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International business

  1. 1. Competitive Advantage - DefinitionA competitive advantage is an advantage over competitors gained by offeringconsumers greater value, either by means of lower prices or by providing greaterbenefits and service that justifies higher prices.Competitive StrategiesFollowing on from his work analysing the competitive forces in an industry, MichaelPorter suggested four "generic" business strategies that could be adopted in order togain competitive advantage. The four strategies relate to the extent to which thescope of a businesses activities are narrow versus broad and the extent to which abusiness seeks to differentiate its products.The four strategies are summarised in the figure below:The differentiation and cost leadership strategies seek competitive advantage in abroad range of market or industry segments. By contrast, the differentiation focusand cost focus strategies are adopted in a narrow market or industry.Strategy - DifferentiationThis strategy involves selecting one or more criteria used by buyers in a market - andthen positioning the business uniquely to meet those criteria. This strategy is usuallyassociated with charging a premium price for the product - often to reflect the higherproduction costs and extra value-added features provided for the consumer.Differentiation is about charging a premium price that more than covers the additionalproduction costs, and about giving customers clear reasons to prefer the product overother, less differentiated products.
  2. 2. Examples of Differentiation Strategy: Mercedes cars; Bang & OlufsenStrategy - Cost LeadershipWith this strategy, the objective is to become the lowest-cost producer in theindustry. Many (perhaps all) market segments in the industry are supplied with theemphasis placed minimising costs. If the achieved selling price can at least equal (ornear)the average for the market, then the lowest-cost producer will (in theory) enjoythe best profits. This strategy is usually associated with large-scale businesses offering"standard" products with relatively little differentiation that are perfectly acceptableto the majority of customers. Occasionally, a low-cost leader will also discount itsproduct to maximise sales, particularly if it has a significant cost advantage over thecompetition and, in doing so, it can further increase its market share.Examples of Cost Leadership: Nissan; Tesco; Dell ComputersStrategy - Differentiation FocusIn the differentiation focus strategy, a business aims to differentiate within just one ora small number of target market segments. The special customer needs of thesegment mean that there are opportunities to provide products that are clearlydifferent from competitors who may be targeting a broader group of customers. Theimportant issue for any business adopting this strategy is to ensure that customersreally do have different needs and wants - in other words that there is a valid basisfor differentiation - and that existing competitor products are not meeting thoseneeds and wants.Examples of Differentiation Focus: any successful niche retailers; (e.g. The PerfumeShop); or specialist holiday operator (e.g. Carrier)Strategy - Cost FocusHere a business seeks a lower-cost advantage in just on or a small number of marketsegments. The product will be basic - perhaps a similar product to the higher-pricedand featured market leader, but acceptable to sufficient consumers. Such productsare often called "me-toos".Examples of Cost Focus: Many smaller retailers featuring own-label or discounted labelproducts. Offensive marketing warfare strategies
  3. 3. In marketing and strategic management, marketing warfare strategies are a type ofmarketing strategy that uses military metaphor to craft a businesses strategy. Seemarketing warfare strategies for background and an overview. Offensive marketingwarfare strategies are a type of marketing warfare strategy designed to obtain anobjective, usually market share, from a target competitor. In addition to market share, anoffensive strategy could be designed to obtain key customers, high margin marketsegments, or high loyalty market segments.Fundamental PrinciplesThere are four fundamental principles involved: 1. Assess the strength of the target competitor. Consider the amount of support that the target might muster from allies. Choose only one target at a time. 2. Find a weakness in the target’s position. Attack at this point. Consider how long it will take for the target to realign their resources so as to reinforce this weak spot. 3. Launch the attack on as narrow a front as possible. Whereas a defender must defend all their borders, an attacker has the advantage of being able to concentrate their forces at one place. 4. Launch the attack quickly. The element of surprise is worth more than a thousand tanks.Types of offensive strategiesThe main types of offensive marketing warfare strategies are: • Frontal Attack - This is a direct head-on assault. It usually involves marshaling all your resources including a substantial financial commitment. All parts of your company must be geared up for the assault from marketing to production. It usually involves intensive advertising assaults and often entails developing a new product that is able to attack the target competitors’ line where it is strong. It often involves an attempt to “liberate” a sizable portion of the target’s customer base. In actuality, frontal attacks are rare. There are two reasons for this. Firstly, they are expensive. Many valuable resources will be used and lost in the assault. Secondly, frontal attacks are often unsuccessful. If defenders are able to re-deploy their resources in time, the attacker’s strategic advantage is lost. You will be confronting strength rather than weakness. Also, there are many examples (in both business and warfare) of a dedicated defender being able to hold-off a larger attacker. The strategy is suitable when o the market is relatively homogeneous o brand equity is low o customer loyalty is low o products are poorly differentiated o the target competitor has relatively limited resources
  4. 4. o the attacker has relatively strong resources • Envelopment Strategy (also called encirclement strategy) - This is a much broader but subtle offensive strategy. It involves encircling the target competitor. This can be done in two ways. You could introduce a range of products that are similar to the target product. Each product will liberate some market share from the target competitor’s product, leaving it weakened, demoralized, and in a state of siege. If it is done stealthily, a full scale confrontation can be avoided. Alternatively, the encirclement can be based on market niches rather than products. The attacker expands the market niches that surround and encroach on the target competitor’s market. This encroachment liberates market share from the target. The envelopment strategy is suitable when: o the market is loosely segmented o some segments are relatively free of well endowed competitors o the attacker has strong product development resources o the attacker has enough resources to operate in multiple segments simultaneously o the attacker has a decentralized organizational structure • Leapfrog strategy -This strategy involves bypassing the enemy’s forces altogether. In the business arena, this involves either developing new technologies, or creating new business models. This is a revolutionary strategy that re-writes the rules of the game. The introduction of compact disc technology bypassed the established magnetic tape based defenders. The attackers won the war without a single costly battle. This strategy is very effective when it can be realized. • Flanking attack - This strategy is designed to pressure the flank of the enemy line so the flank turns inward. You make gains while the enemy line is in chaos. In doing so, you avoid a head-on confrontation with the main force. (see flanking marketing warfare strategies )Performance indicatorA Performance Indicator or Key Performance Indicator (KPI) is an industry jargonterm for a type of Measure of Performance.[1] KPIs are commonly used by anorganization to evaluate its success or the success of a particular activity in which it isengaged. Sometimes success is defined in terms of making progress toward strategicgoals[2], but often, success is simply the repeated achievement of some level ofoperational goal (zero defects, 10/10 customer satisfaction etc.). Accordingly, choosingthe right KPIs is reliant upon having a good understanding of what is important to theorganization. What is important often depends on the department measuring theperformance - the KPIs useful to a Finance Team will be quite different to the KPIsassigned to the sales force, for example. Because of the need to develop a goodunderstanding of what is important, performance indicator selection is often closelyassociated with the use of various techniques to assess the present state of the business,
