International Business Environment: Introduction

Chapter No. Page No.

International Business Environment1 2

CONSUMER PROTECTION IN INDIAINTERNATIONAL BUSINESS AND ITS ENVIRONMENT

“ALL INSTITUTIONS HAVE TO MAKE GLOBALCOMPETITIVENESS A STRATEGIC GOAL. NO INSTITUTION, WHETHER A BUSINESS, A UNIVERSITY OR A HOSPITAL, CAN HOPE TO SURVIVE, LET ALONE SUCCEED, UNLESS IT MEASURES UP TO THE STANDARDS SET BY THELEADERS IN ITS FIELD, ANY PLACE IN THE WORLD.”

PETER DRUCKER

MANAGEMENT CHALLENGES FOR 21ST CENTURY




GLOBALIZATION ENCOMPASSES:

DOING OR PLANNING TO EXPEND, BUSINESS GLOBALLY.

NO DISTINCTION BETWEEN THE DOMESTIC MARKET AND FOREIGN MARKET AND DEVELOPING A GLOBAL OUTLOOK OF BUSINESS.

IRRESPECTIVE OF NATIONAL BOUNDRIES, LOCATING THE PRODUCTION AND OTHER PHYSICAL FACILITIESON GLOBAL BUSINESS DYNAMICS.

CONT….




GLOBALIZATION ENCOMPASSES:

BASING PRODUCT DEVELOPMENT AND PRODUCTION PLANNING ON THE GLOBAL MARKET CONSIDERATION.

GLOBAL SOURCING OF FACTORS OF PRODUCTION, RAW MATERIAL, COMPONENTS, MACHINERY / TECHNOLOGY, FINANCE etc. ARE OBTAINED FROM THE BEST SOURCE ANYWHERE IN THE WORLD.

GLOBAL ORIENTATION OF ORGANIZATIONAL STRUCTURE AND MANAGEMENT CULTURE.




TYPES OF INTERNATIONAL BUSINESS:

TRADING.

MANUFACTURING AND MARKETING.

SOURCING AND MARKETING.

GLOBAL SOURCING FOR PRODUCTION.

SERVICES.

INVESTMENTS.




INDICATORS OF GROWING IMPORTANCE OFINTERNATIONAL BUSINESS

THE FOREIGN TRADE__ GDP RATIO HAS BEEN RISING SIGNIFICANTLY, INDICATING THAT NATIONAL ECONOMIES ARE BECOMING MORE AND MORE EXPORT AND IMPORT DEPENDENT.

INTERNATIONAL INVESTMENT, BOTH DIRECT AND PORTFOLIO, HAVE BEEN GROWING RAPIDLY.

A COROLLARY OF THE RAPIDLY GROWING INTERNATIONAL INVESTMENT IS THE FAST GROWING INTERNATIONAL PRODUCTION.

CONT….




INDICATORS OF GROWING IMPORTANCE OFINTERNATIONAL BUSINESS

A CONNOTATION OF THE GROWING EXPORT-GDP RATIO IS THAT THE EXPORT INTENSITY OF COMPANIES IN GENERAL ARE RISING. (A RISING EXPORT INTENSITY MEANS THAT THE FOREIGN BUSINESS IS GROWING FASTER THAN THE DOMESTIC BUSINESS).

MANY FIRMS MAKE MOST OF THEIR BUSINESS, LIKE THE LEADING IT FIRMS, THERE ARE COMPANIES WHICH DO 100 PER CENT OF THEIR BUSINESS ABROAD.




IMPORTANCE OF INTERNATIONAL BUSINESS TO FIRMS

MOTIVATING OR PROVOKING FACTORS TO GO INTERNATIONAL

PULL FACTORS: (PROACTIVE REASONS)ATTRACTIVENESS OF THE FOREIGN MARKET, INCLUDING RELATIVE PROFITABILITY AND GROWTH PROSPECTS. PUSH FACTORS: (REACTIVE REASONS) COMPULSION OF THE DOMESTIC MARKET, LIKE SATURATION OF THE MARKET, PROMPTING TO INTERNATIONALIZE.




IMPORTANT REASONS FOR GOING INTERNATIONAL

1. PROFIT ADVANTAGE:INTERNATIONAL BUSINESS COULD INCREASE THE TOTAL PROFIT.THE AVERAGE COST OF PRODUCTION WILL BE THE LOWEST IF THE PLANT IS OPERATED AT OPTIMUM CAPACITY.ADVANTAGE OF CHEAP LABOUR.

2. GROWTH OPPORTUNITIES:IN A NUMBER OF DEVELOPING COUNTRIES INCOME AND POPULATION ARE RAPIDLY INCREASING.FOREIGN MARKETS PROVIDE ENORMOUS GROWTH OPPORTUNITIES FOR THE DEVELOPING COUNTRY FIRMS.





3. DOMESTIC MARKET CONSTRAINTS:WHEN DOMESTIC MARKET IS DECLINING, FOREIGN MARKETS MAY PROVIDE GROWTH OPPORTUNITIES.TO TAKE ADVANTAGE OF THE SCALE ECONOMIES.WHEN DOMESTIC MARKET IS VERY SMALL, INTERNATIONALIZATION IS THE ONLY WAY TO ACHIEVE GROWTH.

4. COMPETITION:COMPETITION MAY BECOME A DRIVING FORCE.THE STRATEGY OF COUNTER COMPETITION IS TO PENETRATE THE HOME MARKET OF POTENTIAL FOREIGN COMPETITOR.





5. GOVERNMENT POLICIES AND REGULATIONS:MANY GOVTS. GIVE INCENTIVES AND OTHER SUPPORT TO EXPORT AND TO INVEST IN FOREIGN COUNTRIES.TO EARN FOREIGN EXCHANGE TO FINANCE THEIR IMPORTS.GOVT. POLICIES WHICH LIMIT THE SCOPE OF BUSINESS IN THE HOME COUNTRY.

6. MONOPOLY POWER:FACTORS SUCH AS MONOPOLIZATION OF CERTAIN RESOURCES, PATENTS RIGHTS, TECHNOLOGICAL ADVANTAGE, PRODUCT DIFFERENTIATION, EXCLUSIVE MARKET INFORMATION ARE THE PROACTIVE STIMULUS.




IMPORTANT REASONS FOR GOING INTERNATIONAL 7. SPIN-OFF BENEFITS:

INTERNATIONAL BUSINESS BECOMES A MEANS OF GAINING BETTER MARKET SHARE DOMESTICALLY.FOREIGN EXCHANGE EARNING MAY HELP TO IMPORT CAPITAL GOODS, TECHNOLOGY etc. ECONOMICS INCENTIVES OFFERED BY THE GOVERNMENT.

8. STRATEGIC VISION:THE URGE TO GROW, THE NEED TO BECOME MORE COMPETITIVE, THE NEED TO DIVERSIFY AND TO GAIN ADVANTAGE OF INTERNATIONALIZATION.PLANNING IS DONE CONSIDERING THE ENTIRE WORLD AS A SINGLE MARKET.




AN OVERVIEW OF BUSINESS ENVIRONMENT

SWOT ANALYSIS IS ONE OF THE FIRST STEPS IN THE STARATEGIC MANAGEMENT PROCESS.

BUSINESS DYNAMICS IS A DEPENDENT FACTOR

HENCE THE IMPORTANCE OF ENVIRONMENTALANALYSIS.




AN OVERVIEW OF BUSINESS ENVIRONMENT

FACTORS INFLUENCING BUSINESSDECISIONS

BUSINESSDECISIONS

iINTERNALENVIRONMENT

EXTERNAL ENVIRONMENT




BUSINESS LEVEL ENVIRONMENT

INTERNAL ENVIRONMENT.

MICRO ENVIRONMENT / TASK ENVIRONMENT / OPERATING ENVIRONMENT.

