International Business Environment

world-wide Business Environment1. transnational backing environmentBook0)Business mean to busy in an activity, which atomic number 18 related to money almost backing adopt 50% chances of profit and losses.(Morrison, j. 2002)Business is ope targetd in e very(prenominal) part of the world. As the railway line grow. It is looking for invigorated opportunities across the border. International line of merchandise is the term use for the operation and objective of the composition that guard birth interest in other countries. For illustration Tesco, Ford, General Motor, McDonald, Disney, so many other companies. These companies have key interest to standardise their point of intersection for usual acceptance. The world(prenominal) business becomes more complex. Tie between the different societies and organisations. (Meldrum, D.H) as businesses inter into new market it chances of 50% losses increases. Due to different in frugal, political, cultural structure, policies, geo graphy and currencies. These reckon decreases profit ratio of worldwide investment. thither are no specific criteria to measure such(prenominal) in-stability. Every investor employ their own method and measure. Uncertain condition of expanse make easy for international business to design their own stability criteria.(Considering lay on the line in international business) Business has no idea well-nigh the local risk. Its difficult to operate and wipe taboo in such condition where the cultivation, Social, Economic, Political, and legal structure are not stable. In such cause the international business need to take all(prenominal) the measurement either its Commercial, Culture, Social. Political or legal instability before enter into new market or realm.2. International business(McCulloch, C.1999)International business is started as with the formation of first national borders. Greek started such activity before the Christ fol scurvy by the British in 1600 when they establis h the eastmost India Company throughout the Asian as trading firm. With passage of snip international business is started all over the world especially in linked State. (Czinkota et al., 1999) The international business brings countries together. It makes the world as global village. It transfers the ideas, training, service, and capital across the grounds borders. This results in best used of human capital increases employee opportunity. Equal growth of wealth, cost stability, availabilities of goods and services to apiece and every one. It bring new environment of friend transmit, development, stability, prosperity, innovation and technology in the world. Due to the international business same kind of product are used throughout the world. For example ford, Toyota, Honda, and McDonald, KFC, burger king, and so many other things which are use worldwide.International business brings globalisation in the production. For example dingle com baffleer it different part are produ ced in different countries, assemble these parts in another and sell it in yet other countries.3. interpretation of international business(Book4) The commercial activities crossed national borders. It involved the international movement of good, capital, services, employees and technology importing and exporting cross-border transactions in intellectual position (pa disco biscuitts, trademarks, know-how, copyright materials, etc) via licensing franchising and management contracts.Book3 ) the transaction done by individual or organisation cross the countries. To satisfied the objective by mean of export, import and alien direct investment. And it carried out in wholly owned, joint venture, licensing, franchising and management contracts4. Problems of international businessBook4) International business experiences some difficulties when they operate in other countries.International businesses have to deal under the local rules and regulation. Have to use international languages.Di fficult to get information active foreign countries.Deal in foreign currency. The flip rate may be varied.When deal in other countries their culture and social value must be taken in account.The risk factor is high in foreign countries include political, commercial, and financial.Communication and control of international business is difficult.Difficult to absorb the demand of the international market.Most of time is waste in research and survey of the local market trends.5. Meaning of stabilityJ1) Stability is very important for the human life. Without it there will be no culture no organisation and no society. (dictionary) According to oxfords dictionary. Resistance to change, deterioration or displacement. Stability is a ship in the sea which maintain its upright position either the condition is.Stability maintain for long period of time and it resist to all the changes that chance in the surrounding. According to Aldous Huxleys the stability is way of life. And life Moto is c ommunity, identity and stability. if we come to the countries stability it has great impact on all walks of life. J4) without the stability the countrified well be in depression. And their well be no social security, health care, education, defence, infrastructure, law and protective services, low GDP, GNI, AND PPP (Purchasing, Power, and Parity ), price fluctuation, un-stable fill in rate, high rate of assesses, no leadership, no culture values, no innovation, no technology, financial position of the countries will be week, and have no capital market. such condition is not abundant for the international business. Business development and prosperity are depending on the local and national conditions.bbok1) for