“Components of the Multinational Environment”

Nepal is landlocked country lies in Southern Asia, between China and India. It covers
total area of 147,181 sq. km. it is also known as country of Himalayan. Kathmandu is the capital
city of Nepal. Nepal is divided into five development region, fourteen zones and seventy-five
districts. It is land where Gautam Buddha was born and Mount Everest, the world's highest
mountain peak lies in Nepal

Government laws, regulation and policies of Nepal:

Nepal's new government has unveiled the country's first full budget in three year of $US
6.4 billion budget with spending on policies to improve power supplies and infrastructure and
increase agriculture. "The objective of this budget is to take the country towards high economic
growth, free it from poverty, and build social and infrastructural foundations for long-term
development," (Austrailia Network News, 2014) it represent 19 percent increase then previous
year.

Monetary and fiscal policy:

The target of economic growth and inflation rate were not achieved, monetary as well as
financial indicators, balance of payments (BOP) and revenue collection remained quite
encouraging in the year 2012/2013. The monetary policy for 2013/14 has been formulated based
on the analysis of domestic economic outlook as well as changes in international economic
situation. The monetary policy for 2013/14 has been formulated to support the economic growth
of 5.5 percent by making arrangement of providing adequate credit along with containing
inflation at 8 percent, and maintaining foreign exchange reserves sufficient to cover the imports
of goods and services at least for 8 months to support economic growth the bank rate, one of the
policy rates, is kept unchanged at 8 percent.
 The total population in Nepal was last recorded at 27.8 million people in 2013 and is
reported by the World Bank. The inflation rate in Nepal was recorded at 9.47 percent in April of
2014. Inflation Rate in Nepal averaged 8.38. The Gross Domestic Product (GDP) in Nepal was
worth 19.29 billion US dollars in 2013. The GDP value of Nepal represents 0.03 percent of the
world economy. The Gross Domestic Product per capita in Nepal was last recorded at 409.04 US
dollars in 2013. The Nepalese Rupee decreased to 96.20 in July from 96.28 in June of 2014. The
exchange rate of Nepalese currency with the US dollar witnessed some volatility because of a
fluctuation of Indian currency with the US dollar.. The benchmark interest rate in Nepal was last
recorded at 8 percent. Unemployment Rate in Nepal decreased to 3 percent in 2008 from 8.80
percent in 2001.

The overall BOP recorded a surplus of Rs. 52.69 billion during eleven months of 2012/13
compared to a surplus of Rs. 115.76 billion during the same period of the previous year. BOP
surplus during last two consecutive years and the resulting accumulation of foreign exchange
reserve helped to maintain external stability. Nepal recorded a trade deficit of 57106.70 Million
NPR in March of 2014. In the context of possible risk to external stability emerging from rising
trade deficit and volatility of remittance inflows, monetary management will be handled
cautiously to control unwanted monetary expansion.

According to the Department of Industry (DoI), the country acquired the FDI
commitment of Rs. 17,265 million during the review period. China occupied the first position to
pour the FDI in highest number of industries (55 industries) followed by India (15), USA (15),
South Korea (12) and Japan (9). Bipin Rajbhandari, director of the foreign investment section of
DoI informed that the increment in FDI this year was due to increased number of projects in
energy sector. (Khanal, 2014). It indicates that foreign are more interested towards the
development of Nepal and it is positive sign for Nepal to establish public partnership program.

The Minimum Wage Determination Committee has recommended the new wage
structure to the government for its final approval. For industrial workers will get a minimum
monthly salary of Rs 8,000 — a basic salary of Rs 5,100 a month and dearness allowance of Rs
2,900. Earlier, the basic salary was Rs 3,550, while the dearness allowance was 2,650. (Thapa,
2013)

Trade policy:
 No Licenses is required for exports and import of any products other than banned or
quantitatively restricted items. Nepal has adopted General Agreement on Tariff and Trade
(GATT) valuation system. Principle of lower rate of customs duty on the import of raw materials
compared to finished goods is in use. The foreign company can do import and export business
easily. There are different fee for different good that is import form various country/region.
Export is generally free of duty and No licensees required for exports of any product other than
banned or quantitatively restricted items. Exports in Nepal decreased to 7225.40 Million NPR in
March of 2014 from 8009.10 Million NPR in February of 2014 and Imports in Nepal decreased
to 64332.10 Million NPR in March of 2014 from 65160 Million NPR in February of 2014. Some
of banned items are conserved wildlife articles, national treasurer, and other animal transaction.
Some goods are also banned to import like used in production of arms and ammunition, Guns
and cartridges, Arms and ammunitions, and other explosives, and nay beef product. It motivates
the business man to do business. Every company in Nepal must register in VAT office to operate
Value Added Tax is collected at every (manufacturing, distribution, wholesale and retail) stage
of selling goods and services. The VAT level is 13%. But Nepal government makes free of tax in
some good like agriculture goods, educational goods, health service etc.

