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OBJECTIVES of wto
The WTO's overriding objective is to help trade flow smoothly, freely, fairly
and predictably.
It deals with the rules of trade between nations at a global level.
It's an organization for liberalizing trade.
. It's a forum for governments to negotiate trade agreements and down trade
related disputes between nations.
WTO Documents\implicationof WTOon agriculture sector.doc Page I of IS
The WTO is a place where member governments try to sort out the trade
problems they face with each other. .~
The.WTO's rules - the agreements - are the result of negotiations between the
members.
It is an international body that promotes and enforces the provisions of the
Trade
Laws and Regulations.
It is aimed to enhance the overall welfare both consumers and producers in the
global market.
The WTO is also formally structured organization whose rules have legal
binding on its member states.
The organization provides framework for international trade laws.
Member countries can refer trade disputes to WTO.

What is Joint venture

A joint venture (JV or J-V) is a legal entity formed between

two or more parties to undertake an economic activity
together. The JV parties agree to create, for a finite time, a new
entity and new assets by contributing equity. They then share
in the revenues, expenses and assets and "control" of the
enterprise.There are other types of companies such as JV
limited by guarantee, JVs limited by guarantee with partners
holding shares.

What is Multidomestic company

Multidomestic Company (MDC) is an organization with multicountry affiliates, each of

which formulates its own business strategy based on perceived market differences. (Source:
Mc Graw Hill, “International Business – The Challenge of Global Competition” 10th
edition, page 8)
Multidomestic company is a company that has its branches in many different countries, in
which the company has the same purpose to market their products or services, but each
country has their own strategic management in marketing their products or services. The
business and marketing strategy of the company in each country different is because each
country has their unique characteristics, such as United States has its own ethnics, its society
habits, regulations, rules and much more. In which those are different to the other country
such as United Kingdom. So to reach the market with the purpose to sell the products or
services, in each country the company makes its own strategy to make rapprochement.

What is cross boarder transaction

A transaction in an international or foreign security, or a transaction in a domestic security in
which at least one of the counterparties is located outside the home country of the domestic
security

What are the factors favouring globalisation of Indian business?

Factors Favouring Globalisation
Although India has several handicaps, there are also a number of favourable factors
for globalisation of Indian business.
Human Resources: Apart from the low cost of labour, there are several other
aspects of human resources to India’s favour. India has one of the largest pool of
scientific and technical manpower. The number of management graduates is also
surging. It is widely recognised that given the right environment, Indian scientists
and technical personnel can do excellently. Similarly, although the labour
productivity in India is generally low, given the right environment it will be good.
While several countries are facing labour shortage and may face diminishing labour
supply , India presents the opposite picture. Cheap labour has particular attraction
for several industries.
Wide Base: India has a very broad resource and industrial base which can support
a variety of businesses.
Growing Entrepreneurship: Many of the established industries are planning to
go international in a big way. Added to this is the considerable growth of new and
dynamic entrepreneurs who could make a significant contribution to the
globalisation of Indian business.
Growing Domestic Market: The growing domestic market enables the Indian
companies to consolidate their position and to gain more strength to make foray into
the foreign market or to expand their foreign business.
Niche Markets: There are many marketing opportunities abroad present in the
form of market niches. (A niche is a small segment of a market ignored or not
properly served by large players). Such niches are particularly attractive for small
companies. Several Indian companies have become very successful by niche marking.
Expanding Markets: The growing population and disposable income and the
resultant expanding internal market provides enormous business opportunities.
Transnationalisation of World Economy: Transnationalisation of the world
economy, i.e., the integration of the national economies into a single world economy
as evinced by the growing interdependence and globalisation of markets is an
external factor encouraging globalisation of India business.
NRIs: The large number of non-resident Indians who are resourceful – in terms of
capital, skill, experience, exposure, ideas etc., is an asset which can contribute to the
globalisation of Indian
business. The contribution of the overseas Chinese to the recent impressive
industrial development of China may be noted here.
Economic Liberalisation: The economic liberalisation in India is an encouraging
factor of globalisation. The delicensing of industries, removal of restrictions on
growth, opening up of industries earlier reserved for the public sector, import
liberalisations, liberalisation of policy towards foreign capital and technology etc.,
could encourage globalisation of Indian business. Further, liberalisation in other
countries increases the foreign business opportunities for Indian business.
Competition: The growing competition, both from within the country and abroad,
provokes many Indian companies to look, to foreign markets seriously to improve
their competitive position and to increase the business. Sometimes companies enter
foreign market as a counter – competitive strategy, i.e., m fight the foreign company
in its own home market to weaken its competitive strength.
What is International Business?
International business may be defined as organisation that buys or sells goods and
services across more than two national boundaries even if management is located in
a single country. The Activity include the transaction of economic resources as goods
and capital and services comprising of technology, skilled labour transportation etc.
What is the difference between international trade and international
business?
Fundamentally international trade is a much narrow set of activities and consists
of exports and imports (e.g. goods and services) only.
International business is a much broader concept and includes international
trade, direct foreign production or any other activity across countries conducted
by an entity in managing and carrying out its operations.
Discuss the international Business approaches
Douglas wind and Pelmutter described four approaches of international business
they are as follows.