example both South and northwards Korea. South Korea living standard is 10 times better then northward Korea. GDP of 46.4m compare to 22 m GDP of North Korea. This hulky different is only because of stability of the both countries. North Korea tries to attract the forei gn investment but poor infrastructure, un-reliable power supply, poor transportation and unstable soldiers condition are the big barriers for the foreign investor. On the other hand South Korea has stable political, economical, legal environment, and stable infrastructure. Which cause of attraction for the international business and South Korea main stream business are Daewoo, Hyundai, and LG. These are the internationals brands.6. Instability of the countriesJ9)Different business made their own criteria to measure country in-stability but mostly the factor involved in country in-stability is closely related to each other.Political instabilityEconomical instabilityCultural instabilityLegal instability financial instabilityLocation and neighbourhood6.1 Political instabilityBook3)Political stability play an important role in the stability of the country. Due to political stability international business are attracted to invest in the country, despite their location, weather, and nat ural resources availability. Boo4) politics is define asthe direction and administration of state governing body andthe control of core social family birthBbok5)However, political instability is a great risk for the international business. Usually these are three risks.Ownership risk, in some causes the willpower of the international business is shifted to the host country without any compensation to international business through confiscation or expropriation.Operation risk, international business faces such maculation. Due to the security, change of law and regimen, terrorism, arm conflict, civil war, tax regulation, and so on.Transfer risk, transfer of money from one country to another, in which the government rules are involved, high exchange rate, and tax on transfer of money.J5)Political instability get collectable to continuous change in government, and law, nationalism corruption in the government officer. Example is Pakistan where the government change on a regular basis. this create security risk, inflation and high corruption.Terrorism, internal is external war (arm conflict), kidnapping, example Afghanistan, Pakistan Iraq, and Serra. Jouranl2 according to Gupta (1990) he use ten elements to explain the political in-stabilities.Number of political demonstrationsNumber of riots Number of death (assassinations)Armed attack eventsPolitical executionsNumber of death from political violence point of successful coups dtatOccurrence of un-successful coups dtatNumber of strikes andNature of government democracy or dictatorship.Bo5)Political fluctuation has bad impact on international business. In such condition international business before inter into new political environment need to get all information. request to make such compendium.Government of the country in the political party hand (democracy). Or it power in the hands of one person (dictatorship).The countries have deliver market or the government control it. Is government encouraging th e international business to invest in local market to achieve the economic goals?Who are the customers and competitors of the international business private or public sector?Is Policy making of the country is according to law?Is the change of government the economic policies well change or remains same?B4)Political in-stability affect all kind of business even it home or foreign. To make decision about the future investment in foreign country information about the country political condition are collected from the following sources.Personal enforce to country get information from local business. Bank, stock market and international credit control agencies. And from local news.Get information from the country embassy. And from locals who have expert knowledge about the country point.International chamber of commerce is one of the best sources of information.From the minister of the home country. Get export opinion from the local tribe who are specialist in a particular field.6.2 Economic instabilityBook1)Countries are considered stable if they have high national income. Price stability, high capacity of production of products and services, high employment rates with technological innovation and high investment. And the indicator of the economic growth high rate of GDP affects the high standard of living, heath and capital investment. These factors are very important for international business to invest in such economy. Government and economics are interrelated with each other. If government is stable economy is stable by itself.jour6) Political instability affects the GDP growth of country. It is called politicalization of economic growth. Economic growth is not stirred by the nature of the government (democracy or dictatorship). But it is affected by it policy either its fiscal or monitory. Develop economy have the following features.High education rate, public health care services, and social benefit are available to each and every one in the country. s aving has high defence clay. General public and country assets are secure, no arm conflict and terrorism. For example Pakistan has security problem and internal terrorism due which economy is going down.Developed infrastructure mean of communication, transportation, power supply and the availability of banking and financial structure.