  5. 5. and its key activities. These assessments often lead to the identification of potentialimprovements; and as a consequence, performance indicators are routinely associatedwith performance improvement initiatives. A very common method for choosing KPIs isto apply a management framework such as the Balanced Scorecard.[edit] Categorization of indicatorsKey Performance Indicators define a set of values used to measure against. These rawsets of values, which are fed to systems in charge of summarizing the information, arecalled indicators. Indicators identifiable as possible candidates for KPIs can besummarized into the following sub-categories: • Quantitative indicators which can be presented as a number. • Practical indicators that interface with existing company processes. • Directional indicators specifying whether an organization is getting better or not. • Actionable indicators are sufficiently in an organizations control to effect change. • Financial indicators used in performance measurement and when looking at an operating indexKey Performance Indicators, in practical terms and for strategic development, areobjectives to be targeted that will add the most value to the business.[citation needed] These arealso referred to as Key Success Indicators.[edit] Some Important AspectsKey performance indicators (KPIs) are ways to periodically assess the performances oforganizations, business units, and their division, departments and employees.Accordingly, KPIs are most commonly defined in a way that is understandable,meaningful, and measurable. They are rarely defined in such a way such that theirfulfillment would be hampered by factors seen as non-controllable by the organizationsor individuals responsible. Such KPIs are usually ignored by organizations[citation needed].In order to be evaluated, KPIs are linked to target values, so that the value of the measurecan be assessed as meeting expectations or not.[edit] Identifying Indicators of OrganizationPerformance indicators differ from business drivers & aims (or goals). A school mightconsider the failure rate of its students as a Key Performance Indicator which might helpthe school understand its position in the educational community, whereas a businessmight consider the percentage of income from returning customers as a potential KPI.The key stages in identifying KPIs are:
  6. 6. • Having a pre-defined business process (BP). • Having requirements for the BPs. • Having a quantitative/qualitative measurement of the results and comparison with set goals. • Investigating variances and tweaking processes or resources to achieve short-term goals.A KPI can follow the SMART criteria. This means the measure has a Specific purposefor the business, it is Measurable to really get a value of the KPI, the defined norms haveto be Achievable, the improvement of a KPI has to be Relevant to the success of theorganization, and finally it must be Time phased, which means the value or outcomes areshown for a predefined and relevant period.KPI ExamplesMarketingSome examples are: 1. New customers acquired 2. Demographic analysis of individuals (potential customers) applying to become customers, and the levels of approval, rejections, and pending numbers. 3. Status of existing customers 4. Customer attrition 5. Turnover (ie, Revenue) generated by segments of the customer population. 6. Outstanding balances held by segments of customers and terms of payment. 7. Collection of bad debts within customer relationships. 8. Profitability of customers by demographic segments and segmentation of customers by profitability.Many of these customer KPIs are developed and managed with customer relationshipmanagement (CRM) software.Faster availability of data is a competitive issue for most organizations. For example,businesses which have higher operational/credit risk (involving for example credit cardsor wealth management) may want weekly or even daily availability of KPI analysis,facilitated by appropriate IT systems and tools.ManufacturingOverall equipment effectiveness, or OEE, is a set of broadly accepted non-financialmetrics which reflect manufacturing success. • Cycle TimeCycle time is the total time from the beginning to the end of your process, as defined byyou and your customer. Cycle time includes process time, during which a unit is acted
  7. 7. upon to bring it closer to an output, and delay time, during which a unit of work is spentwaiting to take the next action. • Cycle Time RatioCTR = StandardCycleTime / RealCycleTime • Utilization • Rejection rateIT • Availability • Mean Time Between Failure • Mean Time to Repair • Unplanned AvailabilitySupply Chain ManagementBusinesses can utilize KPIs to establish and monitor progress toward a variety of goals,including lean manufacturing objectives, MBE (Minority Business Enterprise) anddiversity spending, environmental "green" initiatives, cost avoidance (CA) programs andlow-cost country sourcing (LCCS) targets.Any business, regardless of size, can better manage supplier performance with the help ofKPIs robust capabilities, which include: • Automated entry and approval functions • On-demand, real-time scorecard measures • Single data repository to eliminate inefficiencies and maintain consistency • Advanced workflow approval process to ensure consistent procedures • Flexible data-input modes and real-time graphical performance displays • Customized cost savings documentation (CSD) • Simplified setup procedures to eliminate dependence upon IT resources.Main SCM KPIs will detail the following processes: • sales forecasts • inventory • procurement and suppliers • warehousing • transportation • reverse logisticsSuppliers can implement KPIs to gain an advantage over the competition. Suppliers haveinstant access to a user-friendly portal for submitting standardized cost savings templates.Suppliers and their customers exchange vital supply chain performance data while
  8. 8. gaining visibility to the exact status of cost improvement projects and cost savingsdocumentation (CSD).Further performance indicators • Duration of a stockout situation • Customer order waiting timeProblemsIn practice, overseeing Key Performance Indicators can prove expensive or difficult fororganizations. Indicators such as staff morale may be impossible to quantify.Another serious issue in practice is that once a measure is created, it becomes difficult toadjust to changing needs as historical comparisons will be lost. Conversely, measures areoften of dubious relevance, because history does exist.Furthermore, since businesses with similar backgrounds are often used as a benchmarkfor such measures, measures based only on in-house practices make it difficult for anorganization to compare with these outside benchmarks.Measures are also used as a rough guide rather than a precise benchmark.Quality circleFrom Wikipedia, the free encyclopediaJump to: navigation, searchA quality circle is a volunteer group composed of workers (or even students), usuallyunder the leadership of their supervisor (but they can elect a team leader), who are trainedto identify, analyze and solve work-related problems and present their solutions tomanagement in order to improve the performance of the organization, and motivate andenrich the work of employees. When matured, true quality circles become self-managing,having gained the confidence of management.Quality circles are an alternative to the dehumanising concept of the division of labor,where workers or individuals are treated like robots. They bring back the concept ofcraftsmanship, which when operated on an individual basis is uneconomic, but when usedin group form (as is the case with quality circles), it can be devastatingly powerful andenables the enrichment of the lives of the workers or students and creates harmony andhigh performance in the workplace. Typical topics are improving occupational safety andhealth, improving product design, and improvement in the workplace and manufacturingprocesses.The term quality circles derives from the concept of PDCA (Plan, Do, Check, Act)circles developed by Dr. W. Edwards Deming.
