QUESTION 8. Many companies want to go global. What are the motivations for going global?

Explain all the motivational factors involved in going global.

Ans:

All organizations, irrespective of their size, are keen to enter in to international business. Established companies are expanding their business. Many countries encourage trade, and removal of strangulating trade barriers. It motivates companies to aggressively multiply their targets. The governments of various countries are also determined to make their economy grow through international business that has therefore become a inevitable part of their economic policy. The objective behind international business can be looked at: 1. From an individual companys angle. 2. From the government angle. F rom an individual companys angle 1. Managing the pr oduct life cycle: All companies have products, which pass through different stages of their life cycles. After the product reaches the last stage of the life cycle called the declining stage in one country, it is important for the company to identify other countries where the whole cycle process could be encashed. For example, Enfield India reached maturity and declining stage in India for the 350 cc motorcycle. The company entered Kenya, West Indies, Mauritius and other destinations where the heavy engine two-wheeler became popular. The Suzuki 800 cc vehicle reached the last stage of its life cycle in Japan and entered

India in the early 1980s, where it is still doing good business today. HP laptops are moving all the developing countries the moment they reached maturity in the U.S. market. 2. Geogr aphic expansion as a gr owth str ategy: Even if companies expand their business at home, they may still look overseas for new markets and better prospects. For example, Arvind mills expanded their business by either setting up units or opening International Business- Dr. R. Chandran 6 Only for Private Circulation warehouses abroad. Ranbaxys growth is mainly attributed to geographic expansion every year to new territories. Arabindo Pharma, Cipla and Dr. Reddys follow the same. 3. The adventur ous spir it of the younger gener ation The younger generation of business families has considerable International exposure. They are willing to take risks and challenges And also create opportunities for their business. Laxmi Mittal has Emerged as the steel king of the world and Vijay Mallya of the UB Group took a major risk in setting up operations in South Africa. Kumar Birla expands to Australia and Europe through acquisitions. 4. Cor por ate ambition: Every corporate in the country has strategic plans to multiply its sales turnover. In case some of the ventures fail, others will offset the losses because of multi-location operations. For example, Coco Cola is still to day not earning any profit in a number of countries. But this will not affect the company because more than a hundred countries are

contributing to offset losses. Kellogge cannot think of profits in India for further five years. They are ambitious to be visible and then

revenue. 5. Technology advantage: Some companies have outstanding technology through which they enjoy core competency. There is a need for such technology in all countries. Biocon, Infosys, Gharda chemicals are known for their core competency in biotechnology, IT and pesticides respectively and a huge demand exists throughout the world for their technology. Thermax, Ion Exchange, Bharat Heavy Electricals and Larsen & Toubro have marched ahead in International business. 6. Building a cor por ate image Prior to profits and revenue generation, many companies first build their corporate image abroad. Once the image is built, generating revenues is a comparatively easy task. Samsung and LG built their image in India for the first three years and generation of revenue and profits has been considerable, as they have expanded to semi-urban and rural India as well. Today their market share and penetration levels have gone far ahead of other players in India. 7. Incentives and business impact Companies, which are involved in international business, enjoy fiscal, physical and infrastructural incentives while they setup business in the host country. The Aditya Birla Group enjoyed such incentives in Thailand and Indonesia. All such incentives contribute to the company to enjoy multiple advantages like economies of scale, access to import

inputs, competitive pricing and aggressive promotion. 8. Lobour advantage Many companies have a highly productive lobour force. Their unique skills may not be available throughout the world. Manufacturing units in India have consistently performed well, whether in a diamond industry, handicraft, woodwork or leather. Companies nurture the skills of the artisans and win world markets. Knitwear, handlooms, embroidery, metal ware, carpet weaving, cashew processing and seafood call for cost-effective lobour force. India is endowed with such skills. 9. New business oppor tunities Many companies have entered in to business abroad, seeing unlimited opportunities. National foreign trade policy emphasizes focus markets. Enormous amount of growth potential is untapped in Latin America, Sub-Saharan Africa, CIS countries and China. 10. Emer gence of SEZS, EOUS, AEZ Current approvals of Special economic zones, Agrizones and Technology parks by Ministry of Commerce & Industry give new dimensions to international business. The companies setting up units in SEZs enjoy innumerable benefits and competitiveness.

F rom a Government Angle 1. Ear ning valuable for eign exchange Foreign exchange earning is necessary to balance the payments for imports. India imports crude oil, defense equipments, essential raw materials and medical equipments for which the payments have to be

made in foreign exchange. If the exports are high and imports are low it indicates a surplus balance of payment. On the other hand if imports are high and exports are low it indicates an adverse balance of payment, which all economies would want to avoid. A vast majority of the nations in the world are facing adverse balance of payment. 2. Inter dependency of nations From time immemorial, nations have depended on each other. Even during the era of Indus valley civilization, Egypt and the Indus Valley depended on each other for various items. Today, India depends on the Gulf regions for crude oil and in turn the Gulf region depends on India for tea, rice etc. Developed countries depend on developing countries for primary goods, whereas developing countries depend on developed countries for value added finished products. No single country is endowed with all the resources to survive on her own. 3. Tr ade theor ies and their impact The theories of absolute advantage, comparative advantage and which have been propounded by classical economists, indicate that a few nations have certain advantages of resources. The resources may be in the form of labour or infrastructure or technology or even a proactive policy of the government. Such theories are remaining foundations till today, for international business practices with few changes and trends. 4. Diplomatic r elations Diplomacy and trade always go hand in hand. Many sovereign nations send their diplomatic representatives to other countries with a motive of promoting trade besides maintaining cordial relations. Indian diplomats in Latin America have done a remarkable job of promoting

