Difference between Small and Large Samples

Though it is difficult t draw a clear-cut line of demarcation between large and small samples it is normally agreed amongst statisticians that a sample is to be recorded as large only if its size exceeds 30. The tests of significance used for dealing with problems samples for the reason that the assumptions that we make in case of large samples do not hold good for small samples.

The assumption made while dealing with problems relating to large samples are:-

(i) The random sampling distribution of a statistic is approximately normal. and

(ii) Values given by the samples are sufficiently close to the population value and can be used in its place for calculating the standard error of the estimate. 

When conducting research, quality sampling may be characterized by the number and selection of subjects or observations. Obtaining a sample size that is appropriate in both regards is critical for many reasons. Most importantly, a large sample size is more representative of the population, limiting the influence of outliers or extreme observations. A sufficiently large sample size is also necessary to produce results among variables that are significantly different. For qualitative studies, where the goal is to “reduce the chances of discovery failure,” a large sample size broadens the range of possible data and forms a better picture for analysis.

Sample size is also important for economic and ethical reasons.  “An under-sized study can be a waste of resources for not having the capability to produce useful results, while an over-sized one uses more resources than are necessary. In an experiment involving human or animal subjects, sample size is a pivotal issue for ethical reasons. An under-sized experiment exposes the subjects to potentially harmful treatments without advancing knowledge. In an over-sized experiment, an unnecessary number of subjects are exposed to a potentially harmful treatment, or are denied a potentially beneficial one.”

Relevance of International Business Environment

As stated earlier, environment plays a vital role in the conduct of business operations. Especially in the context of international business, environment assumes critical importance as no two countries have similar environments and demand different business strategies to cope with differing business conditions. As the environment affects firms’ strategic as well as tactical decisions, it becomes imperative for the firm to have .in-depth knowledge of the domestic, foreign and global environments.

When a firm decides to enter into international business, it faces two major decision problems: one, in which market(s) to select, and second how to enter into those markets. Both these decisions are strategic in nature and are greatly influenced by the environmental forces. Firms select those countries as their target markets which have sufficient market potential. Market potential in turn depends upon geographic, economic and cultural environments prevailing in the foreign countries. Demand for fans, for instance, will be more in countries which are geographically located in hot zones and where per capita income is high enough for the people to afford purchase of fans. Besides climate and sufficient income, electricity should be available to make the fans workable. 

Once the firm identifies countries with market potentials, it needs to decide as to what mode it should use for entering into those markets. A wide range of options such as exporting, licensing franchising, joint venture or setting up wholly owned subsidiaries abroad are available to firms. Firm’s actual choice of market entry mode is influenced by a variety of environmental factors. Exporting is desirable when it is economical to produce in the home country and there are no legal restrictions on import of given product in the foreign markets. In the case of import bans or excessive costs of transportation, a firm may choose to set up its manufacturing and marketing subsidiaries abroad. But this is feasible only when foreign governments are not averse to foreign direct investment, and necessary raw materials and labour are available locally at competitive prices in the foreign countries. In countries where first condition is not fulfilled, the firm can go in for either licensing or joint venture as these entry modes are politically less objectionable.

Environmental forces play an equally important role in shaping a firm’s functional and tactical decisions. What should be the scale of production? Should the firm employ labour or capital intensive techniques? How to finance firm are foreign operations? How much to repatriate? What marketing mix should the firm use? Should it hire local persons or employ foreign nationals? What should be their compensation package? Answers to these and other questions require in-depth analysis of the prevailing environments in foreign countries. Since the environments differ, firm cannot be much successful by falling back upon its domestic decisions and practices. Firm needs to screen the foreign country environments and accordingly decide about the best course of action in each country. 

It may be pointed out here that environmental analysis is important not only for the firms entering into the foreign markets for the first time, but it is also important for the firms already in international business. Since environmental conditions change over time, firms need to continuously monitor changes in the environment and mike suitable changes in their decisions.

Domestic, Foreign and Global Environment

Another way of understanding various factors constituting international business environment is to divide the various factors into three broad groups: domestic, foreign and global environments. This classification is based on the location at which environmental actors and forces exist and operate. Look at Figure 1 .I where a schematic presentation of these three levels of environment along with their components has been shown. 

In the figure, innermost circle represents firm's business strategy and decisions with regard to production, finance, marketing, human resources and research activities. Since these strategies and decisions are made by the firm, they are called controllable. Firm can change them but ‘within the constraints of various environmental factors.

