Economic Environment Of Business Game Theory Commerce Essay

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"International Business" is the most preferable and essential phenomena in the modern world. Majority of the people know that 'International Business' is necessary for the prosperity of the world. No one can prosper without performing the business. Except business we cannot think a single moment in the modern world. We know that no country is self-sufficient with their resources. So, what can they do? If they want to be sufficiency they must perform business. And, what type of business can they perform? In this question we may suggest that, they can perform "International Business" which means "Performing business across national boundaries". As a result, by performing "International Business" they become familiar with one another as well as fill up their country with necessary resources.

An international business has many options for doing business, it includes,

Exporting goods and services.

Giving license to produce goods in the host country.

Starting a joint venture with a company.

Opening a branch for producing & distributing goods in the host country.

Providing managerial services to companies in the host country.

2. Evaluation of International Business:

International Business has a rich history starting with barter system being replaced by mercantilism in the 15th and 16th centuries. In the 15th & 16th century Europeans made important discoveries in their exploration of the World Ocean. Began cross Atlantic travel to the "New World of the Americas.17th &18th colonization of land movement of people, goods, and ideas.19th the development of new forms of transportation, steamship & railroads and telecommunications. 20th century, road vehicles and Airlines made transportation even faster, the advent of electronic communications, most notably mobile phones and the Internet, connected billions of people in new ways leading into the 21st century.

3. Elements and Drivers of International Business:

A. Globalization of Markets: It refers to the merging of national markets into one huge global marketplace. Nowselling internationally is easier due to falling barriers to cross-border trade. A companydoesn't have to be the size of these multinational giants to facilitate and benefit from theglobalization of markets. It is important to offer a standard product to the worldwide. Butvery significant differences still exist between national markets like consumer tastes,preferences, legal regulations, cultural systems.These differences require that marketing strategies in order to match the conditions in acountry. To illustrate, Wal-Mart may still need to vary their product from countrydepending on local tastes and preferences.

B. Globalization of Production: It refers to the sourcing of goods and services from locations around the world to takeadvantage of national differences in the cost and quality of factors of production. Theidea is to compete more effectively offering a product with good quality and low cost.For example, Nike is considerated one of the leading marketers of athletic shoes andapparel on the world. The company has some overseas factories where has achieved asuper production with low cost. Unfortunately Nike has been a target of protest andpersistent accusations that its products are made in sweatshops with poor workingconditions. The company has signaled a commitment to improving working conditions,but in spite of the fact, the attacks continue.

C. Falling Barriers to Trade and Investment: The falling of barriers to international trade enables firms to view the world as their market. The lowering of barrier to trade and investments also allows firms to baseproduction at the optimal location for that activity. Thus, a firm might design a product inone country, produce a component parts in two other countries, assemble the product inanother country and then export the finished product around the world. The lowering of trade barriers has facilitated the globalization of production. The evidence also suggeststhat foreign direct investment is playing an increasing role in the global economy.

D. Technological Innovation: Technological changes have achieved advances in communication, informationprocessing, and transportation technology, including the Internet and the World WideWeb (www). The most important innovation has been development in themicroprocessors after that global communications have been revolutionized bydevelopments in satellite, optical fiber, and wireless technologies, and now the Internetand the www. The rapid growth of the internet and the associated www is the latestexpression of this development. Besides, innovations have occurred in the field of thetransportation technology. The development of commercial jet aircraft has reduced the time needed to get from one location to another. Now New York is closer to Tokyo thanever.

4. The nature and characteristics or features of international business are:

Large scale operations: In international business, all the operations are conducted on a very huge scale. Production and marketing activities are conducted on a large scale. It first sells its goods in the local market. Then the surplus goods are exported.

Integration of economies: International business integrates (combines) the economies of many countries. This is because it uses finance from one country, labour from another country, and infrastructure from another country. It designs the product in one country, produces its parts in many different countries and assembles the product in another country. It sells the product in many countries, i.e. in the international market.

Dominated by developed countries and MNCs: International business is dominated by developed countries and their multinational corporations (MNCs). At present, MNCs from USA, Europe and Japan dominate (fully control) foreign trade. This is because they have large financial and other resources. They also have the best technology and research and development (R & D). They have highly skilled employees and managers because they give very high salaries and other benefits. Therefore, they produce good quality goods and services at low prices. This helps them to capture and dominate the world market.

