Master of Business Administration MBA Semester 4 MB0053 International Business Management -4 Credits (Book ID: B1724)

Name: Samrudhi Ramchandra Patil Roll no: 521124677

Q1. Write a note on Globalization. Answer: Globalization is a process where businesses are dealt in markets around the world, apart from the local and the national markets. According to business terminologies, globalization is defined as THE WORLD TREND OF BUSINESSES EXPANDINGBEYOND THEIR DOMESTIC BOUNDARIES. It is advantageous for the economy of countries because it promotes prosperity in the countries that embrace globalization. Some of the benefits of globalization Globalization promotes foreign trade and liberalization of economies. It increases the living standard of people in several developing countries through capital investment in developing countries by developed countries. It promotes better education and jobs. Leads to free flow of information and wide acceptance of foreign products, ideas, ethics, best practices, and culture. Gives better access to finance for corporate and sovereign borrowers. Provides better quality of products, customer services and standardized delivery models across countries. Increases sales as the availability of cutting edge technologies and production techniques decreases the cost of production. Provides several platforms for international dispute resolutions in business, which facilitates international trade.

There are some of the ill effects of globalization Leads to exploitation of labour in several cases. Causes unemployment in the developed countries due to outsourcing. Leads to the misuse of Intellectual Property Rights (IPR) copyrights and so on due to the easy availability of technology, digital communication, travel and so on. Influences political decisions in foreign countries. The MNCs increasingly use their economicalpowers to influence political decisions. Causes ecological damage as the companies set up polluting production plants in countries with limited or no regulation on pollution. Harms the local businesses of a country due to dumping of cheaper foreign goods. Leads to adverse health issues due to rapid expansion of fast food chains and increased consumption of junk food. Causes destruction of ethnicity and culture of several regions worldwide in favour of more accepted western culture

In spite of disadvantages globalization has improved our lives through various fields like communication, transportation, health care and education

Q2. Why do nations trade? Discuss the relevance of Porters diamond model in todays business context. The countries world over endowed with different natural, human and capital resources. Each country varies from the other in combining these resources. In a globalized setup, every country cannot be efficient as the best in producing the goods and services as the residents demand. As a result they have to trade off their decision to produce any good or service based on opportunity cost. Opportunity cost model help us understand the choice of producing one good or another. The production decision of the country depends on whether it is more efficient to produce the goods and services with lower opportunity cost with increased and specialized production, or to trade those goods with good or higher opportunity cost. Trade in globalized setup has been used as a instrument of enhancing a countrys economy growth and is usually beneficial to both the exporting and importing countries. Trade is also affected as different countries are endowed with different natural resources and climate zones, longer growing season for a produce, abundance of natural resources like oil, mica, coal, iron ore and high educated and skilled workers, and larger quantities of sophisticated machinery. For e.g. Saudi Arabia will export oil, India will export mica, Iron ore and information technology, Brazil will export coffee and Thailand will export rice. Porters diamond model: In 1990, Michael Porter analyzed the reason behind some nations success and others failure in international competition. His thesis outline four broad attributes that shape the environment in which local firm competes and these attributes promote the creation of competitive advantage. They are explained as follows: Factor Endowments: Characteristics of production were analyzed in detail. There are basic factors like natural resources, climate and location and so on and advanced factors like communication, infrastructure, and research facilities Demand Conditions: the role of home demand is improving competitive advantage is empathized since firms are most sensitive about the needs of their closest customer. For e.g. the Japanese cameras industry which caters to a sophisticated and knowledgeable local market Relating and Supporting Industries: The presence of suppliers or related industries is advantageous since the benefit of investment in advanced factors of production spill over to these supporting industries. Successful industries within a country tend to be grouped into a cluster of related industry. For e.g. Silicon Valley Firm Strategy, Structure and Rivalry: Domestic Rivalry creates pressure to innovate, improve quality, and reduce cost which in return helps create world class competitors. He said that these four attributes constituted the diamond and he argued that firms are most likely to succeed in industry where the diamond is most favorable. He also stated that diamond is a mutually reinforcing system and the effect of one attribute depends on the state of others. For e.g. favorable demand condition will not result in a competitive advantage unless the state of rivalry is enough to elicit a response form the firms

