International business mumbai university solved paper 2008


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International business mumbai university solved paper 2008

  1. 1. International Business-2008 solved by - Mr. Shrund Kalse. Mumbai University Paper 2008…. Solved!! Subject: International Business Q 1) What is Globalization? How do global organizations emerge to enjoy global leadership in their Business? Give relevant illustrations from Global Organization? Ans: Globalisation is the “strategy of optimizing” the resources available in various countries and cater ingto customers throughout the world with internationally standardised products, at competitive prices. It advocates that the nation or a company or product involved should be global. A global man is one who is born in India, studies in the UK, wears Reid & Taylor, shops in Marks & Spencer, drives a Lexus, acquires a steel plant in Kazakhstan and ships his hot rolled coil to China. Thus, he becomes a part of globalisation process. SOME LESSONS FROM GLOBAL COMPANIES Toyota is a good example of a highly globalised company. At the end of 1995 one -third of Toyota’s global output came from wholly or partially owned affiliates located in twenty-five foreign countries spread over North and South America, Europe and Asia. Furthermore, Toyota exported 38 percent of its domestic production from Japan to foreign markets and engaged in significant intro-firm flows among its affiliates. Within its South East Asian regional network Toyota exported diesel engines from Thailand, transmissions from the Philippines, steering gears from Malaysia and engines from Indonesia. In effect units were set up by Toyota in the whole of South East Asia, to assemble different automobile parts, depending on the competency and resources of the country. Key indicators of the globalisation of a company are international dispersion of its sales revenue and asset base, intra-firm trade in intermediate and finished goods, and intra-firm flows of technology. These all lead to its physical presence, scattered investments, global image, brand promotion and building borderless customer patronage. STAGES OF GLOBAL ORGANISATIONS Globalization process does not take place instantly. It is a deliberate and cautious move for several companies. Nike and Addidas took more than a decade to move to other countries from their origin. Apple, HP and Dell are fast globalizing their operations due to technology advantages. if they are not quick then technology obsolescence will crop up and finally they have to lose their current status to their competitors. However, in the normal process, a complete globalization has to pass through several stages as described in the following table: Stages Stage # 1 Purpose Make the presence feel – the move for product or service Action Physically export and establish one strong contact overseas Stage # 2 Study the whole nation and explore the avenues for production Find out a right partner. Jointly promote the product/s. establish brand in one market. Stage # 3 Set up production facility with a local or alone Stage # 4 Expanding to neighboring areas through production Stage # 5 Review all the pitfalls and Identify location or develop a complete network. Reduce the cost and service the mark Take the products from the unit and spread in nearby countries and build brand name Analyse the potential in End Result One market established. Trial and errors are overcome, confidence is built Awareness is created in one territory. The demand level is known for the production. Becoming close to the customer at a reduced cost and part of the local The whole region is aware. Loyalty is built. The network members become patrons Comparing and selection
  2. 2. International Business-2008 solved by - Mr. Shrund Kalse. gear up to other regions Stage # 6 Emerging as global enterprise various regions. Evaluate the partners, investment climate and Socio-Cultural background Produce, distribute, invest and build corporate image and face competition of right locations, right partners and right markets Global production Global investments Global brand name Status of global company Q 2) Why do companies & the countries enter into International business, when the opportunities exist in the domestic business? Ans: A mode of entry into an international market is the channel which your organization employs to gain entry to a new international market. This lesson considers a number of key alternatives, but recognizes that alternatives are many and diverse. Here you will be consider modes of entry into international markets such as the Internet, Exporting, Licensing, International Agents, International Distributors, Strategic Alliances, Joint Ventures, Overseas