  9. 9. Quality circles are not normally paid a share of the cost benefit of any improvements butusually a proportion of the savings made is spent on improvements to the workenvironment.[citation needed]They are formal groups. They meet at least once a week on company time and are trainedby competent persons (usually designated as facilitators) who may be personnel andindustrial relations specialists trained in human factors and the basic skills of problemidentification, information gathering and analysis, basic statistics, and solutiongeneration.[1] Quality circles are generally free to select any topic they wish (other thanthose related to salary and terms and conditions of work, as there are other channelsthrough which these issues are usually considered).[2][3]Quality circles have the advantage of continuity; the circle remains intact from project toproject. (For a comparison to Quality Improvement Teams, see Jurans Quality byDesign.[4]Historya Quality circles were first established in Japan in 1962; Kaoru Ishikawa has beencredited with their creation. The movement in Japan was coordinated by the JapaneseUnion of Scientists and Engineers (JUSE). The first circles were established at theNippon Wireless and Telegraph Company but then spread to more than 35 othercompanies in the first year.[5] By 1978 it was claimed that there were more than onemillion Quality Circles involving some 10 million Japanese workers.[citation needed] There arenow Quality Circles in most East Asian countries; it was recently claimed that there weremore than 20 million Quality Circles in China.[citation needed]Quality circles have been implemented even in educational sectors in India, and QCFI(Quality Circle Forum of India) is promoting such activities. However this was notsuccessful in the United States, as it (was not properly understood and) turned out to be afault-finding exercise although some circles do still exist. ref Don Dewar who togetherwith Wayne Ryker and Jeff Beardsley first established them in 1972 at the LockheedSpace Missile Factory in California.There are different quality circle tools, namely: • The Ishikawa or fishbone diagram - which shows hierarchies of causes contributing to a problem • The Pareto Chart - which analyses different causes by frequency to illustrate the vital cause, • Process Mapping, Data gathering tools such as Check Sheets and graphical tools such as histograms, frequency diagrams, spot charts and pie charts[edit] Student quality circles
  10. 10. Student quality circles work on the original philosophy of Total Quality Management[6].The idea of SQCs was presented by City Montessori School (CMS) Lucknow India in1993 at a conference in Hong Kong in October 1994. It was developed and mentored byduo engineers of Indian Railways PC Bihari and Swami Das in association with PrincipalDr Kamran of CMS Lucknow India. They were inspired and facilitated by JagdishGandhi the founder of CMS after J. Gandhis visit to Japan where he learnt about Kaizen.The worlds first student QC was made in CMS Lucknow in India with then 13 year oldstudent Ms. Sucheta Bihari as its leader. CMS conducts international convention onstudent quality circles at its location in Lucknow since 1997 which it has repeated every 2years to the present day. After seeing its utility, the visionary educationalists from manycountries started these circles. The World Council for Total Quality & Excellence inEducation was established in 1999 with its Corporate Office In Lucknow and HeadOffice at Singapore. It monitors and facilitates student quality circle activities to itsmember countries which is more than a dozen.This is considered to be a co-curricularactivity. Students Quality Circles have been established in India, Bangladesh, Pakistan,Nepal, Sri Lanka, Turkey, Mauritius, Iran, UK (Kingston University), USA, etc.In NepalProf. Dinesh P. Chapagain is promoting this innovative approach through QUEST-Nepalsince 1999. Prof. Chapagain has written a book entitled "A Guide Book on StudentsQuality Circle: An Approach to prepare Total Quality People" which is considered asstandard guide book to promote Students Quality Circles in academia for studentspersonality development.[citation needed]Multinational Companies in India Multinational companies are the organizations or enterprises that manageproduction or offer services in more than one country. And India has been the home to a number of multinational companies. In fact, since the financial liberalization in the country in 1991, the number of multinational companies in India has increasednoticeably. Though majority of the multinational companies in India are from the U.S., however one can also find companies from other countries as well. Destination IndiaThe multinational companies in India represent a diversified portfolio of companies fromdifferent countries. Though the American companies - the majority of the MNC in India, account for about 37% of the turnover of the top 20 firms operating in India, but the scenario has changed a lot off late. More enterprises from European Union like Britain, France, Netherlands, Italy, Germany, Belgium and Finland have come to India or have outsourced their works to this country. Finnish mobile giant Nokia has their second largest base in this country. There are also MNCs like British Petroleum and Vodafone that represent Britain. India has a huge market for automobiles and hence a number ofautomobile giants have stepped in to this country to reap the market. One can easily find the showrooms of the multinational automobile companies like Fiat, Piaggio, and Ford
  11. 11. Motors in India. French Heavy Engineering major Alstom and Pharma major Sanofi Aventis have also started their operations in this country. The later one is in fact one of the earliest entrants in the list of multinational companies in India, which is currently growing at a very enviable rate. There are also a number of oil companies and infrastructure builders from Middle East. Electronics giants like Samsung and LG Electronics from South Korea have already made a substantial impact on the Indian electronics market. Hyundai Motors has also done well in mid-segment car market in India. Why are Multinational Companies in India? There are a number of reasons why the multinational companies are coming down toIndia. India has got a huge market. It has also got one of the fastest growing economies in the world. Besides, the policy of the government towards FDI has also played a major role in attracting the multinational companies in India.For quite a long time, India had a restrictive policy in terms of foreign direct investment. As a result, there was lesser number of companies that showed interest in investing in Indian market. However, the scenario changed during the financial liberalization of the country, especially after 1991. Government, nowadays, makes continuous efforts to attract foreign investments by relaxing many of its policies. As a result, a number of multinational companies have shown interest in Indian market. Following are the reasons why multinational companies consider India as a preferred destination for business: • Huge market potential of the country • FDI attractiveness • Labor competitiveness • Macro-economic stability List of Multinational Companies in IndiaFrom Wikipedia, the free encyclopediaJump to: navigation, search This article has multiple issues. Please help improve it or discuss these issues on the talk page. • It is missing citations or footnotes. Please help improve it by adding inline citations. Tagged since July 2010. • Its neutrality is disputed. Tagged since May 2010.