Q3. Why do firms pay so much attention to economic factors while entering in particular market? Justify your answer with practical examples. Economic environment refers to an economic conditions under which a business operate and take into account all factors all factors that have affected it. It includes prime interest rates, legislation concerning employment of foreigners, return of profits, safety of country, political stability and so on. 1. National Economic Policies: National Economic Policies depends on a countrys socio-economic and cultural back ground. All governments aspire to achieve four major economics objectives Full employment A high economic growth rate A low rate of inflation Absence of deficient in the countrys balance of payment Basic problem is that the first two objectives work against the last two. Measures such as low interest rates, tax cuts, and increase in public spending creates job and stimulates growth but also causes inflation, increase in wage, and higher imports. Due to increased customer expenditure the countrys balance of trade worsens. 2. Economic Structure: international business managers need to understand and assess international economic forces at work. Key variables that need to be examined include gross domestic product (GDP), per capita, regional distribution of GDP, level of investments, consumer expenditure, labour cost, inflation and unemployment. Variables that are examined when accessing national economic environment include Industry structure Market growth Income levels Sector wise trends Openness of the economy International depth Degree of urbanization 3. Balance of Payment: Balance of payments is a record of all economic transactions that occur between residents of a country and foreigners over a specific period of time. The balance is sown monthly, quarterly or annually. The accounts show the structure of external trade, net position as the lender or borrower and tends in economic relationship with the world. The balance of payment is a good overall indicator of a companys economic health. The livelihood of the countys government imposing Forex controls, import restriction and policies such as tax increments and interest rate hike Balance of payment account Defects and Surpluses

Q4. How has India reacted towards regional integration? Discuss briefly the trade agreements signed by India. Answer India considers Regional Trading Arrangement (RTAs) as the building blocks towards the objectives of trade liberalization. Therefore India participates in the number of RTAs which include free trade agreements (FTAs), preferential trade agreements and so on. These agreements take place by laterally or in a regional grouping. We shall now discuss some of the major agreement signed by India 1. Asia Pacific trade agreement (APTA): The Asia Pacific trade agreement, previously known as Bangkok agreement was signed on 31st of July 1975, as an initiative of the United Nations Economic and Social commission for Asia and the Pacific (ESCAP). It focusses on issues that are most effectively addressed through Regional Corporation and includes issues of All or a group of countries in the region face, for which it is necessary to learn from each other Benefit from regional or multi country environment Cut across boundaries or that would benefit from collaborative inter country approaches. Are sensitive or emerging and require further advocacy and negotiation 2. Bay of Bengal initiative for Multi sectorial Technical and Economic corporation (BIMSTEC) Bangladesh. Indian, Myanmar, Srilanka and Thailand technical and economic corporation (BIMSTEC), Sub Regional economic corporation, grouping, was formed in Bangkok in JUNE 1997. Myanmar joined the grouping in December 1997. Bhutan and Nepal to join in February. Five members of SAARC (India, Bangladesh, Bhutan Nepal). The two members of ASEAN (Thailand and Myanmar). 3. Frame work Agreement on comprehensive, economic corporation between Indian and the association of south east nation Look East Policy lead Indian to engage with association of south East Asian nation. (ASEAN) and is starter in the year 1991 Asian political economy and strategic importance in the large Asia pacific region and its capably to become a major partner of Indian in trace and investment made Indian to join association with ASEAN. ASEAN looks to utilize and access Indias technical and professional wealth, India look forward to strengthen the security in the region. 4. India MERCOSURE preferential trade agreement (PTA) India and MERCOSUR signed a frame work agreement on 17th June 2003. The objective of this agreement is to create and environment for negotiation in the first stage, by granting mutual tariff preference and in the second stage, to negotiate a FTA between the two parties in conformity with the rules of the WTO. Preferential Trade Agreement was signed in New Delhi on Jan 25th 2004. The aim of this PTA is to expand and strengthen the existing relations between MERCOSUR and India and promote the expansion of trade by granting mutual fixed tariff preference with the ultimate preferences with the ultimate objectives of creating the free trade area between the parties.

