This document discusses the international business environment and its classification. It covers the key factors in the micro and macro environment that international businesses must consider, including economic, political, technological, social, cultural and legal aspects. Specifically, it outlines how the global economy has become increasingly interdependent and merged. It also describes the economic environment in India before and after 1991, and some of the political, technological and cultural factors firms must navigate internationally.

1. Prof. U. Ramesh Babu
Asst. Prof. of MBA
Annai College of Arts & Science
Kovilacheri, Kumbakonam

2. International Business Environment:
 The international environment is going through a
historic transformation.
 We are moving away from a world in which national
economies were relatively isolated from each other by
different barriers, towards a world in which national
economies, are merging into an interdependent global
economic system.
 The emerging global economy creates opportunities as
well as presents challenges and threats to the business.

3. Classification of International Business environment:
Micro Macro
Suppliers of Inputs
Customers
Internal Environment
External Environment
International Business Environment
Marketing Intermediaries
Competitors
Publics
Economic
Political
Technological
Social - Cultural
Legal

4. Economic Environment
 Economic environment includes the type of economic
system that exists in the economy, the nature and
structure of the economy, the phase of the business
cycle (for example, the conditions of boom or
recession), the fiscal, monetary and financial policies
of the government, foreign trade and foreign
investment policies of the government.
 Before 1991- Mixed economy- Public sector & Limited
Private sector
 After 1991 – Mixed economy – Public sector & Private
sector.

5. Economic Environment
 Per capita income and size of population
 Stages of economic development
 Consumption pattern
 Economic system
 Product demand analysis
 Competition analysis

6. Political Environment
 At the basis of international law and international
relations: sovereignty (Self determination and
independence from external interference, authority
over all nationals)
 International trade limits sovereignty
 Governments can invoke sovereignty and jeopardize
firm’s operations

7. Political Risk
 Risk related to Government trade policies:
 Tariffs
 Exchange – rate controls
 Quotas
 Export / Import license requirements
 Other trade barriers
 Risk related to Government Economic policy:
 Controlling foreign investment through taxes
 Transfer of assets from company to local ownership
 Risk related to labor and action groups
 Risks related to terrorism

8. Technological environment
 New product development
 New organizational styles
 New management techniques
 New marketing techniques
 New production techniques
 Networks, warehouse management, electronic date
interchange(EDI)
 Web/Internet

9. Social - Cultural Environment
 International business means operating in a cross
cultural environment.
 This makes the business more complex because the
business firm must appreciate how different the
foreign culture is from their own and how this
difference is to be reflected in their business strategies.

10. Culture
 Culture is defined as continuously changing totality of
learned and shared meanings, rituals, norms, and
traditions among the members of an organization or
society.

11. Elements of culture
 Language
 Religion
 Cultural values
 Cultural norms