International Business Environment

Environment refers to surroundings, external objects, influences or circumstances under

which someone something exists.
International Business Environment means the factors that surround the international
business.
Definition
According to Davis Keith defines the international of business as the aggregate of all
conditions, events and influences that surround and affect it.

Components of International Business Environment
1. Social Environment:
The social environment shapes the international marketing in a different
manner. Consumer behavior and purchasers practices are greatly influenced by
the system of society, social attitude and behavior, social institutions and other
social environment and the customer countries. The international marketing
manage should adapt his business practices as per social environment.
2. Demographic Environment:
Demographic factors like the size of the population, growth rate of
Population, age compositions, family size, nature of the family, income levels etc.
have very significant implications for business. The size of the population is an
important determinant of demand for many products. There are countries with
only a few lakhs of people, on the one hand, and those with hundreds of millions;
on the other. When the population is very large, even if the country is generally
poor there could be sizeable market even for those goods and services which are
regarded luxuries in these countries.
3. Economic Environment:
Economic environment is generally related to those external forces, which
have direct economic effect upon business. Economic environment is a sum total
of economic conditions in the foreign market, economic policies of the
government and the economic system of the country.
a. Economic conditions in the market:
Economic conditions in the market consist of demand factors and
supply factors include level of income, level of savings and level of
spending. The supply factors include number of suppliers, extent of
competition and nature of supply, whether regular or irregular.
b. Economic policies of the government:
The economic policies of the government have a direct impact on
the working of a business organization. Thus, business organizations have
to comprehend the implications of the various government policies like
industrial policy, Fiscal policy, monetary policy, export- import policy etc.
c. Economic system of the country:
The economic systems are classified on the basic of freedom enjoyed
by private businessmen. A good Knowledge of economic system of different
countries helps importers and exporters to plan their foreign trade activities
more effectively.
4. Commercial Environment:
The business customs and practices have been influencing the
international markets. The marketing manage should be aware of the business
practices, business structure, management style, attitude and behavior of
personnels operating the commercial activities. Commercial environment is
related to the problems are as follows:-
a. Problems of commercial environment:
There are a large number of problems prevailing over the international
market. Change in world market predominant feeling of businessmen and
rapid change in business structure and competition pose a great problem to
the exporter.
b. Business Structure:
The managers have to evaluate and describe the structural pattern in
different countries. The size, ownership, authority pattern and relationship
are considered under business structure. Business is classified into small,
medium and large firms.
c. Management attitudes and Behaviour:
The personal background of manages significantly influences the
business, for it dictates the pattern of aspiration and objectives of the
managers. Consequently, innovation, and management attitudes are
affected.
d. Competition:
Competition restricts the individual business unless many efforts are
made to beat it. With the expansion of transport and communication
facilities, the world has become a single market.

e. Mode of Business:
The international market should assess the differences in contact,
communication tempo and formality of international trade the contact
between exporter and importer is made at top management level, where
there is considerable amount of delegation of authority.
f. Communication:
The business environment has much to deal with the communication
system. Language has become the basic tool of marketers to communicate
each other. It is to be decided what language should be adopted for
communication.
g. Business Ethics:
Business ethics have been used by the marketers to achieve success
in international marketing. It is very difficult to define business ethics, as
deciding what is right or wrong in a very difficult task.
h. Adaptation:
The international marketers have to adapt to the commercial
environment for achieving success and there is need of positive acceptance
of business customs and practices of customer countries.

5. Political Environment:
The political environment in international business operates in different
dimensions:
a) Home country political Environment:
One would not expect domestic policies to affect a films
international activities. Some countries like the U.S.A. encourage their
organizations to establish activities abroad, especially in their core-
competency fields.
b) Host country political environment:
If the actual benefits of foreign firms are shared in term of
employment, taxes and social security with the local population, the
political atmosphere tends to be hospitable.
c) Global political environment:
It is the combined politics of the home country, the host country and
the other countries of the world. Multilateral agreements between
international organizations like GATT, UNO and the commonwealth may
constitute an impediment to free trade and to the nature and scope of the
operation of international firms.

6. Cultural Environment:
The cultural environment for international business means the set of factors
that shape the material and psychological development of a nation and represent
the primary influence on individual lifestyle, attitude, and consumer behaviour in
the market. The most important task of international business is to identify
relevant similarities and differences among countries and the means and methods
to match the organizations culture with that of the country where it will be
operating.
Characteristics of culture:
A. Prescriptive
B. Socially Shared
C. Facilitates communication
D. Learned
E. Subjective
F. Enduring
G. Dynamic
H. cumulative
7. legal Environment :
This relates to the laws and regulations governing the conduct of business
activities in the country. Laws of the land directly affect the international business
wherever they operate. The international business managers should be aware of
the legal systems and the laws that are in force in various foreign countries in
addition to their home country and host country.
I. Home Country Laws:
They deal with conduct of the firm in the domestic territory and
trade with other countries. For international operators, home country laws
are not usually stringent. They are more facilitating or regulating in nature,
but not controlling with regard to the normal practices of the business.
II. Host Country Laws:
These include investment regulations, tariffs and duties, anti-
dumping regulations and protection of local industries from unfair
competition from industrialized countries.
III. International Laws:
These include treaties, conventions and agreement between nations and
basically have the same standing as laws. They are particularly prevalent in
areas relating to patents, trademark protection and privacy laws. One has
to understand the broad provision of UN resolutions and multilateral trade
agreements like the WTO. Disputes are solved by different means.