Political factor:

In Nepal CA Election 2013 was held on 19 November 2013. Constitution of Nepal is

multi-party system. In the CA election there are 121 political party present among them the most
powerful three political party are: Nepal Communist Party (CPN UML), Unified Nepal
Communist Party (Maoist) and Nepali Congress Party (NCP). There are 601 parliament member
in constitution. Nepal transited to become a republic in 2008, expectations emerged that the new
democracy would bring era of peace, stability, and development, whereas now it is struggling
with sickening democracy. There is no stability in political situation of Nepal. Every party are
contingent in their own problem, and government are changing so frequently. It doesn’t helping
in foreign investment. A number of factors such as lack of foresights, narrow visions, and petty
politics have made the political parties almost defunct to execute the critical role that the history
of Nepal has offered to them. Growing lack of trust and cooperation among these political parties
has been putting off the process of institutionalizing the nascent republican system and economic
development at all. Experience so far has showed that these political parties unit only when they
are in opposition, but they bicker when they are in power (Shrestha, n.d.). Political instability is a
feature of transition that exactly Nepal facing today.

Nepali congress party: Nepali Congress is a democratic political party of Nepal. It is also one
of larget parties of Nepal, who ruled the government several years. It is a party with long history.
Nepali Congress emerges largest party in parliament. Nepali congress won 196 seat in recent
election. The leader of Nepali congress Sushil Koiralia is present prime minister of Nepal. The
president of Nepal is Ram Baran Yadav since 2008

The objective of Nepali congress is: establishment of democratic socialism through the
protection and promotion of nationalism

The Communist Party of Nepal (Unified Marxist–Leninist), also known as CPN–

UML, CPN (UML), is one of the largest communist in Nepal. Khadga Prasad Sharma
Oli commonly known as KP Oli is the current chairman of Communist Party of Nepal. The
Communist Party of Nepal (Unified Marxist-Leninist) won a combined total of 175 seats.

The Communist Party of Nepal-Maoist (CPN-M) was formed in 1995 following a split
in the Communist Party of Nepal-Unity Centre. CPN-M is ledaing by Pushpa Kamal Dahal. The
United Communist Party of Nepal (Maoist), which was the largest in the previous parliament,
won 80 seats. Their philosophy is “Political power grows out of the barrel of a gun”

Commercial laws

Most commercial laws of Nepal are based on the common law system so as the legal
system of Nepal. Commercial laws were mainly introduced in the 1930s, during Second World
War. Later on 2005 (Ashwin 23, 2062 BS), Companies Ordinance, 2005 had been introduced to
repeal forthwith the legislation relating to companies in order to bring “dynamism in the
economic development of the country by promoting investments in the industrial, commercial
and business sectors through the process of economic liberalization, and further simplify and
make more convenient and transparent the processes of establishing, managing and
administering companies” [5] . It contained 21 chapters and 188 Sections and addressed almost
all provisions comprising to the objectives mentioned in the preamble. It was a new Nepalese
company laws legal framework. The Company Act, 2063 has been promulgated on 2006 (Kartik
24, 2063 BS) [6] for obtaining the main purposes. It is the prevailing law of the country. This
Act has comprised almost all contemporary aspects of modern business. Therefore, it can be said
that the country has come to the age of modern legal framework.

Courts system in Nepal

The Constitution provides three tiers of Court which include the Supreme Court of the
Kingdom of Nepal, the Court of Appeal and the District Courts. District Court is the Court of
first instance upon which Court of Appeal hear appeal. In addition to these regular courts there is
provision in constitution to establish special types of courts or tribunals for the purpose of
hearing special types of cases by the law. According to these provision there are four Revenue
Tribunals, one Administrative Court, one Labor Court and one special court are functioning
under the respective laws. These institutions are under the judicial control of the Supreme Court.

Intellectual property law

Nepal is a member of the Paris Convention for the protection of Industrial Property as of
2001; hence an applicant can claim priority of up to six months as per the convention. Due to the
lack of awareness and skilled workforce Nepal are behind to make file to protect intellectual
property right. Just one patent was registered in the fiscal year 2069/70 and two in 2068/69.
There are some few patent are register in Nepal by foreign company. Because of due to lack of
clear laws and a separate regulatory body for regulation of all kinds of intellectual property
rights.

