Political environment has a major influence on creating sound investment climate. These agreements are entered into either bilaterally or in a regional grouping. The marketers must make a contingency plan in advance. influences the marketing environment to a great extent in the international business. The business firms must analyze that what impact may be there of various national policies over the product and the market in foreign business. 1.0 Introduction HMV is a limited company of CDs, DVDs, Film, Music, games and Technology products. Therefore it is necessary to understand the political risks in the international business. Therefore the nature of the competition will also be different in all these categories. Any action of the national government is assumed to be a desire for the international power. Thus, business organisation must find a way to deal with it. However, every new technology replaces an old technology. The social unrest may be caused by the following types of the conflicts: (i) Domestic disputes – It is confined within the boundaries of the countries and can escalate into violence. The external environment may further be divided in two parts: The micro environment is made from individuals and organisations that are close to the company and directly impact the customer experience. For example in the United Kingdom Wal-Mart trades as ASDA. It also affects the consumer confidence, which can be observed in his buying pattern. The marketing efforts always interact with a particular culture and determine the response regarding that particular product or service. The above decisions lead to the conclusion that political environment of a country affect the international marketing activities. On the flip side, External environment is composed of those factors which are exterior to the firm. . There are variations in the levels of income and living standards, interpersonal distribution of income, economic organisation, and occupational structure and so on. There is a big challenge in front of the marketing. US companies tend not to assess what the market will be willing to pay. Some other incentives can also be obtained generally in the developing countries such as waiving of import duties on raw materials and other industrial equipments necessary for the further production of the goods and other tax concessions can also be granted in that locality where the business enterprises has been located. Language problems become even more serious once the people of a country speak several languages. It offers following types of coverage against political risks: (e) Breach of contract – The annual premium for every coverage depends upon the type of the project coverages and other terms and conditions. The macro environment includes culture, political issues, technology, the natural environment, economic issues and demographic factors amongst others. If the firm did not orient its marketing strategies in accordance with the product and market requirements, it will not be possible for the company to compete in the international business. Research and Development (R&D) has a vital role to play in increasing technological ability of a firm. Therefore the scanning of geographical environment should be carried out scientifically in the international business. “First the problem should be defined in terms of the culture of the home country. (4) The Attitude of the Government towards Foreign Direct Investment: It is important to mention here that the attitude of the government towards foreign direct investment matters very much in the international business. International Marketing Environment consists of organization’s internal factors, domestic marketing factors, and global marketing factors. It generates new ideas and also absolute some products from the market. are also considered in the cost-benefit analysis. These forms of governments are authoritarian regions. (j) Countries also differ on the accounting reporting requirements from various categories of firms. The marketers are to take in to consideration, all components of cultural environment in international business. The local contents boost the economy in two ways- (i) By encouraging demand for the domestic products (ii) By investing in local production facilities by the company can boost the local economy. The study of all relevant aspects in this regard is necessary in the international business. It is mostly used by the governments of the developing nations to regulate their hard currency balances. 5. It has a significant impact on the marketing strategies of a firm. Some might include a sixth M, which is minutes, since time is a valuable internal resource. Micro environment of business includes various internal environment factors of business firm that affects the performance and decision making of an organization. It depends upon the experience, culture, availability of qualified and experienced administrators and style of functioning of the government. The nature of the population is considered to be a basic requirement of the study. A brief summary of each political model is as under: It is assumed in the state centric model of international politics that national government seek more power in the content of its international objectives. An inability to automate production completely does not necessarily constitute a negative for multinational companies. The international problem of Sri Lanka and Nepal can be an example of such types of the disputes. The cultural forces dictate the consumption patterns, the living styles and the priorities of needs of an individual and a society as well. It also denotes certain kind of beliefs regarding the product characteristics, which are acceptable to the particular society. In this way they earn goodwill in the society also. The language can be seen as the essence of the culture without which no other aspect of culture can be truly understood. A detailed discussion of all the factor is as