Indias business in the 1990s. Indian embassies and high commissions in all the countries around the world play a catalytic role of promoting trade and investment. 5. Cor e competency of nations Many countries are endowed with resources, which are produced at an optimum level. Such countries can compete well anywhere in the world. Rubber products from Malaysia, knitwear from India, rice from Thailand and wool from Australia are a few illustrations. Competing with a focused competency in any major resource or technology gives core competency status. Indias core competency in IT is known throughout the world. 6. Investment for infr astr uctur e Over the years all countries have invested huge amounts of money on infrastructure by building airports, seaports, economic zones and inland container terminals. If the trade activities do not increase, the country cannot recover the amounts invested. Hence, the government fixes targets for every infrastructure unit and time frame to achieve it. Economies like Mauritius, Hong Kong, Singapore, Malta and Cyprus invest in trade related infrastructure in order to elevate themselves to be foreign trade oriented economies. Infrastructure and international business are the two eyes of a growing economy. 7. National image A new era has emerged from conquering countries by sword to winning it by trade. A businessman gives priority to the image of the country he belongs to. We come across products with labels such as made in China and Japan & made in India. Businessmen from

India, China and Japan bring credentials to their country. When L.N.Mittal operaters in Indonesia or Kazakhstan or Trinidad he is perceived by the people as Indian. The stigma cannot be detached. 8. Foreign trade policy and targets All developing countries announce their trade policies. A clear road map is drafted and given to promotional bodies so that timely implementation is possible. Every trade policy in India, in the past had its agenda and action plans right from import control order in 1947. All the trade policies had three fold objectives in their agenda production promotion and competitiveness. 9. National tar gets By the year 2010, India aims to have a 2% share of the global market from the current level of 1%. By the year 2009-10, our trade status should cross $ 500 billion. 10. WTO and inter national agencies The apex body of world trade, the WTO, a free, transparent and regulatory body upholds provisions related to the elimination of tariffs and non-tariff barriers. The International Bank for Reconstruction and Development (IBRD), popularly called the World Bank extends financial assistance on a soft loan basis in order to assist developing countries in their infrastructure and industrial development. The International Monetary Fund (IMF) maintains currency stability in various countries through regulatory mechanisms. Many more organizations like International Maritime Organization, International Standard Organization, International Telecommunication Union, International Civil Aviation Organization are

major catalysts to promote trade between nations. Over the past few years their role in promotion of trade, especially amongst developing economies is unprecedented.

QUESTION 9. Michael porter National Diamond Model

Strategic analysis typically focuses on two views of organization. The industry-view and The ResourceBased View (RBV). These views analyse the organisation without taking into consideration relationship between the organizations strategic choice (i.e. Porter generic strategies) and institutional frameworks. The National Diamond' is a tool for analyzing the organizations task environment. The National Diamond highlights that strategic choices should not only be a function of industry structure and a firms resources, it should also be a function of the constraints of the institutional framework. Institutional analysis (such as the National Diamond) becomes increasingly important as firms enter new operating environments and operate within new institutional frameworks.

Michael Porter's National Diamond framework resulted from a study of patterns of comparative advantage among industrialized nations. It works to integrate much of Porter's previous work in his competitive five forces theory, his value chain framework as well as his theory of competitive advantage into a consolidated framework that looks at the sources of competitive advantage sourcable from the national context. It can be used both to analyze a firm's ability to

function in a national market, as well as analyse a national markets ability to compete in an international market.

It recognizes four pillars of research (factor conditions, demand conditions, related and supporting industries, firm structure, strategy and rivalry) that one must undertake in analysing the viability of a nation competing in a particular international market, but it also can be used as a comparative analysis tool in recognising which country a particular firm is suited to expanding into.

Two of the aforementioned pillars focus on the (national) macroeconomics environment to determine if the demand is present along with the factors needed for production (i.e. both extreme ends of the value chain). Another pillar focuses on the specific relationships supporting industries have with the particular firm/nation/industry being studied. The last pillar it looks at the firm's strategic response (microeconomics) i.e. its strategy, taking into account the industry structure and rivalry (see five forces). In this way it tries to highlight areas of competitive advantage as well as competitive weakness, by looking at a companies/

nations suitability to the particular conditions of a particular market.

A graphical representation of Porter's National Diamond

Factor Endowment

Factor Endowment can be categorized into two forms:

"Home-Grown" resources

Highly specialized resources

For example, in analyzing Hollywood's preeminence in film production, Porter has pointed out the local concentration of skilled labor, including the different schools of film (UCLA & USC) in the area. Also, resource constraints may encourage development of substitute capabilities; Japan's relative lack of raw materials has spurred miniaturization and zero-defect manufacturing.

Related and Supporting Industries

For many firms, the presence of related and supporting industries is of critical importance to the growth of that particular industry. A critical concept here is that national competitive strengths tend to be associated with "clusters" of industries. For example, Silicon Valleyin the USA and Silicon Glen in the UK are techno clusters of high-technology industries which includes individual computer software & semi-

conductor firms. In Germany, a similar cluster exists around chemicals, synthetic dyes, textiles and textile machinery.

Demand Conditions

Demand conditions in the domestic market provide the primary driver of growth, innovation and quality improvement. The premise is that a strong domestic market stimulates the firm from being a startup to a slightly expanded and bigger organization. As an illustration, we can take the case of Germany which has some of the world's premier automobile companies like Mercedes, BMW, Porsche. German auto companies have dominated the world when it comes to the highperformance segment of the world automobile industry. However, their position in the market of cheaper, mass-produced autos is much weaker. This can be linked to a domestic market which has traditionally demanded a high level of engineering performance. Also, the transport infrastructure of Germany, with its Autobahnsdoes tend to favor high-performance automobiles.

