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Unit 3

international business unit 3 of delhi university b.com hons

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Unit 3

international business unit 3 of delhi university b.com hons

Uploaded by

mkashika10
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Unit III: International Business

Environment
Contents

 Role of Political and Legal Systems in International Business


 Cultural Environment of International Business
 Implications of Economic Environment for International Business
 International Economic Organizations:
WTO-functions, structure and scope;
World Bank and IMF
 The international business environment is a complex network of

economic, political, legal, and cultural forces that shape how

organizations conduct international business. It consists of external and

internal factors that impact a company’s success or failure in different

markets.
Role of Political and Legal Systems in
International Business

 Politics can enormously impact business. For example, regional laws and regulations can

determine how a company operates or whether it benefits from international expansion. For

this reason, aspiring entrepreneurs, business leaders, and strategists in heavily regulated

industries should familiarize themselves with politics’ effects on business.


GOVERNMENT'S ROLE IN BUSINESS

1. Protecting citizens from external harm

2. Protecting citizens from internal threats

3. Protecting property rights

4. Creating means of resolving disputes

 How governments fulfill these responsibilities significantly impacts businesses. For


instance, to protect citizens’ well-being and guarantee a living wage, a government
may impose a base pay requirement.
 Protecting citizens’ property rights also has a major impact on businesses. Those hoping to
create organizations must be assured that they own the rights to their products. For this reason,
governments establish copyright and trademark laws to ensure companies maintain ownership
of their goods or brands.

 International Factors

 Several international political factors influence business when a company expands globally. The
same is true when international companies become competitors by expanding into domestic
territories.

 A country's political nuances is one of the primary challenges of international business. Political
leaders often make decisions that impact labor laws, education, transportation, and taxes,
which, in turn, influence business. Navigating multiple countries’ political challenges isn't easy, so
before expanding your business, it's critical to ensure it’s prepared for globalization.
 Government Value Creation
 Value creation in economics refers to the process of creating goods and services that are
worth more than the resources used to produce them. Governments can create value in
the same way as businesses by purchasing resources—like labor and raw materials—and
using them to produce goods or services of higher value.
 Compared to businesses, governments have greater power. For example, governments
can compel individuals and businesses to pay taxes regardless of whether doing so will
create value.
 Governments often attempt to directly create value by producing public goods, which
have two identifying factors:
1. Non-rivalrous: An individual's consumption of goods doesn't prevent anyone else from
accessing them.
2. Non-excludable: Nobody is prevented from using the good.
 Since public goods are accessible and benefit everyone, businesses don't often produce
them because they don’t generate profit.
 Public goods benefit businesses because they allow other entities to create value by
using them. For example, a government provides education to the public, which
produces skilled individuals businesses can hire.
 International Challenges

 An additional challenge pertaining to international business arises when international


companies enter domestic markets. Consumers who purchase from your business
could turn to international competitors. This can be difficult because your competition
may provide similar products for lower costs.

 One example, in Global Business is a country subsidizing domestic companies.


Additional funding from the government allows companies to produce more at a lower
price for consumers, enabling them to expand to neighboring countries with a
competitive advantage over domestic companies.
 Another challenge of conducting international business is encountering situations
where investments are withdrawn from a country. This can occur when governments
take more power than they're entitled to. In these situations, such countries could
become highly dangerous to conduct business in.

 There may be times, however, when a withdrawal is necessary. Some of the primary
reasons include:

• Corruption: Since capture is a prevalent form of corruption in many countries,


companies need to recognize it when expanding.

• Financial crises: The great recession in Russia between 2008–2009 caused many
companies to withdraw as the country prioritized domestic companies’ well-being
over that of international ones.
THE IMPORTANCE OF UNDERSTANDING GLOBAL
POLITICS
 Understanding global politics is critical to your business's success, regardless of whether you
plan to expand internationally. It's always possible an opportunity to globalize your business will
arise.

 Knowledge of global politics is also important because of international competition from foreign
companies. Yet, global politics’ challenges can produce multiple opportunities. An effective
business strategy takes both globalization and domestic factors into account.

 If you're interested in learning more about how globalization and political activity impact your
business, consider taking an online course, such as Global Business. Doing so can prepare you
for the reality of globalization and the ramifications of political decisions on your business.

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