PART 1

INTERNATIONAL BUSINESS CONSISTS OF TRANSACTIONS THAT ARE DEVISED AND CARRIED OUT ACROSS NATIONAL BORDERS TO SATISFY THE OBJECTIVES OF INDIVIDUALS, COMPANIES AND ORGANIZATIONS. -Czinkota, Ronkainen and Moffett

INTERNATIONAL BUSINESS IS A TERM USED TO COLLECTIVELY DESCRIBE ALL COMMERCIAL TRANSACTIONS (PRIVATE AND GOVERNMENTAL, SALES, INVESTMENTS, LOGISTICS, AND TRANSPORTATION) THAT TAKE PLACE BETWEEN TWO OR MORE NATIONS.

A MULTINATIONAL ENTERPRISE (MNE) IS A COMPANY THAT HAS A WORLDWIDE APPROACH TO MARKETS AND PRODUCTION OR ONE WITH OPERATIONS IN MORE THAN A COUNTRY. AN MNE IS OFTEN CALLED MULTINATIONAL CORPORATION (MNC) OR TRANSNATIONAL COMPANY (TNC).

EXAMPLES: McDonalds Yum Brands General Motors Ford Motor Company Toyota

AREAS OF STUDY
Legal systems Political systems Economic policy Language Accounting standards Labour standards Living standards Local culture Corporate culture

OPERATIONS
Objectives: sales expansion, resource acquisition, risk minimization. Modes: importing and exporting, tourism and transportation, licensing and franchising, turnkey operations, management contracts, direct investment and portfolio investments. Functions: marketing, global manufacturing and supply chain management, accounting, finance, human resources. Overlaying alternatives: choice of countries, organization and control mechanisms.

PHYSICAL AND SOCIETAL FACTORS

Political policies and legal practices Cultural factors Economic forces Geographical influences

COMPETITIVE FACTORS
Major advantage in price, marketing, innovation, or other factors. Number and comparative capabilities of competitors. Competitive differences by country.

REASONS FOR GROWTH IN GLOBALIZATION

Technology is expanding, especially in transportation and communications. Governments are removing international business restrictions. Institutions provide services to ease the conduct of international business. Competition has become more global. Political relationships have improved among some major economic powers. Countries cooperate more on transnational issues. Cross-national cooperation and agreements.

IMPORTANCE OF STUDYING INTERNATIONAL BUSINESS

Most companies are either international or compete with international companies. Modes of operation may differ from those used domestically. The best way of conducting business may differ by country. An understanding helps you make better career decisions. An understanding helps you decide what governmental policies to support.

Factors Effecting International Business

INTERNAL FACTORS
Management structure and nature Human Resource Company image Marketing sources Financial Factors

EXTERNAL FACTORS
Economic Environment Political Environment Legal Environment Social Environment Geographical Environment

ECONOMIC ENVIRONMENT
This element comprises the nature of the economic system and institutions of a particular country or region. It also takes into account the nature of human and natural resources within the target market

POLITICAL ENVIRONMENT
The political environment of a country is influenced by the political organisations such as philosophy of political parties, ideology of government or party in power, nature and extent of bureaucracy influence of primary groups etc. political stability in the country, foreign policy, Defence and military policy, image of the country and its leaders in and outside the country.

LEGAL ENVIRONMENT
Legal environment includes flexibility and adaptability of law and other legal rules governing the business. It may include the exact rulings and decision of the courts.

SOCIO-CULTURAL ENVIRONMENT
The social dimension or environment of a nation determines the value system of the society which, in turn affects the functioning of the business. Sociological factors such as costs structure, cultural heritage, view toward, respect for seniority, mobility of labour etc. have far-reaching impact on the business. Socio-cultural environment determines the code of conduct the business should follow.

SOCIAL AND CULTURAL ENVIRONMENT Social Environment

The social environment of an individual, also called social context, is the culture that s/he was educated and/or lives in, and the people and institutions with whom the person interacts.

Cultural Environment
Customs, practices and traditions for survival and development are passed down from one generation to the next.

BUSINESS ETHICS
The term business ethics refers to the system of moral principles and rules of conduct applied to business. What is ethically wrong or condemned in one nation may not be in another.