under: Geographical environment is determined on the basis of the analysis of various geographical units such as, neighbourhoods, cities regions, states and nations etc. Even a common language does not guarantee similarity of interpretation. It reflects the attitude of a culture which may be written or unwritten. The products, the needs and requirements of the market. Components of International Marketing Environment 3. Up-to-date knowledge about the state of technological environment is essential for the firms associated with international marketing. It is mostly prevailing in the third world countries. f. Various implications and threats of competitors. The impact of socio cultural environment on different aspects can be studied as under: (i) Impact of Socio Cultural Environment on the Consumption Pattern: It is evident that consumption pattern varies from one culture to another and one society to another. It may encourage local purchase for its raw material and other products used for its production and other operations. “The economic interest of multinational companies differs widely from the economic interest of those nations where the MNCs do business. The administrative setup of a nation largely depends upon the ruling culture of government and experience to govern the state. It must be supported by sufficient purchasing power. Economic environment. The economic advancement of a country can be characterized as under: i. The forces of supply and demand set others. It is presumed that a marketer should make his product a part of customary action of an individual. A multinational company should evaluate the political environment of a country before operating its business activities there. They are very quality conscious. These kinds of restrictions are prevailing in the Islamic culture. By competitive environment we mean the following variables: (c) Strategical weapons used by the participants. The foreign direct investments were encouraged and it transformed India into one of the most dynamic and highly potential economy in the world. Therefore the firm must monitor the following major forces, within the changing global scenario. If the estimated cost is too high, the product will be taken back to the drawing board. Disclaimer 8. Exports are relatively more profitable in comparison to the domestic sales. The products or services advertised with smiling faces may produce positive or negative reaction in the target market. An analysis of demand is also considered in this view point. Survival of the existing firms becomes very difficult. This is a very difficult task in international marketing because different nations have their different legal and other setup. Tommy Hilfiger has big brand logos on his clothes for teenagers and a little polo logos on the product of baby boomers. Such types of circumstances and social unrest always should be discouraged from international business point of view. The successful x business firms are continuously updating their products with the latest technology and requirements in the changing marketing environment globally. Micro Environment – It involves all forces which directly affect the organisation. Wal-Mart would build and nurture close relationships with key suppliers. They have high literacy, modern technology, and higher per capita incomes. For example, foreign governments can intervene in marketing programmes in the following ways: (1) Contracts for the supply and delivery of goods and services, (2) The registration and enforcement of trademarks, brand names, and labeling, (6) Product safety, acceptability, and environmental issues. Exports have become an inevitable part of any economy. Organizations hav… The U.S. market has increased their attention towards developing countries because of the said reason only. Internal Environment is generally audited by applying 5 Ms i.e. c. Incipient Demand – It refers to that kind of needs, which are likely to be emerged in future. Business refers to the collective effort of the firm in … (ii) Impact of Socio Cultural Environment on Thinking Process: The thinking process of an individual and society is influenced by the socio cultural environment. It is very difficult to make an analysis of a firm in the international business. An assessment of the government of the host country and analysis of the attitude of people of the host country is very important in the study of practical environment. It is because of the political risks. It must understand the characteristics of the buyers at different locations and to decide the product and other features accordingly. The policies of the government depend upon the form of the government governing that particular nation. The economic environment can be studied in the international prospectus as under: The macro environment of a country can be studied by taking a vast perspective. To see this page as it is meant to appear, please enable your Javascript! For example, in Canada, labels must be in both English and French. The consumer behaviour also tends to influenced by the educational level. One type of human nature belongs to those who urge to stand alone and other type of human being urge to stand together. The analysis of the opportunities concentrates on two sets of criteria, i.e. The government policies tend to change in the short run or in the long run period. This results in overcrowding of the market leading to severe competition. The demographic patterns are considered highly reliable in the short run as well as medium period of time. It depends, how a particular culture perceive regarding the particular appeal. The impact of our educational qualification can be observed from our day to day behaviour. But the U.S. government has adopted strict laws to prevent companies from becoming susceptible to the Arab blackmail.”