1. Ethnocentric approaches
2. Polycentric approach
3. Regio Centric approach
4. Geo Centric approach

Ethnocentric approaches: Excessive productions over the

demand, undoubtedly force the company to divert such excess
goods to foreign market. The company in this case considers
the foreign market as an extension of the existing market. As
such no changes in strategies is required. The head offce
decides the export to a particular near by country while
personnel in charge of marketing monitors the export
operations. A point to be noted is that in case of ethnocentric
approach the company maintain the domestic approach in
international business.

Polycentric approach: The companies under endocentric

approach may expand their foreign market in which case
polycentric approach is advised. Under polycentric approach
the companies focus on the conditions of the host country with
regard to policy formulation strategy implementation and
operation culture custom, laws and government policies of the
hose country shall be followed. The head office of the home
country decentralise the operation beside allowing to take
decision and lay down policy required suited to the conditions
of the countries concerned.

Regio Centric approach: The companies operating successfully

under polycentric approach make attempts to expand the
foreign market focusing the region as a whole regions could be
SAARC, ASEAN, NAFTA, EU G8 G22 ETC. The companies in this
case establish subsidiaries in the region permit them to force
on regional environment, which includes culture polices and
laws further allow them to formulate policies and strategies.
Interesting point is polycentric of one country and be adopted
to other countries as the culture buy and pay the same .

Geo Centric approach: The companies operating successfully at

regional level invariably wish to operate at the global level. In
this case the company regards the entire world as single
country. The company established subsidiary everywhere and
co-ordinate their operations. Each subsidiary company is
independent and autonomous company is formulating policies,
strategies product design human resources operation etc.

International Business in a rose Explain or Dis advantage of International business.

International business is an extension of domestic business. In International
business has some disadvantages so it not a easy task to do the business globally or in
international level they are as follows.
1. Payment: as far as payment concerned a buyers of foreign goods or services
shall pay in a currency of respective countries. As the Exchanges rate
fluctuations are bound to happen, importer should go in for contract with
bank mainly to cover the risk . If Indian import from Japan he shall pay in Yen
only.
2. International business is subjected to set of laws, quotas and licences, beside
adhering to the conditions of WTO.
3. International business exposed to varied political , social-cultural;
environment. Language, Taste, Fashion preferences etc. Of various countries
affect the kind of commodities which can be sold.
4. Interest on Credit, inflation and tax system is varied from country to country
in international business.
5. In international business managerial practices need to be altered and find
tuned to correspond with environmental variable.
6. International business is prone to various kinds o frisks in charging political
risk. Nationalisation without proper compensation is a common feature in
International business.
7. International firms take various financial decisions in terms of both domestic
and host country currency and go in for hedging of exchange rate risk. It
follows international accounting system
Conclusion: For the above said reasons the international business is not easy
as compare to domestic business.

Factors leading growth in International Business

1. Expansion of Technology. Air travel, the internet, e-mail, e-commerce,
direct dial international phone calls, fax, and other technologies have
brought down the cost and increased the efficiency of doing business
internationally.

2. Liberalization of Cross-Border Movements. The World Trade

Organization and other international trade agreements have reduced
barriers to the movement of goods and services across national
boundaries.

3. Development of Supporting Services. International banking,

international document delivery, and other services have tremendously
simplified the conduct of international business.

4. Increase in Global Competition. It is becoming increasingly important

that firms have international operations in order to be able to shift
production across countries and take advantage of new production
location and marketing opportunities to stay ahead of other international
competitors.

5. Exports are goods and services produced in one country and then sent
to another country. Imports are goods and services produced in one
country and then brought in by another country. Information about
exports and imports helps us to explain the impact of international
business on the economy.

