IFT:

Foreign trade of India. Foreign trade in Indiaincludes all imports and exports to and from India. At the level of Central
Government it is administered by the Ministry of Commerce and Industry. Foreign tradeaccounted for 48.8% of India's GDP in
2015.

dvantages:

1. Optimal use of natural resources:

Foreign trade helps each country to make optimum use of its natural resources. Each country can concentrate on production of

those goods for which its resources are best suited. Wastage of resources is avoided.

ADVERTISEMENTS:

2. Availability of all type of goods:

It enables a country to obtain goods, which it cannot produce or which it is not producing due to higher costs, by importing from

other countries at lower costs.

3. Specialisation:

ADVERTISEMENTS:

Foreign trade leads to specialization and encourages production of different good in different countries. Goods can be

produced at comparatively low cost due to advantages of division of labour.

4. Advantages of large-scale production:

Due to foreign trade, goods are produced not only for home consumption but for exports to other countries also. Nations of the

world can dispose of goods which they have in surplus in the foreign markets. This leads to production at large- scale and the

advantages of large-scale production can be obtained by all the countries of the world.

5. Stability in prices:

ADVERTISEMENTS:

Foreign trade irons out wild, fluctuations in prices. It equalizes the prices of goods throughout the world (ignoring cost of

transportation etc.).

6. Exchange of technical know-how and establishment of new industries:

Underdeveloped countries can establish and develop new industries with the machinery equipment and technical know-how

imported from developed countries. This helps in the development of these countries and the economy of the world at large.

7. Increase in efficiency:

Due to the foreign competition the producers in a country attempt to produce better quality of goods and at the minimum

possible cost. This increases the efficiency and benefits the consumers all over the world.

8. Development of the means of transport and communications:

Foreign trade requires the best means of transport and communication. For the advantages of foreign trade development in the

means of transport and communication is also made possible.

9. International co-operation and understanding:

The people of different countries come in contact with each other. Commercial intercourse amongst nations of the world

encourages exchange of ideas and culture. It creates co-operation, understanding and cordial relations amongst various

nations.

10. Ability to face natural calamities:

Natural calamities such as drought, floods, famine, earthquake etc., affect the production of a country adversely. Deficiency in

the supply of goods at the times of such natural calamities can be met by imports from other countries.

11. Other advantages:

Foreign trade helps in many other ways such as benefits to consumers, international peace and better standard of living.

Disadvantages:

The important disadvantages of foreign trade that you might not know are listed below:

1. Impediment in the Development of Home Industries:

Foreign trade has an adverse effect on the development of home industries. It poses a threat to the survival of infant industries

at home.

Due to foreign competition and unrestricted imports the upcoming industries in the country may collapse.

2. Economic Dependence:

The underdeveloped countries have to depend upon the developed ones for their economic development. Such reliance often-

leads to economic exploitation. For, instance most of the underdeveloped countries in Africa and Asia have been exploited by

European countries.

3. Political Dependence:

Foreign trade often encourages subjugation and slavery. It impairs economic independence which endangers political

dependence. For example, the Britishers came to India as traders and ultimately ruled over India for a very long time.

4. Mis-utilisation of Natural resources:

Excessive exports may exhaust the natural resources of a country in a shorter span of time than it would have been otherwise.

This will cause economic downfall of the country in the long run.

5. Import of Harmful Goods:

Import of spurious drugs, Luxury articles, etc. adversely affects the economy and well being of the people.
6. Storage of Goods:

Sometimes the essential commodities required in a country and in short supply are also exported to earn foreign exchange.

This results in shortage of these goods at home and cause inflation. For example, India has been exporting sugar to earn

foreign exchange; hence the exalting prices of sugar in the country.

7. Danger to Internal Peace:

Foreign trade gives an opportunity to foreign agents to settle down in the country which ultimately endangers its internal peace.

8. World Wars:

Foreign trade breeds rivalries amongst nations due to competition in the foreign markets. This may event fully lead to wars and

disturbs world peace.

9. Hardships in times of wars:

Foreign trade promotes lopsided development of a country as only those goods which have comparative cost advantage are

produced in a country. During wars or when good relations do not prevail between nations, many hardships may follow.