Economic performance

Because of political instability, unfavorable monsoon, a shortage of chemical fertilizers,

and the delay in introducing a full budget GDP growth remain to 3.6% in FY 2013 (ended 15
July 2013). Agricultural output growth is 1.3%, 6% on improvements in wholesale and retail
trade and in hotels and restaurants. Industry investment is not growing so much because of
electricity shortages, labor disputes, and political uncertainty soured the investment climate. The
inflation rate in Nepal was recorded at 9.47 percent in April of 2014. The overall budget balance
turned from deficits in recent years to a surplus equal to 0.4% of GDP. Exports declined by 2.9%
as demand slowed and supply side constraints hurt competitiveness. Merchandise imports grew
by 10.9%—largely because reliance on imports to meet domestic demand continued to intensify
despite the weakening of Nepalese rupee, and demand for petroleum products rose—pushing the
trade deficit up to 27.1% of GDP. Growth of remittance inflows eased to 11.3% after the large
26.6% expansion in the previous year, yet remittances still amounted to 25.6% of GDP. The
overall balance of payments surplus moderated to $786.5 million, and foreign exchange reserves
increased to $5.6 billion, equivalent to 9.3 months of imports of goods and services.

Economic prospects

The successful second Constituent Assembly election in November 2013, the successful
political transition to a new government has boosted business and investor confidence. Taking
into account the favorable monsoon, more rapid growth of remittance inflows, and the timely
introduction of a full budget—and assuming political stability—GDP is projected to grow by
4.5% in FY 2014, The balance of payments is expected to remain strong in FY2014. Exports are
projected to increase by 3.0%, reflecting improving external demand and the gain in cost
competitiveness owing to currency depreciation. Imports are projected to grow by 15% on the
back of an upturn in domestic demand. The financial sector is stabilizing after the earlier
excessive credit expansion and the subsequent break in the real estate boom in FY2011.

Policy challenge—taming high inflation

Average inflation has surpassed 9% in each of the past 5 years except for FY2012, when
it was only slightly less. Inflation at 12.6% in FY2009

Inflation in Nepal tends to move in tandem with inflation in India, which is Nepal’s
largest trading partner and with whose currency. Nepal has pegged its rupee. According to a
study by the International Monetary Fund, inflation in India and international oil price
movements account for about one-third of the variability in Nepal’s inflation.
Other factors that have driven inflation in recent years are weak currency, wage pressures, and
supply-side constraints. The depreciation of the Nepalese rupee against the currencies of its trade
partners has inflated costs not only for final goods but also for imported raw materials and
intermediate goods. Furthermore, 161 products, mostly industrial raw materials, are imported
from India in exchange for US dollars. Supply-side constraints such as power outages,
transportation bottlenecks, and market price distortions imposed by middlemen and syndicates
have also played major roles in keeping inflation high.

Business system and structure

Nepal in developing country and Nepal started way of industrialization, and

commercialization. In Nepal highly 'top down' approach of planning is commonly practice.
Decision making is highly centralized in public enterprises and private enterprises because of
political appointment in that area. Business organization usually adopt functional organization
structure. The authority are mostly lies on top management level and there is only public
enterprises who practice participative approach.

Nepal economy is an agricultural economy. Most of the people are depend in the
agriculture and government are motivating public through different policy and program. In
recent years, the country's efforts to expand into manufacturing industries and other
technological sectors have achieved much progress. The other main economic activities are
manufacturing, trade and tourism. The main sources of foreign currency earnings are
merchandise export, services, tourism and remittances.

Nepalese Chambers of Commerce and Industry (FNCCI) is an umbrella organization of the

Nepalese private sector. FNCCI is the member of the various international organizations.
Following are the main services being provided by FNCCI:
 It regulate and represent entire business community of the country in national and
international forums. It promote foreign investment in Nepal and more focus on exports. It
facilitate expertise and makes participation on national and international trade fairs. The main
responsibility if to promote business relationship and to provide necessary information. It
Conduct regular basis, trainings, workshops, seminars on chamber management, publication,
information exchange, documentation, industrial relation, productivity, entrepreneurship, quality
management, environment etc.