Strategy, Structure and Rivalry

National performance in particular sectors is inevitably related to the strategies and the structure of the firms in that sector. Competition plays a big role in driving innovation and the subsequent upgradation of competitive advantage. Since domestic competition is more

direct and impacts earlier than steps taken by foreign competitors, the stimulus provided by them is higher in terms of innovation and efficiency. As an example, the Japanese automobile industry with 8 major competitors (Honda, Toyota, Suzuki, Isuzu, Nissan, Mazda,Mitsubishi, and Subaru) provide intense competition in the domestic market, as well as the foreign markets in which they compete.

The role of government

The role of government in Porter's Diamond Model is "acting as a catalyst and challenger; it is to

encourage - or even push - companies to raise their aspirations and move to higher levels of competitive performance " . They must encourage companies to raise their performance, stimulate early demand for advanced products, focus on specialized factor creation and to stimulate local rivalry by limiting direct cooperation and enforcing anti-trust regulations.

QUESTION 4. Exports mistakes

Successful exporters often earn far more from their export markets than from their products or services sold in Canada. These days, large companies almost invariably have a multinational or global dimension, and even if the company does not trade overseas itself, it is bound to encounter competitors from abroad.

This list of mistakes that exporters make comes from experience with hundreds of exporters and would-be exporters. There are potentially great profits from exporting, but many companies fall at the first hurdle. If you can avoid the mistakes of others, you will be on the path to achieve the rich successes available in the global market. MISTAKE #1: Not choosing the most promising foreign market. The best foreign market for your company will usually be the country where your products will be in most demand but may be one where the company has some special entre, for instance, an existing strong personal or commercial connection. ADVICE: Use a structured research approach to identify the best market for you to target. This will mean you do the easy, inexpensive, secondary research to short-list the countries, and then limit the more expensive and time-consuming primary research to a few markets on your shortlist. MISTAKE #2: Trying to enter too many new markets at the same time. Entering a new market can be very demanding in terms of time and money. To be successful, it is wise to limit yourself to one new market at a time. ADVICE: Focus on specific markets and opportunities: dont take the shotgun approach. Successful companies concentrate on one new market at a time. They move on to the next based on their success in the last.

MISTAKE #3: Not doing all the research needed before launching into a new market. Sometimes companies will attempt to enter a foreign market without doing all the necessary research. This can lead to many different problems: regulatory problems at customs, health and safety standards, labelling requirements; marketing problems including offending cultural sensibilities, inappropriate advertising, use of the wrong distribution channels; competition problems including inappropriate pricing, dominant competitors, cartels; cost problems including unexpectedly high transportation, insurance or stocking costs, and many others. ADVICE: Make sure to do all the necessary research on your proposed market and your products place in it. MISTAKE #4: Not finding out how to plan effective research while minimizing research costs. International trade and market research can be very intimidating to a new exporter. It can be expensive if simply handed over to a research company and time consuming if you do it yourself. However, whether done in-house or with the help of consultants, there are ways to structure a research project to minimize cost and time taken and maximize effectiveness. ADVICE: Take a course in international trade research and do the research yourself, or contract to a researcher who you have made sure will work with you to minimize research time and costs while maximizing useful information obtained. MISTAKE #5: Not preparing a clear, written marketing/business plan for their foreign

venture. Entering a new market is in many ways like starting a new business. You need to research your market and develop a market entry strategy. You need to relate this to your existing business and develop a business plan for the new endeavour. You can use this for your own on-going guidance and to show to bankers, investors and any alliance partners you may need, adapting it as necessary for each type of recipient. ADVICE: The plan should not be too long, in fact, it should be kept brief and to the point. For guidance, call Market Access Worldwide for our International Business Plan Guidelines. MISTAKE #6: Not spending enough time and effort searching for a really good agent or distributor. It is unreasonable to expect that you will find the perfect agent for your needs on your one

and only trip to the market. ADVICE: Choose your export partners with care. Make sure to invest ample time and effort to locate and secure the commitment of really good agents, distributors, customs brokers and other local partners in your target country. MISTAKE #7: Not looking after good agents. A good agent is difficult to find, but once found, can make your fortune in the new market. So once having found a good agent, you certainly wont want to lose them. ADVICE: Look after a good agent in every way you can. Make sure you rewarded them well both financially and in terms of attention. Meet with them often at least once a

year. Call them frequently. Make sure they know they are valued. Bring them to Canada to see your factory and meet your people. Dont leave them to their own devices they may soon find another company who will pay them more attention. MISTAKE #8: Not using the range of assistance that is available. There are many sources of help available to exporters. These include government programs, chambers of commerce, trade associations, foreign embassies and consulates, libraries, websites, freight forwarders, trading houses, customs brokers, consultants and other exporters. ADVICE: Use expert specialists to help you succeed. Dont try to do everything yourself. Search the internet for the classifications listed above, or call Market Access Worldwide for our lists of government and non-government assistance for exporters. MISTAKE #9: Going ahead without the full commitment of senior management. Entering a new market is a demanding activity that is unlikely to be successful if not started with the full support and commitment of the companys senior management. ADVICE: Appoint a champion for the new market. This person could be a senior manager who has freed up enough of his/her time to drive the project. Alternatively, an up-andcoming executive who will respond well to a challenging assignment could fill the role. In this case, the CEO should remember that the champion is, in effect, the chief executive of the export endeavour, and needs the necessary level of