In the international business setting, the most common ethical issues involve Employment practices Human rights Environmental regulations Corruption Moral obligation of multinational corporations

PART 2

SOCIAL ENVIRONMENT Introduction The social environment refers to how people and communities, behave, their relationships, education and occupation and the conditions in which they live. In the context of this report, the well-being and poverty related components of the social environment and how these relate to the physical and natural environments, are the points of focus. It is important to note that elements of the social environment overlap and interact with the natural environment.

A persons social environment includes their living and working conditions, income level, educational background and the communities they are part of. All these have a powerful effect on health. For ex:The big differences in social environments within Europe contribute to wide disparities in health. There are big gaps in life expectancy and disease rates between rich and poor, the well and the poorly educated and manual workers and professionals.

Social environment of business means all factors which affects business socially . Every business works in a society, so societies ' different factors like family , educational institutions and religion affects business . Main elements Of Societies and its effect on Business 1. Family :- Family is basic part of society from the birth of a person and upto death , he lives in family so personal decision of buying and selling of goods are affects from family . In the culture of a family , it may happen that parent does not allow to use any product , then sale of such product will decrease , so businessman must analyze different families needs . Many occasion of family like

marriage of any family member , can increase the demand of goods . 2. Educational institutions :- Educational institutions are also main part of societies . They provide good knowledge , education , awareness , thinking what should students buy or not to buy . Suppose if a student is habitual to drink the tea and if his teacher advice him that this is harmful to his health after his guidance students can avoid to drink tea after this the sale of tea will decrease . 3. Religion :- Like family and education institution , religion is also effects the business socially . Religion means the system in which group of persons trust in God . They believe that there is one supernatural power in this earth and its name is God . They gives many name like Ek onkar sat nam , om and many more etc. Different religions have.

different principles , rules and regulations in which they sacrifice to use some products and to eat some food , in Hindu religion , they never use leather products . They affects the sale of leather industries . So, businessman must analyse the targeted audience and after listening their religious thoughts , he should produce the goods

FACTORS IN THE SOCIAL ENVIRONMENT Affluence and education Awareness through television and the Internet Revolution of rising expectations Entitlement mentality Rights movement Victimization philosophy

SOCIAL CLASS AND LIFESTYLE OF COMMUNITY.

The improvement of level of education and the availability of good job for people have given the opportunity to people to move to a higher level of social class. Since there is a positive correlation between the social class and the level of spending, the higher the social class, the higher the demand for consumer goods, then there will be more opportunity available for business. Peoples lifestyle may be the source of good business, especially if the purchasing power is high.

The success of products in the market depend upon which target groups the products aims to. Therefore, understanding of the social class and its lifestyle would definitely help the success of business. Social factors: 1.Consumer care Labeling Quality , quantity, price etc. 2.Environmental care Upkeep waste, disposal , noise, etc 3.Society care Contribution to education , health etc 4.Community care Providing water , road , power , job etc Therefore, defining social ethics as an absolute may be tricky.

Three aspects of social environments are discussed in this article.

o Values held by a community.

o Potential impact of interactions among subgroup in a community (accommodation, cooperation, assimilation, and conflict). o Social change as influenced by globalization.

Values of community To be successful in doing business a businessman should have sound understanding about the communities values. 1. Relation to nature The issue of peoples relationship to nature reflects how people in a society treat the nature and how they orient themselves to the natural world around them and to the supernatural power. 2. Time orientation There are two ways to think about time. The first has to do with ones general orientation toward time, rather than how one thinks about the use of specific unit of time.

3. Belief about basic human nature People assumption about human being is crafted by the way they were educated by their parents. 4. Activity orientation The activity orientation refers to desirable focus of activity, not something about the state of activity or passivity. 5. Relationships among people Relationship among people refers to what degree people concern about others.

Assessing the potential conflict. The potential conflict usually develops in the area where the community consists of several grouping, such as grouping of different ethnic groups, religion, political affiliation and economic activities. Basically if there are two or more strong groups which struggle for dominance in Economic,social and political arena, then there will be a higher chance for group conflict to exist. Source of conflict 1. 2. 3. 4. Economic factors Political factors and social disorder. Religious factors Norms and values

GLOBALIZATION Globalization has influenced people all over the world. The world becomes borderless with the availability of a highspeed transportation and the information technology. Since the modern technology such as television and internet have been used extensively for marketing products and services, the spread of lifestyle from one country to another becomes so intensive. One could see a lot of similarities in the product people use and the foods they eat. The western culture lifestyle is exported to the developing country and the countries in the east past of hemisphere.

