International Business Environment In Poor Countries
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Published: Thu, 11 May 2017
In the context of a business firm, environment can be defined as various external actors and forces that surround the firm and influence its decisions and operations. International Business environment includes the social, political, economic, regulatory, tax, cultural, legal, and technological environments.
Poorest countries are those countries which are extremely poor & less economically developed country, with huge external liabilities. The GDP of poorest 48 nations is less than the wealth of the world’s three richest people combined. The world’s poorest countries are at a competitive disadvantage in every sector of their economies. They have little to export. They have no capital; their land is of poor quality; they often have too many people given available work opportunities; and they are poorly educated. Free trade is not in interest of these countries. Women education is discouraged. They find opportunities only in unorganized sectors where least skills required. Hence, they have less available opportunities and living conditions are worst. Women contribution to country’s economy remains negligible. Women and poor are oppressed by both religious and bad Governance of Governments. Economic Disparity is high in these countries. Buying power of the individuals evaluates country’s status. These are some problems of poorest countries while doing international trade:
Relying on only one or two primary goods as their main exports.
They cannot control the price they get for these goods.
The price they pay for manufactured goods increases all the time.
As the value of their exports changes so much long term planning is impossible.
Increasing the amount of the primary good they produce would cause the world price to fall.
Dependence upon neighbor countries for their primary needs.
Heavy debts of international blocks like world banks.
Economic growth rate is low.
Poor countries have no. of barriers for their national growth. Surrounding conditions make them more dependable upon other countries for their common needs. I have tried to adjudge the characteristics and circumstances of these poor countries. That gives me idea why the free trade is not possible in these poor countries. International investors analyze these geographical areas through which they adjudge their future profits and market share. Economic growth pattern and other indexes show that economic and social development in these area are low. But research reports said that due to less business profitability in these areas visible that’s why MNCs are not willing to expand their business in these areas. I have tried to analyze every aspect and factors of international business that is required for international business expansion in these areas. I try to narrate also the difficulties of investors as well as these poor countries. This research is helpful in understanding the concepts while making decisions of international business promotion and expansion.
Characteristics of Poor Countries
Low capital: Industries are not developed. Less investors are available. Source of income of citizens of poor countries are limited. They have less manufacturing units.
Resources of country are underdeveloped or no developed: Roads, Electricity, transports, etc. are not developed. That’s why setting up organization or doing investment is risky factors.
Literacy Rate is low: Less people are educated thus we found less skilled labors. But at present stage both skilled and unskilled labor are necessary for using good technology and production.
Raw Materials Unavailability: Raw materials are less available or unavailable. It may be gathered from distance sources that incur high expenses.
Poor infrastructure for production of product & services: Due to undeveloped mode of every sector , Production infrastructure is not suitable.
Markets are not available: Market for products are not available. People want low cost product because they have less sources of income.
Customers are less available for good products: High quality products are costly. They are not beared by customers because their purchasing power is low.
More dependent families: Less people earn and more people want to consume. It means more people are dependent upon income generating members.
Lands are not suitable for agriculture: Lands are mostly barren due to poor irrigation system, mismanagement of water, unavailability of modern agriculture methods application and tools, etc. People depend upon still upon ancient irrigation system.
Cheap labors are available: Labors are easily available at low costs but they are mostly unskilled. So they are useless in technical works or in high rated projects.
Poor Technological Development: Due to poor infrastructure of R&D and unskilled employees, technological innovations may not possible and even tuff task.
Natural Disaster are bane: In the time of flood, earthquake, Tsunami, Draught, etc. People are becoming helpless. Because they have not good rescue system and disaster control systems available. Industries are also feeling insecure due to heavy losses.
Poor Health sector: well in case of infection or viral desease they have no good health services available so the infection of deseases are become high. Death rates increase. E.g. African countries are badly affected with such cases. Most of the time they depend upon UNO, WHO or other countries for help.
Dirty Political structure & corruption rate is high: Mostly in these countries, Rich persons dominate the politics. They exploit poor for their own interests. For every work bribes are required
Cross cultural Barriers: Due to different language and culture, Business adaptability in these countries are tuff. Less persons know international languages.
Economic development is low: It leads nation growth is low. GDP and per capita income are also low. Also the value of currency in these countries is low.
Judiciary or Legal procedures are so complex: Industries feel so uncomfortable due to lengthy legal procedures and sanctions.
Export are less : Due to low production exports are less found but in other hand imports are more because they are more depend upon neighbor countries for their needs.
Free trade is not possible: Custom duties, taxes and other charges are main source of income for country. They import products from different countries and impose heavy duties upon them. That’s why free trade is not possible.
Complex international trade procedures: These countries make complex their procedures and documentation to charge more duties from foreign countries. That is not favorable for liberalization and globalization for international trade.
Product costs are high: Due to heavy custom duties, unavailability of raw materials and poor resources condition like transport add extra expense. Thus final price of product become so high. That is not affordable for majority of customers.
HDI is low and poverty index is high: On that case. We found that Human development index of these countries are so low and poverty index are high.
Poor countries have no. of barriers for their national growth. Surrounding conditions make them more dependable upon other countries for their common needs. I have tried to adjudge through the characteristics and circumstances of these poor countries. Their conditions are more critical in the time of natural disasters or epidemics. All the time they are depending upon international blocks like UNO, WHO, World Bank, etc. These countries national debts are so high and value of currency is so low. It has been gained that free trade is not possible in these countries due to these countries interest and legal difficulties generated by these countries for their own profits. These circumstances make their life more critical because people are unable to fulfill their needs due to high prices of products. That’s why we found death rates are high in these countries and living conditions of people are so low standard. That’s why high price products like cars, lifts, etc. are less sold in these countries.
Poor countries are still live in the old periods we can say due to their problems. Their ways and concepts are old for business. They have no choices of free trade that’s why they impose heavy duties upon imports of products. But their impacts are vice-versa upon these countries people. Because that make more inability of persons while purchasing products due to high prices. Human resources have been exploited or treated unfairly by giving low compensations and facilities. It is the matter of discontentment among employees. Peoples have been exploited by bureaucrats, politicians and wealthy persons of these countries. Criime rate is high and legal system is not much accountable. That leads to insecurity of firms, warehouses, offices and other properties and goods of organization. Outdated products are still in emerging stages in these countries. So this is a good factor in case of import in these countries.
Due to less market presence and less customers availabiity for their products and services. Due to Poor resources, low infrastructure, not favorable business environment and high custom duties & complexities of procedures in these countries, foreign firms and investors are not willing to expand their trade and doing investment in these countries
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