  12. 12. • It reads like a personal reflection or essay. Tagged since March 2009.A multinational corporation (MNC) or enterprise (MNE),[1] is a corporation or anenterprise that manages production or delivers services in more than one country. It canalso be referred to as an international corporation. The International LabourOrganization (ILO) has defined[citation needed] an MNC as a corporation that has itsmanagement headquarters in one country, known as the home country, and operates inseveral other countries, known as host countries.The Dutch East India Company was the first multinational corporation in the world andthe first company to issue stock.[2] It was also arguably the worlds first megacorporation,possessing quasi-governmental powers, including the ability to wage war, negotiatetreaties, coin money, and establish colonies.[3]The first modern multinational corporation is generally thought to be the East IndiaCompany.[4] Many corporations have offices, branches or manufacturing plants indifferent countries from where their original and main headquarters is located.Some multinational corporations are very big, with budgets that exceed some nationsGDPs. Multinational corporations can have a powerful influence in local economies, andeven the world economy, and play an important role in international relations andglobalization.Contents[hide] • 1 Market imperfections • 2 International power o 2.1 Tax competition o 2.2 Market withdrawal o 2.3 Lobbying o 2.4 Patents • 3 Transnational Corporations • 4 Micro-multinationals • 5 Criticism of multinationals • 6 References • 7 External links[edit] Market imperfectionsIt may seem strange that a corporation can decide to do business in a different country,where it does not know the laws, local customs or business practices.[1] Why is it not
  13. 13. more efficient to combine assets of value overseas with local factors of production atlower costs by renting or selling them to local investors?[1]One reason is that the use of the market for coordinating the behaviour of agents locatedin different countries is less efficient than coordinating them by a multinational enterpriseas an institution.[1] The additional costs caused by the entrance in foreign markets are ofless interest for the local enterprise.[1] According to Hymer, Kindleberger and Caves, theexistence of MNCs is reasoned by structural market imperfections for final products.[5] InHymers example, there are considered two firms as monopolists in their own market andisolated from competition by transportation costs and other tariff and non-tariff barriers.If these costs decrease, both are forced to competition; which will reduce their profits.[5]The firms can maximize their joint income by a merger or acquisition, which will lowerthe competition in the shared market.[5] Due to the transformation of two separatedcompanies into one MNE the pecuniary externalities are going to be internalized.[5]However, this does not mean that there is an improvement for the society.[5]This could also be the case if there are few substitutes or limited licenses in a foreignmarket.[6] The consolidation is often established by acquisition, merger or the verticalintegration of the potential licensee into overseas manufacturing.[6] This makes it easy forthe MNE to enforce price discrimination schemes in various countries.[6] ThereforeHymer considered the emergence of multinational firms as "an (negative) instrument forrestraining competition between firms of different nations".[7]Market imperfections had been considered by Hymer as structural and caused by thedeviations from perfect competition in the final product markets.[8] Further reasons areoriginated from the control of proprietary technology and distribution systems, scaleeconomies, privileged access to inputs and product differentiation.[8] In the absence ofthese factors, market are fully efficient.[1] The transaction costs theories of MNEs hadbeen developed simultaneously and independently by McManus (1972), Buckley &Casson (1976) Brown (1976) and Hennart (1977, 1982).[1] All these authors claimed thatmarket imperfections are inherent conditions in markets and MNEs are institutions thattry to bypass these imperfections.[1] The imperfections in markets are natural as theneoclassical assumptions like full knowledge and enforcement do not exist in realmarkets.[9][edit] International power[edit] Tax competitionMultinational corporations have played an important role in globalization. Countries andsometimes subnational regions must compete against one another for the establishment ofMNC facilities, and the subsequent tax revenue, employment, and economic activity. Tocompete, countries and regional political districts sometimes offer incentives to MNCssuch as tax breaks, pledges of governmental assistance or improved infrastructure, or laxenvironmental and labor standards enforcement. This process of becoming moreattractive to foreign investment can be characterized as a race to the bottom, a pushtowards greater autonomy for corporate bodies, or both.