Manufacture and International Sales Subsidiaries. Finally we consider the Stages of Internationalization. It is worth noting that not all authorities on international marketing agree as to which mode of entry sits where. For example, some see franchising as a stand alone mode, whilst others see franchising as part of licensing. In reality, the most important point is that you consider all useful modes of entry into international markets - over and above which pigeon-hole it fits into. If in doubt, always clarify your tutor's preferred view. The International Marketing Entry Evaluation Process is a five stage process, and its purpose is to gauge which international market or markets offer the best opportunities for our products or services to succeed. The five steps are Country Identification, Preliminary Screening, In-Depth Screening, Final Selection and Direct Experience. There are two types of indicators / variables that most companies consider when deciding where to operate abroad i.e. Opportunities & Risks A)Opportunities i. Market Size Expectation of a large market and sales growth is probably a potential location’s major attraction. This depends on the economic variables. Some of the main things to consider when examining economic variables are : a)Obsolescence and leapfrogging of products b)Prices c)Income elasticity d)Substitution e)Income inequality f)Cultural factors and taste g)Existing of trading blocs ii. Ease and Compatibility of Operations: Companies are highly attracted to countries that
  3. 3. International Business-2008 solved by - Mr. Shrund Kalse. Are located nearby Share the same language Have market conditions similar to those in their home countries Companies often pare down proposals to those countries that Offer size, technology and other advantages familiar to company personnel. Allow an acceptable percentage of ownership. Have resources they need. iii. Costs and Resource availability : Cost – especially labour costs – are an important factor in companies’ production location decisions. Ease and cost of transporting goods depends on Infrastructure Absence of trade restrictions Companies should consider different ways to produce the same product. iv. Red Tapes and Corruptions Red tape and corruption add to operating costs. Q 3) Write short notes on A) Foreign exchange risks Foreign exchange risk is defined as, ‘ the variance of the real domestic currency value of assets, liabilities or operating income attributed to unanticipated changes in exchange rates’. In other words, risk is a measure of the extent of variability in the values of assets etc. due to unanticipated changes in exchange rates. All forex exposures need not necessarily lead to forex risk, because compensating movements in exchange rates with different currencies might offset loss in deal from gain in the other. Further to qualify as forex risk, only the effect of unanticipated changes in exchange rates on the domestic currency values of assets, liabilities, etc is to be considered. Types of Forex Risks Forex risks are of three types. These are: i Accounting or Translation Risk ii Transaction risk iii Operating risk. i. TRANSLATION OR ACCOUNTING RISK Translation risk is a measure of variation of home currency value of assets and liabilities appearing in balance sheet denominated in foreign currency. It is also called as balance sheet or accounting risk. It is also referred to as accounting risk. It arises while consolidation of accounts (financial statements) involving foreign currency denominated assets and liabilities is prepared. Firms having foreign subsidiaries, require preparing the groups financial statements. ii. TRANSACTION RISK Transaction Risk is the measure of variation of home currency value of receivables and payables denominated’ in foreign currencies due to unanticipated changes in exchange rate. Transactions which give rise to forex receivables orpayables in future create transaction exposure. A US firm has exported to UK, goods valued at 1 million n UK pound, payable 3
  4. 4. International Business-2008 solved by - Mr. Shrund Kalse. months from now. In the three months period, fluctuations in US Dollar value of UK Pound exposes the US firm to transaction exposure. iii. OPERATING OR ECONOMIC RISK In the case of transaction risk the operations pertaining to cash flow are all executed. Only the financial exchange has to be given effect. In operating risk, the manufacturing trading and financial transactions activities- are to fulfill an export of obligation. The prices of inputs might exchange. Operational uncertainties in production may take place. Yet the export price and obligation which are already freed cannot be changed, even if there is cost escalation. All these change