IGNOU : MCOM : IBO 1 : UNIT 1 : Q- 1. Define international business environment. Also differentiate between micro and macro environments.

Ans.  Business is defined as a set of activities relating to industry and commerce. When these activities are performed on an international level, these can be termed as international business. Basic functions, processes and techniques of international business are essentially the same as those involved in domestic business. What is different is the environment within which these functions are performed and processes are carried out, While doing business within one's own country, one is familiar with most of the environmental factors and is readily able to cope with them. But the task of managing international business is not that easy. Because of operating in environments which are unfamiliar and different from the domestic environment, one needs to be extra careful and vigilant to these environmental differences. These variations may need adaptation for business success.

Micro and Macro Environments

Micro environment can be defined as the actors in the firm's immediate environment which directly influence the firm's decisions and operations. These include: suppliers: various market intermediaries and service organizations such as middlemen, transporters, warehouses, advertising and marketing research agencies, business consulting firms and financial institutions; competitors, customers and general public. While the customers constitute firm's market, suppliers and market intermediaries help providing the firm with inputs and assist in production and marketing processes. Competitors and general public ,also influence the way a firm conducts its business. 

Macro environment, on the other hand, consists of broader forces which affect the firm as well as other actors in the firm's micro environment. These include factors such as geographic, economic, financial, socio-cultural, political, legal, technological and ecological forces. Firms need to continuously monitor changes in these environmental forces and devise strategies to cope with them.