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Case Study: Components of the Global Environment …
Case Study:
Components of the Global Environment
Global firms must operate within an environment that has numerous components. These components include the following:
1. Government, laws, regulations, and policies of home country (United States, for example)
Monetary and fiscal policies and their effect on price trends, interest rates, economic growth, and stability
Balance-of-payments policies
Mandatory controls on direct investment
Interest equalization tax and other policies
Commercial policies, especially tariffs, quantitative im-port restrictions, and voluntary import controls
Export controls and other restrictions on trade
Tax policies and their impact on overseas business
Antitrust regulations, their administration, and their impact on international business
Investment guarantees, investment surveys, and other programs to encourage private investments in less-developed countries
Export-import and government export expansion programs
Other changes in government policy that affect international business
2. Key political and legal parameters in foreign countries and their projection
Type of political and economic system, political philosophy, national ideology
Major political parties, their philosophies, and their policies
Stability of the government
Changes in political parties
Changes in governments
Assessment of nationalism and its possible impact on political environment and legislation
Assessment of political vulnerability
Possibilities of expropriation
Unfavorable and discriminatory national legislation and tax laws
Labor laws and problems
Favorable political aspects
Tax and other concessions to encourage foreign investments
Credit and other guarantees
Differences in legal system and commercial law
Jurisdiction in legal disputes
Antitrust laws and rules of competition
Arbitration clauses and their enforcement
Protection of patents, trademarks, brand names, and other industrial property rights
3. Key economic parameters and their projection
Population and its distribution by age groups, density, annual percentage increase, percentage of working age, percentage of total in agriculture, and percentage in urban centers
Level of economic development and industrialization
Gross national product, gross domestic product, or national income in real terms and also on a per capita basis in recent years and projections over future planning period
Distribution of personal income
Measures of price stability and inflation, wholesale price index, consumer price index, other price indexes
Supply of labor, wage rates
Balance-of-payments equilibrium or disequilibrium, level of international monetary reserves, and balance-of-payments policies
Trends in exchange rates, currency stability, evaluation of possibility of depreciation of currency
Tariffs, quantitative restrictions, export controls, border taxes, exchange controls, state trading, and other entry barriers to foreign trade
Monetary, fiscal, and tax policies
Exchange controls and other restrictions on capital movements, repatriation of capital, and remission of earnings
4. Business system and structure
Prevailing business philosophy: mixed capitalism, planned economy, state socialism
Major types of industry and economic activities
Numbers, size, and types of firms, including legal forms of business
Organization: proprietorships, partnerships, limited companies, corporations, cooperatives, state enterprises
Local ownership patterns: public and privately held corporations, family-owned enterprises
Domestic and foreign patterns of ownership in major industries
Business managers available: their education, training, experience, career patterns, attitudes, and reputations
Business associations and chambers of commerce and their influence
Business codes, both formal and informal
Marketing institutions: distributors, agents, wholesalers, retailers, advertising agencies, advertising media, marketing research, and other consultants
Financial and other business institutions: commercial and investment banks, other financial institutions, capital markets, money markets, foreign exchange dealers, insurance firms, engineering companies
Managerial processes and practices with respect to planning, administration, operations, accounting, budgeting, and control
5. Social and cultural parameters and their projections
Literacy and educational levels
Business, economic, technical, and other specialized education available
Language and cultural characteristics
Class structure and mobility
Religious, racial, and national characteristics
Degree of urbanization and rural-urban shifts
Strength of nationalistic sentiment
Rate of social change
Impact of nationalism on social and institutional change
Read “Components of the Global Environment” .
Select a country or trading zone and prepare an analysis using the model.
Choose a country. Include:
a. Brief Overview (Components of the Global Environment).
b. Government Laws, Regulations, and Policies.
c. Key Political and Legal Parameters.
d. Key Economic Parameters and their Projection.
e. Business System and Structure.
f. Social and Cultural Parameters and Their Projections.
g. Reference section .
