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SEMINAR IN GLOBAL BUSINESS STRATEGY

MBSA 2223

INDIVIDUAL ASSIGNMENT

INDIRAN
MBS141104

GBS Individual Assignment

SEM II 2015/2016 || MBSA 2223|| SESSION 01

LECTURER NAME: DR MOHAMED A. ATEIA EL HABIB
SUBMISSION DATELINE: 23RD APRIL 2016

GBS Individual Assignment

Table of Contents
Question 1: Globalization................................................................................................................3
Question 6: WTO.............................................................................................................................5
Question 7: Bonus Mark Question..................................................................................................7

GBS Individual Assignment

Question 1: Globalization
INTRODUCTION
Globalizationthe international integration of goods, technology, labor, and capitalis
everywhere to be seen. Over the past twenty years, foreign trade and the cross-border movement
of technology, labor, and capital have been massive and irresistible. During the same period, in
the advanced industrial countries, the demand for more-skilled workers has increased at the
expense of less-skilled workers, and the income gap between the two groups has grown. There is
no doubt that globalization has coincided with higher unemployment among the less skilled and
with widening income inequality which unintentionally has an impact on jobs and wages.
WHAT ARE THE SIGNIFICANT IMPACTS OF GLOBALIZATION (PROS & CONS)
The share of imports and exports in overall output provides a ready measure of the extent
of the globalization of goods markets. Although foreign goods are available in every country
now more than ever before, the expansion of product market integration has not been continuous
over time. World trade in relation to output grew from the mid-1800s to 1913, fell from 1913 to
1950 because of the two world wars and protectionist policies implemented during the Great
Depression of the 1930s, and then burgeoned after 1950. Only in the 1970s, however, did trade
flows reach the same proportion of output as at the turn of the century, a result of the easing of
tariffs and quotas, more efficient communications, and falling transportation costs.
For many advanced economies the most important decade for globalization since World
War II was the 1970s, when the ratio of trade to output rose markedly in both advanced and
developing economies in the wake of the two oil shocks. In the developing countries, exposure to
international trade picked up again in the late 1980s, coinciding with their movement toward
trade liberalization.
The rise in the ratio of exports to total output likely understates the degree of product
market globalization. More and more output in the advanced economies consists of largely non
tradable services: education, government, finance, insurance, real estate, and wholesale and retail
trade. Perhaps it would be more accurate to measure the importance of international trade by
considering merchandise exports as a share of the production of tradable goods only. This
alternative measure shows a much larger role for trade. However measured, globalization has
occurred and gives no sign of slowing down.
HOW THE ACTION OF LARGE MNC AFFECT ISSUE OF JOBS AND WAGES ?
An important trend in labor markets in the advanced economies has been a steady shift in
demand away from the less skilled toward the more skilled. This is the case however skills are
defined, whether in terms of education, experience, or job classification. This trend has produced

GBS Individual Assignment

dramatic rises in wage and income inequality between the more and the less skilled in some
countries, as well as unemployment among the less skilled in other countries which influences
the major subject of jobs and wages.
EFFECT OF IMPORT PRICES ON WAGES
Economic theory suggests that international trade affects the prices of products in both
exporting and importing countries and this in turn affects the price of laborthat is, wages
within countries by influencing the demand for labor. Changes in product prices brought about
by competition from imports alter the profit opportunities facing firms. Firms respond by shifting
resources toward industries in which profitability has risen and away from those in which it has
fallen. Trade flows thus give rise to shifts in the demand for labor, as more workers are needed in
newly profitable sectors and fewer in unprofitable sectors. If the supply of labor is fixed, these
demand changes lead to a rise in wages, since workers will demand a premium for switching into
more profitable industries.
Theory also suggests that import competition lowers the price of products (such as
apparel and footwear) made by low-skilled labor relative to the price of products (such as office
machines) made by skilled labor, so that domestic firms shift toward producing skill-intensive
goods. But have product prices in the advanced economies in fact changed in this way? If so,
trade might have contributed to rising income equality, but it must first be shown that changes in
product prices are the result of trade rather than other, purely domestic, influences.
CAPITAL MOBILITY AND LABOR MARKETS
Capital flows that change a countrys stock of capital relative to labor potentially affect
the relative price of labor. The volume of capital flows across borders has increased rapidly since
about 1970, growing at a rate much higher than that of international trade in products. While this
process of outsourcing can generate a shift in demand toward more skilled labor within firms, as
has happened in most industries, the process apparently has not yet been large enough to add
noticeably to income inequality. Home and foreign labor are at best weak substitutes for each
other and might even be complements, so that employment rises and falls together at home and
abroad. When firms outsource to independent contractors rather than affiliates, the results appear
to have only a modest effect on wages of unskilled workers. Even the combined effects of trade
flows and capital movements remain smaller than the share of changes in inequality explained by
technological advances.
TECHNOLOGY FLOWS AND WAGES
An inflow of technology can raise labor price bu increasing productivity. In general, one
would expect wages across countries to equalize as technology and production techniques
spread. Increased trade may contribute to innovation and the spread of technology, and thus

