Lecture Series Iii (ism - 2007)

Global Business Environment •

Globalization is a pervasive and multifaceted phenomena involving trans-national migration and integration of industry, technology, finance, culture, labor and political forces - to name a few.

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An economist might see it as “the emergence of a global market”,

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while a historian might describe it as “an era dominated by global capitalism”.

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A political scientist might interpret this as the “gradual erosion of state sovereignty”. • Similarly a social scientist may explain this as a “convergence of preferences in life style and social values”.

A Three Dimensional Concept • •

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Globalization has been described as a three dimensional concept – a phenomenon, a philosophy and a process. As a phenomenon, the globalization manifests itself in the interconnectedness of human life across the planet and this is not new. However, the degree of awareness and implications are more pronounced today than ever before. For example, awareness of global warming and its causes have made most of us realize that people living anywhere on the planet live in the same environment and they are linked at present and into the future. Globalization as a philosophy is an important subject of consideration for both at the government level and the business community. Governments and corporations intervene successfully in the economy and polity with global vision and consequences. As a process it is ensures capital flows and spread of free market.

Global Business Environment • As global economic growth occurs and businesses expands globally, understanding business environment in all cultures is increasingly important. • Knowledge about the global business environment is important so that the decisions in business matters can be made based on basic knowledge of environmental factors influencing them. Understanding the environment provide ability to act, communicate, and negotiate in a cross-cultural context.

Global Business Environment •

It means Environment in which a Business operates in different sovereign countries as well as at home. The global business environment has therefore two components viz.: internal and external.

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External environment is the environment in different sovereign countries where an entity or organization operates with factors exogenous to the entity’s home environment.

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The business environment in the operating country influences decision making on resource use and capabilities.

Pretension can be embarrassing • A young businessman had just started his own firm. He rented a beautiful office and had it furnished with antiques. Sitting there, he saw a man come into the outer office. Wishing to appear the hot shot, the businessman picked up the phone and started to pretend he had a big deal working. • He threw huge figures around and made giant commitments. Finally he hung up and asked the visitor, "Can I help you?" • The man said, "Yeah, I've come to activate your phone lines."

External Environment • • • • • • • • •

The external environment includes: social, cultural, political, economic, regulatory, tax, legal and technology.

Adaptability & Ability • The success of an organization doing business in another sovereign country depends on how well the entity can adapt to the external environment which in turn depends upon the organization’s ability to develop and adjust internal variables to take advantage of the opportunities offered by the external environment and its ability to control threats posed by the same environment.

KFC - Case •

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KFC – Case (Cont.) •

Discussion Issues:

China Vs. India Case •

Read and discuss the case

Behavioral Patterns • Escon Electronics Ltd. , an electronic company based in Holland, wants to set up subsidiaries in USA and Japan. For this purpose, it planned to recruit people for its new subsidiaries in USA and Japan. • The managing director of the company, Michael Vaugn learned that some societies emphasize individualism, while others favor group performance. Therefore, he wants to know the pros and cons of these behavioral patterns before hiring people for these subsidiaries. • You are Micheal’s advisor and you need to help him understand these behavioral patterns. What would you tell him?

Social Environment •

Businesses operating internationally must understand the social environment of the host country of operation in order to function effectively and efficiently.

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Social structure i.e. whether the society emphasizes: – individual OR group behavior • And – social stratification based on class OR stratification based on caste •

The values and norms of a particular society are influenced to a large extent by this structure.

Cultural Environment •

Knowledge and awareness of language and culture of the host country bodes well for entities operating in another country.

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Economic integration and demographic shifts in many countries changed the characteristics of the workforce, culturally and ethnically. Workforce diversity is growing for MNCs.

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A lack of cultural understanding frequently results in many mistakes, such as being culturally offensive, failing in negotiation and consequently losing profits, unsuccessful business deals, etc.

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Religion, values and attitudes, customs and manners, and education all are parts and parcel of culture.

Characteristics of culture •

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Culture is learned. Has its own history, ideology, traditions, values, lifestyles and languages. These in turn determine how individuals interact with one another. Culture is structured Culture is dynamic Cultural beliefs vary – family dynamics, gender role Culture allows to express creativity Culture is shaped by biological, environmental, physiological and historical components of human existence Provides individuals with implicit and explicit guidelines on how to behave in relation to others and the environment

Classification of Culture •

Culture of a country and its work place are influenced by the following dimensions – (1) Power distance, (2) gender & work role, (3) uncertainty avoidance, (4) individualism Vs. collectivism and long-term orientation.

