(Affiliated to University of Lucknow, Lucknow)

Programme: M.B.A.
Semester-2

Paper Code: KMBN201

SUB: BUSINESS ENVIRONMENT & LEGAL ASPECT OF BUSINESS
TOPIC: Business Environment with reference to International Integration
and Business Policy

Ms. Aiman Khwaja

Assistant Professor
Department of Commerce

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 AIMAN KHWAJA NOTES

LECTUREPLAN(UNIT-II)

COURSE: M.B.A SEMESTER- II

SUBJECT - BUSINESS ENVIRONMENT &

PAPER – KMBN201
LEGAL ASPECT OF BUSINESS

SYLLABUS(UNIT-II)
Macro Cont: Economic, Socio-Cultural, Competitive & International Environment – Economy,
Competition, Socio-cultural and International); Business Environment with reference to Global
Integration; Comparative Analysis of Business Environment: India and Other Countries, Factors
affecting international business environment, Business Policy: LPG model & International
forces in business.

Lecture 1 Economic, Socio-Cultural, Competitive & International Environment

Lecture 2 Business Environment with reference to Global Integration

Lecture 3 Comparative Analysis of Business Environment: India and Other Countries

Lecture 4 Factors affecting International Business Environment

Lecture 5 Business Policy: LPG model & International forces in business.

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LECTURE 1: ECONOMIC, SOCIO-CULTURAL, COMPETITIVE &

INTERNATIONAL ENVIRONMENT

Macro: Economy Social culture, competition, and International environment

In macroeconomics, there are several external factors that can have a significant impact on the business
environment and affect the operations and success of companies. These include economic, social-cultural,
competitive, and international environmental factors.
 Economic factors, such as inflation rates, interest rates, and unemployment rates, can significantly
impact the business environment and affect consumer behavior, purchasing power, and business
investment. Understanding these factors and adapting to changes in the economic landscape is
essential for companies to remain competitive and generate long-term value.
 Social-cultural factors, such as changes in consumer behavior, attitudes, and beliefs, can also
influence the demand for certain products or services and shape the competitive landscape.
Understanding these factors and adapting to changes in consumer preferences is essential for
companies to remain competitive and generate long-term value.
 Competition factors, such as the number and strength of competitors in a market, can significantly
impact a company’s operations and create both opportunities and challenges. Understanding these
factors and developing effective strategies to compete with other companies is essential for
companies to achieve a competitive advantage and generate long-term value.
 International environmental factors, such as changes in government policies, regulations, and
trade agreements in foreign markets, can also impact a company’s operations and create both
opportunities and challenges. Understanding these factors and effectively managing global supply
chains and partnerships is essential for companies to remain competitive and generate long-term
value.
By effectively managing external factors such as economic, social-cultural, competitive, and international
environmental factors, companies can achieve a competitive advantage and generate long-term value. This
involves staying informed about changes in the business environment, anticipating future trends and
challenges, and developing strategies to mitigate risks and capitalize on opportunities.

Economy, Competitions, and Social Culture

The economy, competition, and social culture are three key external factors that can have a significant
impact on a company’s success and profitability.
 Economic factors, such as changes in interest rates, inflation, and consumer spending habits, can
have a significant impact on a company’s sales and profitability. For example, during times of
economic downturn, consumers may reduce their spending, and companies may need to adjust their
pricing or marketing strategies to remain competitive.
 Competition is another important external factor that can affect a company’s success. Companies
that operate in highly competitive markets may need to invest in marketing, research and
development, or other areas to differentiate themselves from their competitors and attract customers.
Additionally, companies may need to adjust their pricing or product offerings to remain competitive
and maintain their market share.
 Social culture can also have a significant impact on a company’s operations and success. Changes in
consumer preferences, attitudes, and behaviors can impact a company’s product development and
marketing strategies. For example, as consumer preferences shift towards more sustainable and
environmentally-friendly products, companies may need to adjust their product offerings to meet
these demands.
To remain competitive in the face of changing economic, competitive, and social-cultural factors, companies
must stay informed about industry trends, consumer preferences, and changes in the regulatory environment.
This involves developing effective strategies to mitigate risks, capitalize on opportunities, and maintain a
competitive advantage. By anticipating and adapting to external factors, companies can position themselves
for long-term success and profitability.
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LECTURE 2: BUSINESS ENVIRONMENT WITH REFERENCE TO GLOBAL

