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ACKNOWLEDGEMENT
This is to acknowledge with thanks the help, guidance and
support that I have received during this project writing. At the
outset, it is my duty to express my deep sense of gratitude to the
University of Petroleum & Energy Studies for extending me the
opportunity for undergoing this project providing all the
necessary resources and expertise for this purpose.
I am grateful to Mr. HR.ROY for his encouragement, cooperationbenevolent guidance, keen interest and critical appreciation.
Sumit Kumar Banduni
BBA (Oil and Gas Marketing), UPES
Dehradun
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International business1. The exchange ofgoods and services among individuals and
businesses in multiple countries.
2. A specific entity, such as a multinational corporation or
international business company that engages in business
among multiple countries.
International business deals with business activities (bothproduction and services) that cross the national boundaries.
This activity includes movement of goods, services capital or
personnel, transfer of technology, etc.
Functionally, by business we mean those human activities,
which involve production or purchase of goods and services
with the object of selling them at a profit. Todays world is anera of Global Village or specialization. A particular country is
not self-dependent for producing goods and services. One
country depends on another for goods and services as well as
one area of a particular country depends on another area for
meeting demand. This interdependence creates internationals
Business.
http://www.businessdictionary.com/definition/exchange.htmlhttp://www.businessdictionary.com/definition/goods-and-services.htmlhttp://www.businessdictionary.com/definition/individual.htmlhttp://www.businessdictionary.com/definition/country.htmlhttp://www.businessdictionary.com/definition/entity.htmlhttp://www.businessdictionary.com/definition/multinational-corporation-MNC.htmlhttp://www.businessdictionary.com/definition/international-business-company-IBC.htmlhttp://www.businessdictionary.com/definition/business.htmlhttp://www.businessdictionary.com/definition/business.htmlhttp://www.businessdictionary.com/definition/international-business-company-IBC.htmlhttp://www.businessdictionary.com/definition/multinational-corporation-MNC.htmlhttp://www.businessdictionary.com/definition/entity.htmlhttp://www.businessdictionary.com/definition/country.htmlhttp://www.businessdictionary.com/definition/individual.htmlhttp://www.businessdictionary.com/definition/goods-and-services.htmlhttp://www.businessdictionary.com/definition/exchange.html -
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Business environment
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Components and Significance of Business EnvironmentA business environment comprises a number of environmental factors
which have to be considered while making business policy.
Any change in those factors of the environment is bound to lead to
corresponding changes in the business policy of the organization.
Internal factors of business
The internal environment consists of large number of factors which
contribute to success or failure of an organization. These comprises of
strength and weakness of the organization.
These important factors are
Organizational resources Research and development / technological capabilities Financial capability Marketing capability Operational capability
External factors affecting business
The environment includes the factors outside the firm which can lead
to opportunities or threat to the firm
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Factors that affect international business
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Cultural environmentHumans essentially create their own cultural and social environment.
Customs, practices and traditions for survival and development are
passed down from one generation to the next. In this way, the members
of a particular society become conditioned to accept certain "truths"
about life around them. The increasingly competitive international
business environment calls upon exporters to tailor or adapt their
business approach to the culture and traditions of specific foreign
markets. The inability or unwillingness to do so could become a serious
obstacle to success.
The task of adjusting to a new cultural environment is probably one of
the biggest challenges of export marketing. Export marketing attempts
are frequently unsuccessful because the marketer - either consciously or
unconsciously - makes decisions or evaluations from a frame of
reference that is acceptable to his/her own culture but unacceptable in a
foreign environment. Therefore, business practices which are successful
in one group of countries may be entirely inappropriate in another group
of countries. For example, the Marlboro Company took its famous lonecowboy advertisement to Hong Kong in the early 1960's.However, the
image of the cowboy riding off in the distance by himself led the
Chinese to wonder what he had done wrong.
Cultural factors and its impact on business
Communicable knowledge, learned behavior passed on fromgeneration to generation is called as Culture.
Culture enables people to live together in a society within a givengeographic environment, at a given state of technical
development and at a particular moment in time
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SOCIAL ENVIRONMENT &ITS IMPACT ON internationalbusiness
Sentiments and emotions attached to custom affect business.
People in different cultures form definite attitudes towardswhat is desirable and what is undesirable.
Even the eating habit of people and time on which the foodhas to be taken is a part of custom/caste.
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Social Environment and influence oninternational business structure
Industrialization and urbanization has caused the change in thetaste of the people causing fast disappearance of cottage
industries.
The break ups in joint family the joint family business is also fastdisappearing.
With the emergence of nuclear family, the saving andinvestment has also increased facilitating the growth in companyform of business.
SOCIAL ENVIRONMENT AND ITS IMPACT ON PURCHASING AND
CONSUMPTION
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Economic environment and businessThe purpose, or reason, for developing an economic
analysis of a region or specific country, is directlyrelated to the ability to subsequently make
managements decisions about whether to do, or not
do certain business things in that country or with
that country.
What is economics?Why is the govt.?What are basic economic problems?What are the solutions to those problems?Who will solve these problems?Answers to these questions will automatically give
the relationship between economic and environment.