  14. 14. However, some scholars for instance the Columbia economist Jagdish Bhagwati, haveargued that multinationals are engaged in a race to the top. While multinationalscertainly regard a low tax burden or low labor costs as an element of comparativeadvantage, there is no evidence to suggest that MNCs deliberately avail themselves of laxenvironmental regulation or poor labour standards. As Bhagwati has pointed out, MNCprofits are tied to operational efficiency, which includes a high degree of standardisation.Thus, MNCs are likely to tailor production processes in all of their operations inconformity to those jurisdictions where they operate (which will almost always includeone or more of the US, Japan or EU) that has the most rigorous standards. As for laborcosts, while MNCs clearly pay workers in, e.g. Vietnam, much less than they would inthe US (though it is worth noting that higher American productivity—linked totechnology—means that any comparison is tricky, since in America the same companywould probably hire far fewer people and automate whatever process they performed inVietnam with manual labour), it is also the case that they tend to pay a premium ofbetween 10% and 100% on local labor rates.[10] Finally, depending on the nature of theMNC, investment in any country reflects a desire for a long-term return. Costs associatedwith establishing plant, training workers, etc., can be very high; once established in ajurisdiction, therefore, many MNCs are quite vulnerable to predatory practices such as,e.g., expropriation, sudden contract renegotiation, the arbitrary withdrawal or compulsorypurchase of unnecessary licenses, etc. Thus, both the negotiating power of MNCs andthe supposed race to the bottom may be overstated, while the substantial benefits thatMNCs bring (tax revenues aside) are often understated[edit] Market withdrawalBecause of their size, multinationals can have a significant impact on government policy,primarily through the threat of market withdrawal.[11] For example, in an effort to reducehealth care costs, some countries have tried to force pharmaceutical companies to licensetheir patented drugs to local competitors for a very low fee, thereby artificially loweringthe price. When faced with that threat, multinational pharmaceutical firms have simplywithdrawn from the market, which often leads to limited availability of advanced drugs.In these cases, governments have been forced to back down from their efforts. Similarcorporate and government confrontations have occurred when governments tried to forceMNCs to make their intellectual property public in an effort to gain technology for localentrepreneurs. When companies are faced with the option of losing a core competitivetechnological advantage or withdrawing from a national market, they may choose thelatter. This withdrawal often causes governments to change policy. Countries that havebeen the most successful in this type of confrontation with multinational corporations arelarge countries such as United States and Brazil[citation needed], which have viable indigenousmarket competitors.[edit] LobbyingMultinational corporate lobbying is directed at a range of business concerns, from tariffstructures to environmental regulations. There is no unified multinational perspective onany of these issues. Companies that have invested heavily in pollution controlmechanisms may lobby for very tough environmental standards in an effort to force non-compliant competitors into a weaker position. Corporations lobby tariffs to restrict
  15. 15. competition of foreign industries. For every tariff category that one multinational wantsto have reduced, there is another multinational that wants the tariff raised. Even withinthe U.S. auto industry, the fraction of a companys imported components will vary, sosome firms favor tighter import restrictions, while others favor looser ones. Says ElyOliveira, Manager Director of the MCT/IR: This is very serious and is very hard andtakes a lot of work for the owner.pkMultinational corporations such as Wal-mart and McDonalds benefit from governmentzoning laws, to create barriers to entry.Many industries such as General Electric and Boeing lobby the government to receivesubsidies to preserve their monopoly.[12][edit] PatentsMany multinational corporations hold patents to prevent competitors from arising. Forexample, Adidas holds patents on shoe designs, Siemens A.G. holds many patents onequipment and infrastructure and Microsoft benefits from software patents.[13] Thepharmaceutical companies lobby international agreements to enforce patent laws onothers.[edit] Transnational CorporationsA Transnational Corporation (TNC) differs from a tranditional MNC in that it does notidentify itself with one national home. Whilst traditional MNCs are national companieswith foreign subsidiaries,[14] TNCs spread out their operations in many countriessustaining high levels of local responsiveness.[15] An example of a TNC is Nestlé whoemploy senior executives from many countries and try to make decisions from a globalperspective rather than from one centralised headquarters.[16] However, the terms TNCand MNC are often used interchangeably.[edit] Micro-multinationalsEnabled by Internet based communication tools, a new breed of multinational companiesis growing in numbers.[17] These multinationals start operating in different countries fromthe very early stages. These companies are being called micro-multinationals. [18] Whatdifferentiates micro-multinationals from the large MNCs is the fact that they are smallbusinesses. Some of these micro-multinationals, particularly software developmentcompanies, have been hiring employees in multiple countries from the beginning of theInternet era. But more and more micro-multinationals are actively starting to market theirproducts and services in various countries. Internet tools like Google, Yahoo, MSN, Ebayand Amazon make it easier for the micro-multinationals to reach potential customers inother countries.Service sector micro-multinationals, like Facebook, Alibaba etc. started as dispersedvirtual businesses with employees, clients and resources located in various countries.
  16. 16. Their rapid growth is a direct result of being able to use the internet, cheaper telephonyand lower traveling costs to create unique business opportunities.Low cost SaaS (Software As A Service) suites make it easier for these companies tooperate without a physical office.Hal Varian, Chief Economist at Google and a professor of information economics at U.C.Berkeley, said in April 2010, "Immigration today, thanks to the Web, means somethingvery different than it used to mean. Theres no longer a brain drain but brain circulation.People now doing startups understand what opportunities are available to them aroundthe world and work to harness it from a distance rather than move people from one placeto another."[edit] Criticism of multinationalsMain article: Anti-corporate activismFile:Adbusters NY Billboard.jpgAnti-corporate activism in New YorkThe rapid rise of multinational corporations has been a topic of concern amongintellectuals, activists and laypersons who have seen it as a threat of such basic civilrights as privacy. They have pointed out that multinationals create false needs inconsumers and have had a long history of interference in the policies of sovereign nationstates. Evidence supporting this belief includes invasive advertising (such as billboards,television ads, adware, spam, telemarketing, child-targeted advertising, guerrillamarketing), massive corporate campaign contributions in democratic elections, andendless global news stories about corporate corruption (Martha Stewart and Enron, forexample). Anti-corporate protesters suggest that corporations answer only toshareholders, giving human rights and other issues almost no consideration.[19] Films andbooks critical of multinationals include Surplus: Terrorized into Being Consumers, TheCorporation, The Shock Doctrine, Downsize This, Zeitgeist: The Movie and others.[edit] ReferencesTreatyFrom Wikipedia, the free encyclopediaJump to: navigation, search This article needs additional citations for verification. Please help improve this article by adding reliable references. Unsourced material may be challenged and removed. (August 2009)