the cost side of the operation. The revenue side of the operation, which is the amount of export earnings receivable, is also subject to change in exchange value. The expected home currency value of profit from the particular operation changes. B) Trade barriers A trade barrier is defined as “any hurdle, impediment or road block that hampers the smooth flow of goods, services and payments from one destination to another”. They arise from the rules and regulations governing trade either from home country or host country or intermediary. Trade barriers are man-made obstacles to the free movement of goods between different countries, and impose artificial restrictions on trading activities between countries. Despite the fact that all international organizations such as GATT, WTO and UNCTAD advocate reduction or elimination of barriers, they still continue in different forms. Objectives of trade barriers: 1 .To protect domestic industries from foreign goods. 2. To promote new industries and research and development activities by providing a home market for domestic industries. 3. To maintain favorable balance of payment, by restricting imports from foreign countries. 4. To conserve foreign exchange reserves of the country by restricting imports from fore ign countries. 5. To protect the national economy from dumping by other countries with surplus production. 6. To mobilize additional revenue by imposing heavy duties on imports. This also restricts conspicuous consumption within the country. 7. To counteract trade barriers imposed by other countries. 8. To encourage domestic production in the domestic market and thereby make the country strong and self- sufficient. Since trade barriers are harmful for the growth of free trade, efforts were made to reduce such trade barriers, and international organizations initiated collective efforts of all countries involved in trade. Types of trade barriers: Broadly, Trade barriers are classified as tariff barriers and non-tariff barriers. A country may use both tariff and non-tariff barriers order to restrict the entry of foreign goods. Tariff Barriers A tariff is a special tax on imported goods (and sometimes, imported products), raising their price. To try to overcome this price handicap, the foreign exporter may try several different approaches. It may use marginal cost pricing. It may try to get a more favorable tariff classification with a lower duty. It may ship unassembled products. If none of these is sufficient, the firm may produce in the local market to get behind the tariff wall
  5. 5. International Business-2008 solved by - Mr. Shrund Kalse. Non-tariff Barriers •Specific Limitations on Trade: O Quotas – specific quantitative restrictions - much more rigid than tariffs and give the foreign exporter fewer options. It can accept the limited sales available under the quota, or it can choose to produce inside the country. o Import Licensing requirements o Proportion restrictions of foreign to domestic goods (local content requirements)o Minimum import price limits oEmbargoes •Customs and Administrative Entry Procedures: o Valuation systems o Antidumping practices o Tariff classifications o Documentation requirements o Fees •Standards: O Standard disparities O Intergovernmental acceptances of testing methods and standards O Packaging, labeling, marking and safety standards •Government Participation in Trade: O Government procurement policies o Export subsidies o Countervailing duties o Domestic assistance programs •Charges on imports: O Prior import deposit subsidies o Administrative fees o Special supplementary duties o Import credit discriminations o Variable levies o Border taxes •Others: O Voluntary export restraints o Orderly marketing agreements Monetary Barriers •This is the most extensive tool of trade regulation because it involves restrictions on both trade and foreign exchange. •It is practiced especially by former communist and developing countries. •The international firm may have difficulty getting exchange to import products and supplies or components. •It usually has greater difficulty getting exchange to remit profits. It is tempted to use transfer pricing to avoid these negative effects. C) Intellectual Property Rights The term Intellectual Property Rights (IPR) is often shortened further to Intellectual Property (IP). Intellectual property is a series of legal rights that afford, in most cases temporary protection for different types of inventions, designs, brand names or original creations. The legal rights given are the rights to prevent unauthorized use of the invention, design, brand name or creation for the period of protection. The right given can be an absolute monopoly right orsimply aright to prevent reproduction.