MACRO ENVIRONMENT / GENERAL ENVIRONMENT / REMOTE ENVIRONMENT.




INTERNAL ENVIRONMENT:

VALUE SYSTEM.

MISSION AND OBJECTIVES.

MANAGEMENT STRUCTURE AND NATURE.

INTERNAL POWER RELATIONSHIP.

HUMAN RESOURCES.

CONT…..

i




INTERNAL ENVIRONMENT:

COMPANY IMAGE AND BRAND EQUITY.

OTHER FACTORS:PHYSICAL ASSETS AND FACILITIES.R&D AND TECHNOLOGICAL CAPABILITIES.MARKETING RESOURCES.FINANCIAL FACTORS.




MICRO ENVIRONMENT:

SUPPLIERS.

CUSTOMERS.

COMPETITORS.

MARKETING INTERMEDIARIES.

PUBLICS.




ENVIRONMENT OF INTERNATIONAL BUSINESS

A FIRM IN INTERNATIONAL BUSINESS ENCOUNTERS THREE DIFFERENT SETS OF EXTERNAL ENVIRONMENT

DOMESTIC ENVIRONMENT.

FOREIGN ENVIRONMENT.

GLOBAL ENVIRONMRNT.




BUSINESS ENVIRONMENT AND STRATEGIC DECISIONSIN INTERNATIONAL BUSINESS

INTERNATIONAL BUSINESS DECISION:THIS IS THE FIRST DECISION, BASED ON

PRESENT AND FUTURE OVERSEAS OPPORTUNITIES.PRESENT AND FUTURE DOMESTIC MARKET OPPORTUNITIES.

COMPANY OBJECTIVES AND RESOURCES.

MARKET SELECTION DECISION:THOROUGH ANALYSIS OF THE POTENTIALS AND OVERSEASMARKET ENVIRONMENT IS ESSENTIAL.

CONT……




ENTRY AND OPERATING DECISIONS:( STRATEGIES)LICENSING, FRANCHISING, EXPORTING , COUNTER -TRADE, ESTABLISHING ABROAD ASSEMBLY FACILITIES, MANUFACTURING FACILITIES, WHOLLY OWNED / JOINT VENTURE / CONTRACT MANUFACTURING.

MARKETING MIX DECISION:ELEMENTS OF MARKETING MIX SHOULD BE SUITABLY DESIGNED.

INTERNATIONAL ORGANIZATION DECISION:TO DECIDE ABOUT ITS ORGANIZATION STRUCTURE FOR EFFECTIVELY CONDUCTING THE BUSINESS.




IMPLICATIONS OF DIFFERENCES IN BUSINESS ENVIRONMENT

IT IS INDEED THE DIFFERENCES IN THE BUSINESS ENVIRONMENT THAT HAVE GIVEN RISE TO A SPECIALIZED FIELD OF STUDY, INTERNATIONAL BUSINESS.WHAT MAKES A BUSINESS STRATTEGY WHICH IS SUCCESSFUL IN ONE MARKET A FAILURE IN ANOTHER MARKET IS OFTEN THE DIFFERENCES IN THE BUSINESS ENVIRONMENT.




IMPLICATIONS OF DIFFERENCES IN BUSINESS ENVIRONMENT

THE KEY TO SUCCESSFUL INTERNATIONAL BUSINESS IS ADAPTION TO THE DIFFERENCES IN THE ENVIRONMENT THAT USUALLY EXIST FROM ONE MARKET TO ANOTHER.

ADAPTION IS NOT A PASSIVE PROCESS BUT A CONSCIOUS EFFORT ON THE PART OF THE INTERNATIONAL MARKETER TO ANTICIPATE THE INFLUENCES OF BOTH THE FOREIGN AND DOMESTIC UNCONTROLLABLE ENVIRONMENTS ON A MARKETING MIX AND THEN TO ADJUST THE MARKETING MIX TO MINIMISE THEIR EFFECTS. = CATEORA AND KEAVENEY




NATURE OF THE ECONOMY

A WIDELY USED METHOD OF CLASSIFICATION OF THE ECONOMIES IS ON THE BASIS OF THE PER CAPITA INCOME. ACCORDINGLY COUNTRIES ARE CLASSIFIED AS

LOW INCOME ECONOMIES.

HIGH INCOME ECONOMIES.

THE MIDDLE INCOME ECONOMIES.

DEVELOPING AND DEVELOPED ECONOMIES /COUNTRIES.




NATURE OF THE ECONOMY

CLASSIFICATION BY INCOME DOES NOT NECESSARILY REFLECT DEVELOPMENT STATUS.

IN THE GROUP OF THE HIGH INCOME ECONOMIES, THE INDUSTRIAL ECONOMIES ARE DEVELOPED ECONOMIES.

BESIDES INCOME, THE CRITERIA SUCH AS SECTORAL DISTRIBUTION ON THE INCOME AND EMPLOYMENT GENERATION, SOCIAL DEVELOPMENT INDICATORS ARE APPLIED TO CONSIDER WHETHER AN ECONOMY IS DEVELOPED OR DEVELOPING ONE.




NATURE OF THE ECONOMY( CHARACTERISTICS OF DEVELOPED ECONOMIES )

WIDESPREAD USE OF MODERN AND SOPHISTICATED TECHNOLOGY.CONTINUOUS INNOVATIONS.FAST DIFFUSION OF NEW IDEAS AND TECHNOLOGIES.MARKET FRIENDLY ECONOMIC POLICIES.COMPARATIVELY OPEN TRADE AND INVESTMENT POLICIES.COMPETITION AND CONSUMER CHOICE. etc.




NATURE OF THE ECONOMY( LEAST DEVELOPED ECONOMIES )

VERY LOW GNP PER CAPITA INCOME.

LAND LOCKED REMOTE INSULARITY.

DESERTIFICATION AND EXPOSURE TO NATURAL DISASTERS.

BANGLA DESH, BHUTAN, NEPAL, MALDIVES, MALI,UGNADA, MYANMAR, SUDAN ZAMBIA, ZIMBABVE,AND YEMEN ARE THE EXAMPLES.




NATURE OF THE ECONOMY( ECONOMIC GROWTH / ECONOMIC DEVELOPMENT )

AN INCREASE IN INCOME IS AN INDICATION OF ECONOMIC GROWTH.QUALITATIVE DIMENSIONS OF ECONOMIC DEVELOPMENT BESIDES GROWTH ARE:

DISTRIBUTION OF INCOME. STANDARD OF LIVING. COMPOSITION OF OUTPUT. CHARACTER OF WORKING CONDITIONS.OVER ALL IMPROVEMENT IN ECONOMIC WELFARE.




REGION STATES

WHEN THE DIFFERENT REGIONS OF A NATIONAL ECONOMY SHOW GREAT DIVERSITY, IT MAY NOT BE APPROPRIATE TO REGARD IT AS SINGLE ECONOMIC UNIT.

NATION STATES ARE NO LONGER MEANINGFUL UNITS IN WHICH TO THINK ABOUT ECONOMIC ACTIVITY.

IN A BORDERLESS WORLD, THEY COMBINE THINGS AT THE WRONG LEVEL OF AGGREGATION.

THE UNITS THAT MAKE SENSE ARE REGION STATES.

THEY MAY OR MAY NOT FALL WITHIN THE BOUNDARIES OF A PARTICULAR NATION. =KENICHI OHMAE




REGION STATES

THE MOVEMENT OF BOTH INVESTMENT AND INDUSTRY HAS BEEN GREATLY FACILITATED BY INFORMATION TECHNOLOGY WHICH NOW MAKES IT POSSIBLE FOR ACOMPANY TO OPERATE IN VARIOUS PARTS OF THE WORLD WITHOUT HAVING TO BUILD UP AN ENTIRE BUSINESS SYSTEM IN EACH OF THE COUNTRIES WHEREIT HAS A PRESENCE.




