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Chapter 2. International Business Environment

The document discusses the various components of the international business environment including the political, economic, technological, and cultural environments. It provides details on how each of these factors can impact international business operations and trade. Key aspects of the political environment include the type of government and political risks. Economic factors like GDP, infrastructure development, and taxes also shape the business environment. Technological development levels, rates of adoption, and sources of technology are important technological considerations. Cultural values, beliefs, and practices can significantly influence product acceptance and business operations in different markets.

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Reshma Rao
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46 views3 pages

Chapter 2. International Business Environment

The document discusses the various components of the international business environment including the political, economic, technological, and cultural environments. It provides details on how each of these factors can impact international business operations and trade. Key aspects of the political environment include the type of government and political risks. Economic factors like GDP, infrastructure development, and taxes also shape the business environment. Technological development levels, rates of adoption, and sources of technology are important technological considerations. Cultural values, beliefs, and practices can significantly influence product acceptance and business operations in different markets.

Uploaded by

Reshma Rao
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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International Business Environment

The (IBE) International Business Environment is multidimensional including the political


risks, cultural differences, exchange risks, legal & taxation issues. Therefore
(IBE) International Business Environment comprises the political, economic, regulatory,
tax, social & cultural, legal, & technological environments.

Political Environment in International Business


The Political Environment is a vital part of the international business environment
that focuses on the following aspects:-

 Type of Government 
 Political hazards in the respective countries
 Government connection with the business fraternity.

In executing the cross border trade in International Business Environment, it indicates


dealing with different government constraint, probable risk, and political scenarios. The
political system has been categorized into parts such as one-party states, dictatorships,
constitutional monarchies, and one-party states. Consequently, while planning a business
plan for the overseas location, one has to take the following aspects into account. Those are
as follows:-

Political System Related to the Business

 Government approach towards the business 


 Legal obligations for acquiring specific licenses to run a business. 
 Limitations on obtaining technical knowledge, raw material, and capital goods.
 Constraints related to the exports of goods
 Constraints related to the distribution and pricing of goods
 Probable constraints for establishing a business

Economic Environment in International Business

The economic environment of the country is yet another key element that affects
international trading in one way or another. The economic environment exhibits the
country’s potential for fostering foreign trade. Nations with weaker GDP are less likely to
facilitate the platform or any framework that supports international trading in
International Business Environment. The economic environment could be the deciding
factor for someone who is expecting a higher ROI against the trading of their goods and
services. 

In general, all countries have a distinctive economic environment. Under-developed


economies, normally lack better infrastructure, technical
advancement, healthcare facilities are coined to be extremely important for the well-being
of a particular business. It means that not all nations support international trading due to
their undermined economic situation, such as countries like Somalia and Sudan is not
favorable for executing foreign trade because of their subpar economic conditions and
ongoing crisis. 

Key Parameters to be Considered Related to Foreign Trading

 Facets of the economic system and its bonding with business sectors
 GDP and per capita income (decisive factors)
 Taxes implications on foreign trading
 Raw material and manpower availability 
 Financial resources 
 Wages structures 

Technological Environment in International Business

The technological Environment demonstrates the country’s potential in terms of the


availability of raw materials and machinery required for manufacturing the products. In
general, no companies can control the external environment; therefore seamless adaption
is something that can keep the firm ahead of the curve. 

Companies who are willing to make a swift transition to newer technology are more likely
to capture the potential market as quickly as anybody else. In addition to that, the quicker
adoption of new technology ensures a competitive edge. The paradigm of global trading
deters the approaches that advocate the non-acceptance of technological innovation. The
swift adoption of new technology could help the firms to gain a competitive advantage and
reap higher returns over investment in domestic as well as international market. 

While making an in-depth analysis of the technological environment under International


Business Environment, the organization must take the following parameters into account
without exception. Those are as follows:-

 Degree of technical development in the nation as a whole or particular business


sector
 The pace of technological obsolescence 
 Sources from which technology is originated. 
 Modes and constraints for technology transfer
 The rate at which technology is absorbed. 

Cultural Environment in International Business

The cultural environment is the most complex and tricky component of the international
business environment. The cultural environment is a demonstration of general believe and
the values of the people residing in a particular country. You must also note that believe
and the value is not inculcated overnight as their formation is based on years of history,
religions, and language. 
While this is a purely a generalized description, some renowned experts had explored this
very topic and concluded that Cultural environment has four vital facets such as:

 Individualism: It is a degree to which a country values individual decision in


making of any action.
 Power distance: It represents the country’s approach toward acceptance of
differences in power. 
 Uncertainty avoidance: It represents the country’s willingness to confront
uncertainties. 
 Masculinity

It is hard to believe, at least from general perception, that cultural aspect could be able to
affect global trading in many ways. Moreover, the majority of the businesses that fail to
survive in the international market often found of underestimating the impact of this
specific element. Thus; overlooking such a trait could leave any business in a deserted
situation. 

While analyzing the cultural attributes, one must look into the following aspect, which are
as follows:-

 Society’s approaches toward businesses.


 Influence of cultural factors on the product’s acceptability.
 The lifestyle of people in a specific domain
 Potential regarding the acceptability of change
 Value or believes attached to specific products
 Consumption pattern of the buyers.

Business Ethics
This course provides students with an overview of business ethics at the individual,
organizational, and cultural level.  Concerns such as corruption, sexual harassment, fair trade,
fraud, whistle-blowing, corporate social responsibility, ethical norms, ethical values,
environmental responsibility and examined based on cultural diversity.

Corporate Social Responsibility


Business ethics management strategy is on the  ascendancy and has a growing significance
regarding Corporate Social Responsibility (CSR). This course examines the challenges of ethical
decision making while focusing on CSR as a new management paradigm with ethical,
responsible leadership and sustainability.

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