INTEGRATION

Yes, the international business environment refers to the global integration of markets, industries, and
economies. It encompasses the various economic, political, cultural, and social factors that influence
business operations and interactions between firms, countries, and regions.
The international business environment is shaped by various factors, such as government policies, trade
regulations, cultural differences, technological advancements, and global economic conditions. Companies
operating in the international business environment need to understand and navigate these factors to
effectively compete and succeed in the global marketplace.
Global integration has led to increased competition and opportunities for businesses to expand their reach
and access new markets. However, it also presents challenges such as adapting to different cultural and legal
environments, managing global supply chains and navigating complex trade regulations.
To effectively operate in the international business environment, companies need to develop strategies that
consider the unique characteristics and challenges of global markets. This may involve developing
partnerships with local businesses, adapting marketing and product strategies to meet local needs, and
complying with different regulatory requirements.
Overall, the international business environment represents a complex and dynamic landscape that requires
companies to stay informed, agile, and adaptable to succeed in the global marketplace.
The important forces driving globalization are as follows:
1. Liberalisation: One of the most important factors which have given a great forward thrust to
globalisation since the 1980's is the formation of universal economic policy resulting in liberalisation
of economy in many countries. The immediate result of liberalisation in globalisation of business.
Now many business firms can involve themselves is international trade as the restrictions imposed by
various countries is highly restricted under GATT/WTO.
2. MNC'’s: The companies which have taken a complete advantage of trade liberalisation caused under
GATT/WTO are MNC's (Multi — National Companies). Sony, Philips, Coco Cola, Pepsi, Procter &
Gamble,etc are some famous examples for MNC's. These companies combine their resources and
objectives to achieve profit in globel market. According to the world Investment Report 1997, there
were about 44,500 MNC's in the world with nearly 2.77 lakhs foregin collaborations. Hence MNCs is
an important factor inducing Globalisation.
3. Technology: Technology in a powerful driving force of Globalisation. Once a Technology is
developed, it soon becomes available every where in the world. (for example) A hospital in the USA
performs the required diagnostics on patients say an X — ray or MRI or C.T Scan. These diagnostic
tests represent technology in medical field. In the next three minutes, a radiologists in Bangolore,
India receives the scanned images from USA. He then sends his report to USA. This is called as
teleradiology. The entire process, from the time the patient was admitted, has taken Just 20 minutes.
The cost of this work is 30% lower in India compared to the USA. In short, long distance on — line
services made possible by the technological developments have given a forward thrust to
globalisation.
4. Transportation and Communication revolutions: Technological revolution in several spheres, like
transport and Communication, has given a great impetus to globalisation. The Microprocessor in
computers has created the flow of information from one part of the globe to another not only fast but
also cost effective. It has played a pivotal role in reducing space and time. It has made world in to a
global village. Microprocessors coupled with satellite, optical fibre, wireless technologies, world wide
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web have made this ‘World in to a global village. The consumers/ customers has become more global.
By sitting in front of the computer and logging on to world wide web the consumer can download any
type of information from any part of the world. Flow of information is business. It determines profit.
Hence technology is a strong driving force for Globalisation.
5. Product development and efforts: The immediate impact of increase of Technology is the growth of
new products due to innovation. The fast technology hastens product obsolescence. This has made
many firms to invest heavily on R&D activities with cross — border alliances . These companies have
to stay in business and survive competition. In order to achieve this, many companies have crossed
their borders and have tie — ups to update their products through research and development with
foreign companies. This causes globalisation.
6. Rising aspirations and wants: Because of the increasing levels of education and exposure to the
media, aspirations of people around the world are rising. They aspire for everything that can make life
more comfortable and satisfying. If domestic firms are not able to meet the wants, they would
naturally turn to the foreign firms to satisfy their aspirations. This promotes Globalisation.
7. World economic trends: The world economic conditions are changing fast. There, is a great
difference in the growth rates of economies/ markets between developing nations and developed
nations. In developed nations the economies have become stagnant, due to saturation on the
otherhand, the developing nations are experiencing tremendous growth rate in various business sector.
Cheap labour, high investment in research and development, improvements in technology are some of
the factors which have driven the developing nations towards achieving high growth rate in business.
Hence it is very common for the developing nations to have a strong international trade links with
developed nations. Thus difference in world economies between nation causes gobalisation.
8. Regional Integration: Nowadays many countries are joining hands together to promote free and fair
international trade across the borders. They are forming separate trade blocks. European Union and
North American Free Trade Agreements are two such classical examples. This promotes
globalisation.
9. Leverages: Leverage is simply some type of advantage that a company enjoys by conducting business
in more than one country. Aglobal company can experience three important types of leverages.
10. Experience transfers: The experience that a company gains by doing business in one country can be
effectively transferred to some other country if the particular company does business on global scale.
This is called experience transfer (For example) Cocacola first developed a strong marketing strategy
to tap tea and coffee market in India. In 2002 it became a success. From this experience, it then joined
hands with Mc Donald's for marketing hot beverages. The Georgia Gold brand was thus born and it
was first launched in Delhi and Mumbai. This brand is now available in all Mc Donald's outlets
throughout the country. The success of this business in hot beverages with Mc Donald's promoted
Coca- cola to enter into ice-tea and cold coffee Marketing business in 2003.