help and attention to make a success of the project. MISTAKE #10: Assuming an accidental export proves a market really does exist for your product or service. A domestic company may sometimes receive an unexpected export order. This may be from a foreign visitor to a tradeshow in Canada or to the companys website, or a response to an advertisement in a journal read by a foreign purchaser. We refer to foreign orders such as this as accidental exports because they do not result from a deliberate export strategy. Sometimes when this happens, a company will assume that there must be a good market for their product or service in the country where the order originated. This may be the case, but it is not always so. ADVICE: Before filling the order and dealing with the complexities of transportation, customs, insurance, securing payment, etc, be sure you really want to export to the country in question. Then, before trying to sell more there, carry out a minimum level of research on export and import regulations, who your customers would be, payment methods applicable in that country, competitors, the size of the potential market and the price you should set. If it still looks good, you may indeed have a potential market there. MISTAKE #11: Not visiting the market. The only way to really understand and appreciate a new country and its people is by visiting. It is best to build relationships in foreign markets face-to-face. Emails, faxes and phone calls are good for follow-ups, but distant relationships need at least one face-toface meeting initially, then on-going, regular, meetings to reinforce them.

ADVICE: The old joke advice to vote early and vote often applies to developing a market in a new country: visit early and visit often. This is the best way to establish and maintain good relationships with the partners you need for success. Make sure also that your agents, distributors, etc, have the opportunity to visit you and your company in Canada. MISTAKE #12: Expecting the government to do everything for them, including providing financial assistance. Governments have always be keen to encourage exports, and traditionally companies have come to expect free export assistance from government. However, it is increasingly against the rules of international agreements such as the World Trade Organization (WTO) to provide such assistance. In many countries, governments no longer provide free assistance to exporters and actually charge for any help they give. This is not the case in Canada yet, but assistance programs are not as fulsome as they once were. ADVICE: Make sure to use free government assistance where appropriate and available. However,

remember that the main driving force for your international business must be the same as it is for your domestic business YOU! MISTAKE #13: Not studying the culture of the new market and customers. Although it is quite clear that people in foreign countries speak different languages and have different cultures, some would-be exporters ignore this obvious fact and expect foreign customers to accept their product as-is,

unmodified and delivered exactly as delivered in North America, with no concession to language or cultural considerations. This may work if your foreign distributor can modify the product and delivery methods to suit local needs and still make a profit. However, a well thoughtout approach by the exporter to meeting the reasonable needs of the foreign buyer will always result in more sales, bigger profits and longer-lasting relationships. ADVICE: Be aware of the differences in culture and language between Canada and your target market. Read a book or two about the country or find a website detailing their cultural differences. Learn a few phrases in their language and use them when you meet. Make a point of celebrating the cultures of the countries you deal with. Visit their country and have your agents and distributors visit you and meet as many of your people as possible. Then, when planning product or packaging changes, or planning any marketing initiative, seek advice from natives of that country. People you meet will appreciate you for the effort you make to learn about their country and culture. Tip: if you dont know any nationals from the country, show your ideas to trade officers in their consulates or bi-lateral chambers. MISTAKE #14: Not adapting their products or services to the needs and tastes of the foreign market. However universal a product may be, there are bound to be differences in the way it is sold in other countries and other cultures. Packaging, labelling, sizes, weights and measures, languages used or required, spelling variations, product names, colours, logos, local

tastes, cultural sensitivities, distribution channel structures, will all differ form market to market. ADVICE: Modify products and services to meet the needs of the offshore market. (This is another reason to have a good marketing plan based on thorough research, starting with a checklist of all the above variables and more). MISTAKE #15: Not pricing their products appropriately for the new market or for their chosen market entry strategy. There is no general reason that your prices need to be the same in your new market as they are in your home market. ADVICE: If you have competitors, find out their prices. Determine the total size of the market in the country or region and the percentage of it that you need to succeed. Decide your market entry strategy. Establish the costs of taking your products to the market. Decide the appropriate price for your products or services in view of all the above factors. MISTAKE #16: Not gearing up for the increased demand that a successful new market will generate. People always worry that their product when launched in a new market will not sell. However, success can also bring problems and these can be significant. If the manufacturing capacity of your company or suppliers fails to meet the demand encountered after launch in the new market, you will have problems with your distributors and end customers. Finding sufficient capacity may then result in increased costs, so that you no longer make a profit. Your difficulties may give your competitors the

chance to come in and grab the rich market you have identified but have been unable to exploit. ADVICE: Research and estimate the potential market size, but make allowances for it being larger than expected. Make sure you have sufficient productive capacity and supplies of components and raw materials. Allow for higher costs if you need to increase your production capacity. Set your prices so that you can still make a profit if costs are higher than expected. Possibly increase your prices to control demand, ie use a price skimming or cherry picking strategy. MISTAKE #17: Treating export customers as second class citizens. Sometimes, export orders fail to receive the same urgency and consideration as domestic orders. This can happen when a company regards its export business as an optional extra, not part of the companys core activity. ADVICE: Consider your export customers of equal importance to your domestic customers and never give them second-class treatment. Make sure they receive the same high quality service offered to your domestic customers. MISTAKE #18: Trying to sell too wide a range of products or services in a new market. McCain, the famous potato fries maker, always enters new markets around the world first with their fries. They introduce their many other products after they have established the fries. This minimises the cost and complexity of the initial entry to the market, and gives them a base of distributors who can help with

