international business economics

7/26/2019 International Business Economics

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INTERNATIONAL BUSINESSMANAGEMENT

UNIT I

Versatile Business School, Egmore, Chennai - 600 008


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Africa

Antarctica

Asia

Europe

North America

South America



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EVOLUTION OF INTERNATIONAL

BUSINESS

First phase of go!ai"ation in #$%&

En'e' (ith )or' (ar I 'ri*en !+ In'ustria Re*oution

,A *ast game of !eggar-m+-neigh!our.

Fet nee' for Internationa /ooperation

IMF IBRDVersatile Business School, Egmore, Chennai - 600 008


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EVOLUTION OF INTERNATIONALBUSINESS

Prolonged recession before world war II

GATT by 23 countries

GATT WT

International trade International Mar!eting

International Mar!eting International Business



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/0ARA/TERISTI/S1FEATURES OFINTERNATIONAL BUSINESS

Regional Integration

Declining Trade Barriers

Declining In"est#ent Barriers

Growt$ in FDI

%trides in Tec$nology

Growt$ of M&'s



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2omestic Socia an'/utura

InternationaTechnoogica

Mutinationa Economic Go!a 3oitica Transnationa

2omesticBusiness

InternationaBusiness

Approaches Infuence Ethnocentric E4port 3o+centric 2irect In*estment Regiocentric Licensing Geocentric Franchising Turn5e+ 3ro6ects 7oint Venture Mergers an'Ac8uisition

Goals Mar5et Share 0igh 3ro9t Ris5 A*oi'ance

Resource Ac8uisition E4pan' Business

/apacities

Advantages

Lo( 3rice Variet+ of Goo's 0igh Li*ing Stan'ar's Economic Gro(th /ompetiti*e

A'*antages

Problems 3oitica ris5 Foreign 2e!t E4change Insta!iit+ 0igh /ost

TERNATIONAL BSINESS !O"EL Versatile Business School, Egmore, Chennai - 600 008


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INFLUEN/ES

Accurate Infor#ation e(g( Bata

Ti#ely Infor#ation e(g( 'oca 'ola

%i)e of t$e Business

Mar!et %eg#entation Potentiality of Mar!ets

Inter*'ountry co#+arati"e study

,ost 'ountry-s Monetary %yste#

&ational %ecurity Policies e(g(. /%A

'ultural Factors e(g( . Fi0i

1anguage

&ationalis# and Business Policy e(g(. /%A s Be A#erican BuyA#erican Made



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STAGES OF INTERNATIONALI:ATION "omest#c $ompan%

Limits operation; Vision; Mission to Nationa poitica!oun'aries

Internat#onal $ompan%

Focus on 'omestic practices !ut e4ten' (ings to foreigncountries erent strateg+ for 'i>erent mar5et

Global $ompan%

Either pro'uce in one countr+ an' mar5et go!a+ orpro'uce go!a+ an' mar5et 'omestica+

Transnat#onal $ompan%

3ro'uces; mar5ets; in*ests an' operates across the (or'



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A33ROA/0ES TO INTL? BUSINESS

Ethnocentr#c

2omestic

companies *ie(

foreign mar5ets as

an e4tension to'omestic mar5ets

Pol%centr#c

/ompanies

esta!ish foreign

su!si'iaries an'

empo(ers its

e4ecuti*es

Reg#ocentr#c

Su!si'iaries

consi'er regiona

en*ironment for

poic+1strateg+

formuation

Geocentr#c

/ompanies *ie(

the entire (or' as

a singe unit



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MO2ES OF ENTR@


GOALS OF INTERNATIONAL BUSINESS


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GOALS OF INTERNATIONAL BUSINESS

To achie*e higher rates of pro9ts

E4pan'ing pro'uction capacit+

Se*ere competition in home countr+

Limite' home mar5et

3oitica sta!iit+ *s? insta!iit+

A*aia!iit+ of technoog+ an' human resources

0igh cost of transportation

Nearness to ra( materia

Li!erai"ation an' Go!ai"ation

To increase mar5et share

0igher rate of economic gro(th

Tari>s an' import 8uotas



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A2VANTAGES OF INTL BUSINESS

0igh i*ing stan'ar's

Increase' socio-economic (efare

)i'er mar5et

Re'uce' e>ects of !usiness c+ces

Re'uce' ris5s

Large-scae economies

3otentia Untappe' mar5ets



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A2VANTAGES OF INTL BUSINESS

Opportunit+ for chaenge to 'omestic !usiness

2i*ision of a!our an' speciai"ation

Economic gro(th of the (or'

Optimum an' proper utii"ation of (or' resources

/utura transformation

nitting the (or' into a tra'itiona *iage



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3ROBLEMS OF INTL BUSINESS

3oitica factors

0uge foreign in'e!te'ness

E4change insta!iit+

Entr+ re8uirements

Tari>s; 8uotas an' tra'e !arriers

/orruption

Bureaucratic practices of Go*t

Technoogica pirating

uait+ Maintenance



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UNIT II



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GLOBALIZATION

IMF defines globalization as, the growing eono!iinterde"endene of o#ntries worldwide thro#gh inreasing

$ol#!e and $ariet% of ross border transations in goods and

ser$ies and of international a"ital flows and also thro#gh the!ore ra"id and wides"read diff#sion of tehnolog%&



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'OM(ON)NT* OF GLOBALI*ATION

Globalization of

Mar+etsGlobalization of

Tehnolog%

Globalization of

(rod#tionGlobalization of

In$est!ent



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GLOBALIZATION OF MA-)T*

Globalization of !ar+ets refers to the "roess of integrating and

!erging of the distint world !ar+ets into a single !ar+et

).AM(L)/ 'oa0'ola, (e"si, M1onald2s b#rgers, Le$is 3eans

et4,

F)ATU)*/

*ize of the o!"an% need not be too large

1istintion of national !ar+ets still "re$ail

Most of the foreign !ar+ets are !ar+ets for non0ons#!er goods



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)A*ON* FO GLOBALIZATION OF

MA-)T*

Large sale ind#strialization enabled !ass "rod#tion

is+ red#tion b% di$ersifiation

Inrease "rofits and ahie$e goals

Ad$erse b#siness en$iron!ent in ho!e o#ntr%

1e!and for their "rod#ts in foreign !ar+ets

Fail#re of do!esti o!"anies to ater the needs of #sto!ers



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GLOBALIZATION OF (O1U'TION

Globalization of "rod#tion is loating the !an#fat#ring failities in a

n#!ber of loations aro#nd the globe4 ).AM(L)/ 3et airlines Boeing 555

and *wan o"tials

)A*ON*/

I!"ositions of i!"orts b% the foreign o#ntr%

A$ailabilit% of high 6#alit% raw !aterials and o!"onents

A$ailabilit% of in"#ts at low ost

*+illed h#!an reso#re at low ost

Liberal labo#r laws

To red#e ost of trans"ort

To ater to $ar%ing tastes of #sto!ersVersatile Business School, Egmore, Chennai - 600 008


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GLOBALIZATION OF (O1U'TION

Globalization of in$est!ent refers to in$est!ent of a"ital b% a global o!"an%

in an% "art of the world4

)A*ON*/

Inrease in $ol#!e of global trade

Li!itations of e7"orting and i!"orting

Liberalization

A$oid restritions



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MO1)* OF GLOBALIZATION OF

(O1U'TION

A6#isition

3oint $ent#res

Long ter! loans

Iss#ing e6#it%, shares, debent#res, bonds2

Global de"osit reei"t



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GLOBALIZATION OF T)'8NOLOG9

Latest tehnolog% and distinti$e o!"etenies

Tehnologial ollaboration

Usage of tehnolog% b% "a%ing ro%alt%



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GLOBALIZATION

A1:ANTAG)*

Free flow of a"ital, tehnolog%

Ind#strialization

(rod#tion failities thro#gho#t the

world

Inrease in "rod#tion and

ons#!"tion

Lower "ries and high 6#alit%

3obs and Ino!es

8igher standard of li$ing

Balaned 8#!an de$elo"!ent

;elfare and "ros"erit%

1I*A1:ANTAG)*

-ills do!esti b#siness

)7"loits h#!an reso#re

Une!"lo%!ent and

#ndere!"lo%!ent

;idening ga" between rih and "oor

Transfer of nat#ral reso#res

National so$ereignt% at sta+e

'o!!erial and "olitial

olonialis!Versatile Business School, Egmore, Chennai - 600 008


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INT)NATIONAL BU*IN)**

)N:IONM)NT

INT)NAL

).T)NA

Organisational

*tr#t#re


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*O'IAL AN1 'ULTUAL

)N:IONM)NT

'ULTU)

