International Business 15th edition Not for commercial

1. Global Business Environment
& India
Dr. (Mrs.) Vijaya Katti
Professor & Chairperson (MDPs)
Indian Institute of Foreign Trade
New Delhi
Session Date: 8th May 2017
Session for: CLMV Programme

2. Business may be understood as the organized efforts
of enterprises to supply consumers with goods and
services for a profit
What is Business???

3. Characteristics of Business

4. What is Business Environment???
The environment of any organization is “ the
aggregate of all conditions, events and influences
that surround and affect it.”
Characteristics of Business Environment:
• Complex
• Dynamic
• Multi-faceted
• Far- reaching impact

6. Marketing Environment
• Marketing EnvironmentMarketing Environment- consists of the actors and
forces outside marketing that affect marketing
management’s ability to develop and maintain
successful relationships with its target customers.
• Includes:
– MicroenvironmentMicroenvironment - forces close to the company
that affect its ability to serve its customers.
– MacroenvironmentMacroenvironment - larger societal forces that
affect the whole microenvironment.

7. The Company’s Microenvironment
• CustomersCustomers - five types of markets that purchase
a company’s goods and services.
• CompetitorsCompetitors - those who serve a target market
with similar products and services against
whom a company must gain strategic
advantage.
• PublicsPublics - any group that perceives itself having
an interest in a company’s ability to achieve its
objectives.

8. Contd..
• Company’s Internal EnvironmentCompany’s Internal Environment- functional areas
such as top management, finance, and
manufacturing, etc.
• SuppliersSuppliers - provide the resources needed to produce
goods and services and are an important link in the
“value delivery system”.
• Marketing IntermediariesMarketing Intermediaries - help the company to
promote, sell, and distribute its goods to final
buyers.

9. The Company’s Macroenvironment
• DemographicDemographic - studies populations in terms of age,
gender, race, occupation, location and other
statistics.
• EconomicEconomic - factors that affect consumer purchasing
power and spending patterns.
• NaturalNatural - natural resources needed as inputs by
marketers or that are affected by marketing
activities.

10. The Company’s
Macro environment
• TechnologicalTechnological - forces that create new
technologies, creating new product and market
opportunities.
• PoliticalPolitical - laws, agencies and groups that influence
and limit organizations and individuals in a given
society.
• CulturalCultural - institutions and other forces that affect a
society’s basic values, perceptions, preferences,
and behaviors.

11. The Macroenvironment
DemographicDemographic
TechnologicalTechnological
CulturalCultural
EconomicEconomic
PoliticalPolitical
NaturalNatural
Forces that Shape
Opportunities
and Pose Threats
to a Company
Forces that Shape
Opportunities
and Pose Threats
to a Company

12. Internal Environment
• Value System
• Mission and Objectives
• Management Structure and Nature
• Internal Power Relationship
• Human Resources
• Company Image and Brand Equity
• Miscellaneous Factors

13. External Environment
• Business Opportunities and
• Threats to Business

14. Contd..
• Micro Environment
– Suppliers Customers
– Competitors
– Marketing Intermediates
– Financiers
– Publics

15. Contd..
• Macro Environment
• Global Environment
- WTO principles and agreements;
- Other international conventions
- Treaties
- Agreements
- Declarations
- Protocols etc.
- Economic and business conditions
- Sentiments in other countries

16. Identifying Market Opportunities andIdentifying Market Opportunities and
ThreatsThreats
• Many firms use environmental scanning to identify important trends
and determine whether they represent present or future market
opportunities or threats
• Identify relevant environmental factors and
trends
– Assess Impact of trends on markets and
marketing activities
• Does trend create a marketing opportunity
– Decide how to take advantages of opportunity
• Does trend pose marketing treat
– Decide how to minimize threat

17. The Social Environment
• The social environment includes all factors and
trends related to groups of people, including
their number, characteristics, behavior, and
growth projections.
• Social Environment
• Number of People
• Growth Projection
• Characteristics
• Behaviour

18. The Demographic Environment
The demographic environment refers to the size, distribution,
and growth rate of groups of people with different
characteristics.
The demographic characteristics of interest to marketers relate
in some way to purchasing behavior, because people from
different countries, cultures, age groups, or household
arrangements often exhibit different purchasing behaviors.
A global perspective requires that marketers be familiar with
important demographic trends around the world as well as
within the United States.