SOCIAL ETHICS Social ethics come from someones collective experience of people and cultures throughout life. While ethics are typically driven by individual morals that determine right or wrong, ethics within society focus more on what may be considered appropriate behavior for people as a whole, rather than individual behavior. However, since people perceive things differently, and various cultures share different beliefs, what is deemed right for one may not necessarily be right for another. You can remove a man from society but you cannot remove society from the man. Truer words have never been said.

PART 3

CULTURAL ENVIRONMENT

Nature of Environment
In its narrow sense, culture is understood to refer to such activities as dance, drama, music, & festivals. In its true sense, culture is understood as that complex whole which includes knowledge, belief, art, morals, laws, customs , & other capabilities & habits acquired by an individual as a member of a society. Cultures change gradually, picking up new ideas & dropping old ones, but many of the cultures of the past have been persistent & self-contained.

characteristics :Learned Culture is not inherited or biological based, it is acquired by learning & experience. Shared People as members of a group, organisation, or society share culture; it is not specific to specific individuals Trans-generational Culture is trans-generational, passed from one generation to the next Symbolic Culture is based on the human capacity to symbolise or use one thing to represent another. Patterned Culture has structure & is integrated;a change in one part will bring changer in another. Adaptive Culture is based on the human capacity to changer or adapt, as opposed to the more genetically driven adaptive process of animals.

Levels of Culture
The inter-national manager needs to be aware of the three levels of culture that influence all the operations. These includes A.National Culture B.Business Culture C.Occupational & Organisational Cultures

National Culture

Business Culture

Organisational Culture

Occupational Culture

Multinational Management
Levels of Culture in Multinational Management

A. National Culture National culture is the dominant culture within the political boundaries of a country. States with relatively homogeneous cultures have various subcultures representing regional & rural/urban cultural differences that effect business activities. It usually influences not only the language of business transactions but also the nature & types of law that govern business. B. Business Culture Business culture represents norms, values, & beliefs that pertain to all aspects of doing business in a particular environment. Business cultures tell the correct, acceptable way to conduct business in a society. What to wear to a meeting, when & how to use business cards, whether to shake hands or embrace are all examples of business etiquette taught by business culture. Each national culture has its own business culture.

C.Occupational & Organisational Culture

Organisational

culture refers to the philosophies, ideologies, values,assumptions, beliefs, expectations, attitudes & norms that an organisation & employees are shared together. The firm itself may come to be regarded as source of pride in some sense unique & employees begin to feel a strong bond with it, & they begin to identify with it. Different occupational groups, such as physicians, professors, lawyers, accountants, & crafts-people have distinct cultures, called occupational cultures. The occupational cultures cannot be ignored by the international manager. People with similar jobs often had very similar culture norms.

Elements of Culture

Supernatural Beliefs Language Education

Customs & Manners

Culture

Religion

Attitudes Elements of Culture

Aesthetics

Language & Culture

The Influence of Language on Culture. The Influence of Culture on Language. High & Low-context Languages.

Language
Language includes speech, written characters,numerals, symbols & gestures of non-verbal communication. The Influence of Language on Culture Language establishes the categories on which our perceptions of the world are organised. Many anthropologists argue that the language fails to capture nuances of human thoughts & behaviours. The Influence of Culture on Language The impact of culture seems to be more significant than vice versa. The vocabularies of all languages reflect cultural nuances of the societies.

High & Low-context Languages

Languages in which people state things directly & explicitly are called low context. There is no need to interpret the situation to under-stand the importance of the words. Languages in which people state things indirectly & implicitly are called high context. In the high context language, communications have multiple meanings that can be interpreted only by situation. So important the ideas of high & low context that many people refer to the whole cultures as being high & low context. Ex. of low context are northern European languages, including German, English etc. Ex. Of high context are, Asian & Arabic languages.

Religion & Culture

Religion refers to a specific & institutionalised set of beliefs & practices generally agreed upon by a number of persons. The major ones are :1. Hinduism 2. Christianity 3. Islam 4. Buddhism

1. Hinduism
From the time of the Rig Veda, which contains many prayers for riches, was desirable for the ordinary man, & indeed essential to lead a full & civilised life. India had not only a class of luxury-loving & pleasure-seeking but also one of wealth-seeking merchants & prosperous craftsmen, who if less respected than the Brahmins & warriors, had an honourable place in society.