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Economic factors its components & business
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The economic factors which make us think
which affect international business:
Income distribution & flexible incomeProductivity: Unit labor costs and labor compensation
costs compared
Relates to how much it costs in various regions forour competitors to manufacture stuff, or how much it
costs us for labor to have products made.
We are labor intensive or capital intensive.Major international debtors and debts
relates to the financial burden on govt. to tax us andcompanies (trade surplus, trade deficit, bond debt)
Inflation, interest rates, availability of creditAge distribution
effects lifestyle things such as transportation, foodconsumption, entertainment, living accommodations
Increased risk of violence and terrorism on a national andinternational scale.
Trade surplus and B o P structure.
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Economic environment affecting businessBusiness cannot control the economic forces rather economic
forces affect the business.
Every day there are individuals, businesses and governmentsengaged in economic activity. i.e. buying and selling
Decisions about what to buy and when from individuals,government and businesses drives the whole economy.
Every act of buying and selling - no matter how large or small -contributes to what we call 'the economy'.
The overall effect depends on how many people make decisionson whether to buy or sell.
Economic and business environment inIndiaBecause of large numbers of well educated people we have
become a major exporter of software services.
Despite strong growth the worry is about the continuing publicsector budget deficit aprox. to 10% GDP.
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Political environment
No matter how attractive the economic prospects of a particular country
or region are, doing business there might prove to be financiallydisastrous if the host government(s) inflicts heavy financial penalties on
a company or if unanticipated events in the political arena lead to the
loss of income-generating assets.
The political environment in which the firm operates (or plan to operate)
will have a significant impact on a company's international marketing
activities. The greater the level of involvement in a foreign markets, the
greater the need to monitor the political climate of the countries business
is conducted. Changes in government often result in changes in policy
and attitudes towards foreign business. Bearing in mind that a foreign
company operates in a host country at the discretion of the government
concerned, the government can either encourage foreign activities by
offering attractive opportunities for investment and trade, or discourage
its activities by imposing restrictions such as import quotas, etc. An
exporter that is continuously aware of shifts in government attitude, will
be able to adapt export marketing strategies accordingly.
Nearly all governments today play active roles in their countries'
economies. Although evident to a greater or lesser extent in most
countries, government ownership of economic activities is still prevalent
in the former centrally planned economies, as well as in certain
developing countries which lack a sufficiently well developed private
sector to support a free market system.
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Political Stability, Sovereignty &
Business
There can be various forms of Govt. Rule by one (monarchy) Rule by few (aristocracy) Rule by many (democracy) Today the world seemed to have agreed that democracy is
the best solution.
The Government policies is affecting business in various ways. The
Government policy creating economic risks can be seen affecting:
Policy on Exchange controlsStem from shortages of foreign exchange held by a country.
Local-content lawsCountries often require a portion of any product sold within the
country to have local content.
Import restrictionsSelective restrictions on the import of raw materials to force
foreign industry to purchase more supplies within the host country
and thereby create markets for local industry.
Tax controlsA political risk when used as a means of controlling foreign
investments.
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Approach for better relationshipRelations between governments and MNCs are generally
positive if the investment:
Improves the balance of payments by increasingexports or reducing imports through import
substitution
Uses locally produced resources Transfers capital, technology, and/or skills Create jobs Make tax contributions
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If a company is considered vital to achieving national economicgoals, the host country often provides an umbrella of protection not
extended to other
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The legal environment
The legal environment is derived partly from the political climate in a
country and has three distinct dimensions to it:
The domestic laws of your home country The domestic laws of each of your foreign markets International law in general
Legal systems vary from country to country. You are likely to find that
the legal systems in operation in the buyers' country are in many respects
different from that of South Africa.
Domestic laws govern marketing within a country, e.g. the physical
attributes of a product will be influenced by laws (designed to protect
consumers) relating to the purity, safety or performance of the product.
Domestic laws might also constrain marketers in the areas of product
packaging, marking and labelling, and contracts with agents. Most
countries also have certain laws regulating advertising, e.g. Britain does
not permit any cigarette or liquor advertising on TV
Different legal systems
The legal systems of most of the non-socialist countries can be grouped
into common law and code law. Common law is generally based on
precedents or past practices while a code, which is a comprehensive set
of volumes having statutory force and covering virtually the whole
spectrum of the country's law, is established by arbitrary methods - e.g. a
speed limit of 80 kph or a three-day period for cancelling a contract.
South Africa's commercial legal system has been influenced by English
law. English courts create and follow precedents just as South African
courts do. Furthermore, English cases are regularly cited as authority in
our courts in situations where there is no domestic decision on the point
and the particular case concerns an area of our law (such as insurance or
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negotiable instruments) which derives from, or was considerably
influenced by, English law.
ContractsCentral to all commercial activities is the contract. The purpose of a
contract is to specify the respective rights and obligations of the parties
to an agreement and outline specific procedures or actions that must take
place. In this way, the possibility of disputes arising between the parties
is reduced. In the context of international business, with its inherent risks
and complexities, contracts assume a vital role. The principal legal
arrangement underlying an export transaction is the export sales
contract. However, when a company obtains materials from a localsupplier, engages the services of a freight forwarder or insurer, or
concludes agreements with carriers, e.g. shipping lines, airlines and
domestic road haulers, it is also entering contracts.