market research for other products as they go along. For each different

product you introduce to the market you need inventory, promotional materials, training for your marketing and distribution partners, and education for your customers. The fewer products you introduce at the same time, the lower the cost and complexity of the launch will be. ADVICE: Keep it simple and keep costs low. Introduce just one product or service, or a very limited range. Introduce your other products when the initial one(s) are established. MISTAKE #19: Exhibiting in a foreign trade show BEFORE establishing that it is the right show for their needs. Companies hurrying to enter a new market sometimes commit to the costs of booth design and construction, space rental, promotional materials, hotels and airfares, without thoroughly researching the appropriateness of the show for their products and needs. This can lead to disappointing results. ADVICE: If time permits, attend the show as a visitor the year before you enter the market. (Doing this can also provide an excellent research opportunity). If your timeline demands you must get into a show as soon as possible, make sure to research it properly through professionals who know the show and understand your products and needs. Dont just take the advice of the promoters they want you there come what may, and you may be subject to some hard-sell tactics. MISTAKE #20: Not protecting themselves against the increased risks of doing business with far away customers or suppliers. Doing business always involves risk: non-payment of

receivables, non-delivery of goods, contractual default of partner companies, bankruptcies, loss or damage to goods in storage or in transit, unexpected changes in consumer tastes, new competitors or competing types of products and many others. All of these apply in foreign markets, just as they do in the home market, but the difficulties of dealing with them are exacerbated by distance. In addition, foreign activities can involve new risks such as exchange rate variations, political instability, cultural differences, unexpected costs of setting up and doing business, customs regulations, re-patriation of profits or investment, ownership rules, laws regarding agency agreements, and so on. ADVICE: Proceed with due caution. Seek advice. Allow for additional costs when budgeting and setting prices. Here is a tip from the owner of a very successful international business: estimate your costs and double them; estimate your revenues and halve them. If the project will still be profitable on this basis, proceed! MISTAKE #21: Not committing the time and money needed to be successful. Exploring a foreign market often takes much longer and costs more than expected. Significant expenditure of time and money for personal visits, market research and product launches is nearly always required. It will take time to build your sales in the new market. If you dont commit sufficient cash, human resources and time, you may well give up when you are just about to succeed. ADVICE: Commit dedicated resources to your target market. Plan to visit the market several times, attend several tradeshows (more than once each), follow up on all leads, and follow

up again. Dont reduce your efforts because you suddenly become busy in your domestic market, and thus waste all your marketing effort to date. It is wise to allow for at least two years before expecting the new market to be profitable. MISTAKE #22: Not obtaining adequate training for themselves and their people in international business. Most managers have training in a technical area or in business studies. They may have had minor studies in international trade but this may have been a long time ago. Before you start to export, you need at least a refresher course to update you, and furthermore, your staff members who will have responsibility for the details of exporting and export marketing may need even more training. ADVICE: Get some training. Attend seminars or FITT courses. Go on the Ontario Exports NEBS program. (Call Market Access Worldwide for a list of current courses and seminars). MISTAKE #23: Not learning from successful exporting companies. There are many, many successful exporting companies out there (as well as many unsuccessful ones). As in all things, it is a good idea to learn from the success stories. ADVICE: Identify companies who export to the markets you are interested in and arrange to meet with them. Ask Market Access Worldwide to introduce you to clients who export to the same part of the world or who have overcome exporting challenges similar to your own. MISTAKE #24: Being unwilling to learn to work with people from other cultures. To succeed in a foreign market you need four things. These are:

 the perfect local partner lots of patience

respect for local experience an understanding of local business conditions affecting you as a vendor and local companies as your prospective clients and customers. ADVICE: To achieve these, you must clearly learn to work with people from the local culture. Dont assume the methods you have always used in Canada will work in a new country and culture. MISTAKE #25: Not developing a group of (international) partners to help exploit the new market. Some sophisticated product/service combinations require partnering with other internationally active companies, each of which will provide part of the total customer solution. ADVICE: Develop partnerships with other Canadian companies, or with American, European, Japanese or companies of other nationalities whoever and wherever there are people you can combine with to provide a total solution to your prospective clients. MISTAKE #26: Not exploiting fully the rich sources of business leads that are available. There are many databases listing contracts and opportunities available around the world. Some are free; others are available by subscription only. For some service providers, the prime-contractors bidding for the contracts available are their potential clients. Often this information is available from the same databases. ADVICE: Research the sources that have the types of lead that you need.

Make sure to regularly check the free sites, and carefully evaluate the advantages of subscribing to any paid-for services that address your main areas of interest. MISTAKE #27: Not including financing in the deal. In some markets, customers expect financing to be an integral part of the deal. Failure to meet this expectation can lose the order. ADVICE: Where this is the case, make sure to have a suitable financial partner with the right tools available. This may be a Canadian company or government agency, or may be from another country but with experience of operating in the target market. MISTAKE #28: Not internationalizing their website appropriately. Often, unintentional or accidental export sales can occur through a companys website. This can turn out well but can result in undesirable complications if the website was not designed for transactions with customers in foreign countries. ADVICE: If you do not want foreign orders, make it clear in the text of the website that it is for Canadian residents only. If you do want foreign customers, review the site to make sure foreign nationals will know how to order, what payment will be required, and in what currency. For a checklist of suggestions, please call Market Access Worldwide. MISTAKE #29: Giving up too soon. Many companies hope for a new market that will provide them with instant profits. However, developing a foreign market requires a longterm commitment of time and

money. Many companies dont stick it out long enough. Often, after months of effort, they lose impetus, for instance, if their domestic market suddenly makes an upturn. ADVICE: Be prepared for the long haul. Allow at least two years before you expect consistent profits. MISTAKE #30: Finally, not understanding how the companys core competencies fit into the realities of the global market. This is often the root cause of many other problems arising when a company makes its first steps into the global market. ADVICE: Undertake a thorough review of what the company is, how it operates in the real world, and what it wants to achieve. Follow a systematic procedure to see how the company can transform itself into a successful operator in the global market of today. For a guide to this process, please call Market Access Worldwide.

QUESTION 6. Why Chinese goods are cheaper?