2. Christianity
The vast majority of Christians live in Europe & America, although their numbers are growing in Africa. Capitalism, which is the most dominant economic philosophy to-day, has grown out of Protestantism which advocates hard-work & encourages wealth acquisition.

3. Islam
The Quran speaks approvingly of free enterprise & of earning legitimate profit through trade & commerce. Islam also advocates market based systems. Given this proclivity, Muslim countries tend to attract international businesses so long as they behave in a manner that is consistent with Islamic ethics.

4. Buddhism

Buddhists stress spiritual achievement & obviously wealth creation is not encouraged. In Buddhist societies, we do not see the same kind of cultural stress on entrepreneurial behaviour that we see in the Protestant West.

Education & Culture

In its broad sense, education is the lifelong process of learning through which members of a society acquire knowledge & develop skills, ideas, values, norms, & attitudes which they share with other members of the society. Economic progress of a country depends on the education of its citizens.

Aesthetics & Culture

Aesthetics relates to the artistic tastes of a culture. International managers should understand aesthetic local values if he or she has to appreciate another culture & the way in which business must address these values in the international arena. Music is deeply embedded in culture & should be considered while promoting goods & services.

Attitudes & Culture

Attitudes are positive or negative.Evaluations,feelings, & tendencies which make an individual behave in a particular way towards people or objects.

Customs & Manners

Customs are common & established practices. Manners are behaviours that are regarded as appropriate in a particular society. Customs dictate how things are to be done; manners are used in carrying them out. The inter-national manager should understand the manners & customs of host country citizens.

Supernatural Beliefs
Supernatural belief systems affect the conduct of business by shaping attitudes about work, savings,consumption, efficiency, individual responsibility &decision making.

Implications for Inter-national Business

Global businesses are the repositories of multi-cultures. Multi-culturalism means that people from many cultures (& frequently many countries) interact regularly. Managing multi-culturalism is essential for every inter-national firm. Four tasks are crucial :a) spreading cross-cultural literacy, b) culture & competitive advantage, c) managing diversity & d) strategy culture fit

Spread Cross-culture literacy

Culture & Competitive advantage

Multi culture

Compatibility between Strategy & culture

Managing diversity

Multi Culture & Inter-national Business

Spreading Cross-Culture Literacy

One of the biggest problem to enters in a foreign market is the problem of being ill-informed Doing business in different cultures requires adaptation to conform with the nuances of that culture. One way to appoint local citizens to do business in a particular culture. They must then go on to learn the characteristics of those cultures so that they may adapt to them.

Culture & Competitive Advantage

The conjunction suggest that countries should produce costeffective competitors because of the combination of free market economies. Confucian ideology, group-oriented social structures, & advanced education systems. The relationship between culture & competitive advantage has important implications for the choice of countries in which to locate production facilities & do business.

Managing Diversity
Managing diversity means establishing a hetero-geneous work-force to perform to its potential in an equitable work environment where no member has an advantage or a disadvantage. The challenge is to create a work environment in which each person can perform to his or her full potential & therefore compete for promotions & other rewards on merit alone.

Culture Strategy Compatibility

A culture & strategy fit is essential for the success of an inter-national business (see exhibit below). Cultural differences provide challenges to inter-national managers in marketing products, managing work-forces, & dealing with hostcountry governments.

Strategy - Culture Fit

Name of Company P&G

Strategy - Culture Fit During 1980s, modified its bulky diapers in Japan to trim-fit which helped regain 30 per cent market share. Trim-fit became best sellers in the US. Labels on bottles supplied to gulf contain no-alcohol. Introduced Hindi SMS for Indian users of cell phones Meat prepared after halal is printed on the label before exporting meat to Saudi Arabia

Coca-Cola Nokia McDonalds

Worldwide Integration Strategy

Firms use either a world-wide integration strategy or local (national) responsive strategy. Standardized products are developed & are sold throughout the world with few alternations.

PART 4

BUSINESS ETHICS
Ethics to refers to a system of moral principles- a sense of right and wrong and goodness and badness of actions, and their motives and consequences. Business ethics refresh to the application of ethics of business. To be more specific, business ethics is the study of good and evil, right and wrong, and just and unjust actions of businesses.

SOURCES OF BUSINESS ETHICS

RELIGION
Religion one of the oldest sources of ethical inspiration. More than 100,000 different religions exist across the globe. But despite differences, the major religions coverage on the belief that ethics in an expression of divine will that reveals the nature of right and wrong in business and other areas of life. The worlds great religions are also in agreement on fundamental principles, which are similar to the building blocks of secular ethical doctrine.