Q5. What is global sourcing? What makes India so attractive for global sourcing? Answer: Global sourcing is described as the practice of sourcing cost effective and best goods and services across geo political boundaries in order to cater to global market. Global sourcing strategy is aimed at exploding global efficiency in all areas of manufacturing, trading and services to enable offering clients and customer the best possible product or service. Usually efficiency is that prompt firms global sourcing low cost skilled labour, low cost raw material, proximity to keep markets, time zone differences and other economic factors such as tax exemption and low trade tariffs. Indian industries have successfully levered global sourcing strategies in their global trade operations and sourcing has been the driving force behind the development as expansion of Indian foreign trade in the recent past. Global sourcing strategy has made Indian industry more globalizes as buyers from all over the world are bidding for Indian goods, particularly services, to enable executing their contracts on time, reduced prices and generate efficiency in the system through increased composition. Indian industries in order to reap the benefits of sourcing opportunities has opened global services and subsidiaries to tap opportunities on all fronts, i.e. manufacturing, trading, skilled services and call centers. In a globalized setup trade and commerce of skilled services such as IT enabled services, Software Development and testing, purchasing, engineering and integrated chip designing, knowledge process out sourcing KPO, offshoring and home shoring is growing much faster than trade in merchandise. India, with its demographic dividence has been benefitted from all such developments as the level of knowledge and skills held by Indian professionals allows them to provide high quality services to their client in the development country. For e.g. India has been successful in software development, BPO services, KPO services and in the recent past in areas like engineering Process outsourcing, Analyses Process Outsourcing, Content Development and Website Design

Q6. Write short notes on: a) Cross cultural management b) WTO Answer: a) Cross cultural management An international management, where people are from different cultures, we have to develop and apply your knowledge about cultures and not use a standard process for everyone. This is called cross culture management. In a global market even if you do not have a diverse work group you may have to deal with clients abroad or vendors or service provider of different countries. So knowledge about different culture is must. The factors to be considered in a cross culture management are Cross culture management skill Handling culture diversity Factors controlling group creativity Ignoring diversity

C Cross cultural management skill: the ability to demonstrate a series of behavior is called a skill. It is functionally linked to achieve a performance goal. The most important aspect to qualify as a manager for positions of international responsibilities is communication skill. The managers must adapt to other culture and have the ability to lead its members Handling Culture Diversity: Culture diversity is a work group offers opportunities and difficulties. Economy is benefitted when the work groups are manages successfully. The organization capability to draw, save and inspire people from diverse culture cab give the organization spirited advantage in structures of cost creativity problem solving and adjusting to change Factors controlling group: on complicated problem solving jobs, diverse groups do better than identical groups. Diverse groups require time to solve issues of working together. The work experience helps to overcome gender, racial, organizational and functional discriminations. But the impact cannot be evaluated and there is always a risk in creating a diverse group. A successful group is profitable with respect to quick results and the creation of concern for the future. Negative stereotypes are emphasized if it fails. Ignore diversity: it may be difficult to manage diversity. It is better to ignore, which is also an alternative. The management must: Ignore cultural diversity within the employees. Down-play the importance of cultural diversity.

b) WTO World Trade Organization (WTO) was established on 1st January 1995. In April 1994, the final act was signed at a meeting in Marrakesh, Morocco. The Marrakesh declaration of 15th April 1994 was formed to strengthen the world economy that would lead to better investment, trade, income growth and employment throughout the world. The WTO is the successor to the General Agreement of Tariffs and Trade (GATT). India is one of the founders of WTO. WTO represents the latest attempts to create an organizational focal point for liberal trade management and to consolidate a global organizational structure to govern world affairs. WTO attempted to create various oraganisational attentions for regulation of international trade. WTO created a qualitative change in international body that deals with the rules of trades between nations. Objectives and functions The key objective of WTO is to promote and ensure international trade in developing countries. The other major functions include: Helping trade flows by encouraging nations to adopt discriminatory trade policies. Promoting employment, expanding productions and trade and raising standard of living and income and utilizing the worlds resources. Ensuring that developing countries secure a better share of growth in world trade. Providing forum for trade negotiations. Resolving trade disputes.