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 Components of International Business Environment
The business environment can be divided into two ways.

(A) Internal Environment

(B) External Environment

(I) Micro Environment

(II) Macro Environment

Internal Environment: It includes all those factors which are with in the business itself and influence business. These are usually under the control of business. For example, objectives, policies, organisation structure, management, production method, etc.

External Environment: It includes all those factors which are outside the business and business has no control over these factors. It is divided into two parts:

(I) The Micro Environment of Business

The micro environment consists of the forces in the company’s immediate environment that affects the performance of the company. The micro factors may affect different firms in a particular industry in different ways.

It consists of following elements:

(i) Customers: Customers have direct impact on the micro environment of business. The desires, preferences, attitudes and expectations of customers keep on changing and it impose a constant challenge to business.

(ii) Suppliers: Suppliers are the most important force in the task environment of a businessFor the smooth functioning of the business it is very important to have a reliable source of supply. Multiple source of supply helps to reduce the risk of unavailability or uncertainty of supply of raw material.

(iii) Labour: In big organisations, where hundreds of workers are employed, the labour force is organized in the form of trade unions. The trade unions pressurise the management for the fulfillment of their demands like higher wages, better working conditions and bonus etc.

(iv) Competitors: Competitors play a vital role in running the business enterprise. Business has to adjust its business activities according to the behaviour of the competitors. It is very necessary to know about the competitor’s strategies, policies and product features for other companies to secure its market share.

(v) Regulating Agencies: The regulators include government departments and other organisations which monitor the activities of business. There are certain departments like income tax department, quality control department and other revenue departments and professional bodies like ICAI which prescribes certain standards and practices for the business in their respective areas.

Question for Components of International Business Environment - Global Environment, Business Environment
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Which of the following factors is considered a part of the micro environment in international business?
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(II) The Macro Environment of Business

The macro environment of business includes activities which are uncontrollable and need proper attention on the part of a business enterprise. It refers to the general and overall environment within which an environment entity operates.

It consists of following elements:

(i) Economic Environment: It refers to all those economic factors which have a bearing on the functioning of a business unit. The major macro-economic factors which have considerable influence on business are:

· Economic Systems

· Economic Planning

· Economic Policies

(a) Budgets

(b) Industrial Regulations

(c) Business Laws

(d) Import and Export Regulations, etc.

· Economic Growth

· Interest Rates

· Economic Reforms

· Currency Exchange Rates

(ii) Political and Government Environment: Political environment constitutes all the factors related to government affairs such as the type of government in power, the ideology of ruling party, attitude of government towards different groups of societies. The businessman has to make changes in his organisation according to the changing factor of political environment. For example, in 1977 when Janata Party came in power they made the policy of sending back all the foreign companies. As a result, the Coca Cola and IBM companies had to close their businesses and leave the country.

(iii) Socio-Cultural Environment: Socio-Cultural environment include all the social factors like people’s attitude, education system, their beliefs and values, culture, religion, ethical issues and social responsibility of business etc. All these factors have a great impact on activities of business enterprise. For instance, the chocolate boy ad of AXE Effect was banned by Information and Broadcasting Ministry on grounds of being offensive and vulgar.

(iv) Technological Environment: It consists of new products, new techniques and new approaches to production, new methods and new equipments. In order to survive in today’s competitive world, a business has to adopt technological changes from time to time. If they will not do so, they will be out of market. For instance, in late 1990’s Pagers were very popular among the people, but then came the mobile phone revolution. The companies those were manufacturing pagers at that time, they have to shift towards mobile phones.

(v) Demographic Environment: It includes:

(a) Size, growth rate, age composition, sex etc. of population

(b) Family size

(c) Educational level

(d) Economic stratification of population, etc.

All these demographic factors are relevant to business. These factors affect the demand for goods and services. For example, increase in the demand of baby products shows the increase in the birth rate in certain area.

Question for Components of International Business Environment - Global Environment, Business Environment
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Which element of the macro environment includes factors such as government policies and regulations?
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(vi) International Environment: Due to liberalisation, globalisation, now the Indian companies are competing with the foreign companies. It has been observed that major international developments have their impact on domestic market. Recent example is increase in fuel prices in Indian market because of rise in prices of crude oil at international level. In the same way, because of US recession, Indian stock market also faced downfall.

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FAQs on Components of International Business Environment - Global Environment, Business Environment - Business Environment - B Com

1. What is the global environment in international business?
Ans. The global environment in international business refers to the factors and conditions prevailing in the world economy that affect the business operations of multinational corporations. These factors include political, economic, social, technological, and legal aspects that shape the global business environment.
2. How does the business environment affect international business?
Ans. The business environment comprises the internal factors that influence the business operations of a company, such as its organizational structure, culture, and resources. In international business, the business environment also includes the external factors, such as the host country's political stability, economic conditions, cultural and social norms, and legal framework. These factors affect the company's performance and success in the international market.
3. What are the challenges faced by multinational corporations in the international business environment?
Ans. Multinational corporations face several challenges in the international business environment, such as cultural differences, language barriers, political instability, economic volatility, legal complexities, and ethical issues. These challenges can hinder the company's growth and profitability and require effective management strategies to overcome them.
4. How does technology impact international business?
Ans. Technology has a significant impact on international business, as it enables companies to expand their reach, improve efficiency, and reduce costs. Technology has made it easier for companies to communicate and collaborate with their global partners, customers, and suppliers. It has also facilitated the development of new products and services and enhanced the quality and speed of business operations.
5. What is the role of international trade agreements in the global business environment?
Ans. International trade agreements are essential in the global business environment as they promote free trade, reduce trade barriers, and facilitate cross-border transactions. These agreements provide a framework for international business and establish rules and regulations for trade that benefit all participating countries. They also help to resolve disputes and promote economic growth and development.
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