6. Foreign direct investment (FDI) is equity funds invested in other

nations. Industrialized countries have invested large amounts of money in
other industrialized nations and smaller amounts in less developed
countries (LDCs), such as those in Eastern Europe, or in newly
industrialized countries (NICs), such as Hong Kong, South Korea, and
Singapore. Most of the world’s FDI is in the US, the European Union
(EU), and Japan. As nations have become more affluent, they have
pursued FDI in geographic areas that have economic growth potential.
The Japanese, for example, have been investing heavily in the EU in
recent years.

7. Over 50 per cent of world trade and over 80 per cent of foreign direct
 investment is conducted by three regional economic hubs: the US, the EU
and Japan. Collectively, these areas are referred to as the “triad”. The
triad is a group of three major trading and investment blocs in the
international arena.

What are the Importance of International Business?

International Business is important to the firm could be MNCs. Transnational

companies and global companies for various reasons.

Profit Advantage: International business help to improve the bottom line of a

firm profit can be increased in international market although there is less profit
in domestic market. As the market is global the firm can target various
countries, sell goods keeping the cost advantage in mind. More countries
expects expects results in more profit with low cost of production.

Growth Opportunities: International business is encouraged mainly to go for

growth opportunities. In the present situation, the income and population in
developing countries are increased sizably thanks to economic reforms of the
respective countries.

Domestic Market Constraints: If the demand for the product is reduced in any
county. It will force such country to trade in foreign market. These is a limit for
market when it is tapped fully excess goods produced can’t be dumped in local
market hence foreign market.

Competition: Internationalisation has been on account of competition which is

encouraged greatly after 1991. After the introduction of economic reforms
transformation has been taken place from protected economic into market
oriented as such survival of the fittest was adopted on all issues. to overcome
any threat and thereby help international business to grow rapidly.

Government policies and Regulation: The policies adopted by the Government

from time to time helps fostering international business. The Policies relating to
export. Import, FDI, foreign exchange, human resources, operations of Mnc etc
helps expanding international business. Presently liberalized and decontrol
system forces the domestic companies to go in for Internationalisation.

Monopoly Powers: Monopolisation of certain resources, patent right,

technological advantage, product differentiation etc. Helps internationalisation.
Dominant position of monopoly help expansion.
Availability of Technological and managerial competence: strong technology
and managerial competency act as pulling factors for business firm from the
home country.

Increase of Market share: companies are eager to enhance their market share,
therefore they expand their operations at global level.

What are the modes of international business?

The various modes of International business helps to understand how present
international business has taken shape they are as follows
1 Trade Mode
2 Contractual Mode
3 Foreign Investment.

What are the factors deciding the modes of International business?

A firm can decide about the mode of international business based on four
factors, they are.
1. Corporate Objective
2. Corporate capability
3. Host country environment
4. Perceived risk

Corporate Objective: The Main Objective of the company is to earn profit and
control overall operation of the company is to make profit.

Corporate Capability: Capability is dwelt upon the financial position. If the

financial position is strong, investment is the choice. Where as trade is suitable
if the capability is not so strong.

Host Country Environment: trade or investment in host country depends on her

environment legal culture political economic and regulatory. There is lot of
cultural diversity on other country as such companies needs to understand the
socio cultural aspect of the people. If the company is acquainted with these
investment is better, if trade is advisable.

Control risk: International Business involves risks more the control more is the
risk and vice – versa

Trade Mode : It is one of the important mode of international business. Trade

includes Export, Imports, and Counter Trade.
What is counter trade ? and Explain its types.

Counter trade is a mode of Trade which is bilateral trade where one set of goods
is exchanged for other set. In this case a seller provides a buyer with deliveries
and contractually agrees to purchase goods from the buyer equal to the agreed
position of original sale contract.

Counter trade is classified into two, Commercial counter Trade and Industrial
Trade.

Explain the various forms of counter Trade?

Various forms of counter trade are as follows.

Barter: Direct exchange of goods of equal value. For Ex: MMTC exports Iron
Ore and Pellets to the Yugoslavian company and in turn agreed to buy rails
worth $38 Million. In this value of goods is the same without involving a third
party.

Buy Back: In this case the supplier agrees to purchase goods. Under this
payment may be made in kind in full If the part in kind the rest is to be paid in
cash NTC could have buy back arrangement from Soviet Union.

Compensation Deal In this case seller receives a part of payment in cash and
rest in product.
Counter Purchase: Under this seller receives full payment in cash but agrees to
spend an equivalent amount of money in that country within a specified period.
Pepsi cola sold its concentrates and got the Rubbles from Russia. Out of this is
purchased Russian product like Wine.

What is Contractual Entry Mode ? Explain various forms of contractual Mode.

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