What is Foreign Direct Investment (FDI)?

Foreign direct investment (FDI) is an investment made by a firm or individual in one country into business interests located in
another country. Generally, FDI takes place when an investor establishes foreign business operations or acquires foreign
business assets, including establishing ownership or controlling interest in a foreign company. Foreign direct investments are
distinguished from portfolio investments in which an investor merely purchases equities of foreign-based companies.

Bnefits of fdi:

List of Advantages of Foreign Direct Investment

1. Economic Development Stimulation.

Foreign direct investment can stimulate the target country’s economic development, creating a more conducive environment for
you as the investor and benefits for the local industry.
2. Easy International Trade.
Commonly, a country has its own import tariff, and this is one of the reasons why trading with it is quite difficult. Also, there are
industries that usually require their presence in the international markets to ensure their sales and goals will be completely met.
With FDI, all these will be made easier.
3. Employment and Economic Boost.
Foreign direct investment creates new jobs, as investors build new companies in the target country, create new opportunities.
This leads to an increase in income and more buying power to the people, which in turn leads to an economic boost.
4. Development of Human Capital Resources.
One big advantage brought about by FDI is the development of human capital resources, which is also often understated as it
is not immediately apparent. Human capital is the competence and knowledge of those able to perform labor, more known to us
as the workforce. The attributes gained by training and sharing experience would increase the education and overall human
capital of a country. Its resource is not a tangible asset that is owned by companies, but instead something that is on loan. With
this in mind, a country with FDI can benefit greatly by developing its human resources while maintaining ownership.
5. Tax Incentives.
Parent enterprises would also provide foreign direct investment to get additional expertise, technology and products. As the
foreign investor, you can receive tax incentives that will be highly useful in your selected field of business.
6. Resource Transfer.
Foreign direct investment will allow resource transfer and other exchanges of knowledge, where various countries are given
access to new technologies and skills.
7. Reduced Disparity Between Revenues and Costs.
Foreign direct investment can reduce the disparity between revenues and costs. With such, countries will be able to make sure
that production costs will be the same and can be sold easily.
8. Increased Productivity.
The facilities and equipment provided by foreign investors can increase a workforce’s productivity in the target country.
9. Increment in Income.
Another big advantage of foreign direct investment is the increase of the target country’s income. With more jobs and higher
wages, the national income normally increases. As a result, economic growth is spurred. Take note that larger corporations
would usually offer higher salary levels than what you would normally find in the target country, which can lead to increment in
income.
List of Disadvantages of Foreign Direct Investment

1. Hindrance to Domestic Investment.

As it focuses its resources elsewhere other than the investor’s home country, foreign direct investment can sometimes hinder
domestic investment.
2. Risk from Political Changes.
Because political issues in other countries can instantly change, foreign direct investment is very risky. Plus, most of the risk
factors that you are going to experience are extremely high.
3. Negative Influence on Exchange Rates.
Foreign direct investments can occasionally affect exchange rates to the advantage of one country and the detriment of
another.
4. Higher Costs.
If you invest in some foreign countries, you might notice that it is more expensive than when you export goods. So, it is very
imperative to prepare sufficient money to set up your operations.
5. Economic Non-Viability.
Considering that foreign direct investments may be capital-intensive from the point of view of the investor, it can sometimes be
very risky or economically non-viable.
6. Expropriation.
Remember that political changes can also lead to expropriation, which is a scenario where the government will have control
over your property and assets.
7. Negative Impact on the Country’s Investment.
The rules that govern foreign exchange rates and direct investments might negatively have an impact on the investing country.
Investment may be banned in some foreign markets, which means that it is impossible to pursue an inviting opportunity.
8. Modern-Day Economic Colonialism.
Many third-world countries, or at least those with history of colonialism, worry that foreign direct investment would result in
some kind of modern day economic colonialism, which exposes host countries and leave them vulnerable to foreign
companies’ exploitations.

BOP:

he balance of payments (BOP), also known as balance of international payments, summarizes all transactions that a country's
individuals, companies and government bodies complete with individuals, companies and government bodies outside the
country. These transactions consist of imports and exports of goods, services and capital, as well as transfer payments, such
as foreign aid and remittances.