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Power distance: Social attitude towards physical and intellectual inequities. In societies where there are wide differences among individuals in terms of income and power, the distance is said to be high power distance culture, where high social inequities are prevalent . Arab countries, West Africa, Mexico are examples. Great Britain, Germany and the US are examples of low power distance cultures

Masculinity Vs. Femininity •

Masculinity Vs. Femininity – Relationship between gender and work roles. In many cultures assertiveness and competitiveness are considered male values, whereas solidarity and quality of life are regarded as feminine values. In masculine cultures, gender roles are sharply differentiated. In feminine cultures, the role of men and women are less differentiated. In Japan, women are seen as helpers of men and not considered capable of doing more demanding work. The majority of Japanese firms put women in routine office assistance work despite the Equal Opportunity law (1986).Therefore one might consider Japan as high masculinity culture. The Netherlands on the other hand feminine values are given more importance. People are very interested in quality of life. Flexible work options are allowed depending upon requirement.

Avoidance of Uncertainty •

This refers to the extent to which a society tolerates ambiguity and uncertainty. In high uncertainty avoidance societies like Japan, people do not like taking risk. Employees are given job security and high retirement benefits. Managers encourage strict supervision of work, give clear instructions to employees and all employees adhere to rules and regulations.

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Japanese tend to pay close attention to minute details and discuss them at length which slows down the decision making process. On the other hand cultures with low degree of uncertainty avoidance such as the US, people are ready to take risk and offer low emotional resistance thereby making speedy decisions possible.

Individualism vs. Collectivism •

In individualistic societies, individual interests are given importance rather than the group. In collective societies, the group achievements and efforts are highly valued.

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Japan has a collective society. The US has an individualistic society.

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Countries such as the US, Canada and Britain supposedly are low on the on collectivism and power distance scale. Latin American and Asian countries on the other hand are high on both scales.

Long term orientation •

This refers to a society’s devotion to long-term traditional and forward thinking values. High long-term orientation indicates support for strong work ethics and expectation of long-term rewards. In low long-term orientation societies changes can occur rapidly because society does not reinforce long-term traditional orientation and commitments do not become impediments to change.

Maruti Advertisement •

Maruti Versa advertisement shows how a family consisting of parents, grand parents and travel comfortably in a Versa and thus tries to drive home the message that Versa helps in bonding a family together – a traditional value most Indian families try to adhere to.

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What was the design strategy of this advertisement?

Culture influences consumption patterns of a society • •

The value system, beliefs and perception in particular culture influences the consumption pattern of consumers. Maruti designed this advertisement to make their sales pitch compatible with Indian culture.

Communication in Japanese Business • • •

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In Japan, business cards are called “meishi”. Japanese give and receive meishi with both hands. The card should have details such as the company’s name, address, telephone number and the address of the executive. The cards that are given to the business executives should be printed in the executive’s native language on one side and Japanese on the other. While giving the card, the side printed in the executive’s native language should be on top. In Japan, businessmen are called “sarariman”. After taking the card from the Japanese executive, one should not put it ones pocket or wallet immediately. It is important to examine the card carefully. No business talks can take place without completing the meishi exchange process. The customary greeting is the bow, but with changing times, some Japanese businessmen have started using the handshake as a means of greeting people. If an individual is greeted with a bow, it is important to reciprocate with a bow as low as the one received. How low a person bow3s determines the status of the relationship between the two individual. It is important to It is important to remember that the business card should be given after the bow. While performing introductions, it is important to use the person’s last name plus the word “san”, which means Mr. or Ms. Japanese prefer to use last name. Not being aware of the host country’s culture can result in mistakes that may confuse or even offend the people with whom the organization intend to communicate.

Religion and its philosophies •

Religion and its philosophies may have a bearing on the work habit of the population and therefore affect business.

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For example: According to Max Weber (a German Sociologist) Protestantism emphasizes the importance of work for achieving salvation and encourages followers to accumulate wealth and invest in enterprises. Thus it promotes strong work ethics among its followers.

Values, the basic convictions of people •

Values, the basic convictions of people regarding what is right and what is wrong, what is good and what is bad, what is important and what is not, determine attitudes i.e. persistent tendency to feel and behave in a particular manner towards some object.

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Attitude of the population of the host country has significant impact on the conduct of international business.

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For Example: In India McDonald uses lamb instead of beef in their Hamburgers to avoid offending Hindus.

