INTERNATIONAL IMPACT ON BUSINESS ENVIRONMENT:-
With the dawn of globalization, international business is becoming increasingly popular. Multinational organizations are among the most profitable in the world. A company needs to be aware of the language and culture of the country where it plans to embark with its investment. Politics and laws of the nation can either make international business easy or hard. With the success of international business, its future is gleaming, on a global scale.
Revolutionary changes in technologies have provided the mechanisms that propel the growth of international business. The intensification of competition at both domestic and international levels has driven firms to look beyond their domestic markets for new opportunities. The progressive removal of barriers to trade and capital movements has stimulated greater flows of exports, imports and foreign direct investment (FDI). Multinational enterprises have emerged as the key agents of international economic co-ordination. They provide the capability to generate innovations and deliver new goods and services to the market; they also provide the capability to exploit these technological advances at a global level; and they are a depiction of the capacity of international managerial co-ordination to operate efficiently across international boundaries. Furthermore, the growing economic strength of the newly-industrializing countries (e.g. Taiwan, Hong Kong, Singapore, Korea) and the opening up of China and Eastern Europe have provided an additional stimulus to international business activities
Economic Integration
Market Transitions and Development
Culture and International Business
National Trade and Investment Policies
Politics and Laws
Organization, Implementation, and Control of International Operations, and their Future
Countertrade
International Accounting and Taxation
International Human Resource Management
International Logistics and Supply-Chain Management
International Services
Strategic Planning in International Business
Multinational Corporations
A multinational corporation is a company or enterprise operating in several countries, usually defined as one that has 25% or more of its output capacity located outside its country of origin.
Political Risk:-
Political risk in international business entails discontinuities occurring in the business environment that are: difficult to anticipate; and that result from political action(s) or changes(s) that possess the potential to significantly affect profit or business goals. Political risk may be related to political instability
Politics and laws are therefore, very important in international business. They determine how 2010 123
And where international business may be conducted by an organization or country. In terms of international business, brotherhood, friendship and universality of laws are the best ideas.
Political risk can simply be defined as the risk of losing money due to changes that occur in a country’s government or regulatory environment. Acts of war, terrorism, and military coups are all extreme examples of political risk. Expropriation of assets by the government – or merely the threat – can also have a devastating effect on share prices.
In early 2007, Venezuelan President Hugo Chavez abruptly announced plans to nationalize CANTV, the local phone company. CANTV’s shares plunged almost 50% before the details of Chavez’s plans emerged. Investors sold first and asked questions later.
But political risk comes in many other forms. Other examples include: a new president or prime minister, a change in the country’s ruling party, or an important piece of new legislation. All of these changes can have a big impact on a country’s economic environment and investor perceptions about a country’s prospects.
Managing Political Risk
Unlike economic or financial variables, political risk is more difficult to quantify. While it is possible to calculate political risk “scores” or other quantitative-looking benchmarks, it’s important to remember that these are ultimately based on qualitative judgments. There’s no substitute for doing your own research and coming to your own conclusions.
The Economist’s Country Briefings are a great place to start. These reports contain a wealth of background information a country’s government, politics, and economy. Some questions to keep in mind: Are there any important elections coming up soon? If so, who are the candidates/parties and what are their economic policies?
The name of the game here isn't to avoid political risk completely. Even if you keep all of your investments in the U.S., you are still exposed to decisions in Washington DC. One of the keys to success in international investing is understanding political risk so you can make better decisions.
As with other kinds of risk, the only tried and true method for mitigating political risk is diversification. Be sure to spread your international investments around in a variety of countries and regions so that you won't get hurt too badly even if your political risk calculations turn out to be off the mark.
Features of an underdeveloped economy
1. Predominance of agriculture
2. Wide-spread Poverty
3. Heavy Population Pressure
4. Low Standard of Living
5. Technological backwardness
6. Large unemployment
7. Inequalities in Income distribution
Govindam Business School
India’s Case
1.54% population is dependent on agriculture.
2.22% of the Indian population is below poverty line.
3. People in non-working age group is nearly 40%.
4. Per capita income is very low as compared to other developed & developing countries.
5. Techniques of production are still backward
6. Large number of unemployed people
7. India’s relative global ranking human well-being index is at a low of 126 among 177 countries
India – A Developing Economy - A Mixed Economy
1. Rise in National Income
2. Rise in per Capita Income
3. Significant changes in occupational distribution of population
4. Growing capital base of the economy
5. Development in banking and financial sector
6. Private ownership of means of production
7. Important role of market mechanism
8. Growth of monopoly houses
9. Presence of a large public sector along with free enterprise
10. Economic planning as a means of realizing overall national economic goals
Corporate governance:-
Corporate governance is a term that refers broadly to the rules, processes, or laws by which businesses are operated, regulated, and controlled. The term can refer to internal factors defined by the officers, stockholders or constitution of a corporation, as well as to external forces such as consumer groups, clients, and government regulations.
Well-defined and enforced Business Schoolcorporate governance provides a structure that, at least in theory, works for the benefit of everyone concerned by ensuring that the enterprise adheres to accepted ethical standards and best practices as well as to formal laws. To that end, organizations have been formed at the regional, national, and global levels.
In recent years, corporate governance has received increased attention because of high-profile scandals involving abuse of corporate power and, in some cases, alleged criminal activity by corporate officers. An integral part of an effective corporate governance regime includes provisions for civil or criminal prosecution of individuals who conduct unethical or illegal acts in the name of the enterprise.
What is corporate governance?
Corporate governance refers to the set of systems, principles and processes by which a company is governed. They provide the guidelines as to how the company can be directed or controlled such that it can fulfil its goals and objectives in a manner that adds to the value of the company and is also beneficial for all stakeholders in the long term. Stakeholders in this case would include everyone ranging from the board of directors, management, shareholders to customers, employees and society. The management of the company hence assumes the role of a trustee for all the others.
What are the principles underlying corporate governance?
Corporate governance is based on principles such as conducting the business with all integrity and fairness, being transparent with regard to all transactions, making all the necessary disclosures and decisions, complying with all the laws of the land, accountability and responsibility towards the stakeholders and commitment to conducting business in an ethical manner. Another point which is highlighted in the SEBI report on corporate governance is the need for those in control to be able to distinguish between what are personal and corporate funds while managing a company.
Why is it important?
Fundamentally, there is a level of confidence that is associated with a company that is known to have good corporate governance. The presence of an active group of independent directors on the board contributes a great deal towards ensuring confidence in the market. Corporate governance is known to be one of the criteria that foreign institutional investors are increasingly depending on when deciding on which companies to invest in. It is also known to have a positive influence on the share price of the company. Having a clean image on the corporate governance front could also make it easier for companies to source capital at more reasonable costs. Unfortunately, corporate governance often becomes the centre of discussion only after the exposure of a large scam.
Why was it in the news recently?
Corporate governance has most recently been debated after the corporate fraud by Satyam founder and Chairman Ramalinga Raju. In fact, trouble started brewing at Satyam around December 16 when Satyam announced its decision to buy stakes in Maytas Properties and Infrastructure for $1.3 billion. The deal was soon called off owing to major discontentment on the part of shareholders and plummeting share-price. However, in what has been seen as one of the largest corporate frauds in India, Raju confessed that the profits in the Satyam books had been inflated and that the cash reserve with the company was minimal. Ironically, Satyam had received the Golden Peacock Global Award for Excellence in Corporate Governance in September 2008 but was stripped of it soon after Raju's confession.
Govindam Business School