Components of bop:
Current Account
The four major components of current account are as follows:

1. Visible trade – This is the net of export and imports of goods (visible items). The balance of this visible trade is
known as the trade balance. There is a trade deficit when imports are higher than exports and a trade surplus when
exports are higher than imports.
2. Invisible trade – This is the net of exports and imports of services (invisible items). Transactions mainly constitute of
shipping, IT, banking and insurance services.
3. Unilateral transfers to and from abroad – These refer to payments that are not factor payments. These are ‘one-
way’ transactions. For examples, gifts or donations sent to the resident of a country by a non-resident relative.
4. Income receipts and payments – These include factor payments and receipts. These are generally rent on the
property, interest on capital and profits on investments.

Capital Account
The capital account is used to finance the deficit in the current account or absorb the surplus in the current account. The three
major components of capital account:

1. Loans to and borrowings from abroad – These consist of all loans and borrowings given to or received from
abroad. It includes both private sector loans as well as the public sector loans.
2. Investments to/from abroad – These are investments made by nonresidents in shares in the home country or
investment in real estate in any other country.
 3. Changes in foreign exchange reserves – Foreign exchange reserves are maintained by the central bank to control
the exchange rate and ultimately balance the BOP if it is not.

current account deficit is financed by a surplus in the capital account and vice versa. This can be done by borrowing more
money from abroad or lending more monets.
Biggest Challenges of International Business in 2017
From the U.K.’s unprecedented decision to leave the European Union to the historic and divisive U.S. presidential election, 2016 was a year
of large-scale change and uncertainty. Nowhere, perhaps, was it felt more keenly than in the world of international
business. Political, economic, and environmental issues are increasingly becoming the remit of international business leaders as much as
governments.

At Hult, our aim is to prepare our students to become the next generation of global business leaders, embracing the opportunities and
challenges of international business. While the global marketplace becomes more interconnected and accessible, the risks involved in
doing business abroad are not to be taken lightly.

Expanding business overseas means reaching new clients or customers and potentially boosting profits. Despite all the uncertainty of
2017 and the challenges that have yet to reveal themselves, there are some guidelines for conducting business on a global scale that you
should always consider before leaping into new international operations. Here is our advice on how to tackle the 11 biggest challenges for
international business:

 International company structure

If your aim is to be competitive globally, you must have a team in place that’s up for the challenge. One fundamental consideration is the
structure of your organization and the location of your teams.

For instance, will your company be run from one central headquarters? Or will you have offices and representatives “on the ground” in
key markets abroad? If so, how will these teams be organized, what autonomy will they have, and how will they coordinate working across
time zones? If not, will you consider hiring local market experts who understand the culture of your target markets, but will work centrally?

Coca-Cola offers one example of effective multinational business structure. The company is organized into continental groups, each
overseen by a President. The central Presidents manage Presidents of smaller, country-based or regional subdivisions. Despite its diverse
global presence, the Coca-Cola brand and product is controlled centrally and consistent around the world.

While Coca-Cola is a vast international brand, the structure of your business and the number, nationality, and level of expertise of your team
will vary depending on your industry, product, and the size of your business.

 Foreign laws and regulations

Along with getting your company structure in place, gaining a comprehensive understanding of the local laws and regulations governing
your target markets is key. From tax implications through to trading laws, navigating legal requirements is a central function for any
successful international business. Eligibility to trade is a significant consideration, as are potential tariffs and the legal costs associated
with entering new markets.

Airbnb ran into trouble in 2014, with a crackdown on advertised rental properties falling outside local housing and tourism regulations. The
company was forced to pay a €30,000 fine for a breach of local tourism laws in Barcelona.

It’s important to note that employment and labor requirements also differ by country. For instance, European countries stipulate that a
minimum of 14-weeks maternity leave be offered to employees, while on the other hand, there is no such requirement for U.S. employers.
With the complexity involved in foreign trade and employment laws, investing in knowledgeable and experienced corporate counsel can
prove invaluable.

