Name: Shruti Sunil Sawant

Roll No: 14308A0001

MFM
Subject: International Business
Topic: Economic and social factors and its Impact in
International Business

IMPACT OF ECONOMIC ENVIRONMENT ON

INTERNATIONAL BUSINESS:
The current state of global economy and what it is likely to
be in the near future.
Economic indicators of local economy both in present times
and what they are expected to be in the near future.
Demand dynamics for a particular product in a given market.
Supply situation of a particular product or services at a
particular time.
Situation with respect to the factors affecting the pricing of
products and services.
Degree of competitiveness in a particular market.
Likelihood of short- and long term profitability because of
multifarious factors.
Depression or resurgence of economies that result in the rise
or decline or stability in economic growth rates at global and
national levels.
Availability of foreign investment in the form of FDI and FII.
Extent of regulation and management of national economies
and financial sector by the government.
World food production levels at a particular time.
Rate of inflation in an economy.
Extent of liberalisation, globalisation, and integration with
global economy.

SOCIAL ENVIRONMENT
When a firm operates in an international business environment,
as an individual is bound by the society in which people live, it
needs to understand the importance of society. Social class is an
important part of the society. In most Western societies, these
classes are classified as upper, middle, and lower. The level of
perception of each class and their frequency of buying goods
differ from one country to another.

In countries like India perception and trends of the consumers

have been changing owing to the liberalization and the changes
in lifestyles. Another important aspect of society is the group. The
performance of groups differs in individualistic and collectivist
societies. The family is an important part of the social
environment.

It is a primary group that influences the consumption and buying

behaviour of consumers. The traditional family lifecycle has been
changing owing to the differing lifestyles. So, marketers have to
analyse these trends and bring in products that are suitable to
these changing segments. Also jobs and workplace have to be
designed according to the changing lifestyles.

Growth and movement in populations around the world are

important factors heralding social changes. Eighty percent of the
worlds population lives developing countries; by 2025 this is
likely to reach 85 percent. Two out of every five people live in
china and India. However, whilst world population is growing
framatically, the growth patterns are not consistent around the
world.

SOCIAL FACTORS AFFECTING INTERNATIONAL

BUSINESS OPERATIONS
The social environment primarily affects the strategic
management process within the organization in the areas of
mission objectives setting and decisions related to products and
markets. Major social factors considered under international
business are as follows:-

1) National Taste: - in Thailand, people prefer black shampoo;

Nestle brews different varieties of instant coffee because
people in those countries have different tastes, uncommon
in other countries. Green is the favorite color of all the Arab
countries; red is still widely used in Russia, in banners,
posters, and hoardings although communism is in no way
relevant to modern Russia.
2) Language: - Cross culture and cross border operations call
for necessary language skills, e.g. South Koreans have learnt
Indian Languages to operate in India. One can see this in
Hyundai or LG factories in India. Companies also have to
change their brand names and slogans in different countries.
In Japan, General Motors slogan body by fisher means
corpse by fisher, and Pepsi Cola slogan come alive
means come out of the grave. Prior to promoting the
brand, one has to take into account the socio-cultural
background of a specific nation and different interpretations
of a name in the local language.
3) Values and Beliefs: - It is also important for companies to
understand the significance of different designs and colors in
different countries. For example, blue is perceived as
feminine in Holland and masculine in widen.
Green is

favorite color in the Muslim world, but is associated with

illness in Malaysia although it is a Muslim country. White
indicated death in china and Korea but it is the color of bridal
dresses in Europe. Red is associated with danger in many
countries but it is a favorite in Russia. Another example is
swastika, which is considered sacred in India, but has
completely different connotations in the west.
4) Demography: - A number of demographic factors such as
age, sex ratio, family size and occupation influence the
business of many companies. Different companies
concentrate on different segments. For example, Barbie
generates huge revenues through the childrens segment of
affluent countries.
5) Literacy Rate: - Countries with a high literacy rate
experience a better standard of living. Here the need is for
standardizes goods, supported by technical services. For a
country with an educated population, the amount of training
required for the staff will be far less than in the case of the
country which has a low literacy rate. This is an important
factor, as it influences the cost incurred. An argument holds
in the case of educating the consumer about the
manufactured.
6) Female Workforce: - The most spectacular change that has
taken place in the current era is the empowerment of women
throughout the world. In China, Indonesia, Russia and
Thailand, women are major contributors to the GDP. With
economic independency, women no longer have to depend
on men to make decisions about what to buy; they can make
their own decisions about whether to purchase any
consumer product or durable. Dulex, a well-known brand of
paint in Europe was promoted through campaigns directed at
women, because it was felt that women have an aesthetic
taste for colors in the household paint segment. The
performance of the iPod of Apple hit the roof in terms of
revenue generation due to female customers. The female

workforce is very strong in various sectors in many

countries. For example, Indian women in IT-enabled
services and handicrafts, Chinese women in the soft toys and
ceramics and Indonesian women
in garments and
paperwork, who have brought great success to their
countries.
7) Double Income Families: - As the household income
increases, the demand for the number of products increases
proportionately. This is especially true for packaged food
items, electronic gadgets, household appliances, health
equipment, Japanese entertainment electronics and French
perfumes dominate in the whole of Europe and North
America. Pizza Express, McDonald and Kentucky Fried
Chicken invariably rule the households of double income
families throughout the world.
8) Impulse Buying: - Benefit-oriented buying is taking place
everywhere. Pre-planned shopping and scheduled purchases
are gradually going away. Throughout the world, people
need instant items. They see, ask and by. It is a major
challenge to international businessmen to provide benefits to
lure impulse buying.