International Business and Trade Lesson 2 PDF

INTERNATIONAL BUSINESS AND TRADE LESSON 2 LEARNING OBJECTIVES Explain the international socio- cultural framework; Assess the role of technological developments; Examine the relevant aspects of the international economic environment; and Discuss the importance of t...

INTERNATIONAL BUSINESS AND TRADE LESSON 2 LEARNING OBJECTIVES Explain the international socio- cultural framework; Assess the role of technological developments; Examine the relevant aspects of the international economic environment; and Discuss the importance of the international political environment. INTERNATIONAL BUSINESS ENVIRONMENT SOCIO-CULTURAL TECHNOLOGICAL ECONOMIC POLITICAL SOCIAL AND CULTURAL ENVIRONMENT SOCIAL FACTORS involve reference groups, family, and social roles and statuses  CULTURE the customs, arts, social institutions, and achievements of aparticular nation, people, or other social group. ELEMENTS OF CULTURE  ATTITUDES AND BELIEF The set of attitudes and beliefs of a culture will influence nearly all aspects of human behavior, providing guidelines and organization to a society and its individuals.  ATTITUDE TOWARDS TIME displayed in behavior regarding punctuality, responses to business communication, responses to deadlines, and the amount of time that is spent waiting in an outer office for an appointment.  ATTITUDE TOWARDS WORK AND LEISURE indicative of their views towards wealth and material gains. These attitudes affect the types, qualities and numbers of individuals who pursue entrepreneurial and management careers as well.  ATTITUDE TOWARDS ACHIEVEMENT with high stratified and hierarchical societies, there is a tendency to avoid personal responsibility and to work according to precise instructions received from supervisors that are followed by the latter  ATTITUDE TOWARDS CHANGE The international manager must understand what aspects of a culture will resist change and how the areas of resistance differ among cultures, how the process of change takes place in different cultures and how long it will take to implement change ATTITUDE TOWARDS JOB The type of job that is considered most desirable or prestigious varies greatly according to different cultures. CULTURAL DIMENSION Because cultural attitudes vary so much among countries, it is harder to find general patterns here than for the economic dimension. Thus, to determine the cultural aspects of markets, we must, in large measure, analyze each society by itself without the benefit of guiding generalizations.  RELIGION a major determinant of the moral and ethical standards that play a large part in the business process  FAMILY SYSTEMS matters as the way in which the sexes attract each other bear both on products sold and advertising methods, and they are subject to a host of local codes.  EDUCATIONAL SYSTEMS marketing factors are the literacy rate and the general level of education MARKETING IN CROSS- CULTURAL CONTEXT Culture is adaptive, and marketing strategies based on the values of society must also be adaptive. As culture evolves, marketers may associate product or brand benefits with new values, or they may have to change the product if that valueis no longergratifying in society. TECHNOLOGICAL ENVIRONMENT  TECHNOLOGICAL ENVIRONMENT Given the rapid pace of technological change, it is vital that firms carefully study different elements in the technological segment. The marketers need to identify the speed with which substitute technologies are likely to emerge and the timing of any major technological changes.  ECONOMIC ENVIRONMENT  ECONOMIC SYSTEM There are three types of economic systems: capitalist, socialist, and mixed. This classification is based on the dominant method of resource allocation: market allocation, command or central plan allocation, and mixed allocation, respectively.  MARKET ALLOCATION relies on consumers to allocate resources. Consumers “write” the economic plan by deciding what will be produced by whom.  COMMAND ALLOCATION the state has broad powers to serve the public interest. These include deciding which products to make and how to make them.  MIXED ALLOCATION In amarket economy, the command allocation sector is the proportion of Gross Domestic Product (GDP).  THE INTERNATIONAL ECONOMIC SYSTEM The principal forces have been the development of economic blocs like the European Union (EU) and then the “economic pillars”– the World Bank, the International Monetary Fund (IMF) and the evolution of the World Trade Organization fromthe original General Agreement on Tariffs and Trade (GATT).  EUREPEAN UNION aim to ensure the free movement of people, goods, services and capital within the internal market; enact legislation injustice and home affairs; and maintain common policies on trade, agriculture, fisheries and regional development.  WORLD BANK The World Bank Group is one of the world’s largest sources of funding and knowledge for developing countries. Its five institutions share a commitment to reducing poverty, increasing shared prosperity, and promoting sustainable development.  IMF monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world while periodically depending on the World Bank for its resources.  WORLD TRADE ORGANIZATION operates a global system of trade rules, it acts as a forum for negotiating trade agreements, it settles trade disputes between its members, and it supports the needs of developing countries.  GENERAL AGREEMENT ON TARIFFS AND TRADE creating a credible and reliable system of international trade rules; ensuring fair and equitable treatment of all participants (principle of non-discrimination); stimulating economic activity through guaranteed policy bindings; and promoting trade and development through progressive liberalization.  INCOME AND PURCHASING POWER PARITY AROUND THE GLOBE When a company charts a plan for global market expansion, it often finds that, for most products, income is the single most valuable economic variable.  INFLATION the pervasive and sustained rise in the aggregate level of prices measured by an index of the cost of various goods and services. It results when demand grows faster than supply.  UNEMPLOYMENT The unemployment rate is the number of unemployed workers divided by the total civilian labor force, which includes both the unemployed and those with jobs.  DEBT The sum of government’s financial obligations, measures the state’s borrowing from its population, from foreign organizations, from foreign governments, and from international institutions.  INCOME DISTRIBUTION GNI, even weighted by the size of the population, can misestimate the relative wealth of a nation’s citizens. There is a strong relationship between skewed income distributions and the split between those who live in urban settings versus those who live in rural areas.  POVERTY the state of having little or no money, few or no material possessions, and little or no resources to enjoy a reasonable standard of life.  BALANCE OF PAYMENTS officially known as the statement of International Transactions, records a country’s international transactions that take place between companies, governments, or individuals. Managers use the BOP as a comprehensive indicator of a country’s economic stability.  ECONOMIC ENVIRONMENT POLITICAL SYSTEMS In order to appraise the political Aaron Loeb environment of a country, the knowledge of the form of government of that country is essential. Basically, the government can be classified into two categories – parliamentary (open) or absolutist (closed). POLITICAL RISK political risks include imposition of new controls (such as trade restrictions, exchange limitations or monetary controls), and war, revolution or insurrection. CONFISCATION the process of a government’s taking ownership of a property without compensation. CONFISCATION the process of a government’s taking ownership of a property without compensation. EXPROPRIATION Often, a company whose property is being expropriated agrees to sell its operations – not by choice but rather because of some explicit or implied coercion. NATIONALIZATION Involves government ownership and it is the government that operates the business being taken over. DOMESTICATION foreign companies relinquish control and ownership either completely or partially to the nationals. Social Unrest Attitudes of Nationals Policies of the Host Government SOCIAL UNREST caused by such underlying conditions as economic hardship, internal dissension and insurgency, and ideological, religious, racial, and cultural differences. ATTITUDES OF NATIONALS An assessment of the political climate is not complete without an investigation of the attitudes of the citizens and government of the host country. The nationals’ attitude toward foreign enterprises and citizens can be quite inhospitable. POLICIES OF THE HOST GOVERNMENT Government policy formulation can affect business operations either internally or externally. The effect is internal when the policy regulates the firm’s operations within the home country. The effect is external when the policy regulates the firm’s activities in another country. INTERNATIONAL BUSINESS ENVIRONMENT SOCIO-CULTURAL TECHNOLOGICAL ECONOMIC POLITICAL INTERNATIONAL BUSINESS AND TRADE