Microenvironment refers to any individual(s) or factors that have a direct and short term impact on the business organisation. Combining sections 2.1 & 2.2, we have: Macroenvironment refers to any factor that has an indirect and long term impact on a business organization. This would be equivalent to the General Environment, i.e. the PESTEL factors.

1. Chapter 2: International Business Environment

2.  Identify the main participants and activities of business
 Comprehend why and how IB differs from domestic business

3. 2.0 BUSINESS ENVIRONMENT
i. Internal and External Environments
ii. Microenvironment and Macro
environment

4. 2.1 INTERNAL ENVIRONMENT
This refers to any party or factor within the business
organisation. such as:
i) Employees - performing tasks to help achieve
organisational objectives.
ii) Management - planning, implementing and
evaluating activities.
iii) Shareholders (owners) - individual(s) that
provide the capital to start the business.
iv) Organisational Culture - is the way in which
work is carried out in the organisation.

5. 2.2 EXTERNAL ENVIRONMENT
i. Task environment
ii. General environment

6. i. TASK ENVIRONMENT
 Customers
 Suppliers
 Distributors
 Competitors
 Publics
 Financial institutions
 Local governments

7. II. GENERAL ENVIRONMENT
PESTEL factors:
• Political
• Economical
• Socio- Cultural
• Technological
• Environmental
• Legal

8. 2.3 MICROENVIRONMENT AND MACROENVIRONMENT
i. Microenvironment refers to any individual(s) or factors that have a direct
and short term impact on the business organisation. Combining sections
2.1 & 2.2, we have:
ii. Macroenvironment refers to any factor that has an indirect and long term
impact on a business organization. This would be equivalent to the
Environment, i.e. the PESTEL factors.
Microenvironment = Internal Environment + Task Environment

9. GENERAL ENVIRONMENT
Political
Economical
Socio- Cultural
Technological
Environment
Legal
TASK
ENVIRONMENT
Customers
Suppliers
Distributors
Competitors
Public
Local governments
Financial Institutions
Employees
Management
Shareholders
Organisational
Culture
INTERNAL ENVIRONMENT
MICROENVIRONMENT
MACROENVIRONMENT

10. COURSEWORK
[70%] [30%]
 5% QUIZ 1 – TOPIC 1 & 2 GLOBALISATION, TRADE THEORY
AND BUSINESS ENVIRONMENT (PESTLE AND
INTERNAL/EXTERNAL ENVIRONMENTAL FACTORS)
 5% QUIZ 2 – TOPIC 3, 4 & 5 ETHICAL THEORIES, BUSINESS
ETHICS AND CULTURAL DIMENSIONS
 20% INDIVIDUAL ASSIGNMENT - POSTER ON BUSINESS
ETHICS AND INTERNATIONAL BUSINESS (CANVA PROJECT)
 30% GROUP ASSIGNMENT - WRITE-UP LOCAL AND
INTERNATIONAL BUSINESS AND STRATEGIC ENTRY MODES
 10% INDIVIDUAL PRESENTATION VIDEOCLIPS BASED ON
THE PREPARED INDIVIDUAL ASSIGNMENT POSTERS
(CANVA PROJECT)

11. LET’S RECAP – WHAT DID YOU LEARN FROM LAST LECTURE
Q: WHAT IS THE DIFFERENCE BETWEEN TASK ENVIRONMENT
AND GENERAL ENVIRONMENT?

13. ATTENDANCE TAKING TIME
This Photo by Unknown Author is licensed under CC BY-ND

14. Countries are different
The range of problems confronted by a
mgr. in an IB is wider than those
confronted by a mgr. in a domestic
business
Mgrs in IB must find ways to work within
the limits imposed by govts’ intervention
in int. trade & investment system
Int. transactions involve converting money
into different currencies
Managing an IB is different from managing a domestic
business due to:

15. External forces refer to uncontrollable forces over which
management has no direct control, although it can exert an
influence
Internal forces refers to controllable forces that management
administers to adapt to changes in the uncontrollable forces
“Environment” refers to all the forces surrounding and
influencing the life and development of the firm

16.  Competitive: kinds and numbers of competitors, their locations & their activities
 Distributive: national & international agencies available for distributing goods and services
 Socioeconomic: characteristics & distribution of the human population
 Economic: Variables (such as Gross National Product (GNP), unit labour cost & personal
consumption expenditure) that influence a firm’s ability to do business
 Financial: variables such as interest rates, inflation rates & taxation
 Legal: the many foreign & domestic laws governing how international firms must operate
 Political: elements of nations’ political climates such as nationalism, forms of government
& international organisations
 Sociocultural: elements of culture (eg. attitudes, beliefs & opinions) important to
international managers
 Physical: elements of nature such as topography, climate & natural resources
 Labour: composition, skills & attitudes of labour
 Technological: the technical skills & equipment that affect how resources are converted to
products
These forces
will be the
focus in this
course
Recall:
External forces
=
Uncontrollable
forces