( journal 7) For example power supply situation is very bad in Pakistan it have regular break down and not even fulfil the local requirement. Plus the transportation in Pakistan is not victorian regulated.Country has appropriate industrial and agriculture development.Developed monitory policy, for example country has price stability, equal diffusion of money and money exchange rate is remaining stable. For example Pakistan money exchange rate changes regularly. This increases fluctuation in economy.Economy has high government spending and low tax rates.Jouranl8) economy is realised only when exchange rate not remain stable in international market and government have high tax rates and low spending which increases fluctuation in economy. And inflation is increases in the country. And economic situation is considering in-stable. Book 6) to increase trade between countries economic bloc are establish. For example Europe, North America, South America and Asia pacific areas. Countries in economic bloc have high rate of GNP then the non member countries.Book 7)international business have prier information about the economic situation and make such analysis before investing in the country.Population of the country, power of consumption, income level, balance distribution of money, industrialisation and agricultural activities.GNP rate, rate of growth, GNI rate, price stability, rate of inflation, money exchange rate, government taxes and spending.Infrastructure transportation, communication, mean of power supply, banking and availability of financial intuition.sizing of economy and economic system centrally planned economy, mixed econ omy or market economy.Number and size of competing unit. Balance distribution of business or firm have market monopoly.Life style, shopping pattern, urbanisation, heath and social services, housing environment, law and defence and education level.Sources for international business to get information about local economy is World Bank, IMF, Government publish data, and international economic services.6.3 Cultural instabilityBook6) culture give the bounce be defined in different ways(Meeds) Share patterns of behaviours(Hofstede) Collective mental programming Culture is different from nation to nation, because of language, religion, ethic, and behaviours. These have direct effect on life style, education, economic, organisation and political structure, law and regulation. Culture separates the world into different nation and state. Most of conflicts within country barber are arise due to culture difference. This divides country into two parts. For example Pakistan and India separate fr om each other only due to culture difference.Language is different from country to country. In most countries people used more than one language. Which rise issue of culture different in the same nation. For example Pakistan has more than one language. Which rise race issue in same country. And create economic, political, law and order, unequal distribution of wealth crises in the country. Affect the stability of the country.Book2) From the last one decade spiritual race is rise in the world. Divide the world into two religions Islam and Christianity. And create terrorist and religious extremist. For example Telenor Denmark mobile company operated in Pakistan last lots business and offices across the country during period of 2005 and 2006 due to religious riots and strikes to protest blasphemous cartoon against Islam was publish in one of Denmark news paper.Country with culture extremist is considered unstable. And most of investor shows overlook of confidence in investing such co untries. Following analysis international business need to done before invested in such countries.How strong Culture County have. Number of Culture conflict in the country. And their effect one local and international business.Business has information of Religious extremism activity in country. And number of religious strikes and riots.Information about local social, labour and market culture.Number of language in country and racism activity in country. and law and order situation of country.6.4 Legal instabilityBook india)Law varies from countries to county. Country law is according to their political and economic situation. And design by Government and society. Law deal all aspects of business either it is contract, employment, tax regulation, property protection, company law, competition, health and safety, environment, human right, product liability, trade mark, patents, nationalization, currency exchange, and foreign currency. Court or judicial system exercises such law in coun try. In most countries court system is weak, and law change regularly with change in government. Corruptions in system, conflict are remittal outside courts. Delay in court decision. Judicial system is not destitute in throw under the supervision of the government. For example Pakistan where judicial system is unstable and government supervise court. This created lots of security problems in country. And it have considerable unfavourable situation for foreign investor.J9)In some causes country law put barrier in way of foreign investor. Country law put restriction on transfer of funds. This creates transfer risk for international business. High tax rates on foreign investment. Restrict export and import policy. Analyses of international business before invest in a country.Business has information about common, civil, public and criminal law. And have idea about country law for foreign investment.How local law protect the intellectual property like trademark, patents, alteration a nd copyright.How the court or judicial system work, court system in country is strong or weak, law have their own freedom or it work under the supervision of government.Business