Beyond abiding by official laws, engaging in international business often requires following other unwritten cultural guidelines. This can
prove especially challenging in emerging markets with ill-defined regulations or potential corruption. In response, companies doing business
in the United States must abide by the Foreign Corrupt Practices Act, which aims at eliminating bribery and unethical practices in
international business. A good rule of thumb is to beware of engaging in any questionable activities, which might be legal but could have
future reputational repercussions.

 International accounting

Of the main legal areas to consider when it comes to doing international business, tax compliance is perhaps the most crucial. Accounting
can present a challenge to multinational businesses who may be liable for corporation tax abroad. Different tax systems, rates, and
compliance requirements can make the accounting function of a multinational organization significantly challenging.

Accounting strategy is key to maximizing revenue, and the location where your business is registered can impact your tax liability.
Mitigating the risk of multiple layers of taxation makes good business sense for any organization trading abroad. Being aware of tax
treaties between countries where your business is trading will help to ensure you’re not paying double taxes unnecessarily.

A focus on tax efficiency is often the aim of international accounting efforts. In the European Union, companies may benefit from
the Common Consolidated Corporate Tax Base proposal, whereby companies with operations around the EU can limit tax liability to one
corporate center. Tax consolidation is a feature of several multinationals’ decision to be headquartered in Dublin, as Ireland is known for its
“business-friendly” corporate tax policy. Well-known companies with operational headquarters in the Republic of Ireland include Google,
Facebook, and Intel.

 Cost calculation and global pricing strategy

Setting the price for your products and services can present challenges when doing business overseas and should be another major
consideration of your strategy. You must consider costs to remain competitive, while still ensuring profit. Researching the prices of direct,
local-market competitors can give you a benchmark, however, it remains essential to ensure the math still works in your favor. For instance,
the cost of production and shipping, labor, marketing, and distribution, as well as your margin, must be a taken into account for your
business to be viable.

Pricing can also come down to how you choose to position your brand — should the cost of your product reflect luxury status? Or will
low prices help you to penetrate a new market? Swedish furniture giant Ikea, known in Europe for its low-cost value, struggled initially in
China due to local competitor costs of labor and production being much cheaper. By relocating production for the Chinese market and using
more locally sourced materials, the company was able to successfully cut prices to better reflect its brand and boost sales among target
consumers.

Wherever you’re looking to launch your product or service, here are four useful strategies to help you find the right price:

Source: AmericanExpress

 Universal payment methods

The proliferation of international e-commerce websites has made selling goods overseas easier and more affordable for businesses and
consumers. However, payment methods that are commonly accepted in your home market might be unavailable abroad. Determining
acceptable payment methods and ensuring secure processing must be a central consideration for businesses who seeks to trade
internationally.

Accepting well-known global payment methods through companies like Worldpay, as well as accepting local payment methods, such as
JCB in Asia or Yandex Money in Russia, can be a good option for large international businesses. Accepting wire transfers, PayPal
payments, and Bitcoin, are other possibilities, with Bitcoin users benefiting from no bank or credit card transaction fees. Despite the risk of
fluctuating value, the lack of fees is one of the reasons a number of online companies, including WordPress, the Apple App Store, Expedia,
and a number of Etsy sellers accept Bitcoin.

 Currency rates

While price setting and payment methods are major considerations, currency rate fluctuation is one of the most challenging
international business problems to navigate. Monitoring exchange rates must therefore be a central part of the strategy for all international
businesses. However, global economic volatility can make forecasting profit especially difficult, particularly when rates fluctuate at
unpredictable levels.

Major fluctuations can seriously impact the balance of business expenses and profit. For instance, if your company is paying suppliers and
production costs in U.S. dollars, but selling in markets with a weaker or more unpredictable currency, your company could end up with a
much smaller margin — or even a loss. One way to protect yourself against large fluctuations in currency is to pay suppliers and
production costs in the same currency as the one you’re selling in. This may mean switching to more local production where possible in
order to better balance your outgoings and sales revenue.

Another option for mitigating the risk of unpredictable currency rates can be setting up a forward contract and agreeing a price in advance
for future sales. Of course, this potentially means missing out on greater profit should rates shift in your favor. However, it can protect your
sales from the risk presented by unstable currency.