INTERNATIONAL ECONOMIC GAP

THE WIDENING OR THE PERSISTENCE OF THE INTERNATIONAL ECONOMIC GAP HAS BEEN CAUSED BY FACTORS SUCH AS:

DIFFERENCES IN THE GROWTH RATE.

UNEQUAL ACCESS.

POPULATION EXPLOSION IN DEVELOPING COUNTRIES.

NEGLIGENCE BY THE DEVELOPED COUNTRIES OF THE HUMANITARIAN NEEDS OF THE DEVELOPING COUNTRIES.





THE WORLD’S 200 RICHEST PEOPLE MORE THANDOUBLED THEIR NET WORTH IN THE FOUR YEARS TO1998, TO MORE THAN $ 1 TRILLION.

THE ASSETS OF THE TOP THREE BILLIONAIRES ARE MORE THAN COMBINED GNP OF ALL LEAST DEVELOPED COUNTRIES AND THEIR 600 MILLION PEOPLE.





IN 1993 JUST 10 COUNTRIES ACCOUNTED FOR 84 PER CENT OF GLOBAL RESEARCH AND DEVELOPMENT EXPENDITURE AND CONTROLLED 95 PER CENT OF THE U.S. PATENTS OF THE PAST TWO DECADES.

MOREOVER, MORE THAN 80 PER CENT OF PATENTS GRANTED IN DEVELOPING COUNTRIES BELONG TO RESIDENTS OF INDUSTRIAL COUNTRIES.





DETERIORATED TERMS OF TRADE PUT DEVELOPING COUNTRIES INTO SUBSTANTIAL LOSS.TRADE RESTRICTIONS REDUCE DEVELOPING COUNTRIES GNP BY 3 PER CENT--- AN ANNUAL LOSS OF $ 75 BILLION.GLOBAL MARKET RESTRICTIONS AND UNEQUAL PARTNERSHIP ARE ESTIMATED TO COST THE DEVELOPING COUNTRIES ABOUT $500 BILLION-- AROUND 20 PER CENT OF THEIR GNP AND MORE THAN SIX TIMES OF WHAT THEY SPEND ON HUMAN DEVELOPMENT PRIORITIES, SUCH AS BASIC EDUCATION, PRIMARY HEALTH CARE, SAFE DRINKING WATER, AND ELIMINATION OF MALNUTRITION.

= WORLD BANK STUDY





IF GLOBAL OPPORTUNITIES ARE NOT SHARED BETTER, THE FAILED GROWTH OF THE LAST DECADE WILL CONTINUE.

MORE THAN 80 COUNTRIES STILL HAVE PER CAPITA INCOMES LOWER THAN THEY WERE A DECADE OR MORE AGO.

40 COUNTRIES HAVE SUSTAINED AVERAGE PER CAPITA INCOME GROWTH OF MORE THAN 3 PER CENT.

55 COUNTRIES MOSTLY SUB-SAHARAN AFRICA AND EASTERN EUROPE AND CIS HAVE HAD DECLINING PER CAPITA INCOME.





THE GLOBAL LABOUR MARKET IS INCREASINGLY INTEGRATED FOR THE HIGHLY SKILLED:CORPORATE EXECUTIVES.SCIENTISTS.ENTERTAINERS.OTHERS WHO FORM THE GLOBAL PROFESSIONAL ELITEWITH HIGH MOBILITY AND WAGES.BUT THE MARKET FOR: UNSKILLED LABOUR IS HIGHLY RESTRICTED BY NATIONAL BARRIERS.





NEW INTERNATIONAL ECONOMIC ORDER (NIEO) ENCOMPASSES MOSTLY A DEMAND FOR:

1. IMPROVED ACCESS INTO THE MARKETS OF THE INDUSTRIALIZED NATIONS FOR MANUFACTURED EXPORTS FROM THE SOUTH.

2. CHANGES IN THE MARKETING STRUCTURE AND PRICING MECHANISM OF PRIMARY COMMODITIES.

CONT….





NEW INTERNATIONAL ECONOMIC ORDER (NIEO) ENCOMPASSES MOSTLY A DEMAND FOR:

3. REFORM IN THE INTERNATIONAL MONETARY SYSTEM.

4. ACCESS BY THE SOUTH TO THE TECHNOLOGY AND CAPITAL MARKETS OF THE NORTH.

5. AN INCREASE IN FOREIGN AID OR OTHER FORMS OF RESOURCE TRANSFERS TO THE SOUTH.




STRUCTURE OF THE ECONOMY

FACTORS SUCH AS CONTRIBUTION OF DIFFERENT SECTORS LIKE :

PRIMARY(MOSTLY AGRICULTURAL)

SECONDARY(INDUSTRIAL) AND

TERTIARY (SECONDARY) SECTORS

LARGE, MEDIUM, SMALL AND TINY SECTORS TO THE ECONOMY, AND THEIR LINKAGES, INTEGRATION WITH THE WORLD ECONOMY etc. ARE IMPORTANT TO BUSINESS.




STRUCTURE OF THE ECONOMY

IN MOST OF THE COUNTRIES THE SERVICE SECTOR IS THE LARGEST AND FASTEST GROWING SECTOR.

THE SERVICE SECTOR NOW CONTRIBUTES MORE THAN 60 PER CENT OF THE WORLD GDP.

THE SHARE OF SERVICES IN THE GDP OF INDIA INCREASED FROM 39 PER CENT IN 1980 TO 48 PER CENT IN 2001.

THE GROWTH RATE OF TRADE IN SERVICES HAS BEEN FASTER THAN THAT OF GOODS.




ECONOMIC POLICIES

IMPORTANT ECONOMIC POLICIES :

INDUSTRIAL POLICY.

TRADE POLICY.

FOREIGN EXCHANGE POLICY.

MONETRAY POLICY.

FISCAL POLICY.

FOREIGN INVESTMENT AND TECHNOLOGY POLICY.




INDUSTRIAL POLICY

DEFINES THE SCOPE AND ROLE OF DIFFERENT SECTORS LIKE :

PRIVATE, PUBLIC, JOINT AND COOPERATIVE

LARGE, MEDIUM, SMALL AND TINY.

IT MAY INFLUENCE :

THE LOCATION OF INDUSTRIAL UNDERTAKINGS

CHOICE OF TECHNOLOGY

SCALE OF OPERATION

PRODUCT MIX ETC.




TRADE POLICY

TRADE POLICY IS OFTEN INTEGRATED WITH INDUSTRIAL POLICY.

DUE TO ECONOMIC LIBERALIZATION AND WTO COMPLIANCE, INDIA HAS SUBSTANTIALLY LIBERALIZED IMPORTS.

INDIAN FIRMS FACE A GROWING INTERNATIONAL COMPETITION IN THE DOMESTIC TURF.

FIRMS WHICH DO NOT COME UP TO THE INTERNATIONAL STANDARDS IN QUALITY, COST, MARKETING,AND AFTER SALES SERVICE etc. WILL NOT BE ABLE TO SURVIVE.




FOREIGN INVESTMENT AND TECHNOLOGY POLICY

RESTRICTIONS ON CAPITAL AND TECHNOLOGY CONSTRAINED NOT ONLY THE FOREIGN FIRMS BUT ALSO THE DOMESTIC FIRMS BECAUSE IT MAY COME IN THEIR WAY OF ACQUIRING THE TECHNOLOGY OF THEIR CHOICE FROM THE BEST SOURCE.

RESTRICTIONS ON FOREIGN CAPITAL MAY AFFECT THE GROWTH PLANS OF FIRMS, INCLUDING ESTABLISHMENT OF JOINT VENTURES.

INDIA HAS RESTRICTIONS ON FOREIGN INVESTMENT BY INDIAN COMPANIES.




FISCAL POLICY

GOVERNMENT’S STRATEGY IN RESPECT OF PUBLIC EXPENDITURE AND REVENUE CAN HAVE SIGNIFICANT IMPACT ON THE BUSINESS.