  6. 6. International Business-2008 solved by - Mr. Shrund Kalse. Components of IPR in current context Patents: New and inventive technical innovations can enjoy an absolute monopoly for twenty years. Supplementary Protection Certificate: This is an extension of up to five years on the absolute monopoly given by a patent, where the invention consists of a medicinal product for which approval by the relevant authority has yet to be given. Trademarks: The owner of a trademark has an absolute monopoly forten years. The legal protection of any brand name has the title of trademark and it is shown on any product as TM. Designs: This is an absolute monopoly for twenty-five years, given for a new design of a manufactured article. Unregistered Design Right: This prevents reproduction of an original design, which lasts for a maximum of fifteen years. Copyright: Copyright prevents reproduction of an original literary, artistic, musical ordramaticwork. It is valid for a period of seventy years after the death of the author. Confidentiality and Trade Secrets: This prevents misuse of confidential or secret information. Plant VarietyRight: This relates to a new horticultural genus or species. It gives the monopoly rights of the new variety of plant to the scientist. THE PROCEDURE TO OBTAIN IPR PROTECTION Intellectual property rights can be obtained in one of two ways, by application or by automatic derivation. Where an application procedure is involved, it usually follows the steps set out in the following sequence: 1. File application 2.Search carried out to ascertain originality 3.Examination carried out 4.Objections raised/No objections raised 5.Dealing with objections 6.Grant/Registration Q 4) “Modern trade theories are essential for formulating business strategies at macro level in companies” Discuss in detail only relevant three trade theories. Ans: MODERN THEORY OF INTERNATIONAL TRADE: THE HECKSCHER-OHILIN THEORY The Heckscher-Ohlin theory explains why countries trade goods and services with each other, the emphasize being on the difference of resources between two countries. This model shows that the comparative advantage is actually influenced by the interaction between the resources countries have (relative abundance of production factors) and production technology (which influences the relative intensity by which the different production factors are being utilized during the production cycle. The model starts with the presumption that country A produces two products: food (X) and textiles (Y). These two kinds of production need two different inputs, territory (T) and labour (L), which are available in limited quantities. In the same time, food production (X) requires more land, so it can be said it is territory intensive and textile (Y) production requires more labour, being in this way labour intensive. Beginning with these presumptions, the Heckscher-Ohlin model explains the implications trade between two countries A and B has, if the countries produce the same products: food (X) and textiles (Y). The relative resource abundance, factors intensity and trade specialization Country Product Inputs and production without trade Labour (L) Territory (T) The relative abundance and trade specialization in the product for which there is a factor intensity L/T T/L -
  7. 7. International Business-2008 solved by - Mr. Shrund Kalse. A X Y X 20 95 0.21 X Y 10 5 2.00 Total 30 100 0.30 X Y 4.75 0.50 3.33 Y - B 3 5 0.60 1.66 10 2 5.00 1.20 13 7 1.85 0.53 X Y Total A country having a bigger offer in a resource than in another is relative abundant in that resource and tends to produce more products that use that resource. Countries are more efficient in producing goods for which they have a relative abundant resource. According to the Heckscher-Ohlin theory, trade makes it possible for each country to specialize. Each country exports the product the country is most suited to produce in exchange for products it is less suited to produce. In our case, country A is relative abundant in territory (T) and will specialize in producing food (X) and country B is relative abundant in labour (L) so it will specialize in producing textiles (Y). In this case, trade may benefit both countries involved. The changes in relative prices of goods have a powerful effect on the relative income obtain d from the different resources. International trade also has an important effect on the distribution of incomes. NATIONAL COMPETITIVE ADVANTAGE It is a fact that Porter(1990) never focused primarily on the factors determining the pattern of trade, yet his theory of national competitive advantage does explain why a particular country is more competitive in a particular industry. If, for example, Italy maintains competitive advantage in the production of ceramic tiles and Switzerland possesses the competitive advantage in watched, it can be interpreted that the formerwill export ceramictiles and the latterwill export watches and both of them will import goods in which their own industry is not competitive. Why is this there a difference? Porter explains that there are four factors responsible for such diversity. He calls those factors the “diamond of national advantage”. The diamond includes: 1.Factor conditions 2.Demand conditions 3.Related and supporting industries 4.Firm strategy, structure and rivalry These factors have been more or less taken into account by earlier economists. What is crucial in Porter’s thesis is that it is the interaction among these factors that shapes the competitive advantage. Factor conditions show how farthe factor of production in a country can be utilized successfully in a particularindustry. This concept goes beyond the factorproportions theory and explains that availability of the factors of production per se is not important, rather their contribution to the creation and upgradation of product is crucial for competitive advantage. If one says that Japan possesses competitiveadvantage in the production of automobiles, it is not simply because Japan has easy access to iron ore, but because the country has skilled labour force for making this industry competitive.