Learn more about six key factors that can influence currency exchange rates:

 Choosing the right global shipment methods

The potential of online sales presents a huge international business opportunity for retailers in the 21st century, but finding reliable, fast,
and cost-effective shipment and distribution methods can be a difficult balance in some markets. Depending on the volume and destination
of your shipments, will you send by land, sea, air, or a combination? Your choice of shipping method can be a major influence on your
revenue and may be a limiting factor to the products you can viably sell overseas.

Other considerations to address according to your company’s products and your target markets include customs fees, the need and cost of
storage, and local methods of distribution. There are also country-specific regulations and shipping requirements to take into account. For a
quick check of costs and compliance, UPS International has created an online tool called TradeAbility to help businesses and individuals
manage the movement of good overseas.

 Communication difficulties and cultural differences

Good communication is at the heart of effective international business strategy. However, communicating across cultures can be a very
real challenge. At Hult, developing cross-cultural competency and communication skills are a core focus inside and outside of the
classroom.

Effective communication with colleagues, clients, and customers abroad is essential for success in international business. And it’s often
more than just a language barrier you need to think about — nonverbal communication can make or break business deals too. Do your
research and know how different cultural values and norms — such as shaking hands — can and should influence the way you communicate
in a professional context. Being aware of acceptable business etiquette abroad, and how things like religious and cultural traditions can
influence this, will help you to better navigate potential communication problems in international business.

Discover the subtle nuances of body language for different countries and nationalities you may be doing business with:

Source: BusinessInsider

“Hult gave me an opportunity to open my mind towards the world. It helped me gain perspective towards people from different countries
such that I can go to any country and start working without any culture shock.” –Mayur Chimurkar, MBA Class of 2014
Cultural differences can also influence market demand for your product or service. The need your business may address at home may
already be met or not exist at all overseas. Local market insight is key, and there are a number of successful brands whose business models
simply weren’t viable in overseas markets. For instance, American coffee company Starbucks seriously struggled in Australia, where the
demand for local, independent cafes and coffee shops vastly outweighed the appeal of the corporate giant.

Small practical considerations can also be easily overlooked, such as creating quality translations of product and marketing materials, and
even ensuring your brand name works well abroad. A number of well-known companies have had to consider adapting the names of their
brand or product when launching in a foreign market. The Chevrolet Nova is perhaps the most commonly cited example, where “no va”
literally translates to “no go” in Spanish—not the best product name for a car. Although slumping sales figures in Latin America have
proven to be an urban legend, the story of the “no go” car serves as a useful reminder of the importance of preparing well before launching
your business in a new market.

 Political risks

An obvious risk for international business is political uncertainty and instability. Countries and emerging markets that may offer
considerable opportunities for expanding global businesses may also pose challenges, which more established markets do not. Before
considering expansion into a new or unknown market, a risk assessment of the economic and political landscape is critical.

Issues such as ill-defined or unstable policies and corrupt practices can be hugely problematic in emerging markets. Changes in governments
can bring changes in policy, regulations, and interest rates that can prove damaging to foreign business and investment.

A growing trend towards economic nationalism also makes the current global political landscape potentially hostile towards international
businesses. For instance, companies like Facebook are banned in China, partially in preference for national social networks and also due to
government regulation over internet content. Monitoring political developments and planning accordingly can mitigate political risks of
doing business abroad.

 Supply chain complexity and risks of labor exploitation

When it comes to sourcing products and services from overseas, managing suppliers and supply chains can also be a tricky process.
Unfortunately, the length and complexity of supply chains increases the chance of working with suppliers who have unethical — and even
illegal — business practices. Of growing concern is the risk in international business of forced labor and worker exploitation.

International Business Opportunities

However, for you to join the international business, you have to be well informed and ready to take risks. There are varied entry-
level jobs available today depending on experience and field of interest. International business opportunities & trends reveal
that companies prefer the employees to be fully trained in the domestic operations before they send them abroad. Size of the
firm, geographic location, and qualifications of the employee are some the deciding factor of the salary package.

Each year, billions of dollars in goods and services are exchanged in global business opportunities. Although there are very
many different ways to get involved in business on an international level, the global international opportunities and trends
reveal a few of the more popular ones. Read on to see some of the best international business ideas and opportunities.

