2. 2
Components of International Business Environment
Internal
Environment
Micro Environment
Domestic Environment
Foreign Environment
Global Environment
3. 3
External Environment
Micro Environment Macro Environment
Micro Environment: Actors in the firm’s
immediate environment.
Influence the firm’s decisions & operations
directly.
Do not affect all the firms in an industry in
the same way.
Macro environment: Wider societal forces,
which affect the firm and also the players in
the firm’s micro environment.
4. 4
Micro Environment
Actors in the firm’s immediate environment.
Suppliers
Marketing
Intermediaries
Financial
Institutions
Competitors
General Public
Customers
6. 6
Macro Environment
Forces operate at home (domestic) country,
host (foreign) country and global levels.
Comprises of economic and non-economic
environmental forces.
Economic environment of business both
national and global is of strategic
importance.
1. A firm is an economic unit.
2. Business activities are economic activities.
3. Business decision making are economic in
nature.
7. 7
Major Critical Economic Forces
Economic indicators (GNI, GNI PPP, GDP,
GNI Per Capita, GDP Growth Rate, Structure
of the Economy, etc)
Economic system
Economic plans and policies- Monetary,
fiscal, trade and commerce.
Economic problems and prospects
8. 8
Country GNI
($ billions)
GNI, (PPP)
($ billions)
India
Pakistan
Bangladesh
Sri Lanka
Nepal
Bhutan
Maldives
Afghanistan
1,553.9
182.8
104.7
46.7
14.5
1.4
1.8
14.3
4,159.7 (81.6%)
484.4 (9.5%)
269.7 (5.3%)
104.6 (2.1%)
36.2 (0.7%)
3.6 (0.07%)
2.6 (0.05%)
36.5 (0.7%)
SAARC Total 1920.1(3.07%) 5,097.3 (6.68 %)
World 62,525.2 76,295.6 (100.0%)
Source: Compiled from the Little Data Book, 2012, WB.
GNI and GNI, PPP for SAARC Nations, 2010
9. 9
SAARC nations together represents around
7% of the world GNI, PPP.
Among the eight nations, India
concentrates 82% of GNI, PPP of the total
SAARC nations, which is the highest.
Four countries: Nepal, Bhutan, Afghanistan
and Maldives have less than 1% of gross
income (PPP) to total SAARC GNI, PPP.
Among the SAARC nations, while India
represents the biggest in size and
economic activities, the case of Maldives is
the smallest.
10. 10
Country GNI
($ billions)
GNI, (PPP)
($ billions)
Singapore
Philippines
Malaysia
Brunei
Vietnam
Cambodia
Lao PDR
Myanmar
Thailand
Indonesia
203.4
192.2
220.4
12.5
101.1
10.6
6.5
-
286.6
599.2
283.3 (9.3%)
370.7 (12.1%)
403.9 (13.2%)
19.7 (0.6%)
267.0 (8.7%)
29.4 (1.0%)
15.3 (0.5%)
93.5 (3.1%)
565.8(18.5%)
1008.2 (33.0%)
ASEAN Total 1,632.5
(2.65%)
3,056.8(4.0%)
World 62,525.2 76,295.6(100.0%)
Source: Compiled from the Little Data Book, 2012, WB.
GNI and GNI, PPP for Countries of ASEAN, 2010
11. 11
ASEAN total represents 4% of the world
GNI, PPP.
Among the ten countries, the share of
Indonesia to total ASEAN GNI, PPP is
about 33%, which is the highest.
Brunei though is a high income country,
represents less than 1% of its national
income to GNI, PPP of ASEAN.
Among the ASEAN, Lao PDR size of
economic activity is limited and smallest.
Next to Indonesia, Thailand represents
around 19% share of GNI, PPP of ASEAN.
12. 12
Country GDP
($ billions)
GDP Growth
(annual %)
2008 2010
Economy
Type
India
Pakistan
Bangladesh
Sri Lanka
Nepal
Bhutan
Maldives
Afghanistan
1,727
176.9
100.4
49.6
15.7
1,516 (m)
1,908 (m)
17.2
6.1 8.8
2.0 4.1
6.2 6.1
6.0 8.0
5.3 4.6
13.8 7.4
5.2 9.9
2.3 8.2
LMI
LMI
LI
LMI
LI
LMI
UMI
LI
World 63,242 1.7 4.2 -
Note: HI – High Income, UMI – Upper Middle Income, LMI – Lower
Middle Income, LI – Low Income.
Source: Compiled from the Little Data Book, 2012, WB.
GDP and GDP Growth Rates for SAARC Nations, 2010
13. 13
In 2010, all the SAARC nations, except
Pakistan have their economic growth rates
above the rate of growth of the world.
Except Maldives, among the rest SAARC
nations, India has the highest growth rate
in 2010, i.e. 8.8%.
Keeping its size and growth, India is
expected to be one of the leading
economies and hot market in the world in
future.