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.
When an international commercial dispute occurs, the problem must be
settled in one of the countries involved according to the laws and
regulations of that country unless the contract states otherwise. If thedispute cannot be settled amongst the parties involved, resolution can
possibly be obtained through arbitration (i.e. through negotiations
facilitated by a independent third party). Where the process of arbitration
fails, for one reason or another, the option of litigation, i.e. going to
court, might be considered. Disputes that go to court usually involve
either large monetary transactions or the ownership of patents, copyright
(see chapter 4) or physical property. Court actions can take from a few
months to several years and can involve large expenditure in legal feesand lost revenues.
Whose system of law (i.e. South African law or that of the importing
country) is applicable at a particular stage of an international business
transaction depends, inter alia, on the nature and terms of the agreement.
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Technology environment
Technology can be defined as the method or technique for converting
inputs to outputs in accomplishing a specific task. Thus, the terms
'method' and 'technique' refer not only to the knowledge but also to
the skills and the means for accomplishing a task. Technological
innovation, then, refers to the increase in knowledge, the improvement
in skills, or the discovery of a new or improved means that extends
people's ability to achieve a given task.
Technology can be classified in several ways. For example, blueprints,
machinery, equipment and other capital goods are sometimes referred to
as hard technology while soft technology includes management know-how, finance, marketing and administrative techniques. When a
relatively primitive technology is used in the production process, the
technology is usually referred to as labor-intensive. A highly advanced
technology, on the other hand, is generally termed capital-intensive.
Changes in the technological environment have had some of the most
dramatic effects on business. A company may be thoroughly committed
to a particular type of technology, and may have made majorinvestments in equipment and training only to see a new, more
innovative and cost-effective technology emerge.
Indeed, the managing director of multinational organization
manufacturing heavy machinery once said that the hardest part of his job
had nothing to do with unions, pay or products, but with whether or not
to spend money on the latest technologically improved equipment.
Computer technology has had an enormous impact on education andhealth care, to name but two areas affected. The advancements in
medical technology, for example, have contributed to longevity in many
societies. In addition, the introduction of robots in many factories has
reduced the need for labor, and the use of VCR's and microcomputers
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has become commonplace in many homes and businesses.
Unfortunately, there is a negative side to technological progress. The
introduction of nuclear weapons, for example, has made the destruction
of the human race a frightening possibility. In addition, factories usingmodern technologies have polluted both air and water and contributed to
various environmental and health-related problems.
Technology is a critical factor in economic development. Because of the
advances of international communication, the increasing economic
interdependence of nations, and the serious scarcity of vital natural
resources, the transfer of technology has become an important
preoccupation of both industrialized and developing countries. For manyindustrialized countries, the changes in the technological environment
over the last 30 years have been immense particularly in such areas as
chemicals, drugs, and electronics. It is vital that organizations stay
abreast of these changes - not only because this will allow them to
incorporate new and innovative designs into their products, but also
because it will give them a firmer base from which to anticipate and
counteract competition from other organizations.
When the Gillette Company developed a superior stainless steel razorblade, it feared that such a superior product might mean fewer
replacements and sales. Thus, the company decided not to market it.
Instead, Gillette sold the technology to Wilkinson, a British garden tool
manufacturer, thinking that Wilkinson would use the technology only in
the production of garden tools. When Wilkinson Sword Blades were
introduced and sold quickly, Gillette understood the magnitude of its
mistake.
The transfer of technology is essential for attaining a high level of
industrial capability and competitiveness. Multinational corporations are
playing an increasingly important role in technology transfer because
they invest abroad to expand production, marketing and research
activities. There is also a growing consciousness amongst governments
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of the need to increase technology transfer to the developing countries to
help stabilize their economic and social conditions.
Technology can be transferred from person to person, industry to
industry and government to government, although the government ofany country generally plays the most important role in facilitating or
impeding the transfer process. Contacts amongst students from different
countries are also a means of technology transfer as are journals, books,
technical and professional publications, trade magazines and product
pamphlets. Furthermore, multinational corporations play an important
role in technology transfer by transferring information and technology
from the parent company to subsidiaries in other countries, training
foreign employees, etc.
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ConclusionInternational business environment is an interesting subject to study
as it was clear in this assignment. First of all, bail-out and its
negative effects are creating long-term problems for developed
economies as this system is bringing the chances of corruption in
the system. Secondly, friction is creating problems for the
enterprises as world is going from globalization to regionalization
which can be lethal for world economy. Another factor discussed in
the assignment was the growth strategy and its advantages and
disadvantages to the company. Difference of conduct between
African and Chinese managers provides more opportunities for the
management and is not negative. Furthermore, political instability
can provide more challenges for the operations of a multinational
organization and in the end the spending of R & D by different
government and it advantages were discussed. Although in thisassignment I did not mention my own opinions with separate
headings but there are different views which are my own evaluation
of events in the assignment.