International Business Environment

Gokarna Awasthi Apex College

Introduction
International

business is much more complicated then domestic business because countries differ in many ways. Countries have different political, economic and legal systems. Cultural practices can vary dramatically, as can the education and skill level of the population, and countries are at different stages of economic development.

Introduction
All

these differences can and do have major implications for the practice of international business. They have a profound impact on the benefits, costs and risk associated with the doing business in different countries.

INTRODUCTION
4P's

and 6 Environments

The 4P's are things we can change. 1.One can adapt the product.
2. One can change the price.

3.modify your promotion and 4. move your place.

Six Environmental Factors

The

6 environments that effect business are not things We can change are the things you react to

These

Six Environments

o Economic / Financial o Physical / Geographic o Political / Legal / Regulatory o Sociocultural / Ethnic / Linguistic o Technological o Competitive Environment

Six Environments
How

company reacts to the influences of the these environment factors is the key to its success. Company can monitor the changes in an environment and plan accordingly, or can just react as each situation develops and hope to survive. Successful companies are the ones who see trends developing and plan in advance to deal with the anticipated changes.

The Political and Legal Environment Facing Business.

Objectives

To discuss the different functions that political systems perform To Compare democratic and totalitarian political regimes and to discuss how they can influence managerial decisions. To describe how management can formulate and implement strategies to deal with foreign political environments. To study the different types of legal systems and the legal relationships that exist between countries. To examine the major legal issues in international business.

Political Environment
A

political system is a complete set of institutions, interest groups, such as political parties, trade unions, the relationships between those institutions and the political norms and rules that govern their functions. The two extremes on the political spectrum are democracy and totalitarianism.

Democracy

Democratic system involve wide participation by citizens n the decision making. Representative democracy majority rule is achieved through periodic elections. The ability of people to organize into political parties or other competitive political groupings of their choice. The existence of safeguards on the rights of minorities.

Democracy
The

existence of freedom of the press. Equality under the law for all individuals. The extent of personal social freedoms.

Totalitarianism
Totalitarianism

governments are nondemocratic. Where civil rights are limited. Totalitarianism takes several forms such as, Communism, Theocratic, Secular Fascism, Absolute Monarchism etc.

Theocratic- Religious leaders are political leaders Secular- Control enforced through military power

Totalitarianism
Fascism-

Mussolini in Italy, Hitler in

Germany. Communism is the form of secular totalitarianism in which political and economic systems are virtually inseparable. Communists believe in the equal distribution of wealth, which entails total government ownership and control of resources.

Political Environment
action isnt always consistentdifferent agencies may have different attitudes toward business issues. Formulating political strategies is complicated by the wide range of participants in the decision making process, by differences in logic, and by institutional power.
Government

Formulating and implementing political strategies

There

are certain steps that a company must follow if it wants to establish an appropriate political strategy in its countries of operation.

Identify the issue. Define the political aspect of the issue. Assess the potential political action of other companies and social interest groups.

Formulating and implementing political strategies

Identify important institutions and key individuals. Formulate Strategies. Determine the impact of implementation. Select the most appropriate strategy and implement it.

Political Environment
Democratic

political regimes believe in minimal intervention in the economy by government; totalitarian regimes believe that a governments role is to define a nations needs and priorities and to ensure that they are met through a close cooperation between government and business.

Legal Environment

Kinds of Legal Systems

Common

Law- Common law is based on tradition, precedent, and custom and usage. The courts fulfill an important role by interpreting the law according to those characteristics. The United States and the United Kingdom are examples of countries with a common law system.

Kinds of Legal Systems

Civil Law- The civil law system is based on a detailed set of laws that make up a code. Rules for conduction business transactions are a part of the code. Over 70 countries operate on a civil law basis. The two legal systems differ mostly because common law is based on the courts interpretations of events, whereas civil law is based on how the law is applied on the facts.

Kinds of Legal Systems

For

example, in a common law country, contracts tend to be detailed, with all contingencies spelled out. In civil law country, contracts would cover already are included in the civil code. Theocratic Law- The third type of legal system is the theocratic law system, which is based on religious precepts.

Kinds of Legal Systems

The

best example of the system is Islamic Law, which is found in Muslim countries. Islamic law, is based on the following sources.

The Koran, the sacred text. The Sunnah, or decisions and sayings of the prophet Muhammad. The writings of Islamic scholar. The consensus of Muslim countries legal communities.

Kinds of Legal Systems

25

percent of the worlds population is Islamic., it is important to understand how Islam is translated into rules that govern economic transactions. Islamic law doesnt allow permit banks to pay or collect interest.

Impact of laws on international Business

Some

national laws on local business activity influence both the domestic and foreign companies, especially in the areas of health and safety standards, employment practices, contractual relationships, regulation of trade and investments, taxes, regulation of financial flows and ownership, reporting requirements, environmental practices and patents and trademarks and international treaties.

Impact of laws on international Business

National

laws affect all local business activates. National laws affect cross-border activities. International Treaties and conventions may govern some cross-border transactions.

Thank You