THE PATTERN OF PUBLIC EXPENDITURE MAY AFFECT THE DEVELOPMENT OF VARIOUS REGIONS, SECTORS AND / OR INDUSTRIES DIFFERENTLY

GOVT. OFTEN USE TAX INCENTIVES OR DISINCENTIVES TO ENCOURAGE OR DISCOURAGE CERTAIN ACTIVITIES.




ECONOMIC CONDITIONS

EXPORTS AND IMPORTS OF A COUNTRY ARE GENERALLY AFFECTED BY A NUMBER OF DOMESTIC AND INTERNATIONAL ECONOMIC CONDITIONS.

THEY INCLUDE :A SET OF EXTERNAL FACTORS.A SET OF INTERNAL FACTORS. THE REAL EXCHANGE RATE.

CONT….




ECONOMIC CONDITIONS

EXTERNAL FACTORS:

THE RATE OF GROWTH OF THE ECONOMIES OF THE IMPORTING COUNTRIES.THE RATE OF GROWTH OF THE WORLD TRADE.THE RATE OF CHANGE IN THE PRICE LEVEL IN THE IMPORTING COUNTRY.

THE INTERNAL FACTORS:

THE RATE OF GROWTH OF THE INDIAN ECONOMY.THE RATE OF CHANGE IN THE DOMESTIC PRICE LEVEL.




ECONOMIC ENVIRONMENT AND BUSINESS

PRODUCTS WHICH ARE REGARDED AS ESSENTIAL IN ADVANCED ECONOMIES ARE REGARDED AS LUXURIES IN THE LOW INCOME ECONOMIES.

IMPORT OR PRODUCTION OF SUCH ITEMS MAY NOT BE ALLOWED OR ENCOURAGED BY THE GOVERNMENT OF THESE COUNTRIES.

THE PRICE AND CONSEQUENTLY THE DEMAND FOR THEM MAY BE AFFECTED BY HIGH TAXES ON THEM BECAUSE OF THEIR CATEGORIZATION AS LUXURIES.





DEVELOPING COUNTRIES HOLD GOOD PROSPECTS FOR BUSINESS.

REASONS:

A STEADY INCREASE IN POPULATION.INCREASE IN INCOME.GROWING DEMOCRATIZATION AND INDIVIDUAL FREEDOM.





REDUCTION IN COST CAN BE ACHIEVED BY:

MANUFACTURING THE PRODUCT IN DEVELOPING COUNTRY WHERE THE LABOUR COST IS LOW.REDUCING PACKAGING COST.MODELS WITHOUT FRILLS.SMALL SIZE PACKAGES.




ECONOMIC ENVIRONMENT AND BUSINESSAS REPLACEMENT DEMAND IS THE

MAJOR COMPONENT OF THE DEMAND FOR

MANY CONSUMER DURABLES IN THE DEVELOPED COUNTRIES, COMPANIES

OFTEN RESORT TO THE STRATEGYOF PLANNED OBSOLESCENCE

OF PRODUCTS TO KEEP UP THE DEMAND.




POLITICAL AND REGULATORY ENVIRONMENT

IMPORTANT ECONOMIC POLICIES ARE OFTEN POLITICAL DECISIONS WHICH INCLUDE:

INDUSTRIAL POLICYPOLICY TOWARDS FOREIGN CAPITAL AND TECHNOLOGY.FISCAL POLICY.EXPORT - IMPORT POLICY.




ECONOMIC ROLES OF GOVERNMENT

GOVERNMENTS NORMALLY PLAY FOUR IMPORTANT ROLES IN AN ECONOMY

1. REGULATION.2. PROMOTION.3. ENTREPRENEURSHIP.4. PLANNING.




REGULATORY ROLE

GOVERNMENT REGULATION MAY EXTEND FROM ENTRY INTO BUSINESS TO THE FINAL RESULTS OF A BUSINESS.RESERVATION OF INDUSTRIES TO SMALL SCALE, PUBLIC AND COOPERATIVE SECTOR, LICENSING SYSTEM.REGULATION OF PRODUCT MIX AND CONDUCT OF BUSINESS.REGULATION AS CEILINGS ON PROFIT MARGINS, DIVIDEND etc.

CONT….




REGULATORY ROLE

GOVERNMENT REGULATION OF THE ECONOMY MAY BE BROADLY DIVIDED INTO: DIRECT CONTROL:ADMINISTRATIVE OR PHYSICAL CONTROLS ARE MORE DRASTIC IN THEIR EFFECT. IT IS DISCRETIONARY IN NATURE AND CAN BE APPLIED SELECTIVELY.INDIRECT CONTROL:EXERCISED THROUGH VARIOUS FISCAL AND MONETARY INCENTIVES, DISINCENTIVES OR PENALTIES.




PROMOTIONAL ROLE

TO BUILD UP AND STRENGTHEN THE NECESSARYDEVELOPMENT INFRASTRUCTURE LIKE POWER, TRANSPORT, FINANCE AND MARKETING.

INSTITUTION FOR TRAINING AND GUIDANCE .

TO MAKE PROVISION FOR VARIOUS FISCAL, MONETARYAND OTHER INCENTIVES, INCLUDING MEASURES TO COVER CERTAIN RISKS, FOR THE DEVELOPMENT OF CERTAIN PRIORITY SECTORS.




ENTREPRENEURIAL ROLE

STATE, ESTABLISHING AND OPERATING BUSINESS ENTERPRISES AND BEARING RISK.

FACTORS SUCH AS:

SOCIO-POLITICAL IDEOLOGIES, DEARTH OF PRIVATE ENTREPRENEURSHIP, NEGLECT OF CERTAIN SECTORS, LIKE THE UNPROFITABLE SECTORS, BY THE PRIVATE ENTREPRENEURS, ABSENCE OF OR INADEQUATE COMPETITION IN CERTAIN SEGMENTS AND THE RESULTANT EXPLOITATION OF CONSUMERS, etc. HAVE CONTRIBUTED TO THE GROWTH OF STATE OWNED ENTERPRISES IN MANY COUNTRIES.




PLANNING ROLE

ESPECIALLY IN THE DEVELOPING COUNTRIES, THE STATE PLAYS A VERY IMPORTANT ROLE AS A PLANNER.

“THE TIME ELEMENT IS IMPORTANT AND THE QUESTION IS HOW TO USE OUR RESOURCES TO THE BEST ADVANTAGE. IF OUR RESOURCES ARE ABUNDANT IT WILL NOT MATTER HOW THEY ARE USED. THEY WILL GO INTO A COMMON POOL OF DEVELOPMENT. BUT WHERE ONE’S RESOURCES ARE LIMITED, ONE HAS TO SEE THAT THEY ARE DIRECTED TO THE RIGHT PURPOSE SO AS TO HELP TO BUILD UP WHATEVER ONE IS AIMING AT.

= JAWAHARLAL NEHRU




ECONOMIC SYSTEMS

FREE MARKET ECONOMIES OR CAPITALIST ECONOMIES.

CENTRALLY PLANNED ECONOMIES OF COMMUNIST COUNTRIES.

MIXED ECONOMIES.

THE ECONOMIC SYSTEM IS A VERY IMPORTANT DETERMINANT OF THE SCOPE OF PRIVATE BUSINESS.




INTERNATIONAL LEGAL ENVIRONMENT

IN MANY COUNTRIES THERE ARE LAWS AND REGULATIONS TO:

o THE USE OF MEDIA.o CONTROL ON INVESTMENTS AND RELATED MATTERS.o THE CONDUCT OF BUSINESS. (STANDARD OF PRODUCT,

PACKAGING, PROMOTION, ETHICS, ECOLOGICAL FACTORS etc.)

o PROTECT THE PURITY OF THE ENVIRONMENT.o PROHIBIT THE MARKETING OF CERTAIN PRODUCTS.o COMPETE IN THE PUBLIC INTEREST.