  17. 17. The first two pages of the Treaty of Brest-Litovsk, in (left to right) German, Hungarian,Bulgarian, Ottoman Turkish and RussianA treaty is an express agreement under international law entered into by actors ininternational law, namely sovereign states and international organizations. A treaty mayalso be known as: (international) agreement, protocol, covenant, convention,exchange of letters, etc. Regardless of the terminology, all of these internationalagreements under international law are equally treaties and the rules are the same. (Notethat in United States constitutional law, the term "treaty" has a special meaning which ismore restricted than its meaning in international law; see below.)Treaties can be loosely compared to contracts: both are means of willing parties assumingobligations among themselves, and a party to either that fails to live up to theirobligations can be held liable under international law.Contents[hide] • 1 Modern usage • 2 Bilateral and multilateral treaties • 3 Adding and amending treaty obligations o 3.1 Reservations o 3.2 Protocols • 4 Execution and implementation o 4.1 Interpretation o 4.2 Consequences of terminology • 5 Ending treaty obligations o 5.1 Withdrawal o 5.2 Suspension and termination • 6 Invalid treaties o 6.1 Ultra vires treaties o 6.2 Misunderstanding, fraud, corruption, coercion
  18. 18. o 6.3 Peremptory norms • 7 Role of the United Nations • 8 Relation between national law and treaties by country o 8.1 Brazilian law o 8.2 United States law • 9 Treaties and indigenous peoples o 9.1 United States • 10 Rhetorical usage • 11 See also • 12 Notes • 13 References • 14 External links [edit] Modern usageA treaty is an official, express written agreement that states use to legally bindthemselves.[1] A treaty is that official document which expresses that agreement in words;and it is also the objective outcome of a ceremonial occasion which acknowledges theparties and their defined relationships.[edit] Bilateral and multilateral treatiesBilateral treaties are concluded between two states[2]A multilateral treaty is concluded among several countries.[2] Treaties of "mutualguarantee" are international compacts, e.g., the Treaty of Locarno which guarantees eachsignatory against attack from another.[2][edit] Adding and amending treaty obligations[edit] ReservationsMain article: Reservation (law)Reservations are essentially caveats to a states acceptance of a treaty. Reservations areunilateral statements purporting to exclude or to modify the legal obligation and itseffects on the reserving state.[3] These must be included at the time of signing orratification—a party cannot add a reservation after it has already joined a treaty.Originally, international law was unaccepting of treaty reservations, rejecting them unlessall parties to the treaty accepted the same reservations. However, in the interest ofencouraging the largest number of states to join treaties, a more permissive rule regardingreservations has emerged. While some treaties still expressly forbid any reservations,they are now generally permitted to the extent that they are not inconsistent with thegoals and purposes of the treaty.
  19. 19. When a state limits its treaty obligations through reservations, other states party to thattreaty have the option to accept those reservations, object to them, or object and opposethem. If the state accepts them (or fails to act at all), both the reserving state and theaccepting state are relieved of the reserved legal obligation as concerns their legalobligations to each other (accepting the reservation does not change the accepting stateslegal obligations as concerns other parties to the treaty). If the state opposes, the parts ofthe treaty affected by the reservation drop out completely and no longer create any legalobligations on the reserving and accepting state, again only as concerns each other.Finally, if the state objects and opposes, there are no legal obligations under that treatybetween those two state parties whatsoever. The objecting and opposing state essentiallyrefuses to acknowledge the reserving state is a party to the treaty at all.[4]There are three ways an existing treaty can be amended. First, formal amendmentrequires States parties to the treaty to go through the ratification process all over again.The re-negotiation of treaty provisions can be long and protracted, and often some partiesto the original treaty will not become parties to the amended treaty. When determiningthe legal obligations of states, one party to the original treaty and one a party to theamended treaty, the states will only be bound by the terms they both agreed upon.Treaties can also be amended informally by the treaty executive council when thechanges are only procedural, technical change in customary international law can alsoamend a treaty, where state behavior evinces a new interpretation of the legal obligationsunder the treaty. Minor corrections to a treaty may be adopted by a procès-verbal; but aprocès-verbal is generally reserved for changes to rectify obvious errors in the textadopted, i.e. where the text adopted does not correctly reflect the intention of the partiesadopting it.[edit] ProtocolsIn international law and international relations, a protocol is generally a treaty orinternational agreement that supplements a previous treaty or international agreement. Aprotocol can amend the previous treaty, or add additional provisions. Parties to the earlieragreement are not required to adopt the protocol; sometimes this is made clearer bycalling it an "optional protocol", especially where many parties to the first agreement donot support the protocol.Some examples: the United Nations Framework Convention on Climate Change(UNFCCC) established a framework for the development of binding greenhouse gasemission limits, while the Kyoto Protocol contained the specific provisions andregulations later agreed upon.[edit] Execution and implementationTreaties may be seen as self-executing, in that merely becoming a party puts the treatyand all of its obligations in action. Other treaties may be non-self-executing and requireimplementing legislation—a change in the domestic law of a state party that will direct
  20. 20. or enable it to fulfill treaty obligations. An example of a treaty requiring such legislationwould be one mandating local prosecution by a party for particular crimes.The division between the two is often not clear and is often politicized in disagreementswithin a government over a treaty, since a non-self-executing treaty cannot be acted onwithout the proper change in domestic law. If a treaty requires implementing legislation,a state may be in default of its obligations by the failure of its legislature to pass thenecessary domestic laws.[edit] InterpretationThe language of treaties, like that of any law or contract, must be interpreted when thewording does not seem clear or it is not immediately apparent how it should be applied ina perhaps unforeseen circumstance. The Vienna Convention states that treaties are to beinterpreted “in good faith” according to the “ordinary meaning given to the terms of thetreaty in their context and in the light of its object and purpose.” International legalexperts also often invoke the principle of maximum effectiveness, which interpretstreaty language as having the fullest force and effect possible to establish obligationsbetween the parties.No one party to a treaty can impose its particular interpretation of the treaty upon theother parties. Consent may be implied, however, if the other parties fail to explicitlydisavow that initially unilateral interpretation, particularly if that state has acted upon itsview of the treaty without complaint. Consent by all parties to the treaty to a particularinterpretation has the legal effect of adding an additional clause to the treaty - this iscommonly called an authentic interpretation.International tribunals and arbiters are often called upon to resolve substantial disputesover treaty interpretations. To establish the meaning in context, these judicial bodies mayreview the preparatory work from the negotiation and drafting of the treaty as well as thefinal, signed treaty itself.[edit] Consequences of terminologyOne significant part of treaty making is that signing a treaty implies recognition that theother side is a sovereign state and that the agreement being considered is enforceableunder international law. Hence, nations can be very careful about terming an agreementto be a treaty. For example, within the United States agreements between states arecompacts and agreements between states and the federal government or between agenciesof the government are memoranda of understanding.Another situation can occur when one party wishes to create an obligation underinternational law, but the other party does not. This factor has been at work with respectto discussions between North Korea and the United States over security guarantees andnuclear proliferation.The terminology can also be confusing because a treaty may and usually is namedsomething other than a treaty, such as a convention, protocol, or simply agreement.