Business ethic in Nepal

Though over 100 business companies have made a commitment towards the Business
Code of Conduct (CoC) which was introduced by the National Business Initiative (NBI) last
week in the Capital, implementation of such a self-abiding code will not be an easy task. The
Federation of Nepalese Chambers of Commerce and Industry (FNCCI), the Birjung Chamber of
Commerce and Industry (BCCI), Hotel Association Nepal (HAN), Nepal Gas Dealers’
Association (NGDA), and Nepal Association of Foreign Employment Agencies (NAFEA) are
some of the leading business associations that have endorsed the CoC. A recently conducted
survey of Kathmandu-based companies entitled ‘Ethical Business Practice in Nepal’ by NBI has
found only 7 per cent of the companies following business ethics, while 41 per cent of the
sample were found weak in this. Likewise, 52 per cent of the sample was found to have
attempted to implement the CoC and partially following it (Ghimire, n.d.). There are doubts as to
whether companies will duly follow the provisions stated in the CoC at a time when there are
allegations upon some of them that they are flouting the business laws of the country. Some
member companies of the associations that endorsed the CoC have come under the government’s
scanner for their unscrupulous deeds. In Nepal business ethics are being very hot topic and
regulator are regulating timely to the business houses and they are punishing who violating the
business ethics.
Marketing institutions

Marketing institutions can be considered to embrace a wide range of organizations,

including associations of farmers, traders, and others in the value chain, as well as cooperatives
and government marketing agencies. There are number of distributor and Retailers Company for
each industry. Around the country there are so many retailers that business make happen.

According to American Marketing Association, ‘Advertising is any form of non-personal

presentation and promotion of ideas, goods and services usually paid for by an identified
sponsor. There are number of electronica and non-electronic form of advertisement media. We
can advertise through daily newspaper or through online page. Every business company have
their own pages where they can promote their business.

Some of Advertisement agency are: Bust of Marketing and Pvt.Ltd.,Trikon Advertising

Service. Okash Pvt. Ltd, Gorkhapatra Corporation, Kantipur Publication etc.

There are number of marketing agency in Nepal some of marketing agency are:
Footprints Nepal is leading Media Monitoring and Market Research Company in Nepal, creative
and marketing research center, hawk Everest research org pvt. Ltd, center for business promotion

There is media policy 2012 in Nepal to control the advertisement and marketing practice.
The broadcasting institutions are not allowed to broadcast any advertisement with the matters
such as, Matters adversely affecting political parties, Material of vulgar type, Materials with
object to oust the elected government by using violent force, Matters of such a nature so as to
create unusual fear and terror in the general public; Matters contrary to the non-aligned foreign
policy of Nepal, Materials misinterpreting disregarding, insulting and devaluating any tribe,
language, religion and culture

Manager in Nepal

Manger characteristics: manager is responsible for making long term planning and
executing the strategies and evaluate and monitor the project. The manager has the authority to
change the work assignments of team members and manager action has a great influence in the
success of company. In Nepal some manager are more responsible and some are only manager
they don’t do duty of their. Recently the manager of year is announced, he is Mr. Narrotam
Acharya, principal of king’s college. Some of the characteristics that good manager hold in
Nepal are:

Self-motivation: they love what they are doing and they are self-motivate to do.

Integrity and trust: only few manager hold these characteristics.

Optimism: manger need to be believe on themselves and Nepali manager have these
characteristics. They also motivate their employee.

Confidence: most of the private enterprises manager hold these characteristics. They clear their
own mission and vision and confident on their ability and education.

Collaboration: now days most of the manager collaborate with their employee and other business
manager for mutual benefit.

Organizational hierarchy: manager are changing their culture and system of their organization
and most of the manger now believing in flat organization hierarchy system.

Other characteristic the manger hold is team player, customer service, helpful active listening
and great communication. It is not hold by all the company but only few manger has this
characteristics.

To be a manger there is no any educational barrier in Nepal. We can be manager if our

ancestry hold the business. Such that to be manger in family business there is any requirement
but there are certain criteria that need to full fill to be manager they are:

A bachelor's or master degree in business administration or another applicable major may

qualify you for management positions with various types of businesses, like marketing firms,
financial institutions, retail stores, and manufacturers. Experience count a lot and training plays
significant role to be a manager.