KINDS OF LEGAL SYSTEM

THE LEGAL SYSTEMS THAT EXIST IN DIFFERENTCOUNTRIES OF THE WORLD MAY BE CALSSIFIEDINTO THREE CATEGORIES:

1. COMMON LAW.

2. CIVIL LAW OR CODE LAW.

3. THEOCRATIC LAW.




KINDS OF LEGAL SYSTEM

COMMON LAW : BASIS IS TRADITION,PAST PRACTICES, AND LEGAL PRECEDENTS SET BY THE COURTS THROUGH INTERPRETATIONS OF STATUTES, LEGAL LEGISLATION, PAST RULINGS.

CIVIL LAW OR CODE LAW: BASED ON ALL INCLUSIVESYSTEM OF WRITTEN RULES OF LAW. THE LEGAL SYSTEM IS DIVIDED INTO THREE SEPRATE CODESCOMMERCIAL, CIVIL, AND CRIMINAL.

THEOCRATIC LAW: BASED ON RELIGIOUS PRECEPTS.THE BEST EXAMPLE OF THIS SYSTEM IS ISLAMIC LAW,WHICH IS FOUND IN MUSLIM COUNTRIES.




CATEGORIES OF LAWS

BROADLY THERE ARE THREE SETS OF LAWS ANDREGULATIONS RELEVANT TO INTERNATIONALBUSINESS:

INTERNATIONAL LAWS, TREATIES, CONVENTIONS etc.

LAWS OF FOREIGN COUNTRIES.

LAWS OF HOME COUNTRY (i.e. INDIA), RELATED TO

FOREIGN TRADE.




INCOTERMS

THESE ARE COMMON SALE OR TRADE TERMS USEDIN INTERNATIONAL TRADE TO EXPRESS THE SALEPRICE AND THE CORRESPONDING RIGHTS AND RESPONSIBILITIES OF THE SELLER AND THE BUYER.BROUGHT OUT BY THE INTERNATIONAL CHAMBER OFCOMMERCE.




SETTLEMENT OF DISPUTES

DISPUTES ARE SETTLED BY THE:

1. WTO OR IN ACCORDANCE WITH WTO PRINCIPLES.2. JUDICIAL DISPUTES SETTLEMENT.3. EXTRA –JUDICIAL DISPUTE SETTLEMENT.




REGULATION RELATED TO PRODUCTS

PRODUCT STANDARDS: MANY COUNTRIES HAVE ESTABLISHED STANDARDS OR SPECIFICATIONS FOR MANY PRODUCTS.DISCLOSURES: MANY COUNTRIES HAVE MADE IT MANDATORY TO MAKE CERTAIN DISCLOSURES LIKE THE INGREDIENTS, POTENCY, SHELF LIFE, ADVERSE EFFECTS etc.ENVIRONMENTAL LAWS: REGULATIONS RELATED TO ENVIRONMENTAL PROTECTION ARE GROWING IN MANY COUNTRIES.PRODUCT LIABILITY: IF ANY PERSON SUFFERS ANY DAMAGE BECAUSE OF THE PRODUCT THEN THE PRODUCER IS LIABLE FOR THE CONSEQUENCES.




PACKING AND LABELING REGULATIONS

ONPACKAGING MATERIALS.METHOD OF PACKAGING.PACKAGING STANDARDS. CERTAIN MANDATORY DISCLOSURES TO BE MADE.LABELING IN LOCAL LANGUAGE IS COMPULSORY INSOME COUNTRIES.




REGULATION OF PROMOTION

IN MOST OF THE COUNTRIES , PRODUCT PROMOTION IS SUBJECT TO VARIOUS TYPES OF CONTROLS.PRODUCT COMPARISON ADVERTISEMENTS ARE NOT PERMITTED.

USE OF SUPERLATIVES LIKE BEST, BETTER OR EXCELLENT IS PROHIBITED IN SOME COUNTRIES.

SOME COUNTRIES HAVE RESTRICTIONS ON ILLUSTRATIONS AND USE OF PHOTOGRAPHS OF WOMEN IN ADVERTISEMENTS. CONT…..




REGULATION OF PROMOTION

IN INDIA, DOOR DARSHAN DOES NOT ENTERTAIN ADVERTISEMENTS OF CERTAIN PRODUCTS LIKE ALCOHOLIC DRINKS, CIGARETTES, BEEDIS, PAN MASALA BABY FOOD etc.

IN MANY COUNTRIES INCLUDING INDIA PACKAGE AND ADVERTISEMENT OF CIGARETTES SHALL CARRY STATUTORY WARNING.

BABY FOOD MARKETERS ARE NOT ALLOWED TO PROMOTE THE PRODUCT AS A SUBSTITUTE FOR BREAST FEEDING.




INDIAN LAWSTHE OBJECTIVE OF THE FOREIGN TRADE (DEVELOPMENT AND REGULATION)ACT1992, IS TO PROVIDE FOR THE DEVELOPMENT AND REGULATION OF FOREIGN TRADE BY FACILITATING IMPORTS AND AUGMENTING EXPORTS FROM INDIA AND MATTERS CONNECTED THEREWITH OR INCIDENTAL THERETO.THE ACT EMPOWERS THE CENTRAL GOVT. TO:

(i) MAKE PROVISIONS FOR THE DEVELOPMENT AND REGULATION OF FOREIGN TRADE BY FACILITATING IMPORTS AND INCREASING EXPORTS AND

(ii) MAKE PROVISIONS FOR PROHIBITING, RESTRICTING OR OTHERWISE REGULATING THE IMPORTS AND EXPORTS OF GOODS.




INDIAN LAWSSOME LAWS WHICH CONTROL THE TRADE IN CERTAIN ITEMS e.g.THE EXPORT OF ANTIQUITIES IS REGULATED UNDER THE ANTIQUITIES AND ART TREASURE ACT,1972.EXPORT OF COFFEE IS REGULATED BY THE COFFEE BOARD UNDER THE INDIAN COFFEE ACT,1942.EXPORT OF TEA IS REGULATED UNDER THE TEA ACT.1953. NO EXPORT OF ANY GOODS CAN BE MADE WITHOUT OBTAINING CUSTOMS CLEARANCE UNDER THE CUSTOMS ACT 1962.LEGISLATIONS FOR EXPORT REGULATION IS THE EXPORT (QUALITY CONTROL AND INSPECTION) ACT 1963.




DEMOGRAPHIC ENVIRONMENTDEMOGRAPHIC FACTORS SUCH AS:SIZE OF THE POPULATION. POPULATION GROWTH RATE.AGE COMPOSITION. ETHNIC COMPOSITION. DENSITY OF POPULATION. RURAL – URBAN DISTRIBUTION.FAMILY SIZE.INCOME LEVEL.HAVE VERY SIGNIFICANT IMPLICATIONS ON BUSINESS.




FALLING BIRTH RATE AND CHANGING AGE STRUCTURE

DECLINING BIRTH RATE POSES A PROBLEM FOR MANY BUSINESSES.THE MARKET FOR BABY PRODUCTS HAS SHRUNK.COMPANIES HAVE REPOSITIONED THEIR PRODUCTS.ON THE OTHER HANDDECLINING BIRTH RATE HAS, HOWEVER BEEN A BOON TO INDUSTRIES LIKE HOTELS, AIRLINES AND RESTAURANTS BECAUSE CHILDLESS YOUNG COUPLE HAVE MORE TIME AND INCOME TO TRAVEL AND DINING OUT. SMALL FAMILIES HAVE THE SIMILAR ADVANTAGES WHEN COMPARED WITH LARGE FAMILIES.




FALLING BIRTH RATE AND CHANGING AGE STRUCTURE

DRUCKER POINTS OUT:THE COLLAPSING BIRTH RATE MAY BE AN OPPORTUNITY.IT IS CONCEIVABLE THAT HAVING FEWER CHILDREN MEANS THAT THE CHILD BECOMES MORE AND MORE PRECIOUS.LARGE SHARE OF DISPOSABLE INCOME IS SPENT ON IT.