  21. 21. Conversely some legal documents such as the Treaty of Waitangi are internationallyconsidered to be documents under domestic law.[edit] Ending treaty obligationsSee also: Denunciation[edit] WithdrawalTreaties are not necessarily permanently binding upon the signatory parties. Asobligations in international law are traditionally viewed as arising only from the consentof states, many treaties expressly allow a state to withdraw as long as it follows certainprocedures of notification. Many treaties expressly forbid withdrawal. Other treaties aresilent on the issue, and so if a state attempts withdrawal through its own unilateraldenunciation of the treaty, a determination must be made regarding whether permittingwithdrawal is contrary to the original intent of the parties or to the nature of the treaty.Human rights treaties, for example, are generally interpreted to exclude the possibility ofwithdrawal, because of the importance and permanence of the obligations.[citation needed]If a state partys withdrawal is successful, its obligations under that treaty are consideredterminated, and withdrawal by one party from a bilateral treaty of course terminates thetreaty. When a state withdraws from a multi-lateral treaty, that treaty will still otherwiseremain in force between the other parties, unless, of course, otherwise should or could beinterpreted as agreed upon between the remaining states parties to the treaty.[citation needed][edit] Suspension and terminationIf a party has materially violated or breached its treaty obligations, the other parties mayinvoke this breach as grounds for temporarily suspending their obligations to that partyunder the treaty. A material breach may also be invoked as grounds for permanentlyterminating the treaty itself.[citation needed]A treaty breach does not automatically suspend or terminate treaty relations, however.The issue must be presented to an international tribunal or arbiter (usually specified in thetreaty itself) to legally establish that a sufficiently serious breach has in fact occurred.Otherwise, a party that prematurely and perhaps wrongfully suspends or terminates itsown obligations due to an alleged breach itself runs the risk of being held liable forbreach. Additionally, parties may choose to overlook treaty breaches while stillmaintaining their own obligations towards the party in breach.[citation needed]Treaties sometimes include provisions for self-termination, meaning that the treaty isautomatically terminated if certain defined conditions are met. Some treaties are intendedby the parties to be only temporarily binding and are set to expire on a given date. Othertreaties may self-terminate if the treaty is meant to exist only under certain conditions.[citation needed]
  22. 22. A party may claim that a treaty should be terminated, even absent an express provision, ifthere has been a fundamental change in circumstances. Such a change is sufficient ifunforeseen, if it undermined the “essential basis” of consent by a party, if it radicallytransforms the extent of obligations between the parties, and if the obligations are still tobe performed. A party cannot base this claim on change brought about by its own breachof the treaty. This claim also cannot be used to invalidate treaties that established orredrew political boundaries.[citation needed][edit] Invalid treatiesThere are several reasons an otherwise valid and agreed upon treaty may be rejected as abinding international agreement, most of which involve problems created at the formationof the treaty.[citation needed] For example, the serial Japan-Korea treaties of 1905 1907 and1910 were protested;[5] and they were confirmed as "already null and void" in the 1965Treaty on Basic Relations between Japan and the Republic of Korea.[6][edit] Ultra vires treatiesA partys consent to a treaty is invalid if it had been given by an agent or body withoutpower to do so under that states domestic law. States are reluctant to inquire into theinternal affairs and processes of other states, and so a “manifest” violation is requiredsuch that it would be “objectively evident to any State dealing with the matter". A strongpresumption exists internationally that a head of state has acted within his properauthority. It seems that no treaty has ever actually been invalidated on this provision.[citation needed]Consent is also invalid if it is given by a representative who ignored restrictions he issubject to by his sovereign during the negotiations, if the other parties to the treaty werenotified of those restrictions prior to his signing.[citation needed]According to the preamble in The Law of treaties, treaties are a source of internationallaw. If an act or lack thereof is condemned under international law, the act will notassume international legality even if approved by internal law.[7] This means that in caseof a conflict with domestic law, international law will always prevail.[8][edit] Misunderstanding, fraud, corruption, coercionArticles 46-53 of the Vienna Convention on the Law of Treaties set out the only waysthat treaties can be invalidated—considered unenforceable and void under internationallaw. A treaty will be invalidated due to either the circumstances by which a state partyjoined the treaty, or due to the content of the treaty itself. Invalidation is separate fromwithdrawal, suspension, or termination (addressed above), which all involve an alterationin the consent of the parties of a previously valid treaty rather than the invalidation of thatconsent in the first place.A states consent may be invalidated if there was an erroneous understanding of a fact orsituation at the time of conclusion, which formed the "essential basis" of the states
  23. 23. consent. Consent will not be invalidated if the misunderstanding was due to the statesown conduct, or if the truth should have been evident.Consent will also be invalidated if it was induced by the fraudulent conduct of anotherparty, or by the direct or indirect "corruption" of its representative by another party to thetreaty. Coercion of either a representative, or the state itself through the threat or use offorce, if used to obtain the consent of that state to a treaty, will invalidate that consent.[edit] Peremptory normsA treaty is null and void if it is in violation of a peremptory norm. These norms, unlikeother principles of customary law, are recognized as permitting no violations and socannot be altered through treaty obligations. These are limited to such universallyaccepted prohibitions as those against genocide, slavery, torture, and piracy, meaning thatno state can legally assume an obligation to commit or permit such acts.[citation needed][edit] Role of the United NationsThe United Nations Charter states that treaties must be registered with the UN to beinvoked before it or enforced in its judiciary organ, the International Court of Justice.This was done to prevent the proliferation of secret treaties that occurred in the 19th and20th century. The Charter also states that its members obligations under it outweigh anycompeting obligations under other treaties.After their adoption, treaties as well as their amendments have to follow the official legalprocedures of the United Nations, as applied by the Office of Legal Affairs, includingsignature, ratification and entry into force.In function and effectiveness, the UN has been compared to the pre-Constitutional UnitedStates Federal government by some, giving a comparison between modern treaty law andthe historical Articles of Confederation.[edit] Relation between national law and treaties bycountry[edit] Brazilian lawThe Brazilian federal constitution states that the power to enter into treaties is vested inthe president and that such treaties must be approved by Congress (articles 84, clauseVIII, and 49, clause I). In practice, this has been interpreted as meaning that the executivebranch is free to negotiate and sign a treaty, but its ratification by the president iscontingent upon the prior approval of Congress. Additionally, the Federal Supreme Courthas ruled that, following ratification and entry into force, a treaty must be incorporatedinto domestic law by means of a presidential decree published in the federal register inorder to be valid in Brazil and applicable by the Brazilian authorities.
