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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

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

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.

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.

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.

Political SystemsDemocraciesTheocracySocialismcommunism

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.

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.

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

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

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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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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International Business

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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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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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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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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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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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Globalization Then and Now

Highly mobilelabor market

Fear of jobs moving abroad

Backlash amongthe disaffected

Free-flowing capital and trade

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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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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