1. Export and Import

Buying goods overseas and selling domestic products abroad is one amongst the oldest ways of doing international business. If
you are thinking of starting an import-export business, be aware that there is a lot of preparation involved. This business is a
potentially lucrative business.

The success of the business depends on a company’s ability to properly set up the business and keeping within the trade
guidelines in your country and the countries you plan to import or export goods for profit. Also, make sure there no trade
barriers or embargoes set up against any of the countries you plan to work with.

2. Licensing
Licensing, in the business world, is the contractual agreement to use brand name, property or patent owned by another
company. Take a good example, a greeting-card company can get the license to use some images of 'The Simpsons’ or 'Hannah
Montana’ characters on greetings cards.

When a company enters into any licensing agreement to use certain celebrity, property or characters, they become the licensee.
The licensing agreement is then structured, stipulating all terms, conditions and the fees to use certain names & images on the
products. Keep in mind that you have to follow the right licensing agreement to do your business abroad. There are plenty of
companies who are not only too happy to sort out all your legal issues in foreign lands while doing your business.

3. Franchising
Franchise is the business that actually operates under a certain existing brand name. Very many popular companies are
franchises including H&R Block and McDonald’s. When you open a franchise, you gain instant brand & name recognition,
advertising, employee training, and marketing. A franchise opportunity allows many companies to expand their locations and
still maintain their own brand control. In most cases, these products include services, products, formulas, employee training,
pricing and overall look of a business. Basically, franchise is a common and a great way to expand your business abroad.

4. Outsourcing
Outsourcing is when a company uses a 3rd party to carry out some of its work. Potential benefits of outsourcing include lower
costs, access to great skills and experience and more efficient scaling of a company’s own business activities. As the domestic
labor costs are quite high in countries like US, the companies get their products manufactured in other countries where labor
costs are cheaper. The international contract manufacturing is another of the most common international business
opportunities.

When a country outsources the manufacture of some products to countries like China, this results in lower prices of products.
This creates an ideal marketplace where producers of similar products must also look for cheaper and efficient methods of
manufacturing.

multinational companies:

A multinational company is a business that operates in many different countries at the same time. In other words, it's
a company that has business activities in more than one country. Today's international markets are almost unavoidable even
for smaller companies.

Advantages of Multinational Company

(1) Marketing Opportunity: Multinational company have big market available in different countries. They have the
necessary skill and expertise to sell their products at international level. Any company can enter into a joint venture
with a foreign company to sell its products in the international market.

(2) Research and Development: The resources and experience of multinational companies in the field of research
enable the host country to establish efficient research and development system. This helps host country to produce
quality products at least possible cost.

(3) Export Promotion: Multinational company helps developing countries in earning foreign exchanges. These
companies can supply necessary raw materials, technology, technicians and foreign exchange to promote exports
and reduce imports.

(4) Growth of Industry: Multinational company are specialized, fast growing and dynamic, so they offer growth
opportunities for domestic industries. These companies assist local producers to enter the global markets through
their well established international network of production and marketing.

(5) Give Latest Technology: Technology plays an important role in bringing down cost of production and produce
 quality goods on a large scale. Multinational company is technologically rich. They can be of great help to bridge the
technological gap between developed and developing countries.

(6) Optimum Utilization of Resources: These companies ensures optimum utilization of natural and other
resources of the home country. The home country refers to the country in which this multinational company has its
head office. Thus, the growth of these companies is beneficial to home country.

(7) Help to Local Industries: Multinational companies provide a ready made market to domestic suppliers of raw
material or semi-finished products. In recent years many multinational company have opened their production units in
India, and most of their requirement in respect of spare parts, raw materials, etc. are being met by local suppliers.

(8) Management Opportunities: These company opens management opportunities to the management students of
the host country. They can be appointed as professional managers by multinational company and can earn
handsome salary and build reputation for the country.

(9 National Development: Multinational company assist developing countries to increase efficiency and productivity
through transfer of technology and foreign investment. It helps developing countries by providing the required
financial, technical and other resources in exchange for economic gains.

(10) Control over Monopolies: When multinational company enters in to the domestic market they compete with
existing competitors and breaks the monopoly of selected few domestic companies.