. The eating habits of one society or culture are changing in comparison to another society or culture. An interesting example of this type of restriction is The Arab. Any international marketer, when ignored or forgot new technologies, their business has declined. Thus it is necessary to measure the consumption pattern of different societies, cultures and nations. The final aspect of the microenvironment is publics, which is any group that has an interest in or impact on the organisation’s ability to meet its goals. Excessive competition in domestic market may force a firm to increase its export operations. The people in a society organize different activities, consistent with other expectation and cultural values. The following are some forms of the governments: These types of governments are formed through regular elections. In the short run the circumstances may be unfavourable but in the long run if the perspective are there, the firm should take the opportunity of future favourable environment. An individual’s values arise from his/her moral or religious beliefs and are learned through experiences. An attempt should be made to know the financial strengths of the competitors and other strengths along with weaknesses of the competitors. Some of these factors are controllable while some are uncontrollable and require business operations to change accordingly. the long run period. Legal environments are not just based on different laws and regulations concerning businesses, these are also defined by the factors like rule of law, access to legal systems by foreigners, litigations systems etc. International marketing mix is prepared in light of this environment. Sometime an international business the local firms may not be a partner of the foreign based firms. The company must determine its future policies by evaluating the political environment deeply as the same situation may be instant and may not be real intention and attitude for the future. This type of culture is prevailing mostly in France, Spain, Asia, Japan and in middle east Arab nations. Company`s mission, vision and business objectives, Human Resources – HR department, Operations department, Accounting and Finance departments, Research and Design, Marketing Concepts – Traditional & Modern Concepts, Investment Analysis & Portfolio Management, Mutual Fund – Meaning, Types, Advantages, Mutual Funds in India, Merchant Banking – Meaning, Significance, Functions, Bank Mandate, Power of Attorney, Banker`s Lien, Right to Set-off, Garnishee Order and Attachment order, Banking Instruments & Banking Transactions, Corporate Banking – Services, Clientele, Products & Pricing, KYC – Know Your Customer – Meaning, Objectives, Norms. Copyright 10. So improvements in technology is one of the reason for increasing exports. It is for the marketing managers in an organization to make such efforts regularly for scanning the international marketing environment forces. It is including men’s and women’s sportswear, junior, Hline and Kids. In the high context culture, in most of the time the communication is indirect and most of the information are not carried in the verbal part. In the economic area and in the global perspectives the companies and consumers are increasingly affected by the international market and other forces. International Marketing environment opportunities vary among the nations. The government may impose excessive taxes on the companies operating in the international business. The level of development in a country and the nature of its economy will indicate the type of products that may be marketed in it and the marketing strategy that may be employed in it. The foreign market related factors which are relevant to the international business strategy formulation or which affect the international business are often described as the international business environment. What makes a business strategy which is successful in one market a failure in another market is often the differences in the business environment.nte In other words, the differences in the business environment may call for changes in the business strategies, i.e., there should be adaptation of the business strategy to suit the environment of the market. They should take any kind of decision about foreign business only after reaching until certain concrete conclusions. The domestic marketing environment consist of factors like growth prospects including the competition, government policies etc. Advancements in technology helps a manufacturer to produce quality products at reasonable prices. The economic environment is comprised of the following economic variables: The economic situation varies from country to country. The risk-reward analysis emphasize on the impact of various environmental factors on the marketing mix. Some of the sources can be explained as under: The business companies can transfer their political risks to the third parties by purchasing political insurance. Thus the above model must be studied from critical point of view while taking any decision in the international business. The analysis of the workforce can be carried out in this respect. Hence, it is participating in a number of RTAs which include Free Trade Agreements (FTAs); Preferential Trade Agreements (PTAs); Comprehensive Economic Cooperation Agreements (CECAs); etc. The environmental differences influence the international marketing decisions of a firm. Competitive range – It is that range of the product, which is available in the market as to compete with other similar brands in the market. Another reason for doing exports may be the social responsibility. Let’s look at an example of how the internal environment would impact a company such as Wal-Mart. It also separates the language of one nation from others. The factors discussed above can provide an estimate of the market if in depth and detailed analysis is not possible. Therefore the marketer must study all these factors before taking any decision regarding international marketing mix. In other words, a firm is surrounded by internal and external force which have a great