  24. 24. The Federal Supreme Court has established that treaties are subject to constitutionalreview and enjoy the same hierarchical position as ordinary legislation (leis ordinárias,or "ordinary laws", in Portuguese). A more recent ruling by the Supreme Court in 2008has altered that scheme somewhat, by stating that treaties containing human rightsprovisions enjoy a status above that of ordinary legislation, though they remain beneaththe constitution itself. Additionally, as per the 45th amendment to the constitution, humanrights treaties which are approved by Congress by means of a special procedure enjoy thesame hierarchical position as a constitutional amendment. The hierarchical position oftreaties in relation to domestic legislation is of relevance to the discussion on whether(and how) the latter can abrogate the former and vice versa.The Brazilian federal constitution does not have a supremacy clause with the same effectsas the one on the U.S. constitution, a fact that is of interest to the discussion on therelation between treaties and state legislation.[edit] United States lawMain articles: Treaty Clause and Foreign policy of the United StatesIn the United States, the term "treaty" has a different, more restricted legal sense thanexists in international law. U.S. law distinguishes what it calls treaties from executiveagreements, congressional-executive agreements, and sole executive agreements. All fourclasses are equally treaties under international law; they are distinct only from theperspective of internal American law. The distinctions are primarily concerning theirmethod of ratification. Whereas treaties require advice and consent by two-thirds of theSenate, sole executive agreements may be executed by the President acting alone. Sometreaties grant the President the authority to fill in the gaps with executive agreements,rather than additional treaties or protocols. And finally, congressional-executiveagreements require majority approval by both the House and the Senate, either before orafter the treaty is signed by the President.Currently, international agreements are executed by executive agreement rather thantreaties at a rate of 10:1. Despite the relative ease of executive agreements, the Presidentstill often chooses to pursue the formal treaty process over an executive agreement inorder to gain congressional support on matters that require the Congress to passimplementing legislation or appropriate funds, and those agreements that impose long-term, complex legal obligations on the U.S.See the article on the Bricker Amendment for history of the relationship between treatypowers and Constitutional provisions.[edit] Treaties and indigenous peoplesTreaties formed an important part of European colonization and, in many parts of theworld, Europeans attempted to legitimize their sovereignty by signing treaties withindigenous peoples. In most cases these treaties were in extremely disadvantageous termsto the native people, who often did not appreciate the implications of what they weresigning.
  25. 25. In some rare cases, such as with Ethiopia and Qing Dynasty China, the local governmentswere able to use the treaties to at least mitigate the impact of European colonization. Thisinvolved learning the intricacies of European diplomatic customs and then using thetreaties to prevent a power from overstepping their agreement or by playing differentpowers against each other.In other cases, such as New Zealand and Canada, treaties allowed native peoples tomaintain a minimum amount of autonomy. In the case of indigenous Australians, unlikewith the Māori of New Zealand, no treaty was ever entered into with the indigenouspeoples entitling the Europeans to land ownership, under the doctrine of terra nullius(later overturned by Mabo v Queensland, establishing the concept of native title well aftercolonization was already a fait accompli). Such treaties between colonizers andindigenous peoples are an important part of political discourse in the late 20th and early21st century, the treaties being discussed have international standing as has been stated ina treaty study by the UN.[edit] United StatesPrior to 1871 the government of the United States regularly entered into treaties withNative Americans of the United States but the Indian Appropriations Act of March 3,1871 (ch. 120, 16 Stat. 566) had a rider (25 U.S.C. § 71) attached that effectively endedthe President’s treaty making by providing that no Indian nation or tribe shall beacknowledged as an independent nation, tribe, or power with whom the United Statesmay contract by treaty. The federal government continued to provide similar contractualrelations with the Indian tribes after 1871 by agreements, statutes, and executive orders.[9][edit] Rhetorical usageThe treaty name becomes a trope. As an instance of metonymy, the name of a "treaty" inan abstract sense can refer to the subject of the pact or the elements of the pact itself[10] orsomething else -- for example, the Eulsa Treaty is another name for the Japan-KoreaTreaty of 1905.[11]Schengen Treaty represented as a Euler diagram.Treaties are sometimes identified by the place the place in which negotiations wereconcluded -- for example, the Schengen Agreement[12] is often called the "Schengentreaty" because it was signed near the town of Schengen in Luxembourg.[13]Schengen illustrates nuance and persistent metonymy in treaty names. It is a usefulexample despite or because the actually signing ceremony was held in the Moselle Riverat the tripoint borders of Germany, France and Luxemburg.[14] This metonymic name hascontinued to be used, even after Schengens official status as a treaty was lost[15] and evenafter Schengens express provisions were encompassed within subsequent EU treaties.[16]
  26. 26. In other words, the term treaty conflates the explicit words of the treaty, the signing of thetreaty, and the actual implementation and consequences intended by those who draftedthe words and those who affixed signatures[17] Sometimes the treaty is also known by aname which is not explicitly contemplated by those