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Global Business Environment(MKG 305)
Chapter-IIBY: Dr Fayaz Ahmad Lone
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Business Environments are divided into two primary
Categories
External & Internal
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Business Environments
Environments
External
General
Competitive
Internal
Resources
Leadership
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The external environment encompasses all issues, occurrences, trends, etc. that are peripheral to the corporation and beyond the control of the BUSINESS ORGANIZATION.
The internal environment relates to all aspects within the confines of the organization and generally are within the control of the business organization.
Both environments exert significant influence over the formation of a company's strategy and its degree of success.
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Cross-CulturalBusiness
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
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Chapter Objectives
• Describe culture and explain the significance of national culture and subcultures
• Identify the components of culture and describe their impact on international business
• Describe cultural change and explain how companies and culture affect each other
• Explain how the physical environment and technology influence culture
• Describe two frameworks used to classify cultures and explain their practical use
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What is Culture?
Set of values, beliefs, rules, and institutions held by a specific group of people
Cultural literacyDetailed knowledge of a culture that enables a person to function effectively within it
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EthnocentricityBelief that one’s own
ethnic group or culture is superior to
that of others
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Culture Matters:Creating a Global Mindset
CulturalAdaptability
Bridgingthe Gap
FlexibilityIs Key
BuildingGlobal Mentality
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National Culture
Nation states build museums and monuments to preserve the legacies of important events and people
Filmmakingand
Broadcasting
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Subculture
People who share a unique way of life within a larger culture (language, race, lifestyle, attitudes, etc.)
EXAMPLES
Arabs GloballyGoth, Punk, Emo
China’s Dialects
Groups in U.S.
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Discussion Question
Why should business people try to avoid ethnocentricity and develop cultural literacy?
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Answer to Discussion Question
Ethnocentricity distorts one’s views of other cultures and causes them to overlook important human and environmental differences among cultures. Cultural literacy improves the ability of managers to manage employees, develop and market products, and conduct negotiations in local markets.
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Components of Culture
Physicalenvironments
Education
Personalcommunication
Religion
Social structure
Manners &customs
Values &attitudes
Aesthetics
Culture
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Manners and Customs
MannersAppropriate behavior,
speech, and dressing in general
CustomsTraditional ways or behavior in specific
circumstances
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Customs
Gift Giving
Folk
Assalam u alikum
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Discussion Question
Customs differ from _______ in that they define appropriate ways or behaviors in specific situations. a. Values b. Attitudes c. Manners
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Answer to Discussion Question
Customs differ from _______ in that they define appropriate ways or behaviors in specific situations. a. Values b. Attitudes c. Manners
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Social Structure
Social groupTwo or more people who identify and interact
with each other
Social stratificationProcess of ranking people into social layers
Social mobilityEase of moving up or down a culture's "social
ladder"
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World Religions
Christianity
Islam
Hinduism
Buddhism
Confucianism
Judaism
Shinto
Origin ofHuman Values
Origin ofHuman Values
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Economic Systems
Central Planned EconomyMixed EconomyMarket Economy
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What is central Planned Economy?
Centrally planned economies assume that the market does not work in the best interest of the people, and that in order for social and national objectives to be met a central authority needs to make decisions.
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What is Mixed Economy?
The economic system in which both public and private sectors co-exist is known as Mixed Economy. Some factors of production are privately owned and some are owned by Government. There exists freedom of choice of occupation and consumption. Both private and public sectors play key roles in the development of the country.
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Market Economy
A market economy (also called free enterprise economy) is a type of economic system where supply and demand regulate the economy, rather than government intervention.Most economic decisions are made by buyers and sellers, not the government, so there is limited Government intervention.
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Political SystemsDemocraciesTheocracySocialismcommunism
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Democracies
Democracy is a form of government in which all eligible citizens participate equally—either directly or through elected representatives—in the proposal, development, and creation of laws.
In international business, we study it so that to know the political system of the country for doing trade.
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What is TheocracyA system of Government, where commandments of creator are accepted.An Islamic state is a state that has adopted Islam, specifically Sharia, as its foundations for political institutions, or laws, exclusively, and has implemented the Islamic ruling system khilafah (Arabic: خالفة), and is therefore a theocracy.
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Under socialism economic system, all the economic activities of the country are controlled and regulated by the Government in the interest of the public.An economic theory or system in which the means of production, distribution, and exchange are owned by the community collectively, usually through the state. It is characterized by production for use rather than profit.
What is Socialism
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What is Communism
A system of social organization in which all property is owned by the community and each person contributes and receives according to their ability and needs. It is also called Marxism.
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The best system is Islamic System
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Political RiskPolitical risk refers to the complications businesses and governments may face as a result of what are commonly referred to as political decisions—or “any political change that alters the expected outcome and value of a given economic action by changing the probability of achieving business objectives.
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Globalization is the increasing economic interdependence of national economies across the world through a rapid increase in cross-border movement of goods, service, technology, and capital.
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Chapter 1 - 32
Globalization Involves Us All
We experience internationaltransactions daily
Imports and exports reacheven remote areas
Technology and e-businesspromote trade
Consumers and companiespull markets closer
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Chapter 1 - 33
International Business
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Chapter 1 - 34
Globalization
Trend toward greater economic, cultural, political and technological interdependence among national institutions and economies
Globalization of markets
Convergence in buyer preferences in markets around the world
Globalization of production
Dispersal of production activities worldwide to minimize costs or maximize quality
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Chapter 1 - 35
Benefits of Globalization
Globalizationof markets
Globalizationof production
• Reduces marketing costs
• New market opportunities
• Levels income stream
• Reduces marketing costs
• New market opportunities
• Levels income stream
• Access lower-cost labor
• Access technical expertise
• Access production inputs
• Access lower-cost labor
• Access technical expertise
• Access production inputs
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Chapter 1 - 36
Challenges to Business
Physicalsecurity
Digitalsecurity
Reputationalrisk
Examine companyvulnerability andcreate a disasterrecovery plan
Guard proprietaryinformation andconfidentialcommunications
Require ethical andlawful behavior fromall employees andbusiness partners
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Chapter 1 - 37
Globalization Drivers I
Regional tradeagreements
GATT(General Agreement on Tarrifs and Trade)
WTO(World Trade Organization)
Remove barriers to trade and investment
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Chapter 1 - 38
Globalization Drivers IITechnological Innovation
Email and video conferencing
Internet, intranets,and extranets
Transportationadvancements
Better coordination and control
Improved communications and management
More efficient, dependable shipping
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Chapter 1 - 39
Globalization Then and Now
Highly mobilelabor market
Fear of jobs moving abroad
Backlash amongthe disaffected
Free-flowing capital and trade
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Chapter 1 - 40
Impact of Globalization on Jobs and Wages
Eliminates jobs in developed nations
Lowers wages in developed nations
Exploits workers in developing nations
Increases wealth and efficiency everywhere
Generates labor market flexibility in developed countries
Advances economies of developing nations
SupportersOpponents
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Chapter 1 - 41
Impact of Globalization on Labor and Environmental Regulations
– Globalization lowers labor standards
– Weakens protection of the environment
– Exploits workers in poor nations
+ Investment raises labor standards
+ Open economies most environment friendly
+ Companies concerned about the environmental Laws
Opponents Supporters