International Business Environment

International Business

InternationalBusiness

Environment

19/05/2014 Arhan Sthapit/copyright reserved 1

Arhan SthapitFaculty / SoM-TUInternational Business

InternationalBusiness

Environment

Basic Books/ Readings

Daniel, Radebaugh, Sullivan & Salwan(2010). International Business. NewDelhi: Pearson

Reference: Hill, C. (2010). International Business: Competing

in the Global Market Place, 8th edition. New Delhi:Tata McGraw-Hill/ Irwin

Sthapit, Arhan (2009), International Business:Text & Cases. Taleju Prakashan, 2nd Edition

Sthapit, Arhan (2013). Essentials of InternationalBusiness and Environment (With Case Studies),2nd ed., Asmita Books

19/05/2014 Copyright reserved withArhan Sthapit/TU-SOM 2

Daniel, Radebaugh, Sullivan & Salwan(2010). International Business. NewDelhi: Pearson

Reference: Hill, C. (2010). International Business: Competing

in the Global Market Place, 8th edition. New Delhi:Tata McGraw-Hill/ Irwin

Sthapit, Arhan (2009), International Business:Text & Cases. Taleju Prakashan, 2nd Edition

Sthapit, Arhan (2013). Essentials of InternationalBusiness and Environment (With Case Studies),2nd ed., Asmita Books

International Business EnvironmentTotality of factors or forces surrounding aninternationally operating firm that influence thefirms performance in the global marketIntl Business Environment composed of(External Environment of Intl Business):

1. Political & Legal Environment factors2. Economic & Financial Environment factors3. Socio-cultural (& Human) Environment factors4. Technological Environment factors5. Natural Environment factors6. Global Environment factors

Components of Intl Business Environment putinto the PEST-NG acronym (or model) orPESTLEG

factors uncontrollable by the management of firmsoperating internationally, yet more critical to theirsuccess


Totality of factors or forces surrounding aninternationally operating firm that influence thefirms performance in the global marketIntl Business Environment composed of(External Environment of Intl Business):

1. Political & Legal Environment factors2. Economic & Financial Environment factors3. Socio-cultural (& Human) Environment factors4. Technological Environment factors5. Natural Environment factors6. Global Environment factors

Components of Intl Business Environment putinto the PEST-NG acronym (or model) orPESTLEG

factors uncontrollable by the management of firmsoperating internationally, yet more critical to theirsuccess

Economic Environment

Getting complex with more emerging factorsin global economyUnderstanding of global economicenvironment essential for firmsEconomic Freedom Index (EFI) is anindicator used by businesses (investors) toassess the economic environment in thatcountry


Getting complex with more emerging factorsin global economyUnderstanding of global economicenvironment essential for firmsEconomic Freedom Index (EFI) is anindicator used by businesses (investors) toassess the economic environment in thatcountry

Importance of Economic Environments

Company managers study economicenvironments to estimate how trends affect theirperformanceA countrys economic policies are a leadingindicator of governments goals and its planneduse of economic tools and market reforms.Economic development directly impacts citizens,managers, policymakers, and institutions.

[Daniels, et al]

Arhan Sthapit

Company managers study economicenvironments to estimate how trends affect theirperformanceA countrys economic policies are a leadingindicator of governments goals and its planneduse of economic tools and market reforms.Economic development directly impacts citizens,managers, policymakers, and institutions.

[Daniels, et al]

Elements of the Economic Environment

Gross national income (GNI): the incomegenerated both by total domesticproduction as well as the internationalproduction activities of national companiesGross domestic product (GDP): the totalvalue of all goods and services producedwithin a nations borders over one year,no matter whether domestic or foreign-owned companies make the product.

[Daniels, et al, 2010]

Gross national income (GNI): the incomegenerated both by total domesticproduction as well as the internationalproduction activities of national companiesGross domestic product (GDP): the totalvalue of all goods and services producedwithin a nations borders over one year,no matter whether domestic or foreign-owned companies make the product.

[Daniels, et al, 2010]

World Economic Scenario and Trends ofDevelopment

1. Big, widening gap between have-s and have-nots2. Impact of International/Supra-national

organisations3. Different economic systems & economic

frameworks in countries4. Impact of regional economic groupings and

economic integration5. Emergence of transitional economies6. Emergence of global outsourcing and global trade7. Increased Economic Interdependence among

countries8. Shift from manufacturing to service sector


1. Big, widening gap between have-s and have-nots2. Impact of International/Supra-national

organisations3. Different economic systems & economic

frameworks in countries4. Impact of regional economic groupings and

economic integration5. Emergence of transitional economies6. Emergence of global outsourcing and global trade7. Increased Economic Interdependence among

countries8. Shift from manufacturing to service sector

Varying Economic Systems

1. Command economic system Centrally planned system Govt/ state does pricing and production, decisions; owns

and controls all resources; decides resource allocation2. Market Economy

Ownership on resources with the private sector consumer sovereignty makes this system work Markets supply and demand forces determine allocation

and prices of factors of production3. Mixed Economy

Mixed control and ownership of resources, pricedetermination

Almost all economies are mixed

C o m m a n ds y s t e m

F r e e - m a r k e ts y s t e m

M i x e ds y s t e m


1. Command economic system Centrally planned system Govt/ state does pricing and production, decisions; owns

and controls all resources; decides resource allocation2. Market Economy

Ownership on resources with the private sector consumer sovereignty makes this system work Markets supply and demand forces determine allocation

and prices of factors of production3. Mixed Economy

Mixed control and ownership of resources, pricedetermination

Almost all economies are mixed

Economic factors affecting Intl Business firms(in doing business abroad)

Business influenced by the global and localeconomy of each firm working abroad

Asian financial crisis and Global crisis: bestexamples

Asian Crisis: Case 2 (Page 48-49), Case 23 pg 293-294, Tips to solvecase questions pg 304-307. Case 38: Fashion Industry in GlobalEconomic crisis, pg 328-329


Business influenced by the global and localeconomy of each firm working abroad

Asian financial crisis and Global crisis: bestexamples

Asian Crisis: Case 2 (Page 48-49), Case 23 pg 293-294, Tips to solvecase questions pg 304-307. Case 38: Fashion Industry in GlobalEconomic crisis, pg 328-329

Economic factors affecting Intl Business firms(in doing business abroad)

Major economic factors:1. Economic growth condition

Measured in GDP Examining the E&T of the foreign countrys economic

performance2. Inflation

Impact of inflation illustrated in case No. 3 (Pizza Hut inBrazil) Pg 50

3. Surplus and deficits External BOP surplus and deficit measured in:

o Current account and Capital account


Major economic factors:1. Economic growth condition

Measured in GDP Examining the E&T of the foreign countrys economic

performance2. Inflation

Impact of inflation illustrated in case No. 3 (Pizza Hut inBrazil) Pg 50

3. Surplus and deficits External BOP surplus and deficit measured in:

o Current account and Capital account
International BusinessBasic Books/ ReadingsInternational Business EnvironmentEconomic EnvironmentImportance of Economic EnvironmentsElements of the Economic EnvironmentWorld Economic Scenario and Trends of DevelopmentVarying Economic SystemsEconomic factors affecting Intl Business firms (in doing business abroad)Economic factors affecting Intl Business firms (in doing business abroad)

Documents

International Business Environment