Customs and manners – established & accepted practices and behaviors •

Customs and manners (established practices and behavior regarded as appropriate), varies from country to country. For example (one): In the US, orange juice is considered as a breakfast drink while in France it has to be marketed as refreshing drink.

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In western cultures, what is said and written is considered important, while in Japan the situation in which something is written is more important than the statement itself.

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Entities operating in another country (away from home country) need to understand the customs and manners of the host country to conduct business smoothly.

Customs and manners – established & accepted practices and behaviors •

Example (two): At the beginning of a negotiation meeting, Russians make several demands, but do not mention the concession they are willing to offer. However, as the negotiations progress, they begin to accept the demands of the other party.

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In contrast, Americans announce their concession at the beginning and expect the other party also to make counter offers quickly and conclude the meeting.

Language, •

Language, differ from country to country and region to region. This some times may create communication problems. Therefore, companies should be very careful when translating advertisement and other communicating messages.

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Example: Ford Motor’s Fiera truck did not sell well in Spain because, it meant “Ugly old woman” in Spanish.

Education •

Education, quality of education in host country plays a key role in determining the prospect of international business.

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Modern production plant requires a skilled work force. A country that has a skilled and educated work force is often preferred by MNCs, availability of other resources being the same.

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Example: MNCs consider India a lucrative outsourcing hub because of the availability of low-cost, skilled labor which is English speaking and computer-savvy too.

THE FACTS OF LIFE •

Boy: Dad, what's politics? Dad: Let me set an example with our family. I have all the money so we'll call me the management. Mom receives most of it so we'll call her the government. We'll call the maid the working class, you are the people, and your baby brother is the future. Do you understand now son? Boy: I still don't understand dad. Dad: Think about it for a while son. That night the boy wakes up because his baby brother is crying. He goes in and finds out he's soiled his diapers. He goes to tell his mom but she's asleep he goes in to the maids room but she's in there having sex with his dad. He bangs on the door but no one can hear him. The next day... Son: Dad I understand politics now. Dad: Good, explain it to me in your own words son. Son: The management is screwing the working class while the government's fast asleep. The people are being ignored and the future is full of SHIT!

Political Environment •

The political environment in a country influences the legislation and government rules and regulations under which a foreign firm can operate.

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To understand and assess the political environment, it is necessary to identify and evaluate factors that can cause political instability, social unrest, attitude of nationals, and policies of the host government.

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Every company faces political constraints in the form of anti-trust laws, fair trade decisions, minimum wages, tax programs, pollution and pricing policies to name a few.

Political Environment •

These laws, rules and regulations are aimed at protecting the consumers and the local industries and as such affect company’s profitability. The Political environment also influences the supplier function, the customer function and the competitor function.

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Government’s actions are of great concern to companies doing business in the host country.

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Example: (Effect of political environment on international business). In July 2002, Arab students called for a boycott of American goods and services, due to the alleged close relationship between the US and Israel. The boycott targeted US companies including Starbucks, Burger King, Coca Cola and Estee Lauder.

Political Environment •

The supplier function is influenced by political environment when a foreign company is dependent on the host country’s government owned resources and national stock piles of agricultural products.

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The customer function is affected by Government demand for product and services can create, sustain, enhance or eliminate many market opportunities.

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The competitor function is affected when the Government of the host country take precautions to protect consumers and local industries.

Political system •

Political system may be classified based on:

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1) Mode of gaining power – Monarchy, Democracy, Absolutist, etc.

2) Number of Parties - single party, two-party and multiparty system.

Political Risk •

Political risks i.e. political actions that have a negative impact on a firm’s value. Political risk is not confined to a particular region or country. It is inherent both in developing and highly industrialize economies.

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Political risks can be classified as macro-political micro-political risks. Social unrest, attitude of Nationals, policies of the Host government are some of the factors that give rise to political risks.

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Examples of macro-political risks are: War, anti-globalization efforts, etc.

Political Risks • •

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Micro-political risks involve regulation affecting certain industry and may arise due to: (1) Foreign Politics i.e. political environment in the host country. Host country may view the import of certain products as undesirable. For example, Tobacco imports from the US are discouraged in Japan (for the protection of Japanese tobacco growers). (2) Domestic Politics i.e. political environment in the entity’s home country. (3) International Politics i.e. political relations between the host country and home country. For example, conflicting orders may get the firm operating overseas in a nowin situation. Dresser, an American firm got entangled in international politics while supplying compressor to the Soviet gas pipeline project. The Regan administration prohibited American firms from participating in this project and threatened Dresser with civil action and cancellation of export license in case its French subsidiary supplied the compressor to the Soviets. On the other hand, the French government insisted on Dresser- France supplying the compressor to the Soviets and threatened the company with fine, seizure of the items and jailing the executives.