The next circle represents domestic environment and it consists of factors such as competitive structure, economic climate, and political and legal forces which are essentially uncontrollable by a firm. Besides profound effect on the firm's domestic business, these factors exert influence on the firm’s foreign market operations. Lack of domestic demand or intense competition in the domestic market, for instance, have prompted many Indian firms to plunge into international business. Export promotion measures and incentives in country have been other motivating factors for the firms to internationalise their business operations. Since these factors operate at the national level, firms are generally familiar with them and are able to readily react to them.

The third circle represents foreign environment consisting of factors like geographic and economic conditions, socio-cultural traits, political and legal forces, and technological and ecological facets prevalent in a foreign country. Because of being operative in foreign market, firms are generally not cognisant of these factors and their influence on business activities. The firm can neglect them only at the cost of losing business in the foreign h markets. The problem gets more complicated with increase in number of foreign markets in which a firm operates. Differences exist not only between domestic and foreign environments. But also among the environments prevailing in different foreign markets. Because of environmental differences, business strategies that are successful in one nation might fail miserably in other countries. Foreign market operations, therefore, require an increased sensitivity to the environmental differences and adaptation of business strategies to suit the differing market situations.

The upper most circles, viz., circle four, represents the global environment. Global environment transcends national boundaries and is not confined in its impact to just one country. Global environment exerts influence over domestic as well as foreign countries and comprises of forces like world economic conditions, international financial system, international agreements and treaties, and regional economic groupings. World-wide economic recession; international financial liquidity or stability; working of the international organisations such as World Trade Organisation (WTO), International Monetary Fund (IMF), World Bank and the United Nations Conference on Trade and Development (UNCTAD); Agreement on Textiles and Clothing (ATC); Generalised System of Preferences (GSP); International Commodity Agreements; and initiatives taken at regional levels such as European Union (EU), North American Free Trade Association (NAFTA) and Association of South East Asian Nations (ASEAN) are some of the examples of global environmental forces having world-wide or regional influences on business operations.

CONCEPT AND RELEVANCE OF INTERNATIONAL BUSINESS ENVIRONMENT

Simply speaking, environment refers to one's milieu or surrounding. In the context of a business firm, environment can be defined as various external actors and forces that surround the firm and influence its decisions and operations. The two major characteristics of the environment as pointed out by this definition are: one these actors and forces are external to. The firm, and secondly these are essentially uncontrollable. The firm can do little to change them. It has to rather learn to live with them. 

Micro and Macro Environments 

In order to gain a better understanding, let us have a look at two important classifications of environment one classification is the 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 organisations 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.

OVERVIEW OF WORLD TRADE

Trade has been one of the most buoyant international economic activities in recent period. World merchandise trade has been consistently growing at rates higher than rates of growth in global output in the nineties. The world merchandise trade grew by an average rate of 6% during the period 1990-95.

The trade growth slowed in the year 1998 as the Asian crisis deepened and its repercussions were felt increasingly outside Asia. The volume of world merchandise exports grew by 3.5% in the year 1998 after an outstanding growth rate of 10.5% in 1997. All major regions experienced a marked slowdown of their trade growth in 1998. 

Trade performance in 1998 differed widely among regions. While oil-exporting regions recorded the strongest annual value declines in merchandise exports, countries directly affected by the Asian financial crisis reported the stinger import decline. The contractionary forces of the Asian crisis and falling commodity prices were attenuated by the robustness of continued economic growth in the United States and strengthened demand in Western Europe. All regions recorded a lower export expansion in 1998 than 1997. The transition economies and the Latin America recorded the strongest export volume growth. Asia's export volume increased marginally, as the strong contraction of intra-Asian trade was only just offset by a sharp rise in extra regional flows. Western Europe's export growth remained above the global average of 3.5% and North America's export growth fell below the average.

As far as import is concerned, Western Europe, the largest regional trader, was the only region not to record a deceleration in import growth in the year 1998. Western Europe's import growth rate of 7.5% was less than the 10% rate recorded by North America, Latin America and the transition economies. The imports into Asia fell by 8.5%. The stagnation or decrease in import volumes is estimated for Africa and the Middle East. 

Services are becoming a significant component in global trade. The value of commercial services increased from US $ 1275 billion to US $ 1320 billion in 1996 to 1997. It fell down to US $ 1290 billion in the year 1998.