Cultural experience
Culture, as was stated earlier, refresh to a set of values, rules and standards transmitted among generations and acted upon to produce behaviors that fall within acceptable limits. Theses rules and standards always play in important part in determining values, because individuals anchor their conduct in culture of the group.

The legal system

Laws are rules of conduct, approved by legislatures, that guide human behavior in any society. They codify ethical expectations and keep changing as new evils emerge. 3 types of legal system: Common law Civil law. Theocratic law

Importance of ethics
Ethics corresponds to basic human needs. Value creates credibility with the public. Values give management credibility with employees. Values help better decision making. Ethics and profit

MANAGING ETHICS

Top management:Top management commitment is necessary to ensure ethical standers in a firm. The chief executive should consciously avoid strategies and actions harmful to employees and society.

Code of ethics:Codes of ethics have become popular. Code varies from book-length formulations to succinct statements which, in one or two pages, express a general philosophy for managing conflicts. Nearly 38 percent of fortune 500 companies have codes and the trend is visible in the Indian corporate sector also.

Ethics committees:Many firms have ethics commits to advice on ethical issues. Such committee can be high-level one comprising the board of directors, chaired by the CEO of the company. The committee fields questions from employees, helps the firm establish policy in new or uncertain areas. Advise the board of directors on ethical issue and oversees the enforcement of the code of ethics.

Ethics hot lines:In some firms, when employees are troubled abut some ethical issue but may be reluctant to raise it with their immediate supervisor, than can place a call on the companys ethics hot line. A member of ethics committee receives the confidential call and than quickly investigates the situation.

Ethics training programs:Nearly all companies that take ethics seriously provide training in ethics for their managers and employees. Such training programs acquaint company personal with the official company policy of ethical issues, and they show how those policies can be translated into the specifics of everyday decision-making

Ethics and law :Law and ethics aim at one thing-defining proper and improper behavior but the two are not quite the same, laws are a societies attempt to formalize- that is to reduce to written rules-ideas about what is right and what is wrong in various walk of life.

PART 5

CORPORATE CULTURE AND ETHICAL CLIMATE

Corporate culture is blend of ideas, customs, traditional practices, company values and shared meanings Every organisation has a culture and it exercises considerable influence on employee behaviour Example: Hewlett-Packards stress on culture is called HP WAY

 In some companies one can feel the ethical wind. Unarticulated understanding among employees is called ETHICAL CLIMATE

 Three different types of yardsticks to view ethical climate: 1. EGOISM- self centeredness 2. BENEVOLENCE- concern for others 3. PRINCIPLE- respect for owns integrity, group norms and society laws

ETHICAL CRITERIA EGOISM(self centered approach)

INDIVIDUAL PERSON Self-interest

COMPANY

SOCIETY

Company interest

Economic efficiency

BENEVOLENCE Friendship (concern for others approach)

Team interest

Social responsibility

PRINCIPLE (integrity approach)

Personal morality

Company rules Laws and and procedures professional codes

 Example: If a manager approaches ethics issues with benevolence mind; he/she would stress friendly relations, emphasize the importance of team play, recommend socially responsible courses of action. If a manager uses egoism to think about ethical problems, he/she would be more likely to think of selfinterest, promoting companys profit.

IMPROVING ETHICAL DECISION-MAKING

DIFFICULTIES

FIRSTLY: managers faces dilemma in deciding on a course of action SECONDLY: managers confront a distinction between facts and values when making ethical decisions THIRDLY: good and evil exist simultaneously

 FOURTHLY: knowledge about the consequences s limited. One of the principles of decision making is UTILITARIAN, that is if an act results in the greatest good of greatest numbers it is taken as morally accepted. FIFTHLY: ethical standard also vary SIXTLY: unethical practices abound every where

 PRACTICAL SUGGESTIONS There are 3 well known principles. They are: 1. MORAL IDEALISM: pursue those which are good and avoid badones 2. INTUITION: it leaves individual to sense the moral gravity of situation 3. UTILITARIANISM: seeks to establish moral focus on consequences

 Some other options are engage in imaginary conversations with hypothetical opponent have a conversation or debate with intelligent person Write an essay in favour and against

 Socio-cultural and ethical environment are important. Business is part of larger system SOCIETY In this world nothing can exist in isolation

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