effect on firm’s ability to maintain lasting relations with target customers. There only motive is economic in nature. Marketers generally cannot control the elements of the external environment. A company’s marketing environment consists of all the factors and forces outside marketing that affect management’s ability to develop and maintain successful transactions with its target customers – Kotler and Armstrong. If a country’s exchange rate is low compared to other countries, that country’s consumers must pay higher prices on imported goods. Internal factors are controllable which includes - organisational structure, productivity, relations … Content Guidelines 2. Competitors are also a factor in the micro environment and include companies with similar offerings for goods and services. Multinational companies may gain more in less developed companies by using international technology instead of the most advanced equipment. The successful x business firms are continuously updating their products with the latest technology and requirements in the, It is difficult to survive for those companies, which fails to see changes as an opportunity in the international business. The demographic profile of the industry is the best base to examine the competition in the international business. marketing environment consists internal and external forces. For example, in America people place a very high value on material well-being, and are much more likely to purchase status symbols than people in India. It is helpful to reduce the political risks because the host country will not be willing to destroy its relations with more than one nation in a single time. It includes product standards, packaging and product labeling etc. For example, many Communist nations desire self-sufficiency. Sometimes the problems become so difficult that the foreign firms are left with no option except to leave the business. This was possible only because of political will. It may consist of a husband and wife, couples with children, single parent families, children married couples, traditional families, non-traditional families. Key areas of business that are affected by legal environments are listed below: (a) Laws concerning employment and labour affect managing of workforce in international markets. An international firm must resort to systematic study of international marketing environment to collect the inputs of marketing decision making. India views Regional Trading Arrangements (RTA’s) as ‘building blocks’ towards the overall objective of trade liberalisation. Instead of this the company from other country start joint venture with that company. Each should be evaluated before a company makes a decision to go international. The national economic business. ii. Therefore the multinational companies are to evaluate the system very carefully by keeping in mind its interests of doing business in that particular country. A detailed discussion of all the factor is as, The geographical environment can be determined by the, The world market can be subdivided on the basis of following market. They are mainly interested in supplying retailers with the products they need. The internal environment is company-specific and includes owners, workers, machines, materials etc. Impact of Micro Economic Environment on Marketing Strategy: The micro economic view point of a firm focuses on the firm’s ability to compete in a particular product and market in the international business. Before uploading and sharing your knowledge on this site, please read the following pages: 1. It provides a firm with different alternative markets where it can sell its products. The per capita GNP in combination with population provides an estimated consuming capacity of the population. Second, the same problem is defined again, except that it is defined in terms of the cultural norms of the host country. The product can be designed specifically for each group. Marketing Environment involves forces that directly or indirectly influence an organisation’s capability to market its product successfully. It may be an effort by the government to change domestic industry. There may be the following categories of a product, which are considered in the analysis of competition: a. Citizen- action publics include environmental groups and minority groups and can question the actions of a company and put them in the public spotlight. The nationalistic spirit that exists in many nations has led them to engage in practices that have been very damaging to other countries’ marketing organisations. The process of automation does not work well in the countries like India, where job creation on the national policy. In some countries two party system is prevailing, i.e. In India, until 1991 there was closed economy and the foreign investments were discouraged. A useful tool for quickly auditing the internal environment is known as the Five Ms which are Men, Money, Machinery, Materials and Markets. In some countries the incentives are restricted to the local enterprises or with a minor foreign participation. The impact of economic environment varies in different situations and phases of the economies as well as the business. However, the Japanese do not. The political environment may have the following types- (1) Foreign (2) Domestic and (3) International political environment. It can be explained with the help of following case of a U.S. based company. So manufacturers prefer to go for exports. Every nation does have its own administrative setup. E.g. The developing nations are emerging as an important market in the international business. It is for the marketing manager to make an attempt to eliminate the effect of self-reference criterion, while investigating a phenomenon in another country. Demographic factors include structure of the population, division according to sex, age group, income group, material status, and profession, etc. The government can impose following restrictions