  8. 8. International Business-2008 solved by - Mr. Shrund Kalse. Secondly, the demand forproduct must be present in the domesticmarket from the very beginning of production. Porteris of the view that it is not merely the size of the market that is important, but it is the intensity and sophistication of the demand that is significant for competitive advantage. If consumers are sophisticated,they will make demands for sophisticated products and that, in turn, will help the production of sophisticated products. Gradually, the country will achieve competitive advantage in such production. Thirdly, the firm operating along with its competitors as well as its complementary fi rms gathers benefit through aclose workingrelationship in form of competition orbackward and forward linkages. If competition is acute, every firm will like to produce better quality goods at a lower cost in order to survive in the market. Again, if there is agglomeration of complementary units in a particular region, there may be strong backward and forward linkages. All this will help attain national competitive advantage. Figure 1: Porter’s Diamond of National Advantage Fourthly, the firm’s own strategy helps in augmenting export. There is no fixed rule regarding the adoption of a particular strategy. It depends upon a number of factors present in the home country or the importingcountry and it differs from time to time. Nevertheless, the strategic decisions of the firm have lastingeffects on theirfuture competitiveness. Again, equally important is the industry structure and rivalry amongdifferent companies. The greaterthe rivalry, the greater the competitive strength of the industry. Besides the fourfactors, Portergives weightage to a couple of factors, such as governmental policy and the role of chance of events. Governmental policy influences all the four factors through various regulatory/deregulatory measures. It can control the availability of various resources of change the pattern of demand through taxes and so on. It can encourage/discourage supportive industries through various incentives/disincentives. Similarly, chance of events, such as war or some unforeseen events like inventions/innovations; discontinuities in the supply of inputs; and so forth can eliminate the advantages possessed by competitors.
  9. 9. International Business-2008 solved by - Mr. Shrund Kalse. However, there are various criticisms put forth against Porter’s theory. First, there are cases when the absence of any of the factors embodies in Porter’s diamond does not affect the competitive advantage. For example, when a firm is exporting its entire output, the intensity of demand at home does not matter. Secondly, if the domestic suppliers of inputs are not available, the backward linkage will be meaningless. Thirdly, Porter’s theory is based on empirical findings covering 10 countries and fourindustries. A majority of the countries in the sample have different economic backgrounds and do not necessarily support the finding. Fourthly, availability of natural resources, accordingto Porter, is not the only condition for attaining competitive advantage and there must be other factors too for it. But the study of Rugman and McIlveen (1985) shows that some Canadian industries emerged on the global map only on the basis of natural resource availability. Fifthly, Porter feels that sizeable domestic demand must be present for attaining competitive advantage. But there are industries that have flourished because of demand from foreign consumers. Forexample, a lion’s share of Nestle’s earnings comes from foreign sales. Nevertheless, these limitations do not undermine the significance of Porter’s theory. THEORY OF PRODUCT LIFE CYCLE Theory of international product life cycle propounded by Raymond Vernon emphasizes that every product has to pass through different stages. Conceptually, the life cycle consists of four stages - introduction, growth, maturity and decline. 1. Introductory Stage New products are generally developed after observation of demand, utility and benefits a group of a group of customers enjoy in a given market. It is a normal practice that Japanese company develops a new product for Japanese market first and US Company develops a product for US market first. The Research and Development group creates anew product and predominantly the company concentrates on the domestic market and gradually starts export to other countries. By way of getting constant market feed back the company modifies or alters or adds new features to match international markets. 2. Growth stage Growth stage has few salient features: 1.It increases in export to many countries by which the company generates huge revenue. 2.More competitive forces crop up from a country by innovation, country of entry and any other third country. 3.The organization becomes high capital intensive. 4.The innovatorresorts to foreign production units in order to bring down the cost and come closer to customer. Since the customers are aware of the products and the demand is likely to grow substantially, setting up manufacturingunits become inevitable. While Sony products have huge demand in South East Asia and Middle East, the company started manufacturingproducts in Malaysia. Hewlett Packard started setting up units in South East Asiadue to rapid growth in sales in the whole region. The innovatingcompany will increase its quantum of exports and is prepared to incur small loss in the export markets where the manufacturing subsidiary unit will commence its operations. 3. Maturity stage This stage has following features: 1.There is a gradual fall in quantum of exports from innovating country. 2.Standardization and quality aspects are pre-requisites. 3.Sophisticated machineries are used, hence is huge. 4.Price war is inevitable due to many players. 5.Production facilities are available in many developing countries at a low labors cost. It is a general trend that innovating countries no longer enjoy production advantage. Since many physical, fiscal and infrastructural incentives are offered by the developing countries, such innovators are lured and increase there production in developing countries. Today, we see such manufacturing units in Indonesia, Thailand, Malaysiaand Brazil. Indiais also emergingas astrong production centre for automobiles, health care and consumer products.