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indirectly affect wages. One potential channel through which technology flows from country to
country is through transfer of technology by multinational firms from the parent to its affiliates.

Question 6: WTO
WHAT IS WTO
The World Trade Organization (WTO) is an international organization whose primary
purpose is to open trade for the benefit of all. The World Trade Organization (WTO) is the only
global international organization dealing with the rules of trade between nations. At its heart are
the WTO agreements, negotiated and signed by the bulk of the worlds trading nations and
ratified in their parliaments. The goal is to help producers of goods and services, exporters, and
importers conduct their business.
WHO IS WTO
WTO was born out of negotiations and the bulk of it came from 1986-94 negotiations
called the Uruguay Round and earlier negotiations under the General Agreement on Tariffs and
Trade (GATT). It was officially established in January 1995 in Geneva, Switzerland and had
already have almost 162 countries as members based on 2015 convention participants. The WTO
is run by its member governments. All major decisions are made by the membership as a whole,
either by ministers (who usually meet at least once every two years) or by their ambassadors or
delegates (who meet regularly in Geneva). WTO is driven by its member states and could not
function without its Secretariat to coordinate the activities. The Secretarial consist of almost 640
staff and is headed by Director-General Roberto Azevedo together with his team of experts of
lawyers, economists, statistician and communication experts that assist WTO members on a daily
basis to ensure that the rules of international trade are correctly applied, enforced and
negotiations process are smooth.
WHAT ARE WTOS GOAL, OBJECTIVE & MAIN ACTIVITIES
The main goal of WTO is to improve the welfare of the peoples of the member countries.
The main function of WTO is to administer WTO trade agreements, forum trade negotiations,
handling trade disputes, monitoring national trade policies, providing technical assistance and
training for developing countries and ensuring cooperation with other international organization.
Trade negotiations spell liberalization to countries that are committed to lower custom tariffs;
and to keep an open market in terms of goods, services and intellectual property. Besides that,
they also require governments to make trade policies transparent about the laws and measures
adopted as a body that implements and monitor trade across regions. WTO also assists in dispute
settlement by enforcing rules under the their agreement with judgments by an independent
expert.WTO agreements contain special provision for developing countries, including longer
time periods to implement agreements and commitments, measures to increase their trading

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opportunities, and support to help them build their trade capacity, to handle disputes and to
implement technical standards.
Among WTOs main activities are:
negotiating the reduction or elimination of obstacles to trade
o (Import tariffs, other barriers to trade) and agreeing on rules governing the
conduct of international trade (e.g. antidumping, subsidies, product standards,
etc.)
administering and monitoring the application of the WTO's agreed rules for trade in
goods, trade in services, and trade-related intellectual property rights
monitoring and reviewing the trade policies of our members, as well as ensuring
transparency of regional and bilateral trade agreements
settling disputes among our members regarding the interpretation and application of the
agreements
building capacity of developing country government officials in international trade
matters
assisting the process of accession of some 30 countries who are not yet members of the
organization
conducting economic research and collecting and disseminating trade data in support of
the WTO's other main activities
Explaining to and educating the public about the WTO, its mission and its activities.
WTO hold on to principles of non-discrimination, more open, predictable and transparent, more
competitive, more beneficial for less developed countries and promotes environment protection i
WHAT IS GATT &THE DIFFERENCE OF WTO TO GATT

GATT (General Agreement on Tariffs and Trade)

It was an ad hoc and provisional
It has no provision for creating an organization. It
only has contracting parties
GATT was less powerful and dispute settlement
mechanism was less efficient.
It allow contradiction in local law and GATT

WTO (World Trade Organizations)

It is permanent, has members and driven by
Secretariat. It has more authority than
GATT
It has legal basis because member nations
have verified the WTO agreements
WTO is more hole sum and manages
dispute settlement more efficiently.
It doesnt allow any contradiction in local

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agreements
Deals with trade in goods
Dispute settlement less efficient