Political Risks • Certain Government policies may adversely affect the business environment. For Example: – Non-convertibility of currency, prevention of repatriation of profits. – Nationalization and inadequacy of compensation • Other risks such as: – Domestic political violence : act of violence by certain section of the society to promote their political, economical or social interests. – Damage caused by terrorist attacks: act of violence by certain groups. The most glaring example is September 11, 2001, attack on the WTC.

Political Risk (Joke) •

An Indian politician went to the US to visit his counterpart. When the Senator invited him home for dinner, the minister was very impressed by the lavish mansion, grounds and the costly furnishings. He asked "How can you afford all this on a meagre senator's salary?" The senator smiled knowingly and took him to the window. "Can you see the river?" "Yes" "Can you see the bridge over it?" "Of course", said the minister. "10 per cent", said the senator smugly. Some time later, he had occasion to pay a return visit. The Indian minister lavished all hospitality on him. When they came to his house, the American was stunned by the huge palace the minister had built, glittering with precious art, hundreds of servants etc. etc. "How can you possibly afford this, on a salary in RS?', he asked. The minister called him to the window. "See the river over there?" "Sure", cried the senator. "Can you see the bridge over it?" The senator looked, was confused, peered closely and said - "No, I don't see any bridge." "100 percent", said the minister!!

Economic Environment •

The economic environment in the host country relates to all the factors that contribute to a country’s attractiveness for foreign business.

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Every country has some level of involvement in international business. Most countries avoid extreme economic positions i.e., completely closed or completely open. Countries try to maximize the benefits of FDI investment and minimize its negative effects on the domestic industry and economics.

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Some home country governments encourage outward FDI by providing: country risk insurance to protect MNCs against risks of nationalization, war, etc., providing double taxation relief, persuading the host country to relax norms for inward FDI

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However, most home country government (including those with free market economy), impose some restrictions on the outward FDI

Economic Environment •

Host country governments offer tax incentives, attractive financing and good infrastructure to attract FDI. Host countries also place restrictions in the share holding pattern in the domestic subsidiary to ensure that resource transfer benefits are maximized for the host country.

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Every market is unique and consumption patterns change as the wealth of consumers change in various segments of the market.

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One way to classify Economies is based on ownership of means of production, and levels of economic development.

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Based on these criteria the economies are classified as capitalist, socialist, and mixed and/or as developing and developed. The World Bank relies on per capita income levels to classify countries into developing and developed categories.

Economic Indicators •

Economic indicators indicate current level of economic growth, and the stability of the economy. Common economic indicators include GDP, GNP, income distribution, inflation rate, interest rate, unemployment rate, and foreign exchange reserves.

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GDP = the value of the total final output of all goods and services produced in a single year within a country’s boundary.

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GNP = GDP + Income received by residents from abroad – income claimed by non-residents.

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Income distribution = The number of poor people in the country and the average quality of life depends upon how well the income is distributed. In early 1990’s, Brazil and Hungary had similar per capita incomes. However, In Hungary, the richest 20% accounted for 36.6% and the poorest 20% for 9.5% of national income in 1993. In Brazil, the richest 20% accounted for 67.5% and the poorest 20% for 2.1%. in 1989.

Economic Indicator •

Inflation Index = inflation is the average rate of increase in price. Persistent increase in general price over a period of time does reduce the currency’s purchasing power.

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Interest rate = the rate charged for the use of money.

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Interest rate influences the economic behavior of people.

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Unemployment = Number of unemployed people as a percentage of the total labor force.

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Foreign exchange reserve = refers to the amount of foreign currency held by nation’s banking system as reserve base or financial backup for uts international transactions and payments.

Regulatory Environment •

Regulatory environment refers to a controlled environment which is closely monitored by a body, usually the government.

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All governments have certain regulations which allow them to intervene in business even in highly decontrolled and free market economy.

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However, degree of regulation varies from country to country.

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Supposedly, regulations are introduced to protect the larger interest of the society.

Purpose of Regulation •

The purpose of a regulation may be: – to regulate market power and minimize exploitation – industrial policy, labor laws, price regulation, licensing – to curb the negative externalities – pollution, unemployment, greater disparities between haves and have-nots. – To avoid communication gaps – To achieve balanced regional and economic development in all parts of the country

Tax Environment •

Businesses prefer to invest in countries with low taxation. Tax implications have a bearing on the profitability and consequently on the shareholder wealth.