Benefits to participating countries: International business gives benefits to all participating countries. However, the developed (rich) countries get the maximum benefits. The developing (poor) countries also get benefits. They get foreign capital and technology. They get rapid industrial development. They get more employment opportunities. All this results in economic development of the developing countries. Therefore, developing countries open up their economies through liberal economic policies.

Keen competition: International business has to face keen (too much) competition in the world market. The competition is between unequal partners i.e. developed and developing countries. In this keen competition, developed countries and their MNCs are in a favourable position because they produce superior quality goods and services at very low prices. Developed countries also have many contacts in the world market. So, developing countries find it very difficult to face competition from developed countries.

Special role of science and technology: International business gives a lot of importance to science and technology. Science and Technology (S & T) help the business to have large-scale production. Developed countries use high technologies. Therefore, they dominate global business. International business helps them to transfer such top high-end technologies to the developing countries.

International restrictions: International business faces many restrictions on the inflow and outflow of capital, technology and goods. Many governments do not allow international businesses to enter their countries. They have many trade blocks, tariff barriers, foreign exchange restrictions, etc. All this is harmful to international business.

Sensitive nature: The international business is very sensitive in nature. Any changes in the economic policies, technology, political environment, etc. have a huge impact on it. Therefore, international business must conduct marketing research to find out and study these changes. They must adjust their business activities and adapt accordingly to survive changes.

5. The points below highlight the importance of international business:

Earn foreign exchange: International business exports its goods and services all over the world. This helps to earn valuable foreign exchange. This foreign exchange is used to pay for imports. Foreign exchange helps to make the business more profitable and to strengthen the economy of its country.

Optimum utilization of resources: International business makes optimum utilization of resources. This is because it produces goods on a very large scale for the international market. International business utilizes resources from all over the world. It uses the finance and technology of rich countries and the raw materials and labour of the poor countries.

Achieve its objectives: International business achieves its objectives easily and quickly. The main objective of an international business is to earn high profits. This objective is achieved easily. This it because it uses the best technology. It has the best employees and managers. It produces high-quality goods. It sells these goods all over the world. All this results in high profits for the international business.

To spread business risks: International business spreads its business risk. This is because it does business all over the world. So, a loss in one country can be balanced by a profit in another country. The surplus goods in one country can be exported to another country. The surplus resources can also be transferred to other countries. All this helps to minimize the business risks.

Improve organization's efficiency: International business has very high organization efficiency. This is because without efficiency, they will not be able to face the competition in the international market. So, they use all the modern management techniques to improve their efficiency. They hire the most qualified and experienced employees and managers. These people are trained regularly. They are highly motivated with very high salaries and other benefits such as international transfers, promotions, etc. All this results in high organizational efficiency, i.e. low costs and high returns.

Get benefits from Government: International business brings a lot of foreign exchange for the country. Therefore, it gets many benefits, facilities and concessions from the government. It gets many financial and tax benefits from the government.

Expand and diversify: International business can expand and diversify its activities. This is because it earns very high profits. It also gets financial help from the government.

Increase competitive capacity: International business produces high-quality goods at low cost. It spends a lot of money on advertising all over the world. It uses superior technology, management techniques, marketing techniques, etc. All this makes it more competitive. So, it can fight competition from foreign companies.

6. PESTEL Analysis:

Political Factor:

Economical Factor:

Socio-culture Factor:

Technological Factor:

Environmental Factor:

Legal Factor:

7. Conclusion: International business is a necessity in today's world. The gains for greater awareness and knowledge of international business fare immense for nations, multinational enterprises, trading companies, exporters and even individuals. To go global, the first step would be to understand the international business environment. International business in nothing but extending the areas of activities of business across the boundaries. We have discussed about the importance of understanding international business environment in detail. The concepts of micro environment and macro environment with reference to the political, legal, economical and cultural background are al so discussed. Understanding international business environment requires greater research and information. The fulfillment of this research could happen with greater understanding of the framework for analyzing the international business environment.

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