International Business

Environment
associate professor Radu
Muetescu, PhD
radu.musetescu@gmail.com

How will you get your mark at

this discipline?

Exam = oral =
questions = 60%
Seminar = 40%

open

answer

In addition, up to 1 point due to your

presence at the lectures (4 x 0.25)
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Why do we study international

business environment? Answer: John
Sloman (2008)

the core economics that you will need as a business

student + business related topics not typically covered in
an introductory economics textbook
thinking like an economist
a toolkit of concepts that can be used in a whole host of
different contexts
In this book we will be looking at the economic
environment in which firms operate and at how economics
can help in the process of business decision taking

= a body of knowledge from economics that decision makers

in business may use

Questions:
Does a businessman
economic theory?

need

to

learn

Does he need a PhD (Philosophiae Doctor)

in economics?
Can
someone
be
a
successfull
businessman without paying attention to
economic theory?
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NO! NO! YES!

Bill Gates from Microsoft
Steve Jobs from Apple
Larry Ellison from Oracle
Hundreds? Maybe!
Thousands? Not sure!

 theoretical statement = establishes an universally

valid relationship of causality between concepts (ex.
price increase for a product will lead, ceteris
paribus, to a decrease in demand) = abstract,
universal, etc.;
historical proposition = presents an event from
the past which occured in a particular setting of time
and space (ex. in 2012, Apple Inc. Launched Iphone
5 on the international market) = does not pretend to
explain why, it just transmits a piece of information;
entrepreneurial judgment = an opinion regarding
a possible future development (ex. next year,
compact car sales will grow) = about future,
speculative, implies risk
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Succesful entrepreneurship
= the ability of entrepreneurs to best serve certain
consumption desires
= entrepreneurs always allocate resources in the present in
order to get a future profit = they take over the economics
risk
there is no sure receipt for getting a profit = there is no
theory of successful entrepreneurship (a theory of how
to make money)
there are however some laws of the economic system
that the business decision makers have to pay attention =
if they choose to ignore them, the consequences can be
massive (leading to business failure) = ex. inflation,
business cycle, nationalization / expropriation, so on.
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Definitions of
international business
environment
= all the forces that influence any aspect of
the activity of an organization [Ian Brooks,
2004]
including too many dimensions will be
impossible = however, it is an iimage of the
complexity of any business environment
the need for more focus
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Limited number of dimensions

of the study of business
environment
PEST = political, economic, social and
technologic
PESTLE (STEEPLE) = political,
economic, socio-cultural, technologic,
legal and ethical (also the natural
environment)
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Initially, the concept of environment was

used in the legal dimensions (legal
environment = the core body of laws
with an impact on doing business).
Later, the awarenes that the formal /
nominal laws are not enough for
encompassing aspects with a big impact
on business: national culture, business
practices,
customs,
organizational
culture, etc.
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Some clarifications:
business environment
- an objective reality, independent, that
can be measured a significant number of
quantitative analysis and hierarchies /
comparizons at the international level (World
Economic Forum, Heritage Foundation, so
on)
- a subiective opinion,
persons / organizations

different

from
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Ease of doing business

(ranking by World Bank,
2013)
1. Singapore;
2. Hong Kong;
3. New Zeeland;
4. United States;
5. Denmark;
6. Malaysia;
7. Korea;
8. Georgia;
9. Norway;
10.United Kingdom
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We wil have explore

two fundamental
approaches:
business perspective theory of the firm and the
theory of the international firm = how firms perceive
the business environment
government perspective the theory of public
regulation there is a competition not only between
firms but also between governments in attracting
economic activity (such as Foreign Direct Investments)
governments attempt to create a business
environment which is friendly towards firms and
companies in order to reach some public objectives
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There is a common parallel / comparison

between
the business environment and the natural
environment/ecosystem

complex relationships between an entity and its

environment: supply chain (in business) versus food
chain (in nature)
the paradigm of competition = the best fit to its
environment will survive
the theory of evolution = the challenge of change
and adaptation = only those who adapt will be able
to survive
no single entity can unbalance the system under
normal circumstances (the law of large numbers)
the alien = either dissappears or becomes hugely
successful (invasive species)
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rabbits = an invasive specie in

Australia

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Any metaphor has its limits:

social actors (firms, non-governmental
organizations, so on) have the ability to
take the initiative to change the
environment social actors are not only
reactive but also constructive =
activities such as Public Relations,
lobby and advocacy
human beings always surprise themselves
and the others by the ability to arbitrate
the rules
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Dubai = 1990 versus 2003 versus

2007 (http://weburbanist.com)

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