ib-module 2

8/2/2019 IB-Module 2

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INTERNATIONAL

BUSINESSENVIRONMENT


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GLOBALIZATION OF BUSSINESSThe term globalization describes the increased

mobility of goods, services, labour, technology andcapital throughout the world.

"Globalization is a term for the horizontal andvertical integration of manufacturing and trade on an

international level"


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CHARACTERISTICS OF

GLOBALIZATION Planning expansion of their business throughout the

world.

Treating domestic market & foreign market as one.

Transactions are not restricted within a country.

Entire globe as a single market.

World wide operation. Global orientation in strategies.


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Strategies for going global Exporting

Licensing

Franchising Contract manufacturing

Management contract

Joint venture

Foreign direct investment


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ADVANTAGES OF GLOBALIZATION Free flow of capital

Free flow of technology

Growth of industrialization Spread up of production facilities

Increase in production & consumption

Lower price with higher quality

Higher standard of living

Innovations


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DISADVANTAGES OF GLOBALIZATION Kills domestic business

Exploits human resources

leads under employment Transfer of natural resources

Replacement of traditional products

Take over of national firms

Global dominance


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Factors of Globalization Business:

The Globalization of Markets / Customers:

The Globalization of Production:


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The Globalization of Markets /

Customers:

Globalization of markets refers to the "merging of

historically distinct and separate national markets intoone huge global marketplace"


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The Globalization of Production:

Globalization of production refers to the "sourcingof goods and services from locations around the globeto take advantage of national differences in the costand quality of factors of production like land, labor,and capital.


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WTOWORLD TRADE

ORGANIZATION


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ORIGIN Established on 1st January 1995.

To over come problem of GATT.

GATT is favor for developed countries.WTO was proposed by developing countries &

proposal became reality on 1st January 1995.


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Objectives of WTO:

Promote trade flows by encouraging nation to adoptnondiscriminatory and predictable trade policies

Raising standard of living and incomes, promoting fullemployment, expanding production and trade, andoptimum utilization of worlds resources.

introduce sustainable development a concept whichenvisages that development and environment can gotogether.

Taking positive steps to ensure that developing countries,especially the least developed ones, secure a better share ofgrowth in world trade.

Establish procedures for resolving trade disputes amongmembers


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Function of WTO:

Acting as a watchdog of international trade, constantlyexamining the trade regimes of individual members.

Seeking to resolve trade disputes

Overseeing national trade policies

Cooperating with other international institutionsinvolved in global economic policy making.

Maintaining trade related database

Acting as a management consultant for world trade.

Technical assistance and training for developingcountries.


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EMERGING ISSUES It seeks to eliminate tariffs to zero level by the year 2000 on the

rapidly growing $600 million world market in computer relatedproduct.

Multilateral agreement on investment (MAI); the MAI aims togive MNCs the right to establish any business in any countrywithout being discriminated against by virtue of being foreignMNCs. It would also give member state the right to settle anydispute arising out of compliance with the MAI at the WTO.

Core labour standards; these provide that standardizedinternational labour wages and working conditions must prevail.

Trade and environment.

Government procurement policies that should aim at weedingout corruption at governmental level.


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IMPLICATIONS FOR INDIAArguments for joining WTO: Development of pursuing open market policies, based on

WTO principles

Dynamic export industry can play in the countrysdevelopment. Both in terms of job creation, skilldevelopment, and technological evolution

Formulating and implementing export promotionprograms

WTO provides for a multilateral set of rules, which arebeneficial to a country like India Supporting clothing, agriculture, forestry, and fishery

products and food and beverages.


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Arguments against Membership:

WTO, along with IMF, and World Bank, represents theinterest of developed countries.

WTO will not ensure open trade for goods producedby developing countries

The worst fears expressed about the WTO agreementrelate to the steep hike in prices of drugs and

agriculture inputs.


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REGIONAL TRADE BLOCKS

It has an agreement among countries in ageographic region to reduce & ultimately remove tariff

& non-tariff barriers to the free flow of goods, services& factors of production between each other.


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Types of Regional Blocks

1. PREFERENTIAL TRADING AGREEMENT: where themember countries are lower barriers to imports ofidentified products from one another.

2. FREE TRADE AREA: where barriers to trade inrespect of all items among member countries arecompletely eliminated its own policy in regard totrade with non-member countries.


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3. CUSTOMS UNION: where, apart from elimination of

all barriers to trade among themselves, the membercountries follow a common policy in their trade withnon-members.

4. Common Market: where the region becomes market

for all factors of production including labour, serviceand capital.

5. Economic community: where the member countriesfollow common policies in respect of all economic

matters.


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MAJOR INTER-REGION TRADING

BLOCKS

The European union

NAFTA North American Free Trade AgreementsAPEC Asia pacific economic co-operation

ASEAN Association Of South-east Asian Nation

SAARC South Asian Association For Regional Co-

operation.


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Benefits Of Inter-regional Trade

Among Trade Groups

Economic gains

Political gains

Prices & competitions

Scale economies.


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Trade liberalizationReducing the limitations on trade that countries

around the world have erected over a number of years.

It is the process where by a country opens up itsmarkets to international trade i.e., reduces the taxes(known as the tariffs) & other limits (such as quotas)on goods coming in.

ib-module 2

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