(resri"ti$e

*oiall% *hared

Learned

*#b=eti$e

'#!#lati$e

1%na!i



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*O'IAL AN1 'ULTUAL

)N:IONM)NT

Food habits and International b#siness

1ressing habits and International b#siness

'ross0'#lt#ral o!!#niation "roess and Negotiations

Low0onte7t #lt#res

8igh0onte7t #lt#re

Monohro!i

(ol%hro!i



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*O'IAL AN1 'ULTUAL

)N:IONM)NT

'#lt#ral Uni$ersals

'o!!#niation

Ti!e and '#lt#re

*"ae and '#lt#re

'#lt#re and agree!ent

'#lt#re of friendshi"

'#lt#re and negotiation

'#lt#re and s#"erstition

'#lt#re and gifts



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4'&MI' %5%T4M

4cono#ic syste#. It is an organi)ation of institution to satisfy$u#an needs6wants

4cono#ic syste#s are based on resource allocation

T$ere are t$ree ty+es of econo#ic syste#

'a+italis#. under t$is syste# custo#er allocates resources

T$is econo#ic syste# +ro"ides for econo#ic de#ocracy t$us gi"ing t$ecusto#er $is c$oice for +roducts

'o##unis#. In t$is econo#ic syste# +ri"ate +ro+erty and +ro+ertyrig$ts to inco#e are abolis$ed

Mi7ed. /nder t$is syste# #a0or factor of +roduction and distribution areowned #anaged and controlled by t$e state



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'ountries classified by inco#e

1ow inco#e countries 8 /%9 :;; or less

India Pa!istan and Banglades$

1ower #iddle inco#e countries 8 /%9:;< to /%92==;

'$ina Indonesia and %ir 1an!a

/++er #iddle inco#e countries 8 /%9 2==< to /%9 =2


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P1ITI'A1 4&@IR&M4&T

Political ideology is t$e body of co#+le7 ideas t$eories andob0ecti"es

Political ideology of t$e +eo+le in t$e sa#e country "ary widely dueto t$e "ariation in culture et$nic grou+ tribal co##unity religiousand econo#ic grou+s

De#ocracy . Pure de#ocracy ai#s t$at all citi)ens s$ould be eual+olitically and legally and s$ould en0oy freedo#

Totalitarianis# is e7tre#e to de#ocracy



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Ty+es of +olitical syste#s

A++raisal of +olitical syste#s $el+s us in $a"ing and idea of +oliticalsyste#s and t$eir i#+act on international business

Go"ern#ent #ay be +arlia#entary or absolutist

Parlia#entary is o+en

Absolutist is closed

Go"ern#ent #ay be classified into

Two +arty syste#

Multi +arty syste#

%ingle +arty syste#

ne +arty do#inated syste#



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G1BA1IATI& F B/%I&4%%

Globali)ation is t$e s$ift towards a #ore integrated and

interde+endent world econo#y Globali)ation i#+lies integration of t$e econo#y of t$e country wit$

t$e rest of t$e world econo#y and o+ening u+ of t$e econo#y forforeign direct in"est#ent by liberali)ing t$e rules and regulation andby creating fa"orable socio*econo#ic and +olitical cli#ate for globalbusiness



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F4AT/R4% F G1BA1IATI&

+erating and +lanning to e7+and business t$roug$out t$e world

4rasing t$e difference between do#estic and foreign #ar!ets

Buying and selling goods and ser"ices fro# any country to any country in t$e

world

4stablis$ing #anufacturing and distribution facilities in any +art of t$e world

based on t$e feasibility and "iability rat$er t$an national consideration

+roduct +lanning and de"elo+#ent are based on #ar!et consideration of t$e

entire world

%ourcing t$e factors of +roduction and in+uts li!e raw #aterials #ac$inery

finance $u#an resources tec$nology and #anagerial s!ills fro# entire world

Global orientation in strategies organi)ational structure organi)ational culture

and #anagerial e7+ertise

%etting t$e #ind and attitude to "iew t$e entire globe as a single #ar!etVersatile Business School, Egmore, Chennai - 600 008


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PR'4%% F G1BA1IATI&

Do#estic co#+any e7+ort to foreign countries t$roug$ t$e dealers ordistributors of t$e $o#e country

T$e do#estic co#+any e7+orts to foreign countries directly on itsown

T$e do#estic co#+any beco#es an international co#+any byestablis$ing +roduction and #ar!eting o+erations in "arious !eyforeign countires

T$e co#+any re+licates a foreign co#+any in t$e foregin country by$a"ing all t$e facilities including rCd full fledged $u#an resource

T$e co#+any beco#es a true foreign co#+any by ser"ing t$e needsof foreign custo#er 0ust li!e t$e $o#e country co#+any ser"es



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'o#+onents of globali)ation

Globalizationof markets

Globalization ofproduction

Globalization ofinvestment

Globalization oftechnology



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G1BA1IATI& F MAR>4T%

Globali)ation of #ar!ets refers to t$e +rocess of integrating and

#erging of t$e distinct world #ar!ets into a single #ar!et

T$is +rocess in"ol"es t$e identification of so#e co##on nor#s"alues taste +reference and con"enience and slowly enables t$e

cultural s$ift towards t$e use of a co##on +roducts or ser"ices

A nu#ber of consu#er +roducts $a"e global acce+tance( 4g coca*

cola +e+si sony and !fc



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F4AT/R4% F G1BA1IATI&F MAR>4T%

T$e si)e of t$e co#+any s$ould be large to create a global #ar!et

T$e difference reuire t$e co#+anies to for#ulate different strategiesfor eac$ #ar!et

4g coca cola le"is 0eans e#+loy se+arate strategies for eac$country

Most of t$e foreign #ar!ets are t$e #ar!eters for non*consu#ergoods li!e industrial +roducts #ac$inery co#+uters softwarefinancial +roducts

T$e global business fir#s co#+ete wit$ eac$ ot$er freuently indifferent national #ar!ets including t$eir $o#e #ar!ets



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R4A%&% FR G1BA1IATI&F MAR>4T%

1arge scale industries enable #ass +roduction

'o#+anies in order to reduce t$e ris!

'o#+anies globali)e #ar!ets in order to increase t$eir +rofits and

ac$ie"e co#+any goals

To cater t$e de#and for t$eir +roducts in t$e foreign #ar!ets

T$e failure of t$e do#estic co#+anies in catering t$e needs of t$eircusto#er +ulled t$e foreign countries to #ar!et t$eir +roduct



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G1BA1IATI& FPRD/'TI&

Factors influencing t$e location of #anufacturing facilities "ary fro#

one country to anot$er T$ey #ay be #ore fa"orable in foreign countries rat$er t$an in t$e

$o#e country

4g c$ea+ lab our in de"elo+ing countries a"ailability of $ig$ uality andc$ea+ raw #aterials in ot$er countries enable t$e co#+anies to +roducet$e +roducts of $ig$ uality and low cost in "arious foreign #ar!ets



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R4A%&% FR G1BA1IATI&F PRD/'TI&

A"ailability of $ig$ uality raw #aterials and co#+onents in ot$er

countries

A"ailability of s!illed $u#an resources at low cost

A"ailability of in+uts at low cost in foreign countries

1iberal lab our laws in t$e foreign countries

To reduce t$e cost of trans+ortation and easy logistics #anage#ent

To design and +roduce t$e +roduct as +er t$e "arying tastes of

custo#ers in foreign countries



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G1BA1IATI& F I&@4%TM4&T

Globali)ation of in"est#ent refers to in"est#ent of ca+ital by a

global co#+any in any +art of t$e world

Before =3E #any countries created barriers relating to e7+ort and

i#+orts( After GATT t$e reduction in trade was i#+le#ented

After WT t$e eli#inated t$e in"est#ent barriers

India $as allowed ; foreign direct in"est#ent in Indian

co#+anies



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R4A%&% FR G1BA1IATI&F I&@4%TM4&T

Many countries +ro"ided #ore congenial en"iron#ent for attracting

direct in"est#ent

%ignificant a#ount of FDI is directed to t$e de"elo+ing countries in

Asia and 4astern 4uro+e

%#all and #ediu# co#+anies $a"e started in"esting in foreign

countries

1i#itation of e7+orting and licensing force t$e do#estic co#+anies to

enter foreign countries %ourcing funds globally. T$e Indian go"ern#ent $as allowed Indian

co#+anies to +rocured in"est#ent fro# foreign co#+anies

4g reliance Dr( reddy lab and sat ya# co#+uters



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G1BA1IATI& FT4',&1G5

Tec$nological c$anges is i#+ro"ed after =;E

T$e re"olution in teleco##unication IT and trans+ortation $a"e

#ade #any co#+any go into globali)ation

Met$ods of globali)ation tec$nology

'o#+anies wit$ latest tec$nology acuire distincti"e co#+etencies and gain t$e

ad"antages of +roducing $ig$ uality +roducts at low cost

'o#+anies #ay $a"e tec$nological collaboration wit$ foreign co#+anies t$roug$

w$ic$ tec$nology s+reads fro# country to country T$e foreign co#+anies allow t$e co#+anies of "arious ot$er countries ado+t t$eir

tec$nologies on royally +ay#ent basis



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AD@A&TAG4% A&D DI%AD@A&TAG4% F G1BA1IATI&

Free flow of ca+ital

Free flow of tec$nology

Increase industriali)ation

Balanced de"elo+#ent of worldecono#ics

Increase in +roduction andconsu#+tion

'o##odities at lower +rices wit$$ig$ uality

Increase in 0obs and inco#e

,ig$er standards of li"ingBalanced $u#an de"elo+#ent

Increase in welfare and +ros+erity

Globali)ation !ills do#estic business

47+loits $u#an resources

1eads to une#+loy#ent and undere#+loy#ent

Decline in de#and for do#estic +roducts

Decline in inco#e

Widening ga+ between ric$ and +oor

Transfer of natural resources



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MD4 F G1BA1IATI&

Acuisition of foreign co#+anies

?oint "entures

1ong ter# loans

Issuing euity s$ares debentures and bonds

Global de+osits recei+ts



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DRI@4R% F G1BA1IATI&

4stablis$#ent of t$e world trade organi)ation.

Go"ern#ent of t$e #e#ber countries of general agree#ent on trade and

tariffGATTH concluded t$e /ruguay round negotiation on t$e ;t$

Dece#ber ==( according to uruguay #eeting t$ey ca#e wit$ a +olitical

su++ort J strengt$en t$e world econo#y and lead to #ore trade

in"est#ent e#+loy#ent and inco#e growt$ t$roug$out t$e worldK WT

was establis$ed on st?an ==;( T$is is to facilitate t$e i#+le#entation

ad#inistration and o+eration and furt$er t$e ob0ecti"es of t$is agree#entand on t$e #ultinational trade agree#ent



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Declining trade barriers.

International trade occurs w$en t$e goods flow across t$e countries(Go"ern#ent used to i#+ose trade barriers li!e uotas and tariffs in orderto +rotect do#estic business fro# t$e co#+etition of internationalbusiness( Ad"anced countries after world war 2 agreed to reduce tariffsin order to encourage free flow of goods( T$us reduction of tariffs andot$er trade barriers contributed for t$e growt$ of global trade

Declining in"est#ent barriers.

Global business fir# in"est in order to establis$ #anufacturing and ot$erfacilities in foreign country( Foreign go"ern#ent i#+ose barriers onforeign in"est#ent in order to +rotect do#estic industry(

@arious countries $a"e been re#o"ing t$ese barriers on foreign directin"est#ent



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Growt$ in foreign direct in"est#ent.

T$ere are nu#ber of reasons for t$e growt$ of FDI( W$ic$ is also adri"ers of globali)ation

%trides in tec$nology.

Tec$nological c$anges $as dra#atically di"erged global co#+any toglobali)ation

Micro+rocessors and teleco##unications

T$e internet and world wide web

n*line globali)ation Trans+ortation tec$nology

Growt$ of #ultinational co#+anies

Growt$ of #ultinational and transactional co#+any are s+reading t$eiro+eration in #anufacturing finance and ot$er functional areas( W$ic$ arebeen t$e dri"ers of globali)ation



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TRAD4 1IB4RA1IATI&

Integration of t$e econo#y of a country wit$ t$e rest of t$e world

econo#y is called globali)ation(

Indian go"ern#ent globalised econo#y by announcing econo#ic

liberali)ation in ==(

Integrated global econo#y were sown as early as =E-s w$en ste+s

were ta!en to establis$

International Monetary Fund

International Ban! for Reconstruction and De"elo+#ent

General Agree#ent on Tariffs and Trade



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I&TRD/'TI& T GATT

T$ere were #any barrier for free trade were laid down to su++ort t$e

go"ern#ent e7+enditure

After II world war se"eral international #easures were underta!en to

liberali)e trade and +ay#ent between nations

International #onetary funds and international ban! for

reconstruction and de"elo+#ent were set u+

International trade organi)ation to deal wit$ international trade was

soug$ to be set u+

GATT general agree#ent for trade and tariffHwas set to liberali)e

t$e trade and reduce t$e tariff a#ount


GATT


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GATT T$e General Agree#ent on Tariffs and Trade GATTH was

originally created by t$e Bretton Woods 'onference as +art

of a larger +lan for econo#ic reco"ery after World War II( T$e GATT-s #ain +ur+ose was to reduce barriers to

international trade(

T$is was ac$ie"ed t$roug$ t$e reduction of tariff barriersuantitati"e restrictions and subsidies on trade t$roug$ a

series of different agree#ents(

T$e GATT was an agree#ent not an organi)ation(

riginally t$e GATT was su++osed to beco#e a fullinternational organi)ation li!e t$e World Ban! or IMF called

t$e International Trade rgani)ation T$e agree#ent was not ratified so t$e GATT re#ained

si#+ly an agree#ent(

T$e functions of t$e GATT $a"e been re+laced by t$e WorldTrade rgani)ation(



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GATT trade rounds

Geneva Round 1!" T$e first round-s duration was : #ont$s( 23

countries too! +art in t$e round( T$e #ain focus was Tariffs %igning

of GATT ;EEE tariff concessions affecting 9E billion of trade(

#nnec$ Round 1! T$e second round too! +lace in == in

Annecy France( 3 countries too! +art in t$e round( T$e #ain focus

of t$e tal!s was #ore tariff reductions(

%or&ua$ Round 1'1 T$e t$ird round occurred in Toruay

4ngland in =;E( 3L countries too! +art in t$e round( L:EE tariff

concessions were #ade totaling t$e re#aining a#ount of tariffs to

of t$e tariffs w$ic$ were in effect in =L(



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Geneva Round - 1''-1'6 T$e fourt$ round returned to Gene"a

in =;; and lasted until May =;


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*enned$ * 16! T$e si7t$ round-s duration was 3: #ont$s(


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rugua$ Round - 186-1! T$e /ruguay Round began in =L


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B?4'TI@4% F GATT

To raise standard of li"ing

To ensure full e#+loy#ent and a large and steadily growing "olu#e

of real inco#e and effecti"e de#and

To de"elo+ t$e full use of t$e resource of t$e world

To e7+and +roduction and international trade



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A'TI@ITI4% F GATT

Tariff bargaining Bargaining on non* tariff trade barriers

4li#ination of uantu# restriction

%ettle#ent of dis+utes between contracting +arties



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WR1D TRAD4 RGA&IATI&

WT was establis$ed on ?anuary ==;

WT is t$e e#bodi#ent of t$e /ruguay Round results and t$e

successor to GATT

Go"ern#ent beca#e #e#ber of t$e WT on its first day

As of Dece#ber 2EEE t$ere are 2 #e#bers of t$e WT and 3

countries $a"e an obser"er status

2L #e#bers are t$ere in waiting list


Functions of WT


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Functions of WT

Ad#inistering and i#+le#enting t$e #ultilateral and +lurilateraltrade agree#ents w$ic$ toget$er #a!e u+ WT

Acting as a foru# for #ultilateral trade negotiation

%ee!ing to resol"e trade dis+utes

"erseeing national trade +olicies

'oo+erating wit$ ot$er international institution in"ol"ed in global+olicy #a!ing


%tructure of WT


61/150

Ministerialconference

General council

Dis+utessettle#ent body

council

Directorgeneral

trade +olicy re"iewbody co##ittees

'ouncilFor

TradeIn

goods

'ouncilFor

TradeIn

ser"ices

'ouncilFor tradeRelated

As+ects ofIntellectua

lrig$ts

%ecretariat

f t$eWT

'o##itteen trade

Andde"elo+#e

nt

'o##ittee

nBalance

fPay#entrestrcitio

n

'o##ittee

nBudget

FinanceAnd

ad#in



62/150

Ministerial conference. #inisterial conference is t$e $ig$est

$ierarc$ical le"el in t$e organi)ational structure(

All t$e #e#ber countries of WT are t$e re+resentati"e of t$e #inisterialconference

T$e #inisterial conference $as t$e aut$ority to #a!e decision on all

#atters relating to #ultilateral trade agree#ents

General council. General council is t$e e7ecuti"es body of t$e WT

General council re+orts its decision and acti"ities to t$e #inisterial

conference

T$ere are for#s of general council

Dis+ute settle#ent body

Trade +olicy re"iew body


'ouncil. T$e t$ird le"el in t$e $ierarc$y is council


63/150

y

'ouncil for trade in goods. T$is council su+er"ise t$e i#+le#entation and

functioning of all agree#ent relating to trade in goods

'ouncil for trade in ser"ice. T$is council o"erseas t$e i#+le#entation of all t$e

agree#ent relating to trade in ser"ices

'ouncil for trade related as+ects of intellectual +ro+erty rig$ts. T$is council

o"erseas t$e i#+le#entation

'o##ittees. @arious councils s+ecified earlier constitute co##ittee

for ad#inistering t$e arrange#ent 'o##ittees on trade and de"elo+#ent. T$is co##ittee is concerned wit$ t$e

issues concerning de"elo+ing countries and +articularly least de"elo+ed countries

'o##ittee on balance of +ay#ents. so#e WT #e#bers countries resort to trade

restricti"e #easures wit$ a "iew to co+e wit$ t$eir balance of +ay#ents +roble#s

'o##ittee on budget finance and ad#in. t$is co##ittee deals wit$ t$e issues

relating to t$e budget finance and ad#inistration of WT



64/150

Manage#ent bodies. +lurilateral agree#ent of t$e WT $a"e t$eir

#anage#ent bodies( T$ese #anage#ent bodies re+ort to t$e

general council

WT +ro"ides a #ore +owerful #ec$anis# to sol"e dis+utes o"er trade

a#ong t$e #e#bers countries


Diff b t GATT d WT


65/150

Difference between GATT and WT

It is a set of rules and #ultilateral

agree#ent

It was designed wit$ an atte#+t to

establis$ International Trade

rgani)ation

It was a++lied on a +ro"isional basis

Its rules are a++licable to trade in

#erc$andise goods

GATT was originally a #ultilateral

instru#ent but +lurilateral agree#ent

were added at a later stage

Its dis+utes settle#ent syste# was

not faster and auto#atic

It is a +er#anent institution

It is establis$ed to ser"e its own

+ur+ose

Its acti"ities are full and +er#anent

Its rules are a++licable to trade in

#erc$andise and trade in ser"ices

and trade in related as+ects of

intellectual +ro+erty

Its agree#ents are al#ost

#ultilateral

Its dis+utes settle#ent syste#s is

fast and auto#aticVersatile Business School, Egmore, Chennai - 600 008


66/150

Multinational cor+oration



67/150

Mutinationa corporation1compan+

Mutinationa corporation1compan+ is an organi"ation'oing !usiness in more than one countr+?

It is integrate' go!a enterprise (hich in5s go!aresources (ith go!a mar5ets at pro9t

These companies ha*e saes oCces or manufacturingfaciities in man+ countries

Mnc.s ha*e (or'(i'e in*o*ement an' a go!a

perspecti*e in its management an' 'ecision ma5ing



68/150

Features of MN/.s

MN/;s consi'er opportunities throughout the go!e though the+

'o the !usiness in the countries

MN/;s in*est consi'era!e portion of their assets internationa+

MN/;s engage in internationa pro'uction an' operate pants in a

num!er of countries

MN/;s ta5e manageria 'ecisions !ase' on a go!a perspecti*e? The internationa operations are integrate' into the cooperation.s

o*era !usiness



69/150

)0@ /OM3ANIES BE/OME MN/S

3rotection

Tap go!a

Increase mar5et share

Re'uce cost

O*ercome tari>s

Technoogica a'*antages



70/150

Gro(th of MN/

E4pansion of mar5et territor+

Mar5et superiorities

Financia superiorities

Technoogica superiorities

3ro'uct inno*ation



71/150

/assi9cation of MN/ Go!a corporationD go!a corporation pro'uces in home

countr+ or in a singe countr+ an' focuses on mar5eting

these pro'ucts go!a+

Internationa corporationD internationa corporation

con'uct the operations in one or more foreign countries;

!ut (ith 'omestic orientation

Mutinationa corporationD MN/;s operates in more than

one countr+; !ut operates i5e 'omestic compan+ of the

pro'uct concerne'

Transnationa corporationD Transnationa corporation

pro'uces; mar5et; in*est an' operates across the (or'Versatile Business School, Egmore, Chennai - 600 008

A'*antages an' 2isa'*antages of MN/


72/150

g g

/reates the 'eman' for the home countr+

pro'ucts

Boost up the in'ustria acti*it+ of the home

countr+

/reate unempo+ment for home countr+

peope

Earns foreign e4change for the home countr+

an' contri!utes for the !aance of pa+ment

Get the !ene9ts of foreign cuture

3ro'uces the pro'uct re8uire' !+ the

'omestic consumer in foreign countries (ith

foreign resources

Sa*es the 'omestic countr+ from

en*ironmenta poution

Get the customer for the countr+.s out 'ate'

technoog+

Transfer capita to other countries a' cause unfa*ora!e !aance of

pa+ment

Ma+ not create empo+ment opportunities to 'omestic peope !+

foo(ing geocentric approaches or outsourcing !usiness operations in

*arious counties i5e USA soft(are companies outsourcing !usiness

operation in In'ia

Ma+ negect the in'ustria 'e*eopment of the home countr+ as the

transnationa companies foo( the secuar approaches

Ma+ cause erosion of the 'omestic cuture

Ma+ e4poit the natura resources resuting in e4cessi*e e4poitation of

natura resources


R f MN/ i ' i t i


73/150

Roe of MN/ in 'e*eoping countries

In'ustriai"ations is in a !ac5(ar' state in 'e*eoping countries

Resource a*aia!e in 'e*eoping countries are insuCcient to 'e*eop the

technoog+ an' there!+ in'ustriai"ation

2e*eoping countries are rich in minera an' natura resource

Loca manpo(er; materias; capita etc cannot !e optima+ utii"e' !+ the

'e*eoping countries on their o(n

2e*eoping countries (ou' !e re8uires to import ra( materias; capita

e8uipment; technoog+ on their o(n; thus the+ nee' arge foreign e4change

resources

2e*eoping countries; though the+ pro'uces goo's an' ser*ices on their o(n !+

importing technoog+ an' materias; the+ fai in mar5eting the pro'uct 'ue to

se*ere competitions



74/150

/onict most+ arises

0ost countr+.s companies

0ost countr+.s go*ernment

0ost countr+.s customer

0ost countr+.s societ+

0ome countr+.s companies

0ome countr+.s go*ernment

0ome countr+.s customer

0ome countr+.s societ+



75/150

/onict in MN/

Macro economic area

3ro'uction area

Mar5eting area

Finance area

0uman resource area

Socia an' ethica area

En*ironmenta issues

/ompeting



76/150

/&IT I@IBM


-IN1* OF )'ONOMI' INT)GATION


77/150

-IN1* OF )'ONOMI' INT)GATION

Free Trade Area/ Gro#" of o#ntries agreeing to abolish all trade restritions

Customs Union/ >i? Me!ber o#ntries abolish all restritions >ii? The% ado"t a

#nifor! o!!erial "oli% of barriers and restritions

Common Market/ >i? Me!ber o#ntries abolish all restritions >ii? The% ado"t a

#nifor! o!!erial "oli% of barriers and restritions >iii? The% allow free

!o$e!ent of h#!an reso#re and a"ital

Economic Union/ i? Me!ber o#ntries abolish all restritions >ii? The% ado"t a

#nifor! o!!erial "oli% of barriers and restritions >iii? The% allow free

!o$e!ent of h#!an reso#re and a"ital >i$?Ahie$e #nifor!it% in !onetar% and

fisal "oli%



78/150

)UO()AN UNION

Evolutionary stages

)#ro"ean oal and steel o!!#nit%

)#ro"ean o!!on !ar+et@)#ro"ean eono!i o!!#nit%

)#ro"ean eono!i #nion



79/150

A'TI:ITI)* OF )U

)li!ination of #sto!s d#ties, 6#antitati$e restritions with regard to e7"orts and

i!"orts of goods a!ong !e!ber o#ntries4

)stablish!ent@for!#lation of a o!!on #sto! tariff and o!!on o!!erial "oli%

with regard to non0!e!ber o#ntries

Abolition of all obstales for !o$e!ent of "ersons, ser$ies and a"ital a!ong

!e!ber o#ntries4

'o!!on "oli% in agri#lt#re and trans"ort

(rogra!!es to oordinate the eono!i "oliies and dise6#ilibri#! in balane of

"a%!ents of !e!ber o#ntries4

)stablish!ent of )#ro"ean *oial f#nd

)stablish!ent of )#ro"ean In$est!ent Ban+4



80/150

OGANI*ATION OF )U

)#ro"ean o#nil is the ad!inistrati$e bod% of the )U4

)ah !e!ber o#ntr% is re"resented b% a !inister in this o#nil

)ah !e!ber o#ntr% holds "residen% for !onths on rotation basis4

The o!!ittee of "er!anent re"resentati$es alled 'or"er2 ats as seretariat of

the o#nil4



81/150

OGANI*ATION OF )U

'o#rt of 3#stie

>Ad=#diates

1is"#tes?

Agri#lt#re

*oial *e#rit%

'o!"letion of

(oli%

'o#rt of

A#ditors

))' B#dget

Monitoring

e7"endit#re

)#ro"ean

'o!!ission

>'o!!issioners

and Assistants?

)#ro"ean (arlia!ent

'ons#ltants

A""ro$als

Ad$isor% 'o!!ittees

)ono!i and soial

Monetar%

'oal < *teel Ind#str%



82/150

NOT8 AM)I'AN F)) TA1)

AG))M)NT0NAFTA

NAFTA a!e into being on 3an#ar% C,CDDE4

U*A, 'anada and Me7io together for!ed NAFTA

Initial agree!ent was between U*A and 'anada in CDD whih

was later e7tended to Me7io4



83/150

OB3)'TI:)* OF NAFTA

To reate new b#siness o""ort#nities "arti#larl% in Me7io

)nhane o!"etiti$e ad$antage of o!"anies o"erating in U*A, 'anada and

Me7io4

ed#e "rie of "rod#ts and ser$ies

)nhane ind#strial de$elo"!ent

To "ro$ide stable and "reditable en$iron!ent for in$estors

To de$elo" ind#stries in Me7io, thereb% red#ing !igration fro! Me7io to U*A

I!"ro$e and onsolidate "olitial relationshi" a!ong !e!ber o#ntries



84/150

M)A*U)* A* () AG))M)NT OF

NAFTA

O"ening #" of go$ern!ent "ro#re!ent !ar+ets in !e!ber

o#ntries

(rotetion of I( rights of NAFTA !e!bers

*i!"lifiation and har!onization of "rod#t standards in

!e!ber o#ntries

Free flow of e!"lo%ees and b#siness "eo"le a!ong !e!ber

o#ntries

(oll#tion ontrol a!ong U*A0Me7io border


A*)AN A**O'IATION OF *OUT8 )A*T A*IAN


85/150

A*)AN0A**O'IATION OF *OUT8 )A*T A*IAN

NATION*

A gro#" of !e!bers $iz singa"ore, Br#nei, Mala%sia,

(hili""ines, Thailand and Indonesia in CDD to establish a

'o!!on )ffeti$e (referential Tariffs>')(T? "lan whih

res#lted in reation of A*)AN4

Organisation str#t#re inl#des A*)AN eono!i !inisters,

A*)AN foreign !inisters, A*)AN seretariat, Fi7ed

o!!ittees and rotating o!!ittees4



86/150

IN1IA AN1 A*)AN

India bea!e a setoral dialog#e "artner of A*)AN in CDD4 The

setors were trade, in$est!ent, to#ris! and siene and tehnolog%

India bea!e a f#ll dialog#e "artner of A*)AN d#ring fifth A*)AN

s#!!it in Bang+o+ in CDDH



87/150

AFTA0Asian Free Trade Area

AFTA was for!ed in *e"te!ber CDDE4

AFTA was for!ed to de$elo" A*)AN trade

OB3)'TI:)*

To eno#rage inflow of foreign in$est!ent into this region

To establish free trade area in the !e!ber o#ntries

To red#e tariff of the "rod#ts "rod#ed in A*)AN o#ntries



88/150

*AA'

*AA' stands for *o#th Asian Assoiation for egional 'o0o"eration

India, Bangladesh, Bh#tan, (a+istan, the Maldi$es, Ne"al and *ri

Lan+a established *AA' on 1e , CDH4

Afghanistan =oined *AA' in A"ril 54



89/150

OB3)'TI:)* OF *AA'

To i!"ro$e the 6#alit% of life and welfare of "eo"le

To de$elo" region eono!iall%, soiall%, #lt#rall%

To "ro$ide o""ort#nit% for the "eo"le to li$e in dignit%

To enhane self0reliane of !e!bers

To e7tend o0o"eration to other trade blo+s

To enhane o0o"eration with de$elo"ing o#ntries

To ha$e #nit% a!ong !e!ber o#ntries



90/150

OGANIZATION *TU'TU)

The o#nil of *AA' is the highest "oli% !a+ing bod%

The o#nil is re"resented b% the heads of the Go$ern!ent of the

!e!ber o#ntries

The 'o#nil !eets one in two %ears

This o#nil is assisted b% o#nil of !inisters

The o#nil of !inisters is re"resented b% foreign !inisters of !e!ber

o#ntries

The o#nil of !inisters are assisted b% standing o!!ittee whih

onsists of foreign seretaries of !e!ber o#ntries



91/150

*TAN1ING 'OMMITT))

Monitoring and o0ordinating the "rogra!!es

1eter!ining inter0setoral "riorities

Mobilizing o0o"eration within and o#tside the

region

*tanding o!!ittee is assisted b% (rogra!!ing

o!!ittee



92/150

(OGAMMING 'OMMITT))

This inl#des the senior offiials of the !e!ber o#ntries4 The

f#ntions are

*r#tinising b#dget of the seretariat

Finalising ann#al shed#le of the seretariat

'arr%ing o#t the ati$ities assigned b% the standing o!!ittee

Anal%sing re"orts of tehnial o!!ittees and *AA'

regional entres and s#b!itting the! to the standing

o!!ittee4



93/150

T)'8NI'AL 'OMMITT))

This onsists of re"resentati$e of all !e!ber o#ntries

FUN'TION*

For!#lating "ro=ets and "rogra!!es in their

res"eti$e areas

Monitoring and i!"le!enting "ro=ets

*#b!itting the re"orts to the standing o!!ittee

thro#gh the "rogra! o!!ittee



94/150

T)'8NI'AL 'OMMITT))

The tehnial o!!ittees of *AA' inl#des

Agri#lt#re

)n$iron!ent

#ral 1e$elo"!ent

To#ris! and trans"ort

'o!!#niations

8ealth and "o"#lation ati$it%

*iene and tehnolog%



95/150

The *eretarial wor+ is done b% *AA' seretariat

loated in Ne"al4

The seretar%0General is the hief of the seretariat

Ah!ed *ali! of Maldi$es is the oresent *eretar%

General of *AA'



96/150

)*'A(

)ono!i and *oial o!!ission for Asia and The (aifi

)*'A( has E !e!bers o#ntries

The original na!e of )*'A( was )ono!i o!!ission for Asia and far east

)*'A(2s geogra"hial area is as follows/

)ast/ 'oo+ Island

;est/ Azerbai=an

North/ Mangolia

*o#th/ A#stralia and New Zealand



97/150

A()'

A()' stands for Asia (aifi )ono!i o0o"eration

It loo+s for failitating eono!i growth, o0o"eration, trade and in$est!ent in

Asia (aifi region4

A()' has C !e!bers referred as Me!ber )ono!ies2 whih ao#nts for !ore

than a third of the world2s "o"#lation>4 billion "eo"le?, a""ro7i!atel% J of

world2s G1( and abo#t E5J of world trade4

It is the !ost eono!iall% d%na!i region in the world



98/150

(U(O*) AN1 GOAL*

To enhane the eono!i growth and "ros"erit% of Asia0

"aifi region

To red#e tariff and trade barriers

'reation of an en$iron!ent for safe and effiient !o$e!ent of

goods, ser$ies and "eo"le aross borders



99/150

O()ATION OF A()'

)$er% %ear one of the C A()' !e!ber eono!ies "la% host

to A()' !eetings and ser$es as the A()' 'hair4

The A()' host eono!% is res"onsible for hairing the Ann#l

!eetings of A()'4

A()' is not a donor organization4 It2s ati$ities are entrall%

f#nded b% s!all ann#al ontrib#tions fro! A()' !e!bers

eono!ies4



100/150

M)'O*U

The treat% signed b% Argentina, Brazil, (arag#a% and Ur#g#a% on Marh , CDDC

reated Meros#r4

Meros#r is *o#th A!eria2s largest trade blo+4

OB3)'TI:)*

Free transit of trans"ortation goods, ser$ies and fators between the !e!ber states4

Fi7ing of a o!!on e7ternal tariff and ado"ting o!!on trade "oli%

'o0ordination of !aro0eono!i and setoral "oliies of !e!ber states in areas of

foreign trade, agri#lt#re, trans"ort and o!!#niations et4,



101/150

INT)NATIONAL 'A(ITAL MA-)T

Networ+ of "eo"le, fir!s, finanial instit#tions, and

go$ern!ents borrowing and in$esting internationall%

Borrowers

)7"ands !one% s#""l%

ed#es ost of !one%

Lenders

*"read @ red#e ris+

Offset gains @ losses


INT)NATIONAL FINAN'IAL MA-)T


102/150

INT)NATIONAL FINAN'IAL MA-)T

Few of the International finanial !ar+ets are as follows/

Foreign e7hange !ar+et

)#ro#rren% !ar+et

)#roredit !ar+et

)#robond !ar+et

International sto+ !ar+ets


FO)IGN ).'8ANG) MA-)T


103/150

The foreign e7hange !ar+et allows #rrenies to be e7hanged in order to

failitate international trade or finanial transations4

The foreign e7hange !ar+et assists international trade and in$est!ent b%

enabling #rren% on$ersion4 For e7a!"le, it "er!its a b#siness in the United*tates to i!"ort goods fro! the )#ro"ean Union !e!ber states

The s%ste! for establishing e7hange rates has e$ol$ed o$er ti!e4

Fro! C5 to CDCK, eah #rren% was on$ertible into gold at a s"eified rate

This was followed b% a "eriod of instabilit%, as ;orld ;ar I began and the

Great 1e"ression followed4

The CDEEBretton Woods Agreementalled for fi7ed #rren% e7hange rates4



104/150

FO)IGN ).'8ANG) MA-)T

There is no s"eifi b#ilding or loation where traders

e7hange #rrenies4 Trading also o#rs aro#nd the lo+4

The !ar+et for i!!ediate e7hange is +nown as the spot

market4

Theforward marketenables an MN' to lo+ in the e7hange

rate at whih it will b#% or sell a ertain 6#antit% of #rren%

on a s"eified f#t#re date4



105/150

)UO'U)N'9 MA-)T

The )#ro#rren% !ar+et onsists of ban+s >alled )#roban+s? that ae"t de"osits

and !a+e loans in foreign #rrenies

A )#ro#rren% is a freel% on$ertible #rren% de"osited in a ban+ loated in a

o#ntr% whih is not the nati$e o#ntr% of the #rren%

The de"osit an be "laed in a foreign ban+ or in the foreign branh of a do!esti

ban+

In the CDs and 5s, the )#rodollar !ar+et, or what is now referred to as the

Eurocurrency market, grew to ao!!odate inreasing international b#siness4



106/150

)UO'U)N'9 MA-)T

The )#ro#rren% !ar+et is !ade #" of se$eral large

ban+s alled Eurobanks that ae"t de"osits and

"ro$ide loans in $ario#s #rrenies4

For e7a!"le, the )#ro#rren% !ar+et has

historiall% re%led the oil re$en#es >"etrodollars?

fro! oil0e7"orting >O()'? o#ntries to othero#ntries4



107/150

)UO'U)N'9 MA-)T

The )#ro#rren% !ar+et in Asia is so!eti!es referred to se"aratel% as

theAsian dollar market4

The "ri!ar% f#ntion of ban+s in the Asian dollar !ar+et is to hannel

f#nds fro! de"ositors to borrowers4

Another f#ntion is interban+ lending and borrowing4


)UO ')1IT MA-)T


108/150

)UO ')1IT MA-)T

Loans of one %ear or longer are e7tended b% )#roban+s to MN's or go$ern!ent

agenies in theEurocredit market4 These loans are +nown asEurocredit loans4

Floating rates are o!!onl% #sed in )#roredit Mar+et


)UOBON1 MA-)T


109/150

)UOBON1 MA-)T

In finane, a bondis an instr#!ent of indebtedness of the bond iss#er to the holders4 It

is a debt se#rit%, #nder whih the iss#er owes the holders a debt and, de"ending on

the ter!s of the bond, is obliged to "a% the! interest >the o#"on? and@or to re"a%

the "rini"al at a later date, ter!ed the !at#rit%

There are two t%"es of international bonds4

Bonds deno!inated in the #rren% of the o#ntr% where the% are "laed b#t iss#ed

b% borrowers foreign to the o#ntr% are alledforeign bondsorparallel bonds4

Bonds that are sold in o#ntries other than the o#ntr% re"resented b% the #rren%

deno!inating the! are alledEurobonds4


INT)NATIONAL *TO'- MA-)T*


110/150

INT)NATIONAL *TO'- MA-)T*

In addition to iss#ing sto+ loall%, MN's an also obtain f#nds b% iss#ing sto+ in

international !ar+ets4

This will enhane the fir!2s i!age and na!e reognition, and di$ersif% the

shareholder base4 The sto+s !a% also be !ore easil% digested4

Note that !ar+et o!"etition sho#ld inrease the effiien% of new iss#es4



111/150

A sto+ e7hange is an entit% that "ro$ides trading failities for sto+

bro+ers and traders, to trade sto+s, bonds, and other se#rities4


NA*1A'


112/150

NA*1A'

The NASDAQ Stock Market o!!onl% +nown as

the NASDAQ, is an A!erian sto+ e7hange4 NA*1A

originall% stood for National Association of Securities

Dealers Automated Quotations

It is the seond0largest sto+ !ar+et o!"aring to offiial

sto+ e7hanges b% !ar+et a"italization in the world, after

the New 9or+ *to+ )7hange4

The e7hange "latfor! is owned b% NA*1A OM. Gro#",

whih also owns the OM. sto+ !ar+et networ+4Versatile Business School, Egmore, Chennai - 600 008

* O


113/150

8I*TO9;hen the NA*1A sto+ e7hange began trading on Febr#ar% , CD5C, it

was the worlds first eletroni sto+ !ar+et4

NA*1A was the s#essor to the o$er0the0o#nter >OT'? s%ste! of

trading

NA*1A was also the first sto+ !ar+et in the United *tates to start

trading online, highlighting NA*1A0traded o!"anies

In CDD, it =oined with the London *to+ )7hange to for! the first

interontinental lin+age of se#rities !ar+ets

In NA*1A hanged fro! sto+ !ar+et to liensed national

e7hange4


NA*1A'


114/150

NA*1A'

The NASDAQ!"##is a sto+ !ar+et inde7 of C of the largest non0

finanial o!"anies listed on the NA*1A

The NA*1A has o$er the %ears "#t in "lae a series of stringent

standards that o!"anies !#st !eet before being inl#ded in the inde74

Those standards inl#de the following/

Being listed e7l#si$el% on NA*1A in either the Global *elet or Global

Mar+et tiers4

Being "#blil% offered on an established A!erian !ar+et for three !onths4

8a$ing a$erage dail% $ol#!e of , shares4

Being #rrent in regards to 6#arterl% and ann#al re"orts4

Not being in ban+r#"t% "roeedings4



115/150

NA*1A'0O()ATION*

The Nasda6, on the other hand, is loated not on a

"h%sial trading floor b#t on a teleo!!#niations

networ+

Instead, trading ta+es "lae diretl% between

in$estors and their b#%ers or sellers, thro#gh an

elaborate s%ste! of o!"anies eletroniall%

onneted to one another4



116/150

NA*1A C

Cst 'ent#r% Fo7 >FO.A?

A!azon4o!, In4 >AMZN?

A""le In4 >AA(L?

'ognizant Tehnolog% *ol#tions 'or"oration >'T*8?

1ell In4 >1)LL?

Google In4 >GOOG?

:odafone Gro#", "l4 >:O1?

9ahooP In4 >98OO?Versatile Business School, Egmore, Chennai - 600 008

).IM BAN-


117/150

E$%ort!&m%ort 'ank of &ndiais the "re!ier e7"ort finane

instit#tion of the o#ntr%, established in CD #nder the

)7"ort0I!"ort Ban+ of India At CDC4

Go$ern!ent of India la#nhed the instit#tion with a !andate,

not =#st to enhane e7"orts fro! India, b#t to integrate the

o#ntr%2s foreign trade and in$est!ent with the

o$erall eono!i growth4



118/150

).IM BAN-0OGANIZATION

)7i! Ban+ is !anaged b% a Board of 1iretors,

whih has re"resentati$es fro! the

Go$ern!ent, eser$e Ban+ of India, )7"ort 'redit

G#arantee 'or"oration of India, a finanial

instit#tion, "#bli setor ban+s, and the b#siness

o!!#nit%4



119/150

).IM0FUN'TION*

The Ban+s f#ntions are seg!ented into se$eral o"erating gro#"s inl#ding/

Cor%orate 'anking (rou% whih handles a $ariet% of finaning "rogra!!es

for )7"ort Oriented Units >)OUs?, I!"orters, and o$erseas in$est!ent b% Indian

o!"anies4

)ro*ect Finance + Trade Finance (rou%handles the entire range of e7"ort redit

ser$ies s#h as s#""liers redit, "re0shi"!ent Agri B#siness Gro#", to s"earhead the

initiati$e to "ro!ote and s#""ort Agri0e7"orts4 The Gro#" handles "ro=ets and e7"ort

transations in the agri#lt#ral setor for finaning4

*!all and Medi#! )nter"rise/ The gro#" handles redit "ro"osals fro! *M)s #nder

$ario#s lending "rogra!!es of the Ban+4


E$%ort Services (rou% offers $ariet% of ad$isor% and $al#e0


120/150

).IM0FUN'TION*E$%ort Services (rou% o e s $a et% o ad$ so % a d $a #e

added infor!ation ser$ies ai!ed at in$est!ent "ro!otion4

)7"ort Mar+eting *er$ies Ban+ offers assistane to Indian

o!"anies, to enable the! establish their "rod#ts in o$erseas

!ar+ets4

The idea behind this ser$ie is to "ro!ote Indian e7"ort4

)7"ort Mar+eting *er$ies o$ers wide range of e7"ort

oriented o!"anies and organizations4



121/150

).IM0FUN'TION*

Besides these, the Su%%ort Services grou%s, whih inl#de/

esearh < (lanning, Treas#r% and Ao#nts, LoanAd!inistration, Internal A#dit, Manage!ent Infor!ation

*er$ies, Infor!ation Tehnolog%, Legal, 8#!an eso#res

Manage!ent and 'or"orate 'o!!#niations4


)'G'


122/150

)'G'

The E$%ort Credit (uarantee Cor%oration of &ndia

,imited>EC(C? is a o!"an% wholl% owned b%

the Go$ern!ent of India based in M#!bai, Maharashtra

It is controlled by t$e Ministry of'o##erce( Go"ern#ent of India(

It was transfor#ed into 47+ort 'redit and

Guarantee 'or+oration 1i#ited 4'G'H in =


123/150

)'G'

)'G' of India Ltd, was established in 3#l%, CDH5 to

strengthen the e7"ort "ro!otion b% o$ering the ris+ of

e7"orting on redit

It is !anaged b% a Board of 1iretors o!"rising

re"resentati$es of the Go$ern!ent, eser$e Ban+ of India,

ban+ing, ins#rane and e7"orting o!!#nit%4

)'G' is the fifth largest redit ins#rer of the world in ter!s of

o$erage of national e7"orts4


N))1 FO ).(OT ')1IT IN*UAN')


124/150

N))1 FO ).(OT ')1IT IN*UAN')

An o#tbrea+ of war or i$il war !a% blo+ or dela% "a%!ent for goods

e7"orted4

)ono!i diffi#lties or balane of "a%!ent "roble!s !a% lead a

o#ntr% to i!"ose restritions on either i!"ort of ertain goods or on

transfer of "a%!ents for goods i!"orted4

The o!!erial ris+s of a foreign b#%er going ban+r#"t or losing his

a"ait% to "a%



125/150

FUN'TION* OF )'G'

(ro$ides a range of redit ris+ ins#rane o$ers to e7"orters

against loss in e7"ort of goods and ser$ies4

Offers g#arantees to ban+s and finanial instit#tions to enable

e7"orters to obtain better failities fro! the!4

(ro$ides O$erseas In$est!ent Ins#rane to Indian o!"anies

in$esting in =oint $ent#res abroad in the for! of e6#it% or loan4


FUN'TION* OF )'G'


126/150

FUN'TION* OF )'G'

Offers ins#rane "rotetion to e7"orters against "a%!ent ris+s

(ro$ides g#idane in e7"ort0related ati$ities

Ma+es a$ailable infor!ation on different o#ntries with its own

redit ratings

Ma+es it eas% to obtain e7"ort finane fro! ban+s@finanial

instit#tions

Assists e7"orters in reo$ering bad debts

(ro$ides infor!ation on redit0worthiness of o$erseas b#%ers



127/150

IBM

UNIT :


).(OT (O')1U)*


128/150

(reli!inaries

Offer andeei"t ofonfir!ed

orders

(rod#tionand learane

of the"rod#ts for

e7"orts

*hi"!ent

Negotiationof 1o#!ents

andrealization of

e7"ort"roeeds

Obtaining$ario#se7"ort

inenti$es


()LIMINAI)*


129/150

I!"orter0)7"orter 'ode N#!ber >I)' N#!ber?/ Liense to be obtained fro!

regional liensing a#thorities4

Me!bershi" in ertain bodies/ Me!bershi" in bodies li+e )7"ort "ro!otion

o#nils, India trade "ro!otion organization et4,

egistration/ egister with )7"ort "ro!otion o#nils >)('?, *ales ta7 a#thorities

et4,


INUI9,OFF) AN1 )')I(T OF


130/150

'ONFIM)1 O1)*

In6#ir% is the re6#est !ade b% a "ros"eti$e i!"orter regarding his wish to i!"ort

ertain goods4

Offer is a "ro"osal s#b!itted b% a e7"orter e7"ressing his intention to e7"ort

ertain goods4

)7"orter !a+es an offer in the for! of (rofor!a In$oie2


(OFOMA IN:OI')


131/150

(OFOMA IN:OI')

(rofor!a In$oie inl#des the following/

Name of t-e buyer/ 'o!"lete details of b#%er@i!"orter

Descri%tion of goods/ Tehnial, he!ial and "h%sial feat#res

of goods4

)rice/ Unit wise and total "rie of the goods in internationall%

ae"ted #rrenies or !#t#all% agreed #rrenies4

The for!s #sed sho#ld be f4o4b4, and 4i4f 4, f >'ost, Ins#rane

and Freight >'IF? $s4 Free On Board >FOB?? or internationall%

ae"ted for!4


(OFOMA IN:OI')


132/150

Conditions of Sale/

.alidity/ The "eriod for whih the in$oie is $alid

Escalation Clause/ (ries !a% inrease before deli$er% of the goods d#e to

inrease in ost of in"#ts4 8ene, seller !a% inl#de esalation la#se

Delivery Sc-edule/ ealisti deli$er% shed#le sho#ld be indiated4

&ns%ection/ A#thorit% who will ond#t ins"etion sho#ld be indiated4


(OFOMA IN:OI')


133/150

)ayment Terms/ Letter of redit, bill of e7hange sho#ld be inl#ded4

Other obligations/

(ost sales ser$ie to be "ro$ided

(ro$iding s"are "arts

;arrant%@g#arantee for e6#i"!ent@tehnolog%

Confirmed 0rder/ The b#%er sends the onfir!ed order to the e7"orter b% signing

the d#"liate o"% of the in$oie whih beo!es the onfir!ed order


(OFOMA IN:OI')


134/150

E$%ort ,icense/ The e7"orter has to obtain the e7"ort liense

fro! the a#thorities onerned if the ite!s to be e7"orted

re6#ires liense4

)rocuring Finance/ If the e7"orter does not ha$e the re6#ired

finane then he sho#ld arrange it fro! $ario#s so#res4


(O1U'TION@(O'U)M)NT OF GOO1*


135/150


The e7"orting ho#se after reei$ing the order sho#ld "rod#e the goods

as s"eified in the order4

)acking and Marketing/

The e7"orter sho#ld arrange for "a+ing and !ar+ing of goods as "er

International standards4

B#rea# of Indian *tandards

British *tandard (a+ing 'ode

)7"orters )n%lo"edia

International 'argo08andling 'o0ordination Assoiation4




136/150

Quality control and %re!s-i%ment ins%ection/

#alit% and "re0shi"!ent ins"etion b% )7"ort Ins"etion

'o#nil

E$cise Duty 1ebates/

Goods !eant for e7"ort are e7e!"ted fro! i!"osition of

e7ise d#t%4 ebate on d#t% is "ro$ided on s#b!ission of the

following for!s/

A0E for!s


*8I(M)NT


137/150

)7"orter has to ontat shi""ing o!"anies for s"ae after

getting the order onfir!ed4

*hi""ing ad$ise refers to !ere infor!ation abo#t a$ailabilit%

of s"ae and there is no obligation to ae"t the argo

*hi""ing order iss#ane reates obligation to ae"t the argo


'U*TOM* 'L)AAN')


138/150

The e7"orter has to get #sto! learane of the goods before the% are

loaded on the shi"4 The list of do#!ents to be f#rnished inl#des the

following/

(rofor!a In$oie

G0I For! >1#"liate?

A0E For! >1#"liate?

)7"ort Liense

Letter of redit o$ering e7"ort order, e7"ort ontrat or order in

original

'ertifiate of Ins"etion


'U*TOM* 'L)AAN')


139/150

For! of 1elaration >in d#"liate?

*hi""ing bill >Fi$e o"ies?

#alit% ontrol Ins"etion ertifiate>If re6#ired?

Original ontrat where$er a$ailable

(a+ing list

Letter of registration ertifiate >If a""liable?


'U*TOM* 'L)AAN')


140/150

(1!& Form/

)7hange ontrol do#!ent

(roeeds of sale to be realized in C da%s fro! date of shi"!ent4

Not neessar% in ase of e7"ort to Bh#tan and Ne"al

A1!2 Form/

)$er% !an#fat#rer for learane of e7isable goods files an

a""liation A0E fro! his fator% for e7"ort

The learanes an be #nder lai! for rebate of d#t% or #nder bond4

The goods an be e7a!ined and sealed at the fator% b% a entral

e7ise offier ha$ing =#risdition o$er the fator%4 After shi"!ent of

goods, the #sto!s offier endorses A0E for!


'U*TOM* 'L)AAN')


141/150

'U*TOM* 'L)AAN')

E$%ort ,icense/ The e7"orter has to obtain the e7"ort liensefro! the a#thorities onerned if the ite!s to be e7"orted

re6#ires liense4

,etter of Credit/A letter fro! a ban+ g#aranteeing that a

b#%ers "a%!ent to a seller will be reei$ed on ti!e and for the

orret a!o#nt4 In the e$ent that the b#%er is #nable to !a+e

"a%!ent on the "#rhase, the ban+ will be re6#ired to o$er

the f#ll or re!aining a!o#nt of the "#rhase4


'U*TOM* 'L)AAN')


142/150

Certificate of &ns%ection/ 'ertif%ing or non ertif%ing abo#t thef#lfill!ent of National e7"ort standards

Form of Declaration/

'#sto!s for! o!"leted and s#b!itted b% an e7"orter at the "ort

of e7"ort

>C? to "ro$ide infor!ation on a!o#nt, nat#re,

and $al#e of e7"orts to the

statistial offie for o!"ilation of foreign trade data,


'U*TOM* 'L)AAN')


143/150

S-i%%ing bill/ The bill ontains the following

Na!e of the e7"orter

1esri"tion and #antit% of goods

:al#e of goods

N#!ber of "a+ages and !ar+ings on the!

A!o#nt of drawba+ lai!ed

(ort of 1estination

Na!es of the shi" and its agent@ersatile Business %c$ool 4g#ore '$ennai *


144/150

Carting 0rder/ One the good for e7"orts is read% and shi""ing order is

a$ailable, the s#"erintendent of the onerned "ort tr#st gi$es "er!ission

for "h%sial !o$e!ent of goods into "ort4

Customs E$amination of Cargo at Dock/ 'he+ing of "rod#ts to bee7"orted at the do+ b% '#sto!s A""raiser

,et S-i%/

Let shi" order a#thorizes shi""ing o!"an% to ae"t the argo

Iss#ed b% the "re$enti$e offier of the #sto!s de"art!ent before

loading ta+es "lae4


'U*TOM* 'L)AAN')


145/150

Mate3s 1ecei%t/ The a"tain of the shi" ertifies the loading

of the argo b% iss#ing do#!ent alled Mate2s eei"t2 to

the (ort *#"erintendent4

)ort Trust Dues/ (ort tr#st a#thorities iss#es Bill of

Lading2 to the e7"orter after reei$ing Mate2s reei"t2 fro!

the a"tain4

'ill of ,ading/ Agent ollets Mate2s eei"t2 and gi$es to

"ort tr#st a#thorities and in t#rn ollets Bill of Lading24


'U*TOM* 'L)AAN')


146/150

)7"orter2s agent "ro$ides the following do#!ents in the final

stage/

'o"% of In$oie attested b% #sto!s

'o"% of *hi""ing bill

)7"ort "ro!otion o"% of shi""ing bill

Bill of lading

Original letter of redit

'#sto!ers order or ontrat

1#"liate o"% of A0E For!


N)GOTIATION OF 1O'UM)NT* AN1 )ALIZATION

OF ).(OT (O'))1*


147/150

The e7"orter s#b!its rele$ant do#!ents to his ban+er for getting "a%!ent of goods e7"orted4

*#b!ission of do#!ents and "roess of getting "a%!ent thro#gh ban+ is alled Negotiating the

1o#!ents24

These do#!ents are alled as Negotiable set of do#!ents2

1o#!ents inl#de/

Bill of lading

'o!!erial In$oie with "a+ing sli" and bill of e7hange

'ertifiate of origin

G0I For!

Marine Ins#rane (oli%

Letter of 'redit


N)GOTIATION OF 1O'UM)NT* AN1

)ALIZATION OF ).(OT (O'))1*


148/150

Go$ern!ent of India a""ointed a o!!ittee to reo!!end on the do#!entation

in e7"ort4 *tandardized do#!ents s#ggested are as follows and the s%ste! is

alled as Aligned 1o#!entation *%ste!2

In$oie

)7hange ontrol 1elaration >G For!?

*hi""ing Bill

Bill of Lading


).(OT 1O'UM)NTATION


149/150

)7"ort inenti$es inl#de,

Duty Dra4back/ )ligible to get ba+ e7ise d#t% "aid on all raw !aterials, o!"onents

and ons#!ables #sed in "rod#tion of goods e7"orted4

E$cise Duty 1efund/ )ligible for ref#nd of "aid at the beginning4 Bonds an also be

e7e#ted witho#t !a+ing "a%!ent4



150/150

international business economics

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