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INTRODUCTION TO INTERNATIONAL BUSINESS ENVIRONMENT

INTRODUCTION
A business’ environment influences the functioning of the business
system. Therefore, a business environment may be defined as all those conditions and forces which are external to the business and are beyond the individual business unit, but they all operate within it. These forces are customers, creditors, competitors, government, socio-cultural organizations, political parties national and

international organizations etc. Some of these forces affect the

business directly whilst some others have an indirect effect on the
business.

BUSINESS ENVIRONMENT
The term Business Environment is composed of two words ‘Business’ and ‘Environment’. In simple terms, the state in which a person remains busy is known as Business. The word Business in its economic sense means human activities like production, extraction or purchase or sales of goods that are performed for earning profits. On the other hand, the word ‘Environment’ refers to the aspects of surroundings. There fore , Business Environment may be defined as a set of conditions – Social, Legal, Economical, Political or Institutional that are uncontrollable in nature and affects the functioning of organization

INTERNATIONAL BUSINESS ENVIRONMENT
 When business activities are performed on an international level,

these can be termed as international business.
 Basic functions, processes and techniques of international business

are essentially the same as those involved in domestic business.
 What is different is the environment within which these functions

are performed and processes are carried out.
 International Business environments are unfamiliar and different

from the domestic environment
 These variations may need adaptation for business success.

INTERNATIONAL BUSINESS ENVIRONMENT
 In the context of a business firm, environment can be defined

as various external actors and forces that surround the firm
and influence its decisions and operations.
 The two major characteristics of the environment as pointed

out by this definition are:
1. these actors and forces are external to the firm 2. these are essentially uncontrollable. The firm can do little

to change them

TYPES
Business environments are the sum total of all things external to business firms and are aggregative in nature. Business Environment has two components: 1. Internal Environment 2. External Environment

EXTERNAL ENVIRONMENT
The external environment covers parts of the organization which are usually unable to be controlled within the organization and include factors such as social, legal,

technological and political factors. The external environment
can also include the people outside your organization who are also a part of it in some or the other way This can include

society,

government

and

stakeholders.

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 power over these factors. It can alter or modify factors such as its personnel, physical facilities, and organization and functional means, like marketing, to suit the current environment. The value system of the founders and those at the helm of affairs has an important bearing on the choice of the business, its mission and the objectives of the

organization, including its business policies and practices

The different environmental factors that affect the business can be broadly categorized as internal ands has its own external factors

INTERNAL FACTORS

EXTERNAL FACTORS

INTERNAL FACTORS
Internal factors are those factors which exist within the premises of an organization and directly affects the different operations carried out in a business. These internal factors are : VALUE SYSTEM : It implies the culture and norms of the business. In other words, it means the regulatory framework of a business and every member of the organization has to act within the limits of this framework. MISSIONS AND OBJECTIVES : Different priorities, policies and philosophies of a

business is guided by the mission and objectives of a business.
FINANCIAL FACTORS : Financial factors like financial policies, financial position and capital structure also affects a business performance and its strategies. INTERNAL RELATIONSHIP : Factors like the amount of support the top management enjoys from its shareholders, employees and the board of directors also affects the smooth functioning of a business.

EXTERNAL FACTORS
The EXTERNAL FACTORS include all those factors which exists outside the firm and are often regarded as uncontrollable.. These external forces can further be categorized as

SUPPLIERS : Suppliers are those people who are responsible for supplying necessary inputs to the organization and ensure the smooth flow of production. COMPETITORS : Competitors can be called the close rivals and in order to survive

the competition one has to keep a close look in the market and formulate its policies
and strategies as such to face the competition.

MARKETING INTERMEDIARIES : Marketing intermediaries aid the company in promoting, selling and distribution of the goods and services to its final users. Therefore, marketing intermediaries are vital link between the business and the consumers.

EXTERNAL FACTORS

The EXTERNAL FACTORS include all those factors which exists

outside the firm and are often regarded as uncontrollable.. These
external forces can further be categorized as •MICRO ENVIRONMENT •MACRO ENVIRONMENT.

MICRO ENVIRONMENT
SUPPLIERS : Suppliers are those people who are responsible for
supplying necessary inputs to the organization and ensure the smooth flow of production. COMPETITORS : Competitors can be called the close rivals and in order to survive the competition one has to keep a close look in the market and formulate its policies and strategies as such to face the competition. MARKETING INTERMEDIARIES : Marketing intermediaries aid the

company in promoting, selling and distribution of the goods and
services to its final users. Therefore, marketing intermediaries are vital link between the business and the consumers.

MACRO ENVIRONMENT
ECONOMIC FACTORS : Economic factors includes economic conditions and economic policies that together constitutes the economic environment. These includes growth rate, in fation, restrictive trade practices etc. Which have a

considerable impact on the business.
SOCIAL FACTORS : Social factors includes the society as a whole alongside its preferences and priorities like the buying and consumption pattern, beliefs of people their purchasing power, educational background etc. POLITICAL FACTORS : The political factors are related to the management of public affairs And their impact on the business. It is important to have a political stability to maintain stability in the trade.

TECHNOLOGICAL FACTORS : Latest technologies helps in improving the
market ablity of the product plus makes it more consumer friendly. Therefore, it is important for a business to keep a pace withv the changing technologies in order to survive in the long run.

INTERNAL FACTORS EFFECTING BUSINESS ENVIRONMENT

1. 2. 3. 4. 5. 6. 7. 8.

Social Political Financial Product Quality Distribution Channels Promotional Channels Manufacturing Employee

EXTERNAL FACTORS EFFECTING BUSINESS ENVIRONMENT

1.Physical-natural factors 2.Social-cultural factors 3.Technological factors 4.Economic factors 5.Political-legal factors

6.Competitive factors