India, China, Japan

Comparison between the Indian, Chinese and Japanese two-wheeler industry is inevitable. When discussing China, a few points have to be kept in mind.

China can afford to price so competitively because it does not take on certain costs, such as the cost of customer insight and product innovation, and of making mistakes until you get it right.

The absence of IPR (Intellectual Property Rights) means that products are quickly and easily

copied. When Honda launches a product any where in the world, China copies it without delay.

Chinese motorcycle manufacturers don't make huge investments in marketing. In China, customers' expectations of products are not high. If a product breaks down, parts are replaced. There is no concept of service in the automobile segment. They don't spend on under-standing the customer.

Copying collapses time and eliminates the learning curve right through the supply chain.

Saving on tax is another area. A company declared production of 300,000 units but made 500,000. Labour costs are lower, and more importantly, labour is largely subservient.

Despite these factors, Japanese companies are making a comeback and are recovering lost ground, particularly, in markets such as the Middle East, Europe and South East Asia.

If one looks at the balance sheets of Chinese companies, not too many are making money. One Chinese company was recently taken over by an Indonesian group. Also one

must compare like to like, component to component.

Question 5. Doing business in china

THE TEN COMMANDMENTS FOR DOING BUSINESS IN CHINA

Not very long ago, indian businesses and corporate houses were very scared of the chinese dragon. the corporate houses, big and small, were clamoring for imposition of anti-dumping duties on chinese imports. the recent years have seen that the fear of the dragon does not exist anymore and the indian industry has instead started viewing china as a destination for manufacturing. it must, however, be noted that doing business in china is not everybodys cup of tea. the chinese cup of tea is indeed very different.

Some principles to be borne in mind before embarking on doing business in China are enumerated underneath:

1.

Know why you want to be in ChinaIs it to use it as a manufacturing and export base, to enter the local market or anything else. Do not depend on Chinese statistics or anecdotal evidence of the opportunities or problems in China. Invest time and treasure in researching and understanding the market. Find specific segments and

opportunities. Pass up China if necessary, not everyone has to invest in China.

2.

3.

4. Decide early if you want to go it alone or find a local partner. Choose a local partner after testing its capabilities and reputation. Ensure you retain a leverage that goes beyond legal contracts.

5. Cultivate guanxi but do not be a slave to it. 6. Create an appropriate business model and localize the product as well as the marketing mix. 7. Understand and manage local partners and associates. Do not allow them to manage you. 8. Invest in local management. Choose staff, supplier and client loyalty over short-term profits. Do not

make enemies.

9. Winning in China takes time; the first guy who blinks loses. 10. Strategize and research growing operations in China with the same rigour as the initial investment.

When Asian Paints bought Berger International Ltd, Singapore, it acquired a presence in eleven countries and then faced every shopper's dilemma. How to fit the new buy into the old

cupboard?

But integration is not the only management challenge facing this Mumbaibased homegrown company. As it morphs into a multinational, can Asian Paints export its award winning culture? Or should the question be, should it?

I have begun my travels for a long journey. It all started with a spark of ambition and the dream to grow beyond the set boundaries, and the past year has been arduous and exciting.

Our international business changed from managing a group of 350 people in a few countries to being responsible for the careers of over 1,350 across the globe. Earlier, we did $15 million (about Rs75 crore) worth of business outside India, which was trivial, but after buying Berger International Ltd, Singapore (BIL), our global sales jumped to nearly Rs 500 crore.

Our Indian business is about Rs1,600 crore. Overnight we became much larger, more successful, leaders in ten countries. And managing this is far more complex.

Cleaning the books

By the time we completed the acquisition (a 50.1% stake in BIL), it was November 2002. We were the first Indian company to be listed on the Singapore Stock Exchange, the first Indian company to successfully complete a partial public offer there.

On completing the transaction, our first priority was the issue of compliance. Did we have any skeletons in the closet? The fear was there and it had to be allayed. So consolidation of accounts, finalisation of accounts, announcements of the first results, digging up books, working day and night with bankers, lawyers and auditors went on.

We visited BIL units in other countries, BIL subsidiaries, and carried out whatever due diligence we could. We had set our standards and had decided that if there was something to clean up, it would be done before the next year. That was the focus during the first few weeks.

Quick ear ly wins

Only after settling technical matters did we get into management issues. Suddenly the scale and scope of our organisation struck us. We were now present in all five continents of the world, in 13 out of 24 time zones, in 22 countries with 23 manufacturing facilities, i.e. an Indian multinational.

We now had to deal with new brands, new people and new customers, and most importantly, bring in complete integration. People came from different backgrounds, different cultures and different languages. How does one tackle the people issues? This would be an ongoing process. But first the target was operational efficiencies.

The hallmark of Asian Paints has always been operational efficiency. We have stringent parameters and high standards for every operational activity: be it distribution, sourcing, marketing, manufacturing, or improving the service level.

We are also meticulous about balance sheet management, which comes very naturally to us. The problem is, you can't acquire a company and impose your processes immediately.

We had to tread sensitively and protect the identity of Berger in terms of brands, units, people and so on. But subtly we brought in the underlying theme that operating plans (OPLs) are everything.

Let's face it: creation of shareholder wealth is paramount, and delivering OPLs is the way ahead. For the first three months, P N Khanna, one of our most seasoned operating heads who is now BIL's CEO, travelled to all the units spreading this message.

Then Jalaj, my son, would go in and talk about values and other corporate issues because somewhere, people also need to connect and belong. By January 2003, the OPLs were approved. By then we were beginning to understand BIL's strengths and weaknesses.

BIL had seen four chief executive officers over the last five to six years. Critical data on how many brands BIL had all round the world was not available. Managing intellectual property became a key priority after the acquisition.

