Exploring the External Environment of International Business: Legal, Political, Economic, , Slides of International Management

Download Exploring the External Environment of International Business: Legal, Political, Economic, and more Slides International Management in PDF only on Docsity!

THE ENVIRONMENT OF IB

Domestic and International Business

• Similarities- Objectives and Means
• Objectives - Profit Motive
• Means - The functional areas of Business (Production, Marketing, HRM processes)
• Differences- External Environment, Scope of Operations, and Measurement of performance

Legal Systems and Managerial Implications.

• Common Law System, e.g... U.K..., U.S.A...
• Civil Law System, (Codified Law), e.g... France,

Germany.

• Theocratic Law, e.g... many of the Islamic Nations.
• Impact on contracts, Health and Safety Standards,

HR practices, Taxes, Pricing, etc......

• Issue of Extraterritoriality

Political Systems

• Means of Integration in pluralistic society
• The democratic/totalitarian continuum
• Impact on management issues such as FDI, nationalization etc......
• Present day fragmentation of political entities and global business
• Impact of geo-politics on MNCs

Globalization and Localization

• Impact of environmental forces
• Forces for Globalization and Localization
• Regionalization and MNCs

Globalization Forces

• Need for Economies of Scale
• Cost of Factors of Production
• Snowball effect of globalization, inter-industry impact (Auto and Tire Industry)
• Changes in geopolitical systems, movement towards democracy and market systems.

Localization Forces

• Differences in level of industrialization, political systems, history and national culture (Power distance, Uncertainty Avoidance, Individualism, and Masculinity)
• Government and Political Objectives of Host Countries
• Fear that MNCs are not only vehicles of development but also of elitist distinctions, and corrupting society (Chile)

Localization forces cont.

• Differences in market structures
• High Cost of Globalization
• New technology that allows for flexible design

Impact of MNCs on Host Country

• B= (m-m1) + (x-x1) + (c-c1) B = Balance of payment effects m = import displacement m1 = import stimulus x= export stimulus x1 = export reduction c= capital inflow other than import and export payment c1 = capital outflow other than import and export payment

Impact of MNCs on Host Country

• MNCs objectives are Primarily financial
  • Profit
  • ROI
  • Market share
• Host Country’s government want

Social cost/benefit

Political return

Industrial policy “fit”