  10. 10. International Business-2008 solved by - Mr. Shrund Kalse. 4. Declining stage 1. The main feature of the decliningstage is that maximum production takes place in less developed countries. 2. The innovatingcountry starts importingfrom othercountries. 3. The days of keeping high margins are over. 4. It is the stage of survival and no prosperity forthe innovator. 5. The innovator may completely deviate from a specific product and go in for a completely new product. The industrial countries disappoint the innovator because the affluent customer demands more and more. New products are flooded in the market with so many features. Since cost factor is the only weapon, production from less developed countries will win. The innovator of the product cannot depend on the first production unit which gave the first product for launching. Q 5) Discuss major objectives, agreements & achievements of WTO & the issues encountered by WTO at the end of Doha round? Ans: The WTO has six key objectives: (1)to set and enforce rules for international trade, (2)to provide a forum for negotiating and monitoring further trade liberalization, (3)to resolve trade disputes, (4)to increase the transparency of decision-making processes, (5)to cooperate with other major international economic institutions involved in global economic management, and (6)to help developing countries benefit fully from the global trading system. Although shared by the GATT, in practice these goals have been pursued more comprehensi vely by the WTO. For example, whereas the GATTfocused almost exclusively on goods—though much of agriculture The WTO’s rules — the agreements — are the result of negotiations between the members. The current set were the outcome of the 1986–94 Uruguay Round negotiations which included a major revision of the original General Agreement on Tariffs and Trade (GATT). The WTO agreements cover: Goods It all began with trade in goods. From 1947 to 1994, GATT was the forum for negotiating lower customs duty rates and other trade barriers; the text of the General Agreement spelt out important rules, particularly nondiscrimination. Since 1995, the updated GATT has become the WTO’s umbrella agreement for trade in goods. It has annexes dealing with specific sectors such as agriculture and textiles, and with specific issues such as state trading, product standards, subsidies and actions taken against dumping. Services Banks, insurance firms, telecommunications companies, tour operators, hotel chains and transport companies looking to do business abroad can now enjoy the same principles of freer and fairer trade that originally only applied to trade in goods.