19. The Cultural Environment
• The cultural environment refers to factors
and trends related to how people live and
behave.
– Cultural Factors
• Values
• Subgroup Activities
• Ideas
• Beliefs
• Attitudes

20. Cultural Diversity
– Cultural differences are important in
both international and domestic markets.
– Much of the population and buying
power growth in the United States is and
will be from multicultural groups.
2004 2009
African Americans $723 $965
Asian Americans $363 $528
Central and Eastern Europeans $570 $810
Hispanics $686 $992

21. Changing Roles
– As more women enter the workforce and
household compositions change, typical
household roles are altered.
– Tremendous market opportunitiesTremendous market opportunities exist for firms
that can develop effective strategies for
appealing to these changing roles.

22. Emphasis on Health & Fitness
The pursuit of a more healthful lifestyle
includes:
– eating more nutritious foods
– exercising regularly
– participating in various sports activities
– focusing on wellness.
This translates into potential market
opportunities for firms that provide products
and services geared toward improving health
and fitness.

23. Consumerism
Consumerism is the movement to
establish and protect the rights of
buyers.
One increasingly important
consumer issue is
environmentalism.
Successful marketers can respond
by developing environmentally
safe products and communicating
their environmental contributions.

24. The Political/Legal Environment
• The political/legal environment encompasses
factors and trends related to governmental
activities and specific laws and regulations
that affect marketing practice.
• Global Trends
• Political Legal Environments
• Regulation
• Legislation

25. Global Political Trends
In today’s world economy, international political
events greatly affect marketing activities. For
example the impact of the war on terrorism on
the travel and security industries.
A second important political trend is movement
toward free trade and away from protectionism.
Studies show that countries with the freest trade
have the highest GDP growth.

26. The Technological Environment
The technological environment includes factors
and trends related to innovations that affect the
development of new products or the marketing
process.
These technological trends can provide
opportunities for new product development,
affect how marketing activities are performed, or
both.

27. The Institutional
Environment
The institutional environment consists of all the
organizations involved in marketing products and
services.
MarketMarket
Research FirmsResearch Firms
AdvertisingAdvertising
WholesalersWholesalers
RetailersRetailers
SuppliersSuppliers
CustomersCustomers

28. The Economic
Environment
The economic environment includes factors and
trends related to income levels and the
production of goods and services.
Economic trends in different parts of the world
can affect marketing activities in other parts of
the world.
The gross domestic product
(GDP) represents the total size of
a country’s economy measured in
the amount of goods and services
produced.

29. Market Economy
• In a market economy, two societal units play
important roles: the individual and the
company
• The market mechanism involves an interaction
of price, quantity, supply, and demand for
resources and products

30. Contd…
• The key factors that make the market
economy work are consumer sovereignty
• Freedom of the enterprise to operate in the
market

31. Classifying Countries
• Factor conditions also known as production
factors
• Demand conditions include three dimensions:
- The composition of home demand (or
the nature of buyer needs)
- the size and pattern of growth of home
demand
- The internationalization of demand

32. Two important components
of demand
• Population Size
• Per Capita Income

33. International Trade Theory
• Trade theory focuses on these questions
– What products to import and export?
– How much to trade?
– With whom to trade?
• Some theories explain trade patterns that
exist in the absence of governmental
interference
• Some theories explain what governmental
actions should strive for in trade

34. Contd..
Most trade theories emphasize differences
among countries in
• Climate
• Factor endowment
• Innovative capability

35. Contd..
Growth is characterized by
• Increase in exports by the innovating country
• More competition
• Increased capital intensity
• Some foreign production

36. Contd..
Maturity is characterized by
• Decline in exports from the innovating country
• More product standardization
• More capital intensity
• Increased competitiveness of price
• Production startups in LDCs

37. Contd..
Decline is characterized by
• Concentration of production in LDCs
• Innovating country becoming net importer

38. Competitive Structure of Industries
• Rivalry among existing firms
• Threat of new entrants
• Threat of substitutes
• Bargaining power of suppliers
• Bargaining power of buyers

39. Global Environment
• The WTO principles and agreements
• Other international
conventions/treaties/agreements
declarations/protocols etc
• Economic and business conditions /
sentiments in other countries etc.

40. Global Competitiveness Index
• The World Economic Forum has ranked 138 economies in its
2016-2017 Global Competitiveness Report.
• India climbs for the second year in a row, to 39th. Its 16-place
improvement is the largest this year. It ranks ahead of Latin
America’s Argentina (104) and way ahead of its neighbors Pakistan
(122), Sri Lanka (71) and Bangladesh (106), but behind China (28).
• The CLMV stands CLMV (Cambodia (89) Lao PDR (93)
Myanmar (N.A.) Vietnam (60)
• For the seventh consecutive year Switzerland leads the top 10, and
again this year Singapore ranks as the second-most competitive
economy in the world. Overall, the rankings at the top have
remained rather stable, although it is worth noting the significant
progress made by the United States, which retains the 3rd place this
year.