FALLING BIRTH RATE AND CHANGING AGE STRUCTURELABOUR SHORTAGE AND RISING WAGES ENCOURAGED THE GROWTH OF LABOUR INTENSIVE METHODS OF PRODUCTION.CAPITAL INTENSIVE TECHNOLOGIES, AUTOMATION AND RATIONALIZATION ARE OPPOSED BY LABOUR AND MANY SOCIOLOGISTS, AND ECONOMISTS IN DEVELOPING COUNTRIES.CHEAP LABOUR AND GROWING MARKET HAVE ENCOURAGED MANY MULTINATIONALS TO INVEST IN DEVELOPING COUNTRIES.MANY COMPANIES OF DEVELOPED COUNTRIES HAVE RELOCATED THEIR PRODUCTION FACILITIES IN THE DEVELOPING COUNTRIES TO REDUCE THE LABOUR COST




FALLING BIRTH RATE AND CHANGING AGE STRUCTUREFOR THE NEXT TWENTY OR THIRTY YEARS DEMOGRAPHICS WILL DOMINATE THE POLITICS OF ALL DEVELOPED COUNTRIES. IMPORTANT ISSUES INCLUDE THE RETIREMENT AGE AND IMMIGRATION.NO DEVELOPED COUNTRY IS LIKELY TO HAVE A STABLE GOVERNMENT.IT IS LIKELY THAT THE TREND TOWARDS EARLY RETIREMENT WILL CONTINUE. BUT IT WILL NO LONGER MEAN THAT THE PERSON STOPS WORKING.IN ALL DEVELOPED COUNTRIES THE PRODUCTIVITY OF ALL WORKERS –WHETHER FULL TIME OR PART TIME , WILL HAVE TO INCREASE RAPIDLY.

= PETER DRUCKER




MIGRATION AND ETHNIC ASPECTS

POPULATION WILL BE DECLINING IN MANY DEVELOPED COUNTRIES, LEADING TO LABOUR SHORTAGE.POPULATION PRESSURE WILL BE MOUNTING IN DEVELOPING COUNTRIES.RESPONSE TO IMMIGRATION WILL DIFFER BETWEEN COUNTRIES.IMMIGRATION WILL, LIKELY BE A HOT POLITICAL ISSUE.NOW THE U.S. IS CALLED A SALAD BOWL SOCIETY WITH ETHNIC GROUPS, MAINTAINING ETHNIC DIFFERENCES, NEIGHBORHOOD AND CULTURE.MARKETERS MUST BE CAREFUL NOT TO OVER GENERALIZE ABOUT ETHNIC GROUPS.




SOCIAL / CULTURAL ENVIRONMENT

CULTURE IS A VERY INTRIGUING AND COMPLEX AND A CRITICAL COMPONENT OF BUSINESS ENVIRONMENT.PROPER UNDERSTANDING OF THE CULTURAL DIMENSIONS IS VERY IMPORTANT FOR :

PRODUCT DEVELOPMENT.PROMOTION.BUSINESS NEGOTIATION.HUMAN RESOURCE MANAGEMENT.MANAGEMENT OF THE SOCIAL AND POLITICAL ENVIRONMENT.




SOCIAL / CULTURAL ENVIRONMENT

MANY MULTINATIONAL BUSINESSMEN AGREE THAT,

“CULTURAL DIFFERENCES ARE THE MOST SIGNIFICANT AND TROUBLESOME VARIABLES ENCOUNTERED BY THE MULTINATIONAL COMPANY. THE FAILURE OF MANAGERS TO COMPREHEND FULLY THESE DISPARITIES HAS LED TO MOST INTERNATIONAL BUSINESS BLUNDERS.”




MEANING OF CULTURE (CONCEPT OF CULTURE BY FRANCIS MERILL )

CULTURE :

IS THE CHARACTERISTICALLY HUMAN PRODUCT OF SOCIAL INTERACTION.

PROVIDES SOCIALLY ACCEPTABLE PATTERNS FOR MEETING BIOLOGICAL AND SOCIAL NEEDS.

IS CUMULATIVE FOR, IT IS HANDED DOWN FROM GENERATION TO GENERATION.

IS MEANINGFUL TO HUMAN BEINGS BECAUSE OF ITS SYMBOLIC QUALITY.

CONT…..




MEANING OF CULTURE (CONCEPT OF CULTURE BY FRANCIS MERILL )

CULTURE :

IS LEARNED BY EACH PERSON IN THE COURSE OF HIS DEVELOPMENT IN A PARTICULAR SOCIETY.

IS, THEREFORE, A BASIC DETERMINANT OF PERSONALITY.

DEPENDENT FOR ITS EXISTENCE UPON THE CONTINUED FUNCTIONING OF SOCIETY BUT IS INDEPENDENT OF ANY INDIVIDUAL OR GROUP.




ELEMENTS OF CULTURE

KNOWLEDGE AND BELIEFS:IT REFERS TO A PEOPLE’S PREVAILING NOTIONS OF REALITY, INCLUDES MYTHS AND METAPHYSICAL BELIEFS AS WELL AS SCIENTIFIC REALITIES. IDEALS:IT REFERS TO THE SOCIETAL NORMS WHICH DEFINE WHAT IS EXPECTED,CUSTOMARY,RIGHT OR PROPER IN A GIVEN SITUATION.PREFERENCES:IT REFERS TO THOSE THINGS IN LIFE WHICH ARE ATTRACTIVE OR UNATTRACTIVE AS OBJECTS OF DESIRE. PREFERENCES MAY DIFFER IN BETWEEN CULTURES.




ORGANISATION OF CULTURE

ORGANISATION OF CULTURE REFERS TO THE SOCIAL STRUCTURE AND THE INTEGRATION OF TRAITS, COMPLEXES AND PATTERNS THAT MAKE UP THE CULTURAL SYSTEM.

SOCIAL STRUCTURE IS THE “WEB OF ORGANIZED RELATIONSHIPS AMONG INDIVIDUALS AND GROUPS THAT DEFINES THEIR MUTUAL RIGHTS AND LIABILITIES.”—TOGETHER WITH TRAITS, COMPLEXES AND PATTERNS, REFLECTS THE ORGANISATION OF A CULTURE.




ORGANISATION OF CULTURE

IMPORTANT COMMON INSTITUTIONS OF MODERN CULTURES ARE: ECONOMIC SYSTEM.POLITICAL ADMINISTRATIVE SYSTEM.EDUCATIONAL SYSTEM.RELIGION.FAMILY.EXPRESSIONISTIC, AESTHETIC AND RECREATIONAL INSTITUTIONS.SUCH INSTITUTIONS HAVE BEEN ESTABLISHED TO MEET SOCIETY'S COMMON NEEDS.




CULTURAL ADAPTATION

IT IS OFTEN NECESSARY TO KNOW THE PROCESS AND NATURE OF THE CULTURAL ENVIRONMENT FOR THE SUCCESSFUL FORMULATION OF BUSINESS STRATEGIES.

WHILE INTRODUCING:

NEW IDEAS, TECHNIQUES, PRODUCTS, SEGMENTING THE MARKET, FORMULATING THE PRODUCT AND PROMOTION MIX STRATEGIES

ONE SHOULD CONSIDER THE EXTENT TO WHICH DIFFERENT CATEGORIES OF CONSUMERS ADAPT TO THE NEW THINGS OR ENVIRONMENT AND THE FACTORS FAVORING OR DISFAVORING ADAPTATION.




CULTURAL SHOCK

ENVIRONMENTAL CHANGES SOMETIMES PRODUCE CULTURAL SHOCK.

A FEELING OF CONFUSION, INSECURITY AND ANXIETY CAUSED BY THE STRANGENESS OF THE NEW ENVIRONMENT.