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In every society, there is always an unequal distribution of wealth due to differences in the physical or mental ability of people or differences in their willingness to work. Irrespective of the form of government or social structure, some people are richer than others.

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Under feudalism, the nobility and the royalty are richer compared to other classes.

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Under communism, bureaucrats and political leaders enjoy certain services, such as cars, apartments, membership to clubs etc. compared to the vast majority of the people.

Tax Environment •

Taxation is a system of redistribution of wealth that is used by the government in an attempt to reduce this inequality, or provide equal opportunity to all.

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Taxation is therefore a wealth transfer system by which the wealth of those who earn more than others are transferred to the government, these are then used by the government for the maintenance of services such as transportation, defense, education, etc.

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Taxes can be direct or indirect. Direct taxes are paid by individuals or by legal entities such as corporation. Income tax, property tax, wealth tax are direct taxes.

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Indirect taxes are paid in connection with production, consumption, import or export. Sales tax, octroi duty, central excise duty, VAT, etc. are examples of indirect tax.

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Double taxation: Double taxation is the taxation of the same earnings twice – once in the source country and then again in the country of residence. Tax treaties: to reduce the burden of double taxation and to avoid complications in international trade, countries often enter into bilateral tax treaties with each other.

With rapid changes in business activities in the era of globalization – all governments are trying to make their policies favorable for business to grow so as to encourage foreign investors to invest in the country. • Organizations like EU are trying to maintain a level playing field for all its members. • Development of international business has led to the diminishing of geographical barriers. Countries are therefore entering into treaties which they feel will enhance business growth.

Legal Environment •

Global legal environment refers to the legal environment in international business. The legal environment regulates the operation of firms in international markets.

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Every country in the world follows its own system of law. A foreign company operating in a particular country must abide by those laws while operating in that country.

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Host countries enact laws to enable them to monitor and control the behavior of foreign businesses. Laws may be :

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Budgetary – tariffs, subsidies, quantitative restrictions, export restraints

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Administrative – licensing, administrative protection.

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Organizations operating in different countries need to know and comply with the laws of the domestic country as well as all the host countries they operate in.

Technological Environment •

Factors related to materials, machines, skill set

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Technology is defined as systematic knowledge for the manufacture of a product, for the application of a process or for the rendering of a service. Technology affects businesses in many ways. It can intensify competition, can erase the competitive advantage of a well established firm, can change industry structure, create completely new industry. The choice of technology for a company depend on the type of competitive advantage it seeks to develop. The extent to which an organization’s competitive advantage depends on technological changes determine the selection of specific technology and their development. Sometimes firms are forced to choose between conflicting options. Example: A firm may have to choose between investing in an established technology or a new technology

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Political Environment in the U.S.A • • • •

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Constitutional-based federal republic with strong democratic traditions American politics has been dominated by two political parties – The Democratic and the Republican About 60% of the Americans today, would identify themselves with one of the two parties. The two-party system is further strengthened by the electoral college system for choosing the President of the country. American people do vote directly but for their president but they vote within each state to elect a slate of electors who are pledged to one or the other presidential candidate. These electors then vote for the president. The President is the chief executive having formidable but not unlimited powers. The legislative branch, the Congress, is made up of the senate (Upper House) and the House of Representatives (Lower House).435 members. Members of the lower house is elected for a two year term. Each member representing a district in his or her state. The Senators are elected for a six year term, one third of whom retire every two years. Each state has two Senators. The Cabinet appointed by the President has to be approved by the Senate

Political Environment in the U.S.A • •

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Democratic Party : Supports a stronger role for Government regulation in economic management and environmental issues and are known to be socially more permissive. Counting on a base constituency among minorities, low-income whites and white-social activists Members of labor unions are also thought to be closer to the Democratic ideology. Republican Party: The Republicans are generally thought to be free enterprise oriented, socially conservative and claims to favor small government. The Republican party is also known as Grand Old Party (GOP). Its core constituency is business executives, wealthy and upper middle class voters.

Political Environment in the U.S.A Political Leaders must have certain amount of intelligence – right? •

Bush goes to neuro surgeon for a diagnosis. surgeon says, sir, we've found your problem--on the left side of your brain nothing is right, and on the right side of your brain nothing is left.