17. Internal
Forces
Recall:
Internal
forces =
controllable
forces
FO
P
Capital
Raw
materials
(Land)
Labour
Activities of
the
organisation
Personnel
(HRM)
Finance
Production
Marketin
g
• Mgmt must administer these forces to adapt to
changes in the uncontrollable (i.e. foreign) forces
• Example: The expansion of EU in 2007 (foreign
force) affected all the controllable forces of firms
worldwide that had business with the 27 EU
member-nations.
• Changes that were caused by the expansion of EU
– eg. foreign subsidiaries relocated operations to
other EU nations to exploit the lower wages there;
new companies set up business within EU
member-nations to supply this giant free trade
area (increase competition)

19. International
Business
Domestic
Environment
International
Environment
Foreign
Environment
Domestic
Environment
Domestic Business

20.  Environment and forces that managers are most familiar with
 Domestic forces can also affect foreign operations (international
business)
 Example: If home country is suffering from shortage of foreign
currency -> govt. may place restrictions on overseas investment to
reduce its outflow -> managers of MNCs find that they cannot
expand overseas facilities as they would want to
 Example: Labour union strike at home-based plants -> strikers
might contact other foreign unions (from which the company has
transactions with) to join in their pledge & not to supply what the
struck plants could not
All the uncontrollable forces in the home country that surround
and influence the firm’s life and development

21.  The forces in the foreign environment are the same as those in the domestic environment,
only that they occur outside the firm’s home country
 However, they operate differently for several reasons:
- Forces have different values
Eg: American export embargo on shipments of goods from Cuba. To get around this trade
barrier, the Cuban govt ordered from the American firm’s Argentine subsidiary. American HQ
ordered the subsidiary not to fulfil the order because of the embargo, but Argentine govt
ordered the subsidiary to do so – reason: Argentine companies did not answer to the demand of
a foreign govt.
- Forces can be difficult to assess
Eg: Mexico had a law prohibiting foreigners from owning a majority interest in a Mexican
company. However, a clause permitted exceptions “if the investment contributes to the welfare
of the nation”
- Forces are interrelated
Although forces in domestic mkt are also interrelated, but at international level, the
interrelated forces are on a much larger scale & impacts
All the uncontrollable forces originating outside the home
country that surround and influence the firm

22. The importance of understanding
the foreign external environment:
• Some ‘news’ might be just myths
or false
• They must be weighed against
domestic opportunities and risks
• Understanding social science
disciplines and how they affect all
business functions helps assure
success abroad
• Identify external forces which
management has control over and
the ones which are beyond the
control of the management
Factors Effects on decision making
Geographic • Where different G&S can be best produced
• Operating risks
Politics • Determines where and how international
business can take place
Legal • Each country has its own laws regulating
businesses
Behavioural • Norms influence how companies should operate
there
Economic • Explains country differences in costs, currency
values & market size
Competitive Companies’ competitive situations may differ by:
• Their rankings among countries
• The competitors they face by country
• The resources they can commit internationally

23. Interaction between domestic & foreign environmental forces or
between sets of foreign environmental forces
Interactions
between domestic
& foreign
environmental
forces
Interactions
between foreign
environmental
forces of two
countries when
affiliate in one
country does
business with
customers in
another
agrees
with
Definition of IB?
Business that involves
the crossing of
national borders

24. Consider the following scenarios:
Does a sales manager of Nokia’s
China operations work in
international environment?
The answer
depends on where
the products are
being sold to
If products manufactured
by Nokia’s China are only
sold within China
If products manufactured
by Nokia’s China are sold to
Thailand (through export)
The mgr does NOT work
in the international
environment
The mgr does work in
the international
environment
Domestic
forces
Foreign
forces
Concerns on:
Domestic
forces
Concerns on:

26. CLASS
ACTIVITY
1. DO A MIND MAP ON ONE OF THE FORCES BELOW [15 MNS]
 ROOM 1/GROUP 1 – POLITICAL FORCES
 ROOM 2/ GROUP 2 – ECONOMIC FORCES
 ROOM 3 / GROUP 3 – SOCIOCULTURAL FORCES
 ROOM 4 / GROUP 4 – TECHNOLOGICAL FORCES
 ROOM 5 / GROUP 5 – LEGAL FORCES
 ROOM 6 / GROUP 6 0 ENVIRONMENTAL FORCES
 2. ALL GROUP MEMBERS (CAN TAKE TURNS) TO PRESENT YOUR
GROUP WORK TO THE CLASS-[5 MNS]