EXECUTIVES AND OTHER EMPLOYEES ON FOREIGN ASSIGNMENTS MAY EXPERIENCE CULTURAL SHOCK IN ALIEN ENVIRONMENT.

THIS ALSO HIGHLIGHTS THE IMPORTANCE OF THE SELECTION OF PEOPLE FOR THE FOREIGN MARKETS.




CULTURAL TRANSMISSION

CULTURAL TRANSMISSION CAN TAKE PLACE BY :

SYMBOLIC COMMUNICATION.LANGUAGE.LITERATURE.FILM.TELEVISION AND SOME OTHER ELECTRONIC GADGETS.SOCIAL INSTITUTIONS.ADVERTISING AND MARKETING TECHNIQUES.




CULTURAL TRANSMISSION

CULTURAL TRANSMISSION AND DIFFUSION IN A SOCIETY IS IMPORTANT TO BUSINESS DECISION –MAKING. TO FORMULATE A PROMOTIONAL POLICY FOR A PRODUCT, A SERVICE OR AN IDEA IT IS IMPORTANT…..

TO IDENTIFY THE RELEVANT ELEMENT OF TRANSMISSION TO EVALUATE THE RELATIVE EFFECTIVENESS OF ALTERNATIVE COMMUNICATION MEDIA.

TO IDENTIFY THE REFERENCE GROUPS AND THE EXTENT OF THEIR INFLUENCE.

TO IDENTIFY THE CHANNEL OF INFLUENCE ON THE REFERENCE GROUP.




CULTURAL CONFORMITY

A KNOWLEDGE OF THE NATURE AND EXTENT OF CULTURAL CONFORMITY AND DEVIANCE WILL SOMETIMES BE HELPFUL IN BUSINESS DECISION-MAKING.

IF A SOCIETY IS CHARACTERIZED BY BLIND CONFORMITY, IT WILL BE VERY DIFFICULT TO MARKET NEW REVOLUTIONARY IDEAS.

SPECIAL EFFORTS MAY BE REQUIRED IN SUCH A SOCIETY TO CHANGE THE ATTITUDES OF THE PEOPLE IN FAVOR OF UNCONVENTIONAL IDEAS. IT IS ALSO IMPORTANT TO UNDERSTAND THE EXTENT AND EFFECT OF INITIAL DEVIATION.




LOW-CONTEXT AND HIGH-CONTEXT CULTURES

A LOW-CONTEXT CULTURE, ASSUMES A HIGH DEGREE OF SHARED KNOWLEDGE ON THE BEHALF OF A TRANSACTION PARTNER AND THUS DEALS ONLY IN SUCH TANGIBLE ASPECTS OF THE DEAL AS FACTS, FIGURES AND PERFORMANCE.

A HIGH-CONTEXT CULTURE IS ONE THAT PLACES GREAT VALUE ON THE INTANGIBLE ASPECTS OF A NEGOTIATION OR BUSINESS DEAL.




UNIVERSALISM VS. PARTICULARISM

UNIVERSALISM:

HERE THE FOCUS IN MORE ON RULES THAN ON RELATIONSHIP.

PARTICULARISM :

HERE THE FOCUS IS ON RELATIONSHIP AND TRUST , LEGAL CONTRACTS OFTEN ARE MODIFIED, AND AS THE PEOPLE GET TO KNOW EACH OTHER BETTER, THEY OFTEN CHANGE THE WAYS IN WHICH DEALS ARE EXECUTED.




UNIVERSALISM VS. PARTICULARISM

TROMPENAARS RECOMMENDS:

WHEN PARTICULARIST CULTURES DO BUSINESS WITH UNIVERSALIST CULTURE THEY SHOULD BE PREPARED FOR RATIONAL, PROFESSIONAL RGUMENTS AND A “LET’S GET DOWN TO THE BUSINESS “ ATTITUDE.

WHEN UNIVERSALIST CULTURES DO BUSINESS IN A PARTICULARIST ENVIRONMENT THEY SHOULD BE PREPARED FOR PERSONAL MEANDERING OR IRRELEVANCIES THAT SEEM TO GO NOWHERE AND SHOULD NOT REGARD PERSONAL.




INDIVIDUALISM VS. COMMUNITARIANISM


WHEN INDIVIDUALISM DEALS WITH COMMUNITARIANISM CULTURE, THEY SHOULD HAVE PATIENCE FOR THE TIME TAKEN TO CONSENT AND TO CONSULT AND THEY SHOULD AIM TO BUILD LASTING RELATIONSHIPS.WHEN COMMUNITARIANISM DEAL WITH THOSE FROM INDIVIDUALIST CULTURE, THEY SHOULD BE PREPARED TO MAKE QUICK DECISIONS AND COMMIT THEIR ORGANIZATION TO THESE DECISIONS, AND ALSO SHOULD REALIZE THAT THE PERSON THEY ARE DEALING WITH IS A RESPECTED PERSON BY THE ORGANIZATION AND HAS AUTHORITY.




NEUTRAL VS. EMOTIONAL


WHEN INDIVIDUALS FROM EMOTIONAL CULTURE DO BUSINESS IN NEUTRAL CULTURE THEY SHOULD PUT AS MUCH AS THEY CAN ON PAPER AND SUBMIT IT. THEY SHOULD REALIZE THAT LACK OF EMOTION DOES NOT MEAN DISINTEREST.

WHEN NEUTRAL CULTURES DO BUSINESS IN EMOTIONAL CULTURE, THEY SHOULD TRY TO RESPOND WARMLY TO THE EMOTIONAL AFFECTIONS OF THE OTHER GROUP.




SPECIFIC VS. DIFFUSE


WHEN SPECIFIC CULTURES DO BUSINESS IN DIFFUSE CULTURES, THEY SHOULD RESPECT A PERSON’S TITLE, AGE AND BACKGROUND CONNECTIONS.

WHEN DIFFUSE CULTURE DO BUSINESS IN SPECIFIC CULTURES THEY SHOULD TRY TO GET TO THE POINT AND BE EFFICIENT, LEARN TO STRUCTURE MEETINGS WITH THE JUDICIOUS USE OF AGENDA.




ACHIEVEMENT VS. ASCRIPTION


WHEN ACHIEVEMENT CULTURES DO BUSINESS IN ASCRIPTION CULTURE, THEY SHOULD MAKE SURE THAT THEIR GROUP HAS OLDER, SENIOR AND FORMAL POSITION-HOLDER WHO CAN IMPRESS THE OTHER SIDE.

WHEN ASCRIPTION CULTURE DO THE BUSINESS IN ACHIEVEMENT CULTURE, THEY SHOULD MAKE SURE THAT THEIR GROUP HAS SUFFICIENT DATA, TECHNICAL ADVISORS, AND KNOWLEDGABLE PERSONS TO CONVINCE.




RELIGION

DIFFERENT PEOPLE HAVE THEIR OWN RELIGIOUSCONVICTIONS, BELIEFS, SENTIMENTS, CUSTOMS,RITUALS, FESTIVALS etc.

THE COST OF IGNORING CERTAIN RELIGIOUS ASPECTS COULD BE VERY HIGH, SOME TIMES EVENFATAL, IN INTERNATIONAL BUSINESS.




RELIGION

MANY RELIGIOUS GROUP CONSIDER CERTAIN DAYS OR CERTAIN PERIODS AS AUSPICES FOR LAUNCHING NEW VENTURE.THE CUSTOMS OF MARRIAGE, NAMING CEREMONY OF THE CHILD, FESTIVALS etc. VARY SIGNIFICANTLY BETWEEN RELIGIONS. THESE HAVE IMPLICATIONS FOR MANY TYPES OF BUSINESS LIKE TEXTILE, JEWELLERY, CATERING etc.THE INFLUENCE OF RELIGION IS ON INCREASE IN THE POLITICS.IN A NUMBER OF COUNTRIES RELIGION AND GOVERNMENT ARE INSEPARABLY UNITED. MANY BUSINESS DECISIONS IN INDIA AND IN SEVERAL OTHER COUNTRIES ARE BASED ON ASTROLOGICAL ADVICES.




