Global Business Environment
Chapter 1 : An Overview of the Global Business Environment
Understanding globalization
The Global business
environment & its components
Social environment
Social structure
and international business
Cultural environment
Religion and
international business
Values and attitudes and international
business
Customs and Manners and International Business
Language
Education
Political environment
Economic environment
The
changing nature of international business
Changing world output and
world trade
Changes in Foreign Direct Investment (FDI)
Growth in
the Stock and Flow of FDI
Changes in the Sources of FDI
Changes in
Recipients of FDI
Legal environment
Tariff
Subsidies
Non-Tariff
Barriers
Regulatory bodies
Technological environment
Adoption of
technology in companies
Global production networks
Tax
environment
Impact of globalization on business
Chapter Summary
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Globalization is a three dimensional concept. It is a
phenomenon, a philosophy, and a process. The international business environment
can be defined as the environment in different sovereign countries, with factors
exogenous to the home environment of the organization, influencing decision
making on resource use and capabilities. The international business environment
can be classified into the environment external to the firm and the environment
internal to the firm.
The external environment includes the social, political, economic, regulatory,
tax, cultural, legal, and technological environments. To function effectively
and efficiently, companies operating internationally must understand the social
environment of the host country they are operating in. Today there are thousands
of MNCs which operate in many parts of the globe. Such companies should acquaint
themselves with the language and culture of the country in which they are
operating. Religion and its philosophies influence the working habits of people,
which in turn affect business. |
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Values determine attitudes, which have a significant impact on the conduct of
international business. Social customs and manners differ from country to
country. MNCs need to understand them to conduct business smoothly in the
countries in which they operate. The diversity of languages used in
different countries poses a problem in ensuring effective communication
between the employees of an MNC. Such companies should be very careful when
translating advertisements and other communication messages.
The quality of education in the host country also plays a key role in
determining the prospects of an international business. Every company faces
political constraints in the form of antitrust laws, fair trade decisions,
tax programs, minimum usage legislation, pollution and pricing policies,
administrative activities and many other actions, aimed at protecting the
consumers and the local environment. These laws, rules and regulations
affect a company’s profits. Every market is unique and consumption patterns
change as the wealth of consumers changes in various segments of the market.
Certain crucial macroeconomic trends have to be taken into consideration for
strategic planning. These include the growth of the Gross National Product
(GNP), the volume of trade, and the level of FDI. Every country in the world
follows its own system of law. A foreign company operating in a particular
country has to abide by the country’s laws as long as it is operating in
that country. In order to monitor and control the behavior of foreign
businesses, host countries enact laws. The laws relating to the conduct of
trade take the form of tariffs, subsidies, quantitative restrictions,
voluntary export restraint, licensing, and administered protection. The
regulatory environment relates to the factors that dealing with the planning
and promotion by governments; these may affect the economic activities of a
business or an organization.
Regulatory bodies exist both at the national and the international levels.
The technological environment comprises factors related to the materials and
machines used in manufacturing goods and services. The receptivity to new
technology in organizations and its adoption by consumers influence
decisions made in an organization. The tax system of a country influences
the performance of an organization operating in that country to a
significant extent.
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Short Case Studies / Caselets