International Business environment

Internal Environment
1. Organisational structure
2. Production
3. Finance
4. Marketing
5. HRM & HRD
6. R&D

External Micro Environment
1. Share holders
2. Creditors
3. Bankers and financial institutions
4. Competitors
5. Suppliers of Raw material
6. Market intermediaries
7. Customers

External Macro Environment
1. Socio cultural environment
This part deals with attitude of the people to work, wealth, family, marriage, religion, education, ethics, human relations, social responsibilities etc.
Culture is derived mostly from the climatic conditions of the geographical regime and economic conditions of the country.

The features of culture are
1. Culture is based on perspective
2. It is socially shared
3. Culture facilitates communication
4. Culture is learned not inherited genetically

Social environment
1. Religion
2. Family
2. Technological environment

Influence of Technology
1. The way we cook (Electric rice cooker)
2. The way we drink water (Filtered mineral water)
3. Communication (Telephone, Fax, Email, Mobiles etc)
4. Trading (e- commerce)
5. Learning (e – learning)
6. Paying tax, getting information (e – governance)

Ranking of Asian countries based on technology
1. Singapore
2. Japan
3. South Korea
4. Malaysia & Taiwan
5. Hong Kong
6. Indonesia
7. India

Technology transfer
1. Establishing the subsidiaries in the developing countries
2. Establishing joint ventures
3. Acquisition
4. Mergers
5. Technological transfer for royalty

Procedure for scanning technological environment
1. The level of technology of the industry in the home country
2. The level of technology of the industry in the host country
3. Compatibility of the home country technology in the host country
4. If the technology is not compatible then select the appropriate technology for the host country
5. Study the technology with culture, taste, Government regulations etc.
6. Study the mode of technology transfer
7. Study the impact on technology environment
3. Economic environment
International business is mostly and directly influenced by the economic environment of various countries.

Economic system
1. Capitalism
2. Socialism
3. Mixed Economy
Based on the economic conditions the countries are classified as
1. Low income countries (Per capita Income Less than US $ 400)
Features
1. Limited industrialisation.
2. Excessive dependency of population on agriculture
3. High birth rates
4. Low literacy rates
5. Heavy reliance on foreign aid
6. Political instability and unrest
7. Excessive unemployment
8. Technological backwardness
9. Under utilisation of natural resources
10. Excessive dependency on imports
2. Lower middle income countries (Per capita Income US $ 400 -2000)

Features
1. Early stages of industrialisation
2. Expansion of consumer products market
3. Availability of cheap labour and motivated human resources
4. Domestic markets are dominated by the products like Clothing, batteries, tires
5. Location of production of standardised nature products like clothing for exports
6. Pose threat to rest of the world in labour intensive products due to cheap labour
3. Upper middle income countries (Per capita Income US $ 2000 – 12000)

Features
1. Less dependency on agriculture
2. Occupational mobility of the people from agriculture to industry
3. People migrate from rural to urban areas which results in increased urbanisation
4. Increase in literacy and wage rates
5. Formidable competition
6. High exports and rapid economic development
4. High income countries (Per capita Income More than US $ 12000)

Features
1. Oil rich countries are excluded from this category
2. Countries developed through industrial growth
3. Development of information and service sectors
4. Development of technology
5. Domination of professionals and scientists
6. Emphasis on future plans
7. The countries face the problems like pollution, excessive urbanisation, increase in aged population etc.
4. Political environment

Types of Political system
1. Parliamentary system
- People are allowed to take part in the decision making process
2. Absolutist Government
- Ruling the Government like a dictator
Government may also be classified as
1. Two Party system – USA & UK
2. Multiparty System - India
3. Single party System - Egypt
4. One party dominated System - India

Political risk
1. Confiscation: Process of nationalisation of the property with out compensation e.g. China 1949.
2. Expropriation: Process of nationalisation with compensation e.g. India 1969
3. Nationalisation: 100 % role by the Government and no role for private e.g. Burma and Poland
4. Domestication: No foreign ownership and only local players
5. General Instability Risk: Due to social, political and religious unrest e.g. Mahendra Choudry Vs George Speight in Fiji Island
6. Operational Risk: Imposition of control over foreign business. E.g. Enron deal in 1992

Indicators of Political Instability
1. Social unrest
2. Attitudes of nations
3. Policies of the host Government

How to minimise political risk?
1. Stimulation of the local economy
2. Employment of local nationals
3. Sharing ownership
4. Being civic minded (Social responsibility)
5. Political neutrality
6. Behind the scenes lobby.

Democracy
 Representative Democracy
Freedoms:
•Expression, opinion, organization
•Media
•Regular elections with universal suffrage
•Limited terms for elected representatives
•Fair and independent court system
•Non political bureaucracy, police force and armed service
•Relatively free access to state information