Plekhanov Russian University of Economic Lecture 1 International

Plekhanov Russian University of Economic Lecture 1. International Business Environment: Components & Analysis Ekaterina V. Trochova Department of International Business & Customs Head of Department, Associate Professor, Ph. D Elena A. Rozhanskaia Department of International Business & Customs Assistant Professor, Ph. D.

Objectives § Discuss the meaning of international business § Explain the importance of understanding international business § Identify and describe objectives and advantages of international business activities § Describe the major elements of business environment and their types

International Business Environment: Components & Analysis

International Business Environment: Components & Analysis What is INTERNATIONAL BUSINESS?

International Business Environment: Components & Analysis International business means carrying on business activities beyond national boundaries or business transactions between parties from more than one country These activities normally include transactions of economic resources Goods Capital Services etc.

International Business Environment: Components & Analysis Objectives of International Business Sales Expansion Resources Acquisition Competitive Risk Minimization Diversification

International Business Environment: Components & Analysis Advantages of International Business Increased Welfare Wider Market Reduced Effects of Business Cycles Reduced Risks Large Scale Economies Opportunity for Domestic Business

International Business Environment: Components & Analysis Why is international business different from domestic one? Varying environment in host countries, often unfamiliar to the company

International Business Environment: Components & Analysis A company adopts various modes for its entry into foreign markets. It depends on four (at least) factors: § Conformity with the corporate objectives § Corporate capability § Host country environment § Perceived risk

International Business Environment: Components & Analysis Economic Political Business Environment Legal Human-Cultural

International Business Environment: Components & Analysis Analyzing Tools + Legal factors = SLEPT + Environmental factors = PESTEL or PESTLE + Industry analysis = PESTELI + Education factors = STEEPLE + Demographic factors = STEEPLED

International Business Environment: Components & Analysis Common Law Legal System Civil Law Religious Law Legal Environment Legal Norms International Domestic

International Business Environment: Components & Analysis Democracy Political Environment Forms of Political System - Parliamentary - Presidential Totalitarianism - Secular - Theocratic

International Business Environment: Components & Analysis Political Environment: Issues to Consider § How stable is the political environment? § Will government policy influence laws that regulate or tax business? § What is the government’s position on marketing ethics? § What is the government’s policy on the economy? § Does the government have a view on culture and religion? § Is the government involved in trading agreements such as EU, NAFTA, ASEAN, or others?

International Business Environment: Components & Analysis Market Forms of Economic System Planned Mixed Economic Environment Economic Indicators - Level of Income - Inflation - Availability of Resources - Infrastructure etc.

International Business Environment: Components & Analysis Economic and Technological Environment: Points to Consider § Interest rates § The level of inflation § Employment level per capita. § Long-term prospects for the Gross Domestic Product (GDP) per capita and so on • Does technology allow products and services to be made cheaper and of a better quality? • Do the technologies offer consumers and businesses more innovative products and services such as Internet banking, new generation mobile phones, etc? • How is distribution changed by new technologies? • Does technology offer companies a new way to communicate with consumers?

International Business Environment: Components & Analysis Language Religion Human-Cultural Environment Elements of Culture Education Attitudes and Values Customs Social Institutions

International Business Environment: Components & Analysis Sociocultural Environment: Factors to Consider § What is the dominant religion? § What are attitudes to foreign products and services? § What are the roles of men and women within society? § How long are the population living? Are the older generations wealthy? § Do the population have a strong/weak opinion on green issues?

International Business Environment: Components & Analysis Campbell Soup Company leaved the Russian market four years after its entry: Why?

International Business Environment: Components & Analysis THE IMPACT OF INTERNATIONAL BUSINESS ON YOUR EVERYDAY LIFE 1. Make a list of items that you use regularly (not more than 5) 2. Determine the companies – producers of these items 3. After compiling the list find answers to the following questions for each item: ü In which country is the head office of the manufacturer? ü What percentage of the company’s annual sales accounts for sales in the domestic market and in the markets of other countries? ü Determine the place of manufacturing the product. ü Does your list include products with components that were released by both domestic and foreign companies?

International Business Environment: Components & Analysis Course Readings § Griffin R. W. , Pustay M. International Business (7 th Edition). – Prentice Hall, 2012. – 600 p. § Daniels John, Radebaugh Lee, Sullivan Daniel. International Business: Environments and Operations (14 th Edition). – Prentice Hall, 2012. – 888 p. § Hill Ch. W. L. International Business: Competing in the Global Marketplace. 9 th ed. – NY: Mc. Graw-Hill/Irwin, 2012. – 752 p.

Thank you for your attention!