RELIGION

THE ISLAMIC HOLY BOOK KORAN PROHIBITS PAYMENT ACCEPTANCE OF INTEREST.

ISLAMIC BANKS DO NOT PAY REGULAR PREDETERMINED INTEREST TO DEPOSITORS NOR DO THEY CHARGE PREDETERMINED INTEREST RATES TO BORROWERS.

BANKS TAKE A SHARE OF THE PROFITS OR LOSS WHICH ARE AGAIN SHARED WITH DEPOSITORS.

EVEN SOME LARGE WESTERN BANKS NOW HAVE ISLAMIC BRANCHES.




ETHNO DOMINATION

IN MANY COUNTRIES ONE OR OTHER INDUSTRY OR TRADE IS DOMINATED BY CERTAIN ETHNIC GROUPS.

THIS IS PARTICULARLY TRUE OF TRADE.

THE CONTROL IS MANIPULATED THROUGH THE FAMILIAR COERCIVE AND COLLUSIVE PRACTICES.

CONT….




ETHNO DOMINATION

A STRANGER OR SOJOURNER MINORITY, SELECTING OR HAPPENING INTO A TRADE OPPORTUNITY IN A PARTICULAR COMMODITY.

MEMBERS OF THE ETHNIC GROUP THEN MASTER THE INTRICACIES OF SUPPLY AND DEMAND IN WORLD MARKET FOR THAT COMMODITY.

IT WOULD BE BENEFICIAL FOR THE INTERNATIONAL MARKETER TO CO-OPT RATHER THAN COMPETE WITH THE DOMINANT ETHNIC GROUP.




LANGUAGE

DIFFERENCES IN LANGUAGE IS A VERY IMPORTANT PROBLEM AREA IN BUSINESS.

EVEN SOME OF THE SAME WORDS OF THE SAME LANGUAGE HAVE DIFFERENT MEANINGS OR CONNOTATIONS IN DIFFERENT PLACE.

BESIDE 18 OFFICIALLY RECOGNIZED LANGUAGES IN INDIA, 33 ARE SPOKEN, WHERE AS 1652 ARE MOTHER TONGUES LISTED BY THE CENSUS.

PROBLEMS CAUSED BY LANGUAGES INCLUDES, THOSE RELATED TO BRAND NAMES AND OTHER NAMES, MARKETING COMMUNICATION.

CONT….




LANGUAGE

THERE ARE TWO PROBLEMS FOR THE TRANSLATION OF ADVERTISEMENTS etc. ONE, THE APPROPRIATE WORD IS NOT THERE IN SOME LANGUAGES AND SECONDLY,THE LITERAL TRANSLATION MANY A TIME DO NOT CONVEY THE RIGHT MEANING.

NONVERBAL COMMUNICATIONS ALSO CREATE PROBLEMS.

BODY LANGUAGE HAS DIFFERENT INTERPRETATIONS IN DIFFERENT CULTURES.

THE SAME SYMBOL AND GESTURE MAY MEAN DIFFERENT IN DIFFERENT COUNTRIES / REGIONS OF THE SAME COUNTRY.




CULTURE AND ORGANISATIONAL BEHAVIOUR

THE CULTURAL IMPACT ON INTERNATIONAL MANAGEMENT IS REFLECTED BY SEVERAL BASIC BELIEFS AND BEHAVIORS:

CENTRALIZED VS. DECENTRALIZED DECISION MAKING.

SAFETY VS. RISK.

INDIVIDUAL VS. GROUP REWARD.CONT….




CULTURE AND ORGANISATIONAL BEHAVIOUR

INFORMAL VS. FORMAL PROCEDURE.

HIGH VS. LOW ORGANISATIONAL LOYALTY.

COOPERATION VS. COMPETITION.

SHORT–TERM VS. LONG TERM HORIZON.

STABILITY VS. INNOVATION.




CONSUMER PREFERENCES, HABITS AND BELIEFS

LIKING OF THE PEOPLE OF ONE CULTURE MAY NOT BE THE SAME AS THAT OF THE OTHER CULTURE.

WHEN PEOPLE OF THE DIFFERENT CULTURES USE THE SAME PRODUCT, THE MODE OF CONSUMPTION, CONDITIONS OF USE, PURPOSE OF USE OR THE PERCEPTIONS OF THE PRODUCT ATTRIBUTES MAY VARY SO MUCH SO THAT THE PRODUCT ATTRIBUTES, METHOD OF PRESENTATION, POSITIONING, OR METHOD OF PROMOTING THE PRODUCT MAY HAVE TO BE VARIED TO SUIT THE CHARACTERISTICS OF DIFFERENT MARKETS.




CONSUMER PREFERENCES, HABITS AND BELIEFS

PRODUCT PLANNING FOR AN INTERNATIONAL MARKET INVOLVES ANTICIPATING THE NEEDS AND WANTS OF CONSUMERS IN ENTIRELY DIFFERENT CULTURES, AND ONE MAY HAVE TO ANSWER THE QUESTIONS SUCH AS :

WHO USES THE PRODUCT?

HOW AND WHEN IS THE PRODUCT USED?

WHERE AND HOW OFTEN IS IT PURCHASED?

DETERMINING THE VALUE AND IMPORTANCE OF THE VARIOUS PRODUCT FEATURES ARE VERY IMPORTANT.




ETIQUTTES

THE WAYS OF MEETING AND GREETING PEOPLE.

EXPRESSION OF APPRECIATION OR DISAPPROVAL.

METHODS OF SHOWING RESPECT.

WAYS OF CONDUCTING MEETINGS AND FUNCTIONS.

TABLE MANNERS.

LAUGHTER AND SMILE.

VARY QUITE WIDELY BETWEEN CULTURES.




ETIQUTTES

GIFT GIVING HAS ITS OWN PLACE IN MOST CULTURES.

WHAT IS AN APPROPRIATE GIFT. TO WHOM SHOULD IT BE GIVEN, WHEN SHOULD IT BE GIVEN.

FAILURE TO TAKE METICULOUS CARE OF THESE FACTORS CAN SOME TIMES PRODUCE NEGATIVE EFFECTS.

SOMETIMES GIFTS ARE EXPECTED AND FAILURE TO SUPPLY THEM IS SEEN INSULTING.

THE WAY THE GIFT IS PRESENTED IS ALSO VERY IMPORTANT.




GEOGRAPHICAL ENVIRONMENT

GEOGRAPHICAL AND ECOLOGICAL FACTORS, WHICH ARE RELEVANT TO BUSINESS ARE :

NATURAL RESOURCES ENDOWMENTS.

WEATHER AND CLIMATIC CONDITIONS.

TOPOGRAPHICAL FACTORS.

LOCATION ASPECTS IN THE GLOBAL CONTEXT.

PORT FACILITIES etc.




GEOGRAPHICAL ENVIRONMENT

ECOLOGICAL FACTORS HAVE RECENTLY ASSUMED GREAT IMPORTANCE.

THE DEPLETION PF NATURAL RESOURCES, ENVIRONMENTAL POLLUTION AND DISTURBANCE OF THE ECOLOGICAL BALANCE HAVE CAUSED GREAT CONCERN.

GOVT. POLICIES AIMED AT PRESERVATION OF ENVIRONMENTAL PURITY AND ECOLOGICAL BALANCE, CONSERVATION OF NON-REPLENISHABLE RESOURCES etc. HAVE RESULTED IN ADDITIONAL RESPONSIBILITIES AND INCREASING THE COST OF PRODUCTION AND MARKETING.

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International Business Environment: Introduction

Education

Transcript of International Business Environment: Introduction