41. Source : The Global Competitiveness Report 2016–2017, World Economic Forum

42. 7 Indian Companies Made it to Global Fortune
500 List for 2016
• Seven Indian companies have made it to
the Fortune 500 list for 2016, which is led
by Walmart, the world's largest retailer.
• Indian Oil Corp. is the highest-ranked
Indian company on the list at 161, with
revenue of $54,711 million. Other Indian
companies in the list are as follows:

43. Indian companies – Fortune 500 List of 2016
In brackets = Revenue in US$ Billions
Company Rank
Indian Oil Corp. 161 (USD 54,711 million)
Reliance Industries 215 (USD 43,437 million)
Tata Motors 226 (USD 42,092 million)
State Bank of India 232 (USD 41,681 million)
Bharat Petroleum 358 (USD 29,082 million)
Hindustan Petroleum 367 (USD 28,829 million)
Rajesh Exports 423 (USD 25,237 million)

44. How India ranks on Doing Business topics
Source: Doing Business 2017 – India, (World Bank)

45. How far has India come in the areas measured
by Doing Business?
Source: Doing Business 2017 – India, (World Bank)

46. Summary of Doing Business indicators for India
(India has improved over earlier year)
Source: Doing Business 2017 – India, (World Bank)
Indicator India DB2017 India DB2016
Starting a Business (rank) 155 151
Time (days) 26.0 28.0
Paid-in Min. Capital (% of income per capita) 0.0 0.0
Dealing with Construction Permits (rank) 185 184
Time (days) 190.0 190.0
Cost (% of warehouse value) 25.9 26.5
Registering Property (rank) 130 140
Getting Credit (rank) 44 42
Paying Taxes (rank) 172 172
Time (hours per year) 241.0 243.0
Resolving Insolvency (rank) 136 135
Recovery rate (cents on the dollar) 26.0 25.7

47. Drivers of global manufacturing competitiveness
Talent-driven innovation
Cost and availability of
labor and materials
Energy cost and policies
Supplier network
Local market
attractiveness
Economic, trade,
financial and tax
systems
Physical infrastructure
Government investments
in manufacturing and
innovation
Legal and regulatory
system
Healthcare system
Manufacturing
competitiveness
Market forces
Government forces

48. Indian Business
Environment
• Top Five countries in Global Competitiveness are as follows:
– Switzerland
– Singapore
– United States
– Netherlands
– Germany
• Ranking of Select emerging economy nations is:
– Singapore (2)
– China (28)
– India (39)
– Taiwan (14)
– Brazil (81)
– Russia (43)
– CLMV (Cambodia (89) Lao PDR (93) Myanmar (N.A.) Vietnam (60)
• Five years from now, emerging economy nations surge to occupy the top three
spots, with China retaining the top spot, and India and Brazil moving up to claim
the second and third rankings, respectively.
Source : The Global Competitiveness Report 2016–2017

49. Investment Climate in India and
China: A comparison
Indicators India China Advantage
A. Macroeconomic Stability
(i) Fiscal Deficit High Moderate China
(ii) Current account Deficit Deficit, but manageable Surplus Same
(iii) Inflation Rising Rising Same
B. Infrastructure Poor Good China
C. Institutions
(i) Legal Developed Not developed India
(ii) Corruption Present Present Same
(iii) Red tape More Less China
(iv) Political Stable Stable Same
(v) Openness More Less India
(vi) Financial Robust Fragile India
D. Demographic
(i) English-speaking population More Less India
(ii) Ratio of Young to Old Favourable Favourable Same
(iii) Higher Education Better Good India

50. India's scores on Global Dynamism Index (GDI)
Scores on a scale of 1-100; Ranking on the basis of 60 countries covered in the survey
Source: Global Dynamism Index 2013, Grant Thornton India

51. Latest Position
• Studies have shown a distinct change in the pattern of
international trade in the recent years.
• Intra-regional trade has grown manifold at the expense of
trade between developed and developing countries.
• These studies also point to the emergence of hub countries,
i.e., Asia in manufacturing; Americas in agricultural products;
Africa in natural resource based commodities and India,
possibly in services.
• They also suggest that FDI strategies will increasingly get
regional.
• The implication of these is that developing countries will
become more immune to global slowdowns.
• The fact that Asian countries, as also Latin America, were
relatively less impacted by the global economic slowdown
perhaps bears this out.

52. THANKS
Contact:
Dr. (Mrs.) Vijaya Katti
Professor and Chairperson (MDPs)
IIFT, New Delhi
E-mail: vijayakatti@iift.edu; vckatti@yahoo.com