2019
INDIAN MNCs

• Tata Motors sells its passenger-car Indica in the UK through a marketing

alliance with Rover and has acquired a Daewoo Commercial Vehicles unit
giving it access to markets in Korea and China.
• Ranbaxy is the ninth largest generics company in the world. An impressive 76
percent of its revenues come from overseas.
• Dr Reddy's Laboratories became the first Asia Pacific pharmaceutical
company outside Japan to list on the New York Stock Exchange in 2001.
• Asian Paints is among the 10 largest decorative paints makers in the world
and has manufacturing facilities across 24 countries.
• Small auto components company Bharat Forge is now the world's second
largest forgings maker. It became the world's second largest forgings
manufacturer after acquiring Carl Dan Peddinghaus a German forgings
company last year. Its workforce includes Japanese, German, American and
Chinese people. It has 31 customers across the world and only 31 percent of
its turnover comes from India.
• Essel Propack is the world's largest manufacturers of lamitubes - tubes used
to package toothpaste. It has 17 plants spread across 11 countries and a
turnover of Rs 609.2 crore for the year ended December 2003. The company
commands a staggering 30 percent of the 12.8 billion-units global tubes
market.
• About 80 percent of revenues for Tata Consultancy Services comes from
outside India. This month, it raised Rs 54.2 billion ($1.17 billion) in Asia's
second-biggest tech IPO this year and India's largest IPO ever.
• Infosys has 25,634 employees including 600 from 33 nationalities other than
Indian. It has 30 marketing offices across the world and 26 global software
development centres in the US, Canada, Australia, the UK and Japan.
• Sundram Fasteners is not merely a nuts and bolts company. It believes in
thinking out of the box. Probably that is why it decided to acquire a plant in
China. The plant in Jiaxin city in the Haiyan economic zone has ensured one
fact: that its customers who were earlier buying Sundram products in Europe
and the US, did not have to go far from home to access the product.

BENEFITS FROM MNCS

Benefits from MNCs can be studied under two broad heads:

i) Benefits to the host countries and

ii) Benefits to the home countries

Benefits to the host countries

➢ Transfer of technology, capital and entrepreneurship to the host country

➢ Improvement of the host country’s balance of payments
➢ Creation of local job and career opportunities
 ➢ Improved competition in the local economy and better utilization of available
resources
➢ Greater availability of products for local consumers
➢ Greater access to high quality managerial talent that tends to be scarce in host
countries, particularly the developing ones.
➢ Encouragement to world economic unity and through that political and
economic integration-all resulting in world harmony.

Benefits to home countries

➢ Acquisition of raw materials from abroad, often from a steadier supply and at
lower prices than can be found domestically.
➢ Technology and management expertise acquired from competing in global
markets.
➢ Export of components and finished goods for assembly or distribution in foreign
markets.
➢ Inflow of income from overseas profits, royalties, licensing fees and
management contracts.
➢ Job and career opportunities of home and abroad in connection with overseas
operations.

Challenges of International Business

➢ Government and Trade Regulations
➢ Developing an International Perspective
➢ Managing Diversity
➢ Need To Maintain Good Corporate Citizenship

Strategies in Globalization
Globalization involves decision-making on the following lines:
➢ Deciding whether to go global
➢ Deciding which markets to enter
➢ Deciding how to enter the market
➢ Learning to handle differences
➢ Adjusting the management process
➢ Selecting a managerial approach
➢ Deciding organization structure.

Deciding which markets to enter:

1. Demographic characteristics
• Size of population
• Rate of population growth
 • Degree of urbanization
• Population destiny
• Age structure and composition of the population.

2. Geographic characteristics
• Physical size of a country
• Climatic conditions
3. Economic Factors
• GNP (Gross National Product) per capita
• Income distribution
• Rate of growth of GNP
4. Technological Factors
• Level of technological skill
• Existing production technology
• Existing consumption technology
• Education levels
5. Socio-cultural factors
• Dominant values
• Life style patterns

6. National goals and plans

• Industry priorities
• Infrastructure investment plans.

UNIT-1 : Extra Stuff

1. Environment refers to all external forces which have a bearing on the
functioning of business.
2. The feature of New Economic Policy related to Economic environment.
3. The feature of Economic system related to which environmental factor?
a. Economic
4. R&D full form: Research & Development
5. EU stands for European Union.

6. It is the feature(s) of Technological Environment:

7. The feature of Education related to which environmental factor?
8. WHO: World Trade Organization.
9. FTAA : Free Trade Area of Americans.
10. It is the one of the strategies in Globalization.
Answer: Deciding which markets to enter
11. Size of population is relating to demographic characteristics.
12. Environment mainly refers to the external forces that impact business, such
forces are political-legal, technological, cultural, and economic.
13. These are the feature(s) of global environment.
(a)increasing opportunity (b)Improving quality (c)Competition from MNCs
(d)Capital and technology transfers.
 14. Income distribution is relating to Economic Factors.
15. Identification of Indian MNCs
16. Caste system is the feature of Socio-Cultural Environment.
17. Globalization is the integration of markets across the globe.
18. MNC full form: Multinational Corporation
19. Culture is the feature of Socio-Cultural Environment.
20. Economic Environment is the feature of New Economic Policy
21. Socio-cultural environment is the feature of Ethics in Business.
22. Growth strategy is the feature of Economic Environment.
23. Technological Environment is the feature of Fast Changing Technology
24. Suppliers is related to internal factor of BE
25. Few external factors of BE: Political, Economic, Physical & Cultural
26. TCS: Tata Consultancy Services
27. It is the benefit from MNCs to the host country – Technology transfer.
28. Role of legislature is the feature of Political Environment.
29. Economic factors is one of the relates to external factors of BE
30. It is the benefit from MNCs to the home country: Inflow of income from
overseas.
31. Lifestyle Patterns is the socio-cultural factor.
32. Agriculture is the feature of Natural Environment Factor

BUSINESS ENVIRONMENT
Assignment-I
Due date: Monday, 25th May, 2020.

01. Explain briefly the internal and external factors of business environment?
02. Give a detailed explanation on Globalization. Write the Pros and Cons of
Globalization.
03. List out the benefits from MNCs to host and home countries. Take one MNC as an
example to brief how it was influenced the indigenous business environment in India.
04. Describe elaborately the strategies followed by companies to enter into global
markets.
05. Discuss briefly about the environmental factors and their features.

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