has information about law of data protection and personal details.How health and safety, human right regulation work at the place of work.International business can get such information from sources World bank report, human right organisation, UNO, country financial report, news, and country legal report.6.5 financial instabilityJ10) Financial instability slows down development process in the countries. Stock market of the country goes down. Trade decreases and done with considerable high prices. Financial institution is in deficit. Taxes and interest rate are increases. Current account of the country goes in deficit. External borrowings are increases. Federal relief of the country decreases. Remittances are goes down. Fiscal position of the country becomes weak. Country cut down the social security and ot her health care benefit of general public. Cash flow in country slow down. Prices go high and selling decreases. Government spending in country goes down. Country exports are decreases. Unemployment increases, criminal offense rate are high, capital loss and bankruptcies are the result of the financial instability. In such condition there are rear recovery solutions.journal11) Financial instability in country rise due to following reasonsUn-proper economic policies monetary, fiscal and exchange rate.Poor risk management of financial intuitions.Weakness of the government intuitions.Wrong measurement of the international financial market.J12 In this situation their are many risk for international business to invest in such country. Where exchange rate is not fixing and fluctuated regularly. It is a real risk for investor. Under and over valuation of the money caused loss to investor. For example currency rate of Pakistan is regularly fluctuated although country foreign policies is ve ry relax to attract the foreign investor but due to financial instability international business are reluctant to invest in Pakistan economy.J13)Sovereign is another risk for international investor. When host country is not able to meet add obligation. Country is run out of foreign exchange due to financial instability.6.6 Location and neighbourhood(Jour14)Location and neighbourhood play an important role on the stability of the country. Stability in country and good relationship with their neighbourhood are favourable condition for international business. Countries with same culture, value, ethic and believes, establish a economic bloc where neighbour country share free trade, no restriction of immigration, and they enjoy the same currency. And remove all barriers from trade and they enjoy smooth business with each other. For example the European countries they have free trade agreement. And have one common currency. This brings stability in countries and economic progress as well . If business invest in one of country. Business can cover the market of it neighbouring countries as well. For example Nissan and Toyota establish plant in UK and it covers the whole Europe market.Journal15) On other hand countries in area where situation is not stable. It has effect on other countries. For example Chechnya was in state of war due to Chechen war whole reign was in changeful condition. It war effect economic and political instability in neighbour countries as well.Similarly Pakistan border are near to Afghanistan and India. Pakistan political and domestic relationship with India is not good and both have many dispute. This creates instability in area. On other part of Pakistan have Afghanistan border. Afghanistan is suffering with terrorist activity in the area. such(prenominal) terrorist activity are now inter inside of Pakistan area. As the distance increases from the investor country it increases in risk of control and communication problem. It cause delay in bu siness operation. Some causes business not gives quick response to economic and political changes in the area. Due distanced of management control from the host country.7. Table 1Instability impact by investment typesDirect investment short term financial short term loan long term loanInstabilityprivate sectorprivate sectorto governmentto governmentEconomic High secondary first base ModeratePolitical High Low Moderate HighCulture High Low Low LowLegal Moderate High High HighFinancial High High High HighLocation High Moderate Low ModerateTable show the impact of instability on type of investment.Journal 98. List of unstable countries of the worldVenezuelaPakistanColombiaIndonesiaEcuadorNigeriaIvory coastNorth KoreaJournal 169. Conclusion and recommendationThe process of location of foreign operation in a new country must be carried out carefully. Firm which aim to invest in foreign country need to make analysis of capital development, economic, political, culture, and legal stabili ty not to make analysis on the risk involved in country. Almost of countries have risk in past. the investment of international firm bring changes in the situation. And country becomes economically stable. The country with risk has no competitor in the area. And with inter of international business it make positive impact. Create more employment, which increases consumption power of people. International business have high rate of profit. As the international business making contribution toward the economy of the country the government of host country give international business some relaxation in law and ensure him all kind of security as business need to do their operation.In order to minimise risk in foreign operation international business need to inter into new county as trader (exporter-importer) or most commonly inter as joint venture with same size local company.