  11. 11. International Business-2008 solved by - Mr. Shrund Kalse. These principles appear in the new General Agreement on Trade in Services (GATS). WTO members have also made individual commitments under GATS stating which of their services sectors they are willing to open to foreign competition, and how open those markets are. Intellectual property The WTO’s intellectual property agreement amounts to rules for trade and investment in ideas and creativity. The rules state how copyrights, patents, trademarks, geographical names used to identify products, industrial designs, integrated circuit layout-designs and undisclosed information such as trade secrets — “intellectual property” — should be protected when trade is involved. Dispute settlement The WTO’s procedure for resolving trade quarrels under the Dispute Settlement Understanding is vital for enforcing the rules and therefore ensuring that trade flows smoothly. Countries bring disputes to the WTO if they think their rights under the agreements are being infringed. Judgments by specially- appointed independent experts are based on interpretations of the agreements and individual countries’ commitments. Policy review The Trade Policy Review Mechanism’s purpose is to improve transparency, to create a greater understanding of the policies that countries are adopting, and to assess their impact. Many members also see the reviews as constructive feedback on their policies. ACHIEVEMENTS OF WTO 1. Trade Liberalisation • WTO’s trade liberalization measures are embodied in a variety of agreements, No.60,which each country has to sign for becoming member of WTO. 2. Agreement on Agriculture (AOA) • Tariffs on agricultural products are bound • Non Tariff barriers such as Quotas for Import have been converted to tariff (Tariffication) to give predictability to trade in agriculture commodities. • Developed countries have agreed to cut export subsidies by 36% (24% cut for developing countries). 3. Trade Related Investment Masures Agreement (TRIMS )Applies to measures that affect trade in goods. •No country shall apply any measure that discriminates against foreigners or foreign products (Principle of National treatment). However, permits utilization of local resources through ‘Local Content Requirements’. •Discourages ‘trade belonging requirements’ of countries by restricting import & pushing exports. •Deadlines for implementation – •Developed Countries - 1996 •Developing Countries – 1999 (extended) • LDC - 2001 (extended) 4.SPS Agreement (Sanitary & Phyto – Sanitary Agreement ) Anti Dumping Agreement – • Member Countries can resort to anti dumping measures if they can establish that goods are being dumped at price lower than the price prevailing in the exporting country. • Extension of Import Duty can be levied to prevent dumping 5.Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) •Enjoins on the member countries to protect the rights of the creators/invention of products or ideas. •Copyrights, trademarks, geographical indications, Industrial designs, patterns etc. are covered. e.g. Computer programs, films, wires & spirits are protected. 6. General Agreement on Trade in Services (GATS) – •Lays down obligations of member countries to provide access to import of services on the basis of MFN principle.
  12. 12. International Business-2008 solved by - Mr. Shrund Kalse. •Exclusions permitted but to be notified by respective Govts. eg. Air Transport Services are excluded. ISSUES OF DOHA ROUND The fourth round was Doha round of negotiations which was held in Doha, Qatar in 2001. Many of the Seattle issues, covering unfinished agenda of Uruguay Round, were reconvened in Doha. This round is also known as Doha Development Round because it is mentioned in the Ministerial Declaration that this round seeks to place developing countries’ needs and interests at the heart of the Work Programmed adopted in this declaration. In every negotiable issue of the round, special concessions for developing countries were mentioned. The declaration stated that “We commit ourselves to the objective of duty- free, quota-free market access for products originating from LDCs”. However, there was no mention about the policies that involve use of domestic instruments in creating a protective environment and achieving the end result of restricting exports from LDCs. One such example is farm subsidies. The final resolution on Doha issues has still not been achieved, even after more than 8 years since its introduction. The reason is lack of forward movement by major negotiators on agriculture subsidy and tariff reduction, the two most intractable issues in the Round. Negotiations aimed at a world that no longer exists Neither the collapse of the Round, nor the recriminations to follow, should be taken too seriously. The mandate for negotiations under the auspices of the Doha Round has fallen further and further behind the pace of change in the world economy Success requires a different game, with different rules and different players Consider agriculture –the proximate cause of the Doha collapse. According to World Bank commodity price indexes, in 2001 grain prices were only 70 % of their nominal 1995 levels. In defining the negotiating agenda for the Doha Round, the focus of commodity exporters in