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law
Deals in trade in services and intellectual
property as well
Faster and more automatic

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Question 7: Bonus Mark Question

INTRODUCTION
Growing multicultural workforces are parts of the increasingly global patterns of
exchange and interaction which makes it important to understand how peoples preferences,
beliefs and values differ. Thus, having a good understanding allows executives to be aware and
adapt to differences that matter to achieve the objective of an organizations.
According to Hofstedes national cultural systems; at work based on the world-wide survey in
IBM between 1967 to 1973, he theorized 4 main dimension such as power distance,
individualism, uncertainty avoidance, masculinity, and long term orientations which is the
leading factors that multinational organization need to rock-hard in order to achieve project and
organization goals. In the direction to avoid cultural misunderstandings, executives and managers
should be culturally sensitive and promote creativity and motivation through flexible leadership.
Traditional projects, as national projects, may be affected by personality conflicts. Cultural
differences among project team members may create additional misunderstanding throughout the
project life cycle. The impact of cultural factors such as language barriers, time differences, and
socio-economic, political, and religious diversity may result in a normative pattern prescribing a
range of permissible actions so as to encourage self-interest.
Motivating project team members may encounter significant barriers in multi-cultural project
communications. The context of international projects includes cultural diversity, where
participants are continuously learning. This fact influences training and educational approaches
and has an impact on attitudes toward the use of technology, the amount of practice,
reinforcement, and level of interaction with the instructor to which learners from other
educational systems are accustomed.
WHY EXECUTIVES SHOULD UNDERSTAND LOCAL CULTURE.
Cultural patterns at work reflect cultural patterns in the wider society. Managers share the
cultures of their society and of their organization with their project teams. For instance, project
management techniques and training packages have been developed almost exclusively in
individualist countries, first of all in the USA, and are based on cultural assumptions that may
not hold in collectivist cultures. For instance, the ability to communicate bad news and to
manage performance are considered key skills for a successful project manager. However, in
managing international projects involving partners from collectivist societies, one has to bear in
mind that discussing a persons performance or abilities openly with him or her is likely to clash
head-on with the societys harmony norm and may be felt by the subordinate as an unacceptable
loss of face. Such societies have more subtle, indirect ways of communicating feedback, such as
through the withdrawal of a normal favor or verbally via a mutually trusted intermediary.

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In collectivist/particularistic/communitarian cultures greater attention is also given to the

obligations of relationships and to unique circumstances. Friendship has special obligations and
hence may come first. Accordingly, less attention is given to abstract legal codes. In
individualist/universalist cultures, the law and social norms may take precedence over
friendships. The key concept of guanxi in Asian business is by now known worldwide. It refers
to personal connections; it links the family sphere to the business sphere. Having a personal
network of acquaintances is extremely important in these societies. This is an evident
consequence of collectivism (relationships before task), but it also contributes to a long-term
orientation and paternalism. Ones capital of guanxi lasts a lifetime, and one would not want to
destroy it for short-term, bottom-line reasons.
HOW TO PROMOTE EXECUTIVES TO UNDERSTAND LOCAL CULTURE:
Executives should develop verbal and nonverbal communication skills to negotiate in a
cross-cultural environment to maintain effectiveness due to diverse personalities and
characteristics which may cause misunderstanding and misinterpretations in order to maintain a
good relationship.
Executives can create appropriate motivational technique to stimulate employees performance
by fair rewarding and motivating periodically to ensure employees will not lose interest in
striving reward in accordance various backgrounds and values.
Executives should develop a trait of international leadership which is associated with trust,
manger-employee relationship and organizational commitment. It also involves cultural
intelligence and global business orientation. Effective leaders need to be open-minded, think
globally and act swiftly to maintain their competitiveness in multicultural organizations and
global markets. They also should engage transformative learning in leadership development that
focuses on individual behaviors and understanding the environment
Lastly, executives should be cultural literate and has to understand the social mobility of the local
culture in order not to offend the caste or individual and may drive the business model by
adapting the local culture.
CONCLUSION
Global project management can succeed through effective leadership, cross-cultural
communication, and mutual respect. Without them, it is destined to fail. International projects
that use effective cross-cultural teams can provide a source of experience and innovative thinking
to enhance the competitive position of their companies, and to resolve potential communication
barriers.
Multi-cultural projects are becoming the norm. More and more projects are being executed
successfully using multicultural teams. To achieve project goals and avoid potential risks, project
managers should be culturally sensitive and promote creativity and motivation through flexible
leadership.

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