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LECTURE 3: COMPARATIVE ANALYSIS OF BUSINESS ENVIRONMENT: INDIA

AND OTHER COUNTRIES
Competitive analysis of the business environment involves comparing and contrasting the strengths and
weaknesses of businesses operating in different countries. In the case of India and other countries, the
following are some factors that can be analyzed to determine the competitiveness of businesses operating in
these countries:
1. Economic environment: The economic environment of a country plays a crucial role in determining
the competitiveness of businesses. Factors such as GDP, inflation, exchange rates, and fiscal policies
can impact the profitability of businesses. In India, the economic environment is characterized by a
large domestic market, favorable demographics, and government initiatives such as Make in India,
which aim to promote domestic manufacturing.
2. Regulatory environment: The regulatory environment in a country can impact the ease of doing
business and competitiveness of businesses. In India, regulatory reforms such as the Goods and
Services Tax (GST), the Insolvency and Bankruptcy Code (IBC), and the introduction of the
National Company Law Tribunal (NCLT) have made it easier for businesses to operate in the
country.
3. Infrastructure: Infrastructure such as transportation, communication, and energy supply can impact
the competitiveness of businesses. In India, infrastructure development has been a major focus of the
government, with initiatives such as the Bharatmala project to develop roadways and the Ujwal
DISCOM Assurance Yojana (UDAY) to improve the power sector.
4. Technology: Technology is a key driver of competitiveness, and businesses that invest in innovation
and technology are more likely to be successful. In India, the government has launched initiatives
such as Digital India and Start-up India to promote innovation and entrepreneurship.
5. Labor force: The quality and availability of the labor force can impact the competitiveness of
businesses. In India, the labor force is characterized by a large pool of young, educated workers,
which can provide a competitive advantage for businesses.

Comparing India to other countries, some factors that can be analyzed include:
 Market size: India has a large domestic market, but may be smaller than other countries such as
China or the United States
 Regulatory environment: The regulatory environment in India may be more complex than in other
countries, which could impact the ease of doing business.
 Infrastructure: Infrastructure development in India may be lagging behind other countries, which
could impact the competitiveness of businesses.
 Technology: India has a growing technology sector, but may not be as advanced as other countries
such as the United States or Japan.
 Labor force: India has a large and educated labor force, but may not have the same level of technical
skills as other countries.
Overall, competitive analysis of the business environment in India and other countries requires a detailed
examination of various factors that impact the competitiveness of businesses. By understanding these
factors, businesses can develop effective strategies to succeed in the global marketplace.