Political Environment in the U.S.A A lady bought a new Lexus. Cost a bundle. Two days later, she brought it back, complaining that the radio was not working. "Madam," said the sales manager, "the audio system in this car is completely automatic. All you need to do is tell it what you want to listen to, and you will hear exactly that!" She drove out, somewhat amazed and a little confused. She looked at the radio and said, "Nelson." The radio responded, "Ricky or Willie?" She was astounded. If she wanted Beethoven, that's what she got. If she wanted Nat King Cole, she got it. She was stopped at a traffic light enjoying "On The Road Again" when the light turned green and she pulled out. Suddenly an enormous sports utility vehicle coming from the street she was crossing sped toward her, obviously not paying attention to the light. She swerved and narrowly missed a collision. "Idiot!" she yelled and, from the radio, "Ladies and gentlemen, the President of the United States."

Political Environment in the U.S.A • •

Our well read President: Crawford, Texas -- A tragic flood this morning destroyed the personal library of President George W. Bush. The flood began in the presidential bathroom where both of the books were kept. Both of his books have been lost. A presidential spokesman said the president was devastated, as he had almost finished coloring the second one. The White House tried to call FEMA but there was no answer.

Political Environment in the U.S.A •

President: George W. Bush, Republican

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Vice President: Richard Bruce (Dick) Cheney

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Federal Reserve Board: Is the US central Bank and is not accountable to any government agency, except to the Supreme court. The board members are selected for a period of 14 years. The Federal Reserve System was founded to provide a safe, flexible and stable monetary and financial system for the US. FRB guides US monetary policy, supervises and regulates banking institutions, protects consumer credit rights, maintains the stability of of the financial system and provide certain financial services to the US government, financial institutions and foreign government organizations as well as the US citizens.

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Political Environment •

Labor: A major force which used to influences major economic and political decisions. However, the gradual shift in employment from manufacturing to non-organized service sector, increased used of automated systems in manufacturing units has reduced employment and consequently membership of unions. Labor’s influence has diminished. Strikes do occur and affects businesses. The unions have shifted their movement from wage issues to import competition.

Economic Environment • • • •

StatisticsGDP (PPP)$12.98 trillion (2006 est.) GDP growth3.4% (2006 est.) GDP per capita$43,500 (2006 est.) GDP by sectoragriculture (0.9%), industry (20.4%), services (78.6%) • Inflation (CPI)CPI 3.7% (2006 est.) • Pop below poverty line11.4% (2006 est.) • Labour force151.8 million (includes unemployed) (

Economic Environment •

Labour force by occupation - managerial and professional (31.1%), technical, sales and administrative support (28.6%), services (14.1%), manufacturing, mining, transportation, and crafts (23.7%), farming, forestry, and fishing (2.5%) (excludes unemployed) (2002)

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Unemployment - 4.5%(2006)

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Main industries - petroleum, steel, motor vehicles, aerospace, telecommunications, chemicals, electronics, food processing, consumer goods, lumber, mining

Economic Environment •

Trading Partners

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Exports - $1.024 trillion (2006 est)

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Export goods - agricultural products (soybeans, fruit, corn) 9.2%, industrial supplies (organic chemicals) 26.8%, capital goods (transistors, aircraft, motor vehicle parts, computers, telecommunications equipment) 49.0%, consumer goods (automobiles, medicines) 15.0% (8%

Economic Environment Main partners - Canada 23%, Mexico 14%, Japan 6%, Mainland China 6% Imports - $1.869 trillion (2006 est) ] Imports goods - agricultural products 4.9%, industrial supplies 32.9% (crude oil 8.2%), capital goods 30.4% (computers, telecommunications equipment, motor vehicle parts, office machines, electric power machinery), consumer goods 31.8% (automobiles, clothing, medicines, furniture, toys) (2003) Main Partners - Canada 17%, Mainland China 16%, Mexico 11%, Japan

• Public finances - $8.6 trillion (2006 est)

Economic Environment • • • •

Private income – United States Median House Hold Income All Household $ 46,326 Two Income Household $ 67,348

Median Personal Income Male, Age 25 or older $ 39,403

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Income Distribution Lowest 25%, less than $18,500 Middle 20%, $34,738 to $55,331 Top 20%, more than $ 88,000

Bottom quarter $ 22,500 or less Middle 50% $ 22,500 to $ 77,500

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Female, Age 25 or oloder $ 26,507

Top quarter $ 77,500 or more Top 1.5% $ 250,000+ Top 5% $ 157,000 Bottom 5% $7,500 or less Bottom 10% $10,500 or less Household income by Race Asian $ 57,518 White (non-hispanic) $ 48,977 Hispanic $ 34,241 African American $ 30,134