14. 14
Country GDP
($ billions)
GDP Growth
(annual %)
2008 2010
Economy
Type
Singapore
Philippines
Malaysia
Brunei
Vietnam
Cambodia
Lao PDR
Myanmar
Thailand
Indonesia
209
199.6
238
10.7
106.4
11.2
7,296 (Mill)
-
319
707
1.1 14.5
3.8 7.6
4.6 7.2
0.6 -1.8
6.2 6.8
6.7 6.0
7.5 9.4
12.7 10.4
2.5 7.8
6.1 6.1
HI
LMI
UMI
HI
LMI
LI
LMI
LI
UMI
LMI
World 63,242 1.7 4.2 -
Note: HI – High Income, UMI – Upper Middle Income, LMI – Lower
Middle Income, LI – Low Income.
Source: Compiled from the Little Data Book, 2012, WB.
GDP and GDP Growth Rates for Countries of ASEAN, 2010
15. 15
Among the ASEAN, in 2010, the growth rate
of Singapore was the highest - 14.5%.
Despite Cambodia’s limited market size, its
annual growth (6.0%) represents future
expansion of market and markets for the
products of international business.
All the economies of ASEAN, except Brunei
had their economic growth rates above the
world economic growth rate in 2010.
16. 16
Country GNI
Per Capita ($)
GNI Per Capita,
PPP ($)
Economy
Type
India
Pakistan
Bangladesh
Sri Lanka
Nepal
Bhutan
Maldives
Afghanistan
1,270
1,050
700
2,240
490
1,870
5,750
410
3,400
2,790
1,810
5,010
1,210
4,990
8,110
1,060
LMI
LMI
LI
LMI
LI
LMI
UMI
LI
World 9,069 11,066 -
Note: HI – High Income, UMI – Upper Middle Income, LMI – Lower
Middle Income, LI – Low Income.
Source: Compiled from the Little Data Book, 2012, WB.
GNI Per Capita and GNI PC, PPP for SAARC Nations, 2010
17. 17
Among SAARC nations, Afghanistan shows
the lowest GNI PC and PPP.
Three SAARC nations, Afghanistan,
Bangladesh and Nepal are the low income
countries, as their GNI PC is $ 1,005 or less,
as per 2010.
While large economy like India is a lower
middle income country, India has a fairly
wealthy middle class around 400 million
people which shows its attractiveness.
18. 18
Country GNI
Per Capita ($)
GNI Per Capita
PPP ($)
Economy
Type
Singapore
Philippines
Malaysia
Brunei
Vietnam
Cambodia
Lao PDR
Myanmar
Thailand
Indonesia
40,070
2,060
7,760
31,800
1,160
750
1,050
-
4,150
2,500
55,790
3,980
14,220
50,180
3,070
2,080
2,460
1,950
8,190
4,200
HI
LMI
UMI
HI
LMI
LI
LMI
LI
UMI
LMI
World 9,069 11,066 -
Note: HI – High Income, UMI – Upper Middle Income, LMI – Lower
Middle Income, LI – Low Income.
Source: Compiled from the Little Data Book, 2012, WB.
GNI Per Capita and GNI PC, PPP for Countries of ASEAN,
2010
19. 19
Among ten nations, Cambodia and
Myanmar are the low income countries.
Singapore and Brunei are the high income
countries as their GNI PC is above $12,276
as per 2010 classification of countries.
Malaysia (upper middle income) now
presents one of the attractive markets in
the region.
Cambodia though a low income and least
developed country (LDC) provides an
attractive destination for foreign investors
due to its economic growth.
20. 20
As estimated (Goldman, 2003) China
economy will overtake Japan by 2015 and
US by 2041.
India’s economy would be larger than
France in 2020 and Japan 2032.
By 2050, China will be the largest economy
in the world followed by US and India.
21. 21
Domestic Environment
All the uncontrollable forces
originating in the home country that
surrounds and influence the life and
development of the firm.
23. 23
Domestic firms venture into
international business
Lack of domestic demand and/or
Intense Competition
Export Promotion Measures and/or
Economic Incentives
24. 24
Foreign Environment
Geographical factors
Economic conditions
Socio-Cultural environment
Political environment
Technological environment
Legal forces
Uncontrollable forces originating outside the
home country that surround and influence the
firm.
25. 25
Global Environment
World Economic Conditions
International Financial Systems
Working of WTO, IMF, WB..
International Agreements & Treaties
Regional Economic Groupings
European Union (EU)
North American Free Trade Association (NAFTA)
Association of South East Asian Nations ( ASEAN)
Association of South Asian Regional Cooperation (SAARC)
Exerts influence over domestic as well as
foreign Countries.
29. 29
Environmental forces and
Decisions of a Firm
What should be the scale of production?
Should the firm employ labor intensive or
capital intensive techniques?
How to finance firm's foreign operations?
How much to repatriate?
Should the firm hire local persons or employ
foreign nationals?
What should be their compensation
package?
