Introduction and Types of International Business Environment (IBE)

The (IBE) International Business Environment is multidimensional including the political risks, cultural
differences, exchange risks, legal & taxation issues. Therefore (IBE) International Business Environment
comprises the political, economic, regulatory, tax, social & cultural, legal, & technological environments.

Political Environment:
The political environment refers to the type of the government, the government relationship with a
business, & the political risk in the country. Doing business internationally, therefore, implies dealing with a
different type of governments, relationships, & levels of risk.
There are many different types of political systems, for example, multi-party democracies, one-party
states, constitutional monarchies, dictatorships (military & non-military). Therefore, in analyzing the
political-legal environment, an organization may broadly consider following aspects:

 The Political system of the business;

 Approaches to the Government towards business i.e. Restrictive or facilitating;
 Facilities & incentives offered by the Government;
 Legal restrictions for instance licensing requirement, reservation to a specific sector like public
sector, private or small-scale sector;
 The Restrictions on importing technical know-how, capital goods & raw materials;
 The Restrictions on exporting products & services;
 Restrictions on pricing & distribution of goods;
 Procedural formalities required in setting the business

Economic Environment:
The economic environment relates to all the factors that contribute to a country’s attractiveness for
foreign businesses. The economic environment can be very different from one nation to another. Countries
are often divided into three main categories: the more developed or industrialized, the less developed or
third world, & the newly industrializing or emerging economies. Within each category, there are major
variations, but overall the more developed countries are the rich countries, the less developed the poor
ones, & the newly industrializing (those moving from poorer to richer). These distinctions are generally
made on a basis of the gross domestic product per capita (GDP/capita). Better education, infrastructure, &
technology, healthcare, & so on are also often associated with higher levels of economic development.
Clearly, the level of economic activity combined with education, infrastructure, & so on, as well as the
degree of government control of the economy, affect virtually all facets of doing business, & a firm needs
to recognize this environment if it is to operate successfully internationally. While analyzing the economic
environment, the organization intending to enter a particular business sector may consider the following
aspects:

 An Economic system to enter the business sector.

 Stage of economic growth & the pace of growth.
 Level of national & per capita income.
 Incidents of taxes, both direct & indirect tax.
 Infrastructure facilities available & the difficulties thereof.
 Availability of raw materials & components & the cost thereof.
 Sources of financial resources & their costs.
 Availability of manpower-managerial, technical & workers available & their salary & wage
structures.

Technological Environment:
The technological environment comprises factors related to the materials & machines used in
manufacturing goods & services. Receptivity of organizations to new technology & adoption of new
technology by consumers influence decisions made in an organization. As firms do not have any control
over the external environment, their success depends on how well they adapt to the external
environment. An important aspect of the international business environment is the level, & acceptance, of
technological innovation in different countries. The last decades of the twentieth century saw major
advances in technology, & this is continuing in the twenty-first century. Technology often is seen as giving
firms a competitive advantage; hence, firms compete for access to the newest in technology, &
international firms transfer technology to be globally competitive. It is easier than ever for even small
businesses to have a global presence thanks to the internet, which greatly grows their exposure, their
market, & their potential customer base. For the economic, political, & cultural reasons, some countries
are more accepting of technological innovations, others less accepting. In analyzing the technological
environment, the organization may consider the following aspects:

 Level of technological development in the country as a whole & specific business sectors.
 The pace of technological changes & technological obsolescence.
 Sources of technology.
 Restrictions & facilities for technology transfer & time taken for absorption of technology.

Cultural Environment:
The cultural environment is one of the critical components of the international business
environment & one of the most difficult to understand. This is because the cultural environment is
essentially unseen. National culture is described as the body of general beliefs & the values that are shared
by the nation. Beliefs & the values are generally seen as formed by the factors such as the history,
language, religion, geographic location, government, & the education; thus firms begin a cultural analysis
by seeking to understand these factors. The most well-known is that developed by Hofstede in1980.
In a nation that is high on individualism one expects individual goals, individual tasks, & individual
reward systems to be effective, whereas the reverse would be the case in a nation that is low on
individualism.

 While analyzing social & cultural factors, the organization may consider the following aspects:

 Approaches to the society towards business in general & in specific areas;

 Influence of social, cultural & religious factors on acceptability of the product;

 Lifestyle of people & the products used for them;

 Level of acceptance of, or resistance to change;

 Values attached to a particular product i.e. the possessive value or the functional value of the
product;

 Demand for the specific products for specific occasions;

 The propensity to consume & to save.

Definitions of Planning
Different authors have given different definitions of planning from time to time. The main definitions of
planning are as follows:

 According to Alford and Beatt,

“Planning is the thinking process, the organized foresight, the vision based on fact and experience
that is required for intelligent action.”
 According to Theo Haimann,
“Planning is deciding in advance what is to be done. When a manager plans, he projects a course of
action for further attempting to achieve a consistent co-ordinate structure of operations aimed at
the desired results.
 According to Billy E. Goetz,
“Planning is fundamentally choosing and a planning problem arises when an alternative course of
action is discovered.”
 According to Koontz and O’ Donnell,
“Planning is an intellectual process, conscious determination of course of action, the basing of
decision on purpose, facts and considered estimates.”
 According to Allen,
“A plan is a trap laid to capture the future.”

