Question

Explain various economic and financial environment which influence
international business with examples.

Answer 1

Answer:

International business decisions to be taken by executive managers of multinational firms are becoming more challenging due to uncertainties in business environment which is due to fast changing and unpredictable domestic, foreign, and global environment for long term sustainability. Even though firms are cautious and take precautions while taking decisions on international investment for production and marketing, their sustainability for a long time in a given business is shaking due to continuous changes in domestic, foreign, and global business environment. This is mainly due to variations in economic conditions, political scenarios, socio-cultural environment, technological breakthroughs, legal aspects and human behavioural effects on opportunities and challenges on the international business performance of multinational firms. In this paper, we have studied in brief, the various domestic, foreign, and global environmental issues which affects the multinational firm’s business decisions related to international investments and marketing. The paper also discusses the impact of the domestic environment, foreign environment, and global environment on economical, political, technological, legal, and cultural issues on investment and expansion decisions of multinational corporations in general.

Answer 2

The economic and financial environment which influence the transactions that happen all over the world refer as the International Business.

Step by step explanation:

• These transactions comprise the transfer of goods & services, managerial knowledge, technology, and capital to other countries.

• International business involves import and export.

• The economic environments which influence the international business are Demand and Supply, Marginal and Total Utility, Money and Banking, Economic Growth and Development, Income and Employment, Trade Cycles.

• Example of economic environments, when prices go up, the total revenue generated has a high chance to go down because there might be a decrease in demand. Assume consumer have bought around 16 pizzas for the price of 1000 rupees. But because of the increase in the price of the pizzas, the consumers may only be able to afford 10 pizzas for a higher cost of 1200 rupees.

• The financial environment which influences international business is the foreign exchange market, international monitory system, currency convertibility, international financial markets and balance of payments.

• The financial environment which influences international business is the foreign exchange market, international monitory system, currency convertibility, international financial markets and balance of payments.Example of the financial environment, fluctuation in the exchange rate of the domestic currency.