from time to time by changing its policies: When the countries do have a problem of balance of trade then it may impose restrictions on the free use of foreign exchange. What they perceive about the foreign companies? The following are some factors which are responsible for the political instability: The social unrest is a major cause for the political unrest. Deciding whether or not to adjust its domestic marketing program is a critical issue for any organization planning to expand internationally. Such types of governments are governing in the People Republic of China, North Korea, Vietnam and Yugoslavia etc. The role of culture, family relationship, friendship, social reference groups and gender role is very important in the decision making process of an individual in a society. Prohibited Content 3. These are the people that help the company promote, sell, and distribute its products to final buyers. (iii) Multinational Investment Guarantee Agency: It was established in year 1988, with the objective to create an attractive investment climate to its member states. The change in the attitude of the government leads to change in the government policies. In developed nations it is again difficult for the multinational companies to enter in the joint venture until they don’t win the faith of the concerned government. The main factors to consider when analyzing the internal environment in marketing are: 1. By the word “environment” we understand the surroundings or conditions in which a particular activity is carried on. For instance, Six Sigma encourages identifying internal customers as a way of creating a more positive work environment. These types of dictators also hold elections as to adopt a civilian posters. The marketers also keep Lim updated with the latest changes and requirements by producing new products and innovating new technologies continuously. International marketing operations can be smoothly conducted in a country having political stability and healthy political situation. Business markets include those that buy goods and services for use in producing their own products to sell. A marketer must consider all these factors while taking any kind decisions of such kinds in the international business. Definition: Internal environment is a component of the business environment, which is composed of various elements present inside the organization, that can affect or can be affected with, the choices, activities and decisions of the organization. (e) Many countries also have different laws and regulations that affect ownership of businesses by foreigners. Punctuality and deadlines are routine business practices in the US. Americans spend large amounts of money on soap, deodorant, and mouthwash because of the value placed on personal cleanliness. That is, it is more difficult to move upward in a social structure that is rigid. Wal-Mart trades mainly in the United States but also in international markets. From this first important judgment all else follow. That’s why knowledge of cultural environment is utmost important to the international marketer. So obsolete products of the developed countries may have demand in the developing or under­developed countries. The general public can greatly affect the company as any change in their attitude, whether positive or negative, can cause sales to go up or down because the general public is often the company’s customer base and finally those who are employed within the company and deal with the organisation and construction of the company’s product. Analyzing The Marketing ENVIRONMENT 2. International marketing environment is a set of controllable (internal) and uncontrollable (external) forces or factors that affect international marketing. 3. The firm should analyze carefully the monetary policy of the country, what is the position of inflation and whether the currency of that country is strong or not etc. Also, the report shall endeavour to provide recommendations for the case study in view of the marketing issues raised. The economic environment of the home country influences international marketing, to the great extent. The marketing environment of a particular nation is also depends upon the market characteristics. In practice human nature is of two types. It further indicates that whether a firm can enter in a particular market successfully or not? (c) Maintenance standards vary from one nation to the next. It is pertinent to mention here that a company must pay its special attention towards election time. The legal system of a particular country is dictated by the one of above or more patterns. Where market-oriented company can respond to what is desired … Instead, they must understand how the external environment is changing and the impact of that change on the target market. Local publics are neighborhood and community organisations and will also question a company’s impact on the local area and the level of responsibility of their actions. Any multinational company primarily must consider the legal requirements pertaining to that competition, prices, place factor and product promotion. Unique innovation at entry level – It is mainly technical in nature. viii. It has provided a big opportunity to the business houses to do business there. It has Over 120 Stores all over the UK, offers different verities of Movies, Music, Headphones and Ipads as well. It is evident that geographical mobility always changes the habits of the consumers. These factors are uncontrollable or we can say that these are beyond the control of a company. Language differences cause many problems for marketers in designing advertising campaigns and product labels. Each is discussed in the following sections: The importance of language differences cannot be overemphasised, as there are almost 3,000 languages in the world. To produce goods and services the majority of the population is growing at an of. 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