Disadvantages of Multinational Company

1) High Profit Low Risk Investment: The multinational company prefer to invest in areas of low risk and high
profitability. Issue like social welfare, national priority etc. have less priority on their agenda. Mostly they invest in
consumer goods industry.

(2) Interference in Political Matters:The multinational company from developed countries interfere in the political
affairs of developing nations. There are many cases where multinational company has bribed political leadership for
their own economic gains.

(3) Create Artificial Demand: These companies create artificial and unwarranted demand by making extensive use
of advertising and ales and promotion techniques.

(4) Exploitation: These companies are financially very strong and adopt aggressive marketing strategies to sale their
products, adopt all means to eliminate competition and create monopoly.

(5) Technological Problem: Technology they use is capital intensive so sometimes that technology does not fully fit
in the needs of developing countries. Also, multinational company is criticized for transferring outdated technology to
developing countries.

(6) Foreign Exchange go outside the Country: The working of multinational company is a burden on the limited
resources of developing countries. They charge high price in the form of commission and royalty paid by local
business subsidiary to its parent company. This leads to outflow of foreign exchange.

(7) National Threat: Sometimes outdated technology is used by domestic industries which hamper the quality and
price of their products so they cannot compete with those multinational company. Hence, there is a threat of
nationwide opposition to multinational company. Arrival of these companies creates an atmosphere of uncertainly to
the domestic industries.

(8) Impose their Culture: Multinational company impose their culture on developing countries. Along with the
products they also indirectly impose the culture of developed nations. These companies have imposed the culture of
fast food and soft drinks onto the developing nations. For examples:- burger and coke.

(9) Work for Self Interest: Multinational company work toward their own self interest rather than working for the
economic development of host country. They are more interested in marketing of profits at any cost.
International Business Environment

The (IBE) International Business Environment is multidimensional including the political risks, cultural differences, exchange

risks, legal & taxation issues. Therefore (IBE) International Business Environment comprises the political, economic,

regulatory, tax, social & cultural, legal, & technological environments.

Political Environment

The political environment refers to the type of the government, the government relationship with a business, & the political risk

in the country. Doing business internationally, therefore, implies dealing with a different type of governments, relationships, &

levels of risk.

There are many different types of political systems, for example, multi-party democracies, one-party states, constitutional

monarchies, dictatorships (military & non-military). Therefore, in analyzing the political-legal environment, an organization may

broadly consider the following aspects:

Economic Environment

The economic environment relates to all the factors that contribute to a country’s attractiveness for foreign businesses. The

economic environment can be very different from one nation to another. Countries are often divided into three main categories:

the more developed or industrialized, the less developed or third world, & the newly industrializing or emerging economies.

Within each category, there are major variations, but overall the more developed countries are the rich countries, the less

developed the poor ones, & the newly industrializing (those moving from poorer to richer). These distinctions are generally

made on the basis of the gross domestic product per capita (GDP/capita). Better education, infrastructure, & technology,

healthcare, & so on are also often associated with higher levels of economic development.

Clearly, the level of economic activity combined with education, infrastructure, & so on, as well as the degree of government

control of the economy, affect virtually all facets of doing business, & a firm needs to recognize this environment if it is to

operate successfully internationally. While analyzing the economic environment, the organization intending to enter a particular

business sector may consider the following aspects:

Technological Environment

The technological environment comprises factors related to the materials & machines used in manufacturing goods & services.

Receptivity of organizations to new technology & adoption of new technology by consumers influence decisions made in an

organization.
As firms do not have any control over the external environment, their success depends on how well they adapt to the external

environment. An important aspect of the international business environment is the level, & acceptance, of technological

innovation in different countries.

The last decades of the twentieth century saw major advances in technology, & this is continuing in the twenty-first century.

Technology often is seen as giving firms a competitive advantage; hence, firms compete for access to the newest in

technology, & international firms transfer technology to be globally competitive.

It is easier than ever for even small business plan to have a global presence thanks to the internet, which greatly grows their

exposure, their market, & their potential customer base. For the economic, political, & cultural reasons, some countries are

more accepting of technological innovations, others less accepting. In analyzing the technological environment, the

organization may consider the following aspects: