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Q1. The world economy is globalizing at an accelerating pace. What do you mean by globalization? Discuss the merits and demerits of globalization.
Globalisation is a process where businesses are dealt in markets around the world, apart from the local and national markets. According to business terminologies, globalisation is defined as the worldwide trend of businesses expanding beyond their domestic boundaries. It is advantageous for the economy of countries because it promotes prosperity in the countries that embrace globalisation. Merits of globalisation The merits and demerits of globalisation are highly debatable. While globalisation creates employment opportunities in the host countries, it also exploits labour at a very low cost. Some of the benefits of globalisation are as follows: Promotes foreign trade and liberalization of economies. Increases the living standards of people in several developing countries through capital investments in developing countries by developed countries. Benefits customers as companies outsource to low wage countries. Outsourcing helps the companies to be competitive by keeping the cost low, with increased productivity. Promotes better education and jobs. Leads to free flow of information and wide acceptance of foreign products, ideas, ethics, best practices, and culture. Provides better quality of products, customer services, and standardized delivery models across countries. Gives better access to finance for corporate and sovereign borrowers. Increases business travel, which in turn leads to a flourishing travel and hospitality industry across the world. Increases sales as the availability of cutting edge technologies and production techniques decrease the cost of production. Provides several platforms for international dispute resolutions in business, which facilitates international trade. DeMerits of globalization Some of the demerits of globalization are as follows: Leads to exploitation of labour in several cases. Causes unemployment in the developed countries due to outsourcing.

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Leads to the misuse of Intellectual Property Rights (IPR), copyrights and so on due to the easy availability of technology, digital communication, travel and so on. Influences political decisions in foreign countries. The MNCs increasingly use their economical powers to influence political decisions. Causes ecological damage as the companies set up polluting production plants in countries with limited or no regulations on pollution. Harms the local businesses of a country due to dumping of cheaper foreign goods. Leads to adverse health issues due to rapid expansion of fast food chains and increased consumption of junk food. Causes destruction of ethnicity and culture of several regions worldwide in favour of more accepted western culture.

Q2. The international trade theories explain the basics behind international trade. Compare the Absolute and comparative cost advantage theories with the help of example.
Absolute advantage theory In one of the most notable book Wealth of Nations in 1776, Adam Smith attacked the mercantilism and argued that countries differ in their ability to produce goods and services efficiently due to variety of reasons. At that time, England, by virtue of their superior manufacturing processes, were the worlds most efficient textile manufacturers of the world. On the other hand, the French had one of the most efficient wine industries of the world. Thus, England had an absolute advantage in the manufacturing of textiles and France had an absolute advantage in the production of wine. Adam Smith argued that a country has an absolute advantage if it has one of the most efficient and cost effective product in comparison to any other country producing it. Smith argued that countries should specialize in production and manufacturing of goods and services in which they have an absolute advantage. Such cost effective and efficient products can be traded with goods from other countries in which that country has an absolute advantage. According to Smith, both countries should exchange such products of absolute advantage with each other, i.e. England should sell textiles to France and France should sell wine to England. The crux of Smiths absolute advantage theory is that a country should not produce goods at home in which it does not have cost advantage; instead it should import from other countries.

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Comparative advantage theory David Ricardo, in his notable book Principles of Political Economy published in 1817 came up with an improvement on Adam Smiths absolute advantage theory. Ricardo argued what might happen if one country has an absolute advantage in the production of all goods. Adam Smiths theory suggests that such a country might not have benefitted from international trade as trade is positive sum game and countries prosper only if they exchange the goods in which they have absolute advantage. Ricardo argued that it was not the case and showed that countries should trade goods with each other where they have comparative cost advantage Practical case on comparative cost advantage is tabled as under:

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Q3. Culture is more often a source of conflict than synergy. As an Indian manager, what management style and corporate culture you should be aware of while travelling to Japan and to USA?
Corporate cultures The success of any multinational company depends on the techniques and cultures. Corporate culture is an organisational culture, related to the management of businesses with respect to organisational structure,strategy, and control. The corporate cultures of USA and Japan are stated below in the table.
Countr y Basis of approach to corporate culture Buisness Culture Management Style Team work

Japan

Relations hip must come before business.

Hierarchically structured, based on harmony and co-operation, with individuals aware of their position within a group

Information flows from the bottom of the company to the top. Implementation of decisions has been personality is not seen as the requisite for effective leadership actively involved in the modeling of policy. Individual

Consensus building process is used to define an agreement before a formal meeting to avoid any conflict. People are modest and self-promotion is not Encouraged. expected be modest and selfpromotion is not encouraged.

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USA

Every aspect of commerci al life is studied and analysed.

The company is an entity in its own right and survives independently from its workers. Senior management is more rooted in the personality at the top. Americans like to know where exactly they are, what are their responsebilities and to whom they report.

Management style is individualistic in approach; managers are responsible for the decisions made within their regions of responsibility. Important decisions are discussed in open environment and the responsibility for the concerns of the decision lies with the manager.

Groups of individuals are brought together to complete a given task. During that period the group is together, everybody is committed to the common goals, and work with dedication to assure that the goals are accomplished. Teams are assumed to be temporary in nature.

Q4. Regional integration is the bonding between nations and states through

political, cultural and economic cooperation. A whole range of regional integration exists today. Discuss these 6 types in brief.
The Six types of regional integration are discussed below 1. Preferential trading agreement Preferential trading agreement is a trade pact between countries. It is the weakest type of economic integration and aims to reduce taxes on few products to the countries who sign the pact. The tariffs are not abolished completely but are lower than the tariffs charged to countries not party to the agreement. India is in PTA with countries like Afghanistan, Chile and South Common Market (MERCOSUR). 2. Free trade area Free Trade Area (FTA) is a type of trade bloc and can be considered as the second stage of economic integration. It comprises of all countries that are willing to or agree to reduce preferences, tariffs and quotas on services and goods traded between them. Countries choose this kind of economic integration if their economical structures are similar. If countries compete among themselves, they are likely to choose customs union.

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3. Custom union Custom Union is an agreement among two or more countries having already entered into a free trade agreement to further align their external tariff to help remove trade barriers. Custom union agreement among negotiating countries may encompass to reduce or eliminate customs duty on mutual trade. Under customs union agreement, countries generally impose a common external -tariff (CTF) on imports from non-member countries 4. Common market Common market is a group formed by countries within a geographical area to promote duty free trade and free movement of labour and capital among its members. European community is an example of common market. Common markets levy common external tariff on imports from non-member countries. 5. Economic union Economic union is a type of trade bloc and is instituted through a trade pact. It comprises of a common market with a customs union. The countries that are part of an economic union have common policies on the freedom of movement of four factors of production, common product regulations and a common external trade policy. The purpose of an economic union is to promote closer cultural and political ties. 6. Political union A political union is a type of country, which consists of smaller Countries/nations. Here, the individual nations share a common government and the union is acknowledged internationally as a single political entity. A political union can also be termed as a legislative union or state union.

Q.5 The decision of a firm to compete internationally will be strategic. While formulating global marketing strategies, how should a firm deal with segmentation, market positioning and international product policy?
Segmentation Firms that serve global markets can be segregated into several clusters based on their similarities. Each such cluster is termed as a segment. Segmentation helps the firms to serve the markets in an improved way. Markets can be segmented into nine categories, but the most common method of segmentation is on the basis of individual characteristics, which include the behavioral, psychographic and demographic segmentations. The basis of behavioral segmentation is the general behavioral aspects of the customers. Demographic segmentation considers the factors like age, culture, income, education and gender. Psychographic segmentation takes into accountbeliefs, values, attitudes, personalities, opinions, lifestyles and

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so on. Once you are done with the segmentation of market, you can choose one or more segments to carry out trade. This process of selecting or choosing the potential market segment is known as targeting. The three basic criteria for targeting are potential competition, the current size and growth rate of the market and compatibility and feasibility. International product policy Some theorists of the industry feel that there is a difference between conventional products and services, stressing on service characteristics, such as heterogeneity (variation in standards among providers and different locations of the same firm), inseparability from consumption, intangibility and perishability. Typically, products are composed of some service component like documentation, warranty and distribution. These service components are an integral part of the product and its positioning. We often think of a product in terms of fulfilling the need of our own culture. However, the functions served by that product may be very different in other cultures. Thus, it is important to consider the findings of marketing research and determine customers desires, motives and expectations in buying a product. Market positioning The next step in the marketing process is, the firms should position their product in the global market. Product positioning is the process of creating a favorable image of the product against the competitor's products. In global markets, product positioning is categorized as high-tech or high touch positioning. One challenge that firms face is to make a tradeoff between adjusting their products to the specific demands of a country and gaining advantage of standardization, such as the maintenance of a consistent global brand image and cost savings. The classification of high-tech and high-touch products is shown in figure

Q6. Global sourcing industry is on a growth run as there are sound business reasons to it. Discuss these reasons with examples
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These reasons for global sourcing industry on a growth run are: 1. Lower salary and wages The foremost reasons for global sourcing has been the financial incentive of outsourced operations to low cost labour destinations Due to the different stages of economic development, labour cost of workers in any developed countries is far higher than their counterparts. For example countries like India, Philippines, Poland and Romania. 2. Regulatory costs in business An underappreciated incentive in global sourcing to developing countries has seen significant difference in the regulatory cost of business. For Example Attorneys in India charge a fraction of the cost compared to US, hence, law firms in the US get their law related work done in India. Layoff expenditure in US are far higher than in India. 3. Tax breaks and benefits Developing countries like India offer tax breaks for new entrants thus offering cost savings for these companies. For example, Hyundai was offered a tax break (VAT) of 5 years by the Tamilnadu government for setting up a plant. 4. Improved performance Developed countries usually outsource their business operations to developing countries like India which is at the bottom of their core operations, monotonous and require huge labor. Such work can be done by dedicated outsourced labour force in developing country at a fraction of the cost of developed countries. 5. Faster turnaround time Companies as well as government are outsourcing their noncore operations to low cost countries as it helps not only to focus on core activities but to also get the required job done much faster with reduced time and accuracy. In business, time is money as the saying goes, thus, firms outsource some of their business operations for faster and quicker turnaround time 6. Uncertainty over political/business climate Another advantage of global sourcing is that companies want to evade their political and business risks by locating their business operations at various parts of the world For example, auto companies worldwide have invested in India as well as in Thailand for supply of auto components as both are low cost countries having specialization in the auto component industry. 7. Proximity to key markets In an era of globalization, firms have outsourced their business operations close to their key markets. For example, it is cheaper to manufacture goods in Thailand or China and then ship them to Japan than from US or Europe.

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