Type of company in Nepal

 Currently, three types of companies can be established in Nepal according to the Companies
Act 2006 (2063 B.S.). They are:-

 Private limited company - requires only one shareholder or promoter

 Public limited company - requires at least seven shareholders and promoters

 Non-profit company - requires at least five members

“Development Cooperation Policy, 2014”

The objectives of this policy will be as follows:

a) To contribute in the achievement of development goals

b) With a vision of transforming Nepal from ‘Least Developed Country’ to ‘Developing

Country’ by 2022.

c) To make and try to ‘Best Value for Money’,

Ministry of finance

MOF are responsible to formulate of periodic plans, to do economic analysis, monetary

formulation and analysis, revenue policy, foreign exchange and control, develop international
economy relationship. Wok on budget, responsibility of handling economic affairs of the country,
responsibility of negotiating and concluding agreements with donors even though any formal
procedures and mechanism to mobilize foreign aid in a coordinated manner.

Foreign investment in Nepal is regulated and administered by the Foreign Investment and
Technology Transfer Act and Industrial Enterprises Act. The Department of Industries (DOI) is
the sole agency for administration and implementation of the Foreign Investment and Technology
Transfer Act in Nepal.
Nepal is open to all prospective foreign investors: individual or institutional. Nepal
formulate different policy regarding FI and they are motivating foreign to invest more in Nepal.
Nepal is trying to maintain sustain economy and political stability in Nepal encouraging foreign
to do business in Nepal. In the current situation most of the foreign investor are willing to invest
in energy sector and hydropower.

FI can be made in any industry in the following forms:

1. Investment in shares (equity);

2. Reinvestment of the earnings derived from equity;

3. Investment made in the form of loans or loan facilities; and

4. Investment in kinds, e.g. machineries and equipment

Foreign investors are permitted to own up to 100% equity share in any industries except the
following some industry like cottage industry, film industries, bank notes and coins, fisheries, bee
keeping, tourism, consultancy service real estate business etc.

Social and culture parameters

The culture of Nepal is rich and unique. Nepal has a host of ethnicities present as well.
The various temples, churches, monasteries and other religious buildings are on the every corner
of Nepal. Nepal has about thirty-six different ethnic groups and multiple religions and
languages. They have their own culture and language.. As a result, Nepal can boast of a multi-
ethnic population that also houses a host of different cultures that are shared by its inhabitants. It
also has different religions present, most significantly Hinduism and Buddhism, but minorities of
Muslims and Christians are present as well.

There are 125 caste/ethnic groups reported in the census 2011. Similarly, there are 123
languages spoken as mother language with Nepali as the largest (44.6 percent) followed by
Maithali (11.7 percent) and Bhojpuri (6.0 percent).

Nepal is richest in the festival. dashain and tihar is most famous and long festival that we
celebrate with fullness of joy. Other festival are Buddha jayanti, bisket jatra( new year festival),
Guru purnima, Christmas, maha shivrati etc.
Education system

Nepal followed the three-tier eighteen-year education system, allocating ten years to
school education, two years each for intermediate and four years for bachelor program, and two
to the Master’s program at the university.

School Education
(a) Primary Level
(b) Middle School/Lower Secondary Level (S.L.C.)
(c) High School/ Secondary Level
(d) 10+2/ Higher Secondary Level

Higher Education
(a) Bachelor's/Undergraduate Level
(b) Master's Level/Graduate/Degree Level
(c) Post Graduate, M. Phil. Level
(d) Ph.D. Doctoral Level

According to Central Bureau of Statistics releases National Census Report 2011

shows Overall literacy rate (for population aged 5 years and above) has increased from 54.1
percent in 2001 to 65.9 percent in 2011. The male literacy rate is 75.1 percent in comparison to
female which is 57.4 percent. There are various factor involving, Nepal is not improving so fast
in the education level despite of various program and foreign aid help. It’s because result of
socio culture factor and poverty in Nepal.

Socio-culture factor plays an important role in the process of demand of the product.
Depending upon social norms and value people demand the product. Depending upon the time
the social attitude changes and business must understand it and must take opportunity to grow
themself. Cultural factor of county, place affect the acceptance of the product. some of social
culture factor are population growth rate and age profile, Population health, education and social
mobility, Population employment patterns, job market freedom and attitudes to work, Press
attitudes, public opinion, social attitudes and social (Healthknowledge, 2010). All the norms and
values must consider in strategic planning to motivate to individual to work. The organization
must create their own culture and system.

Nepal has experienced progress in economic, social and human development over the last
decade. Social change has huge impact in the society and individual. Social change is the
significant alteration of social structures. It changes how people live, hoe people behave and how
people percept the condition. It changes the whole structure of society. It has some advantage
and some disadvantage. With rapid hanging in the social structure it changes the people culture
how they spoke, how they think. It changes the language it force to change the religious. Some of
people changes their caste to make enrollment in the society. It changing the social norms and
value .most of the people following western trend and forgetting own identity.
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