the WTO (Brazil, Argentina, Australia, etc.) has been to raise these prices by eliminating price-distorting policies. At the same time, major importers (India, China) have also been concerned about the impact of low prices on their farmers. Impasses over agriculture are as much an excuse as a cause of the breakdown In a sense, developing countries are collectively asking that food prices go up and down at the same time. The inconsistency reflects divergent interests across the newer, non-OECD members of the WTO. It also highlights the fact that remainingimpasses overagriculture are as much an excuse as a cause. The problem is irreconcilable differences in views on trade policy, linked to differences in stages of economic development. Non-agricultural issues Moving past agriculture to NAMA and services, developing country gains at this point really require SouthSouth dialog and South-South initiatives at liberalization. This is the message from much of the policy modeling literature. Indeed, model-based analysis of recent NAMA proposals simply reinforces the message from earlier research on the impacts of multilateral trade liberalization, namely: “active developing country participation in terms of market access concessions is critical to their prospects Q 6) “NAFTA is emerging as an effective trade partner for India despite of global slowdown” if so, categories major sectors & business opportunities for Indian business houses to prosper in future in the NAFTA bloc. Ans: NAFTA- The north American free trade agreement (NAFTA) came into being on January 1,1994.the most affluent nations of the world ,i.e. the USA and Canada along with Mexico –a developing country joined together to form a trade block. A free trade agreement was signed by the USA and Canada in 1989.this was extended to
  13. 13. International Business-2008 solved by - Mr. Shrund Kalse. Mexico in 1994.NAFTA is expected to eliminates all tariffs and trade barriers among these countries by 2009.However internal tariffs on a large number of product categories were removed already. NAFTA has a population of 363 million and hence it is one of the significant trading areas in the globe. Objectives To create new business opportunities particularly in the Mexico To enhance the competitive advantage of the companies operating in the USA,Canada and Mexico in wider international markets. To reduce the prices f the products and services by enhancing the competition To enhance industrial development and thereby employment throughout the region. To provide stable and predictable political environment for the investors. To develop industries in Mexico in order to create employment and to reduce migration from Mexico to the USA. To assist Mexico in earning additional foreign exchange to meet its foreign debt burden. To improve and consolidate political relationship among member countries. There are tremendous opportunities in Canada and globally for Canadian banks. Domestically, we are positioned as an alternative to the Canadian financial institutions; our model can be best identified as a full-service direct bank. In addition, our structure is flat and our size allows us to be close to our customers. Indian engineering exports and Free Trade Agreement amongst the three countries i.e. Canada, USA and Mexico, provided enormous opportunities for bilateral trade. Q 7) Enumerate all the challenges encountered by global human resources division operating in a cross border business environment. Ans: challenges related to managing people in management an internationally oriented business. Driving force for globalization 1.Foreign direct investment (FDI) flows 2.Cross-border inter-firm agreements Organizations expand beyond domestic boundaries to achieve 1.Satisfied employees 2.Competitive products and services 3.Searching for new or broader markets 4.Acquiring new, more efficient manufacturing technology 5.Large, inexpensive labor forces Global human resource management (GHRM) includes the same functions as domestic HRM, plus several aspects unique to international management 1.“people challenge” the most difficult for firms becoming international 2.Most critical to success, acquiring a competent workforce (survey of top execs.) The top HR challenges include 1.Finding suitable candidates 2.Intercultural understanding 3.Career management 4.Employee retention 5.Adjusting to environment 6.Partner dissatisfaction 7.Relocation reluctance The cultural nature of global human resource management cultural differences
  14. 14. International Business-2008 solved by - Mr. Shrund Kalse. 1.Individualism versus collectivism 2.Power distance 3.Uncertainty avoidance 4.Masculinity versus femininity The concept of "fit" in global human resource management 1.Fit (congruence among HR policies, firm’s plan & values of foreign culture) 2.Internal fit (HR policies that allow for smooth work flow: HQ & local) 3.External fit (HR to consider the local cultural/socioeconomic environment) The legal and ethical climate of global human resource management 1.Foreign Corrupt Practices Act – (1977) forbids in conducting to give the firm an unfair advantage 2.There exists varying degrees of employment discrimination in other countries which may cause problems/dilemmas for PCNs managers Convert PDF to Word