TYPES OF PLANNING
Definition of Goals
Goals are defined as the target or purpose that a person imagines or plans to accomplish or to reach or to
achieve in future. They are the driving force that directs a person to make efforts to achieve it.
In our childhood, we decide, what we want to become in the future and strives to achieve it. The goal is
that point which a person envisions himself, after a particular span of time. To achieve these goals, people
usually put a timeline, so that they can reach their goal in the desired time. However, they are long term.

Definition of Objectives
The aim or target which you want to achieve within a limited period is known as the objective. They are the
milestones that help you to reach your goal. That is why they are also termed as subgoals. It is a step to
reach a particular point. Suppose I want to score 90% marks in an exam to get admission in a good
university.
Objectives are easily measured when the target is achieved. For example, A company wants to increase its
sales by 50% in the upcoming six months and then when it hits the target it can be measured through the
sales figure.
Key Differences between Goals and Objectives

The major differences between goals and objectives are provided below:

1. The goals are the broad targets, which can be achieved through continuous actions taken in the
particular direction. Objectives are the aims that you want to achieve in a short span of time.
2. The goals are the result i.e. a primary outcome, but if we talk about objective, it is a stepping stone
for achieving the goal.
3. The goals are based on ideas, whereas objectives are facts based.
4. When it is about the time limit, it is difficult to determine correctly that in how much time it can be
achieved, but objectives can be time bound, in essence, they can be attained in a given period.
5. It is hard to measure goals, i.e. how much distance you have covered till now, while chasing your
goal and how much is left to be achieved. On the other hand, objectives are easy to measure.
6. The goals are abstract, while objectives are concrete.
7. The goals require general actions to attain it. As opposed to objectives, that needs specific actions.

Conclusion

Although there is a difference between goals and objectives, objectives are the steps that you take to

achieve your goal. So, it will not be wrong if we say that objectives are a part of the goal. Goals involve

lifelong ambition; it defines the destination where you want to see yourself after a particular period. The

objectives are short term targets that you set to achieve something, in a fixed period.
Definition: Strategic Management Process
Strategic Management Process is an ongoing process of five steps which defines the way an organization
makes its strategy to achieve its goals.

The process is not a one time implementation but we can think strategic management process as a loop
which keeps on going to achieve the objectives as per the need.
1. Goal Setting:
The vision and goals of the organization are clearly stated. The short-term and long-term goals are defined,
processes to achieve the objectives are identified and current staff is evaluated to choose capable people to
work on the processes.
2. Analysis:
Data relevant to achieve the goals of the organization is gathered, potential internal and external factors that
can affect the sustainable growth of the organization are examined and SWOT analysis is also performed.
3. Strategy Formulation:
Once the analysis is done, the organization moves to the Strategy Formulation stage where the plan to
acquire the required resources is designed, prioritization of the issues facing the business is done and finally
the strategy is formulated accordingly
4. Implementation:
After formulation of the strategy, the employees of the organization are clearly made aware of their roles
and responsibilities. It is ensured that funds would be available all the time. Then the implementation begins.
5. Strategy Evaluation:
In this process, the strategies being implemented are evaluated regularly to check whether they are on track
and are providing the desired results. In case of deviations, the corrective actions are taken.
As shown in the figure, the five stages are not stand-alone and constantly interact with each other in
order to ensure better management of the business.

Strategic Management Techniques

Strategic management uses a company’s mission to develop policies and procedures, which move the
organization forward toward reaching goals. The strategic management techniques help the company plan
and implement projects designed to align with the company mission.

Levels of strategy
A typical business firm should consider three types of strategies, which form a hierarchy as shown in
Figure 1.1

Corporate strategy
Which describes a company’s overall direction towards growth by managing business and product
lines? These include stability, growth and retrenchment.
For example, Coco cola, Inc., has followed the growth strategy by acquisition. It has acquired local
bottling units to emerge as the market leader.
Business strategy
Usually occurs at business unit or product level emphasizing the improvement of competitive
position of a firm’s products or services in an industry or market segment served by that business unit.
Business strategy falls in the in the realm of corporate strategy.
For example, Apple Computers uses a differentiation competitive strategy that emphasizes
innovative product with creative design. In contrast, ANZ Grindlays merged with Standard Chartered Bank
to emerge competitively.

Functional strategy
It is the approach taken by a functional area to achieve corporate and business unit objectives and
strategies by maximizing resource productivity. It is concerned with developing and nurturing a distinctive
competence to provide the firm with a competitive advantage.
For example, Procter and Gamble spends huge amounts on advertising to create customer demand.

SWOT analysis
is a framework used to evaluate a company's competitive position by identifying its strengths,
weaknesses, opportunities and threats. Specifically, SWOT analysis is a foundational assessment model
that measures what an organization can and cannot do, and its potential opportunities and threats.