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LECTURE 4: FACTORS AFFECTING INTERNATIONAL BUSINESS

ENVIRONMENT
The international business environment is influenced by a variety of factors, including:
1. Political environment: The political environment of a country can have a significant impact on
international business. Factors such as government stability, trade policies, and regulations can affect
business operations.
2. Economic environment: The economic environment of a country, including factors such as inflation,
exchange rates, and GDP growth, can impact international business by affecting the cost of
production, demand for products, and availability of resources.
3. Social and cultural environment: Social and cultural factors such as language, religion, and social
norms can influence the way business is conducted in different countries.
4. Technological environment: Technological advancements can have a significant impact on
international business by changing the way products are manufactured, marketed, and distributed.
5. Legal environment: The legal environment, including regulations, intellectual property laws, and
contract enforcement, can impact international business operations.
6. Demographic environment: Demographic factors such as population size, age, and education levels
can influence consumer behavior and demand for products in different countries.
7. Competitive environment: The level of competition in a country can impact the success of
international businesses by affecting pricing, market share, and profitability.
8. Natural environment: Natural factors such as climate, geography, and availability of natural
resources can affect the operations and sustainability of international businesses.

Overall, the international business environment is complex and dynamic, influenced by a variety of factors
that are constantly changing. Companies operating in the global marketplace need to understand and adapt to
these factors to succeed and remain competitive.

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LECTURE 5: BUSINESS POLICY: LPG MODEL & INTERNATIONAL FORCES IN

BUSINESS

BUSINESS POLICY
Business policy refers to a set of guidelines, procedures, and principles that govern the decision-making
process of an organization. It involves the formulation and implementation of strategies that help an
organization achieve its goals and objectives. Business policies are designed to guide the actions of
employees and managers, and to ensure that they are consistent with the organization’s overall mission,
vision, and values.
Business policy is typically developed by top management, and it covers a wide range of areas, including
marketing, finance, human resources, operations, and information technology. The policy sets out the
organization’s approach to each of these areas, including its goals, objectives, and strategies.
The main objectives of business policy are to:
 Ensure consistency in decision-making across the organization
 Provide a framework for strategic planning and implementation
 Enhance organizational performance and effectiveness
 Ensure that the organization’s activities are aligned with its mission, vision, and values
 Provide a basis for evaluating and controlling organizational performance.
Overall, business policy plays a crucial role in the success of an organization, as it helps to ensure that
everyone in the organization is working towards a common goal and that decisions are made in a consistent
and effective manner.

LPG model
The LPG model refers to the Liberalization, Privatization, and Globalization model that was adopted by
many developing countries in the 1980s and 1990s. The model involves a series of economic reforms aimed
at opening up the economy, reducing government intervention, and encouraging private sector participation.
Liberalization involves reducing government regulations and barriers to trade, such as tariffs and quotas, to
create a more open and competitive market. Privatization involves transferring ownership and control of
state-owned enterprises to the private sector, with the aim of improving their efficiency and profitability.
Globalization involves integrating the economy with the global market, through trade, investment, and other
forms of economic cooperation.
The LPG model was implemented in response to the economic crises faced by many developing countries at
the time, which were characterized by high inflation, fiscal deficits, and low economic growth. The model
was seen as a way to attract foreign investment, increase exports, and promote economic growth and
development.
While the LPG model has been successful in some countries, particularly in Asia, it has also been criticized
for its negative impact on vulnerable populations, such as the poor, who may not benefit from the economic
growth generated by the model. It has also been criticized for promoting a narrow focus on economic growth
at the expense of other social and environmental goals.

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INTERNATIONAL FORCES IN BUSINESS

International forces in the business refer to the various factors that affect the operations of businesses across
national borders. These forces can be broadly categorized into political, economic, social, technological, and
legal factors.
Political factors include government policies and regulations, political stability, and the relationship between
countries. For example, trade agreements and tariffs can significantly impact the flow of goods and services
between countries, while political instability can create risks for businesses operating in certain regions.
Economic factors include currency exchange rates, inflation, and economic growth rates. Changes in these
factors can impact the cost of doing business, market demand, and overall profitability.
Social factors include cultural norms and values, demographics, and consumer preferences. Businesses
operating in different regions must be aware of these factors to effectively market and sell their products and
services.
Technological factors refer to the advancements in technology that impact businesses. For example,
advancements in communication technology and the internet have significantly increased the ability of
businesses to operate across borders.
Legal factors include laws and regulations related to trade, intellectual property, and employment.
Businesses must comply with these laws and regulations to avoid legal and financial consequences.
Overall, understanding and adapting to international forces is essential for businesses operating across
borders. By carefully considering these factors, businesses can identify opportunities and mitigate risks to
succeed in the global marketplace.