International Business Environment Lecture Support PDF

International Business Environment professor Radu Mușetescu, PhD [email protected] 1  How will you get your mark at this discipline? Exam = written = multiple choice questions + open answer questions = 50% Seminar = 50% In addition, p...

International Business Environment professor Radu Mușetescu, PhD [email protected] 1  How will you get your mark at this discipline? Exam = written = multiple choice questions + open answer questions = 50% Seminar = 50% In addition, points due to your participation at the lectures 2 Uncontacted tribe (Amazon) Singapore: almost 50% of the population is foreign, 70% of the workforce → in Qatar, 95% of the workforce is foreign  “Ease of doing business” (ranking by World Bank, 2021).. 1. New Zeeland; 53. Morocco 2. Singapore 54. Cyprus 3. Hong Kong; 55. Romania 4. Denmark; 56. Kenya 5. Korea, Rep. 57. Kosovo 6. United States; … 7. Georgia; 187. Yemen 8. United Kingdom 188. Venezuela 9. Norway; 189. Eritrea 10. Sweden; 190. Somalia 5  Going beyond borders allows comparisons: foreign versus domestic = which is the real value of things? exploit opportunities: either through import or export of ideas, technologies, goods and services; correct distortions: eliminate domestic errors and misallocations; early warning: for global / regional risks / phenomena. EX. speculatores of the Roman army develop ambidexterity: better manage complex situations / systems → complexity characterizes the international environment better manage uncertainty: global phenomena have higher amplitudes that builds resilience 6  Going beyond borders: personal allows role-playing: learning foreign languages; develop risk-taking and entrepreneurship build self-awareness: who am I? In XIXth century British society, taking a trip around the world was expected from young persons (“Around the World in 80 Days” by Jules Verne) 7  How to learn swimming? The same approach to building international expertise tacit knowledge = cannot be formally worded “thrown in the lake” versus “swimming pool” lessons 8  Why do we study „international business environment”? Answer: John Sloman (2008) „the core economics that you will need as a business student + business related topics not typically covered in an introductory economics textbook” „thinking like an economist” „a toolkit of concepts that can be used in a whole host of different contexts” „In this book we will be looking at the economic environment in which firms operate and at how economics can help in the process of business decision taking” = a body of knowledge from economics that decision makers in business may use 9  Questions: Does a businessman need to learn economic theory? Does he need a PhD (Philosophiae Doctor) in economics? Can someone be a successfull businessman without paying attention to economic theory? 10  theoretical statement = establishes an universally valid relationship of causality between concepts (ex. „price increase for a product will lead, ceteris paribus, to a decrease in demand”) = abstract, universal, etc.; historical proposition = presents an event from the past which occured in a particular setting of time and space (ex. „in 2012, Apple Inc. Launched Iphone 5 on the international market”) = does not pretend to explain why, it just transmits a piece of information; entrepreneurial judgment = an opinion regarding a possible future development (ex. „next year, compact car sales will grow”) = about future, speculative, implies risk 11  Succesful entrepreneurship = the ability of entrepreneurs to best serve certain consumption desires = entrepreneurs always allocate resources in the present in order to get a future profit = they take over the „economics risk” → there is no sure receipt for getting a profit = there is no „theory” of successful entrepreneurship (a theory of „how to make money”) → there are however some „laws / principles” of the economic system that the business decision makers have to pay attention = if they choose to ignore them, the consequences can be massive (leading to business failure) = ex. inflation, business cycle, 12  Business versus politics the core end is private the core ends are political profit; objectives; market transactions are implies the use of the state always mutually agreed; mechanisms (which is, in the price is a result of the end, based on coercion supply and demand; – e.g. taxation); profit is a sign that there is no price, it is producers satisfy difficult to assess the consumer needs; satisfaction of failure to satisfy consumer “consumers” (that is, needs lead to bankruptcy ; citizens); There is always an failures are “socialized”; alternative! There is no alternative! 13  Definitions of „international business environment” = „all the forces that influence any aspect of the activity of an organization” [Ian Brooks, 2004] → including too many dimensions will be impossible = however, it is an iimage of the complexity of any business environment → the need for more focus 14  Environment versus market a vast variety of actors there are two types of (political, social, economic, actors: buyers and sellers; cultural, religious and so interaction is through on) markets contracts; Interaction is through we assume that their goal formal and informal is profit maximization; agreements; the knowledge is somehow the goals of the actors are unified through the incredible diverse; rewarding of the most their knowledge is competing and the incredible diverse; penalizing of the least high amount of competitive (in terms of externalities (cannot be welfare) internalized); externalities can be social order and rule- internalized through making is endogenous; contract clauses; 15 Limited number of dimensions of the study of „business environment” PEST = political, economic, social and technologic PESTLE (STEEPLE) = political, economic, socio-cultural, technologic, legal and ethical (also the natural environment) 16 Initially, the concept of environment was used in the legal dimensions („legal environment” = the core body of laws with an impact on doing business). Later, the awarenes that the formal / nominal laws are not enough for encompassing aspects with a big impact on business: national culture, business practices, customs, organizational culture, etc. 17  Some clarifications: „business environment” - an objective reality, independent, that can be measured → a significant number of quantitative analysis and hierarchies / comparizons at the international level („World Economic Forum”, „Heritage Foundation”, so on) - a subiective opinion, different from persons / organizations 18  We wil have explore two fundamental approaches: business perspective → theory of the firm and the theory of the international firm = how firms perceive the business environment government perspective → the theory of public regulation → there is a competition not only between firms but also between governments in attracting economic activity (such as Foreign Direct Investments) → governments attempt to „create” a business environment which is friendly towards firms and companies in order to reach some public objectives 19  There is a common parallel / comparison between the „business environment” and the „natural environment/ecosystem” complex relationships between an entity and its „environment”: supply chain (in business) versus food chain (in nature) the paradigm of „competition” = the best fit to its environment will survive the theory of „evolution” = the challenge of „change” and „adaptation” = only those who adapt will be able to survive no single entity can „unbalance” the system under normal circumstances („the law of large numbers”) the „alien” = either dissappears or becomes hugely successful („invasive species”) 20 Any metaphor has its limits: social actors (for-profit business firms, non-governmental organizations and not- for-profit entities, governments, cartels, so on) have the ability to take the initiative to change the environment → social actors are not only „reactive” but also „constructive” = activities such as „Public Relations”, „lobby” and „advocacy” human beings always surprise themselves and the others by the ability to „arbitrate” the rules 21