Benchmar king best pr actices

We started collecting data about the brands in every region and began systematically registering all intellectual property: logos, trademarks, designs, etc. The Berger brand is well recognised across the world but we realised its power when we signed a licensing agreement in Indonesia.

At the same time we began benchmarking best practices within member countries and companies. For example, ISO documentation in Jamaica is excellent. Berger has a fabulous reporting system: all sales reports are in on the first of each month and the P&L (profit and loss statement) is ready by day eight.

Management was an issue, results may be bad but reporting processes were in place: BIL made a loss of $11 million in 2001, which came down to $1 million in 2002 and hopefully we should make a profit in 2003. On the marketing side, there are some gaps in the product range, some lapses in positioning in the market place, but we are working on this. Place Chart Hear

Emotional integr ation

You can't go into a company and be seen as only emphasizing marketing because along with products and brands, there are also customers and employees. After an acquisition, you have to address the emotional issues, reach out to people and convince them that you are committed to growing the business,

and servicing the customers. And that you need their commitment.

To address these issues, we held a Global Managers' Conference in February 2003 attended by senior managers and unit heads from 23 countries. When individuals realise they face the same problems as others, they start exchanging ideas.

Out of this forum emerged a spirit of sharing problems and solutions, a feeling of belonging to a group that is present in various markets and the collective benefits such a group canbring.

Everyone had a lot of questions about what is Asian Paints, what does Asian Paints stand for? What is expected of me now that I am a part of Asian Paints? Suddenly we realised we are a multinational and responsible for managing the careers of our people.

Earlier Asian Paints was not a multinational in that sense. Can an Indian company become a multinational? There are so few role models, except maybe a Ranbaxy.

People need a sense of belonging and we have initiated various processes to ensure that it happens smoothly. During the conference, we defined four guiding principles for business and success: Responsibility, Entrepreneurship, Continuous improvement, and Trust. These four values determine our actions in all markets: those in which we are leaders and others in which we have aspirations to grow. All these four

values are sacrosanct and the true representation of what we would like to stand for.

Tr usting people

Local expertise is critical in the paints business. BIL had good human resources and post acquisition, we had to ask only about 35-40 people to leave. I want people at BIL to feel that we are adding value, but at the same time we will not compromise on growth.

Topline has to grow, costs have to come down, balance sheet has to improve, and for us inventory management is absolutely critical.

At the same time, we are not sending Asian Paints people all over. Not one Asian Paints person has been sent where there was no position, and we have not created any new position. The chief executive of China had to be replaced because BIL had earlier closed the factory due to some dispute.

We resolved it and restarted the factory. Asian Paints deputed one senior manager from India to head its operations in China. The remaining employees are all locals. At Singapore, we sent an Indian manager as the unit was operating without a CEO.

Similar was the case with our operations in Myanmar. These are the only employees being seconded from our Indian

operations. I feel that local talent is good and it must be disturbed only if they do not produce results.

Paying the pr ice

At present, the HR cost is a little high and actual growth is low. But the tradeoff is clear. To grow we need people. It is better to carry these people as they are good. They are the people who will be there for 20-30 years and will make us successful in their local market.

We can give them direction. In every unit I want five to six local champions with ownership: one each for marketing, back office, finance and accounts, production (manufacturing), supply chain and sales.

We have to invest in locals -- fly them into India or any other place where we are market leaders to help them understand why we are good. Though this exercise of identifying local champions will take some time, we have already begun the process.

Honestly, cost is an issue. HR cost to sales is about 15% to 18% and material cost is about 55% to 60%. So I am still attacking material cost, and giving people more time. I feel there are substantial savings to be gained from material costs.

We make about 220,000 tonnes of paint in India but now we will make 60,000 tonnes of paint outside India. So we

can really exploit scale for the overseas units. We can send formulations from one place to another. We can bring down costs and manufacturing losses by introducing initiatives that we have implemented in India.

I strongly believe that it is better to be tolerant on people issues because we can be aggressive in cutting other costs. I know that if I get rid of 100 people, I can make a straight $1 million profit, but then this will paralyse operations, make people feel insecure and no other discussion will happen except who lost his job and who is next.

I don't want to be seen as a predator. Also, to operate in foreign markets, we need people who speak the local language, understand the culture. India provides only back office support.

Think r egional, act local

The supply chain is critical and that is Asian Paints' biggest strength. We want to leverage our supply chain capabilities across BIL subsidiaries. Our operating model is 'think regional but act local.'

Whether it's brands, people or purchase, it makes sense for us to operate businesses regionally. We operate in five regions of the world ie South Pacific, Caribbean Islands, South East Asia, South Asia (SAARC) and the Middle East.

The South Pacific in spite of its size and irrelevance as a global player, taught us how to manage island economies.

We have taken this model, and are now mapping it so that we can implement it across other island economies.

In the Middle East, we operate factories in the United Arab Emirates, Oman, Bahrain and Egypt, and are among the top five players. Here the model is different because the growth potential is much higher.

Also, though the management is local and follows local labor laws etc, human resources are mostly from India. South East Asia has been run locally from the very beginning. They have depth of talent and our market share is minimal.

Three years from now I am very sure we will have to start bringing it together but right now if we want to even double in each of these markets we require a lot of local decisions to be taken.

In Thailand the local resource pool is good but there is no marketing at any level so we are going to have two to three people devoted to developing marketing strategies. I want to do that in Malaysia and Singapore also.

In Singapore, the first thing Jalaj was told was to send a sales manager from India. It took him two months to convince our unit head in Singapore that Chinese dealers need a local who understands their language, who eats their food, celebrates their festivals.

Air miles galor e

Training people, sharing expertise requires a lot of traveling and we spend a lot on travel. Actually it will hit the bottom line in the current year but anybody who wants to travel,

I will not stop them. You want to see anything of Asian Paints, Berger anywhere in the world, go. Even people in the core business here, in Decoratives India, are considering taking technology from Berger units.

At present, I am not putting too much emphasis on processes because if a particular market needs reactivity, then it is necessary to take quick action. However, in the long run, it is not advisable and common processes are being instituted across units of BIL.

Intellectual integr ation

With growth being the focus, we need a system of information and knowledge sharing. This means transferring expertise from an Asian Paints overseas unit to a BIL overseas unit and vice versa.

Our focus currently is on understanding how the knowledge transfer will happen on the technology side. We want to create free flow of information across companies and that is when the benefits of integration will be seen.

We have formed lead technology centres and regional technology centres. There are five or six individuals in these

centres, one each who drives regional technology, local sourcing, manufacturing equipment, and most importantly, can react immediately.

We would like to operate closer to our consumer rather than from the corporate headquarters. The lead technology centres, started out of the same concept as centres of excellence and will provide technology expertise in one specific segment.

For example, Dubai is doing good work on wood finishes so that is the lead technology centre on wood finishes outside of India. We also needed to improve our communication channels.

So if someone in Caribbean wants to introduce wood finishes, he has to get in touch with the regional technical managers who will then get in touch with the lead technology centre manager in Dubai and the communication will happen with free exchange of knowledge.

We plan to create a new position of Central Technical Head, someone who will be responsible for all these lead and regional technology centres. Then it will be centrally coordinated but competent centres will still prosper. Decisions will be taken regionally.

We are trying to build a knowledge structure borrowing from organisation such as Trans Ocean. This is an association of independent paint companies around the world who share marine and protective coating technology to

all their partner companies.

Since we have subsidiaries all across the world, we can also exchange technology and all can access each other's strengths. Then in that sense we are multinational and still have our own independent identity.

Over coming Indianness

While internal communication has to improve, so does communication with consumers. Frugal, value-for-money are virtues that we at Asian Paints understand very well and so do our customers. But in other markets, it is not a virtue and just doesn't work.

For example, in countries like Sri Lanka, they want aspirational, best-ofbreed, and are willing to spend money for that.

We have access to the Berger brand in more than 70 countries, and the fact is that Berger has the potential to be much bigger and stronger than Asian Paints. Naturally we will leverage the Berger brand equity and -- combined with Asian Paints expertise in technology and marketing -- that's very strong.

But brand-building is critical and my problem is that after a few years I can't take Asian Paints everywhere, neither can I take Berger everywhere, so I may have to have a third brand. For that I have to focus on understanding how to build another brand.

We have to spruce up the marketing side. We are considering hiring an agency to understand each of the important markets and understand its growth potential because every market is so different in terms of consumer preferences, distribution channels, product choices, etc.

We need to fully understand how the retail channel functions, how wholesalers work, which channels work, what are the expectations of contractors, retailers, architects, and final consumers. How each brand -- corporate, premium, value for money, entry level or upgradation -- is received.

In the current phase, we are launching new products, so brand names become important. Take Apcolite, for example. It is the largest paint brand in India but can I build a brand like Apcolite in overseas countries?

On products, take for example, our operations in Thailand and the Caribbean: I find there is nothing similar in terms of brands. The can designs in both countries are so different. In the Caribbean we have brand names like 303, 404, 505, while in the Thailand we have a brand 'Jumbo', and this is just within Berger. Asian Paints have many others.

Brands that sell in Singapore don't sell in Thailand, and China has totally different brands. We also have to take a

call about which are our key brands at a global level.

We are beginning to understand what are our corporate colours, what they stand for, whether yellow and red are acceptable in every market, blue in another market. That is going to cost a lot of money again. We are going to spend the next twelve to eighteen months understanding branding. At the same time, we have to keep pushing sales.

Fast for war d

For the future, the direction is clear: technology, supply chain, marketing groups and HR. We have one group working on people issues: putting in place common group policies and practices, defining productivity benchmarks and improving performance across units.

The group will decide on issues like how many people are required: in branches, for dealer servicing, for sales, for distribution, administration, finance, IT, etc. On the financial side, we had assumed that a significant induction of capital would be needed but so far we have been able to generated finance from the business.

The first year was all about back-end efficiency. The next year will be about topline growth. In India we are growing at 10% and 12% and if whatever we have acquired is also going to grow at that rate, then what is the fun?

In a complex and dynamic global competitive environment, adaptive capability is the key to survival and growth. Indian businesses will find themselves on the road to rapid growth when they have learned to think and act

adaptively, say Raghavan Parthasarthy and N. S. Chandrasekaran.

IN RECENT years, the world of business has dramatically changed. In the new business landscape, competition is no longer an occurrence among groups of regional firms, protected from foreign rivals by tariff walls and distance barriers. Instead, it is a global event that includes national and transnational firms, operating uninhibitedly as if the world is a single market. Most firms must now compete with rival products made in far-off lands, side-by-side with those made by others in their own backyard.

Efficiencies in production and distribution of goods, free-market reforms enacted by developing countries and rapid information flow due to the Internet are some factors that have caused the emergence of this new type of competition. Indications are that the new competition will grow in intensity as the World Trade Organisation charter gains wider acceptance. In this new environment, traditional strategies of building and sustaining competitive advantage will not guarantee success. Instead, a firm must continuously develop new advantages or learn to destroy the opponent's advantage.

How equipped are Indian firms to wage this new competitive battle? For many Indian firms, competition per se is a new phenomenon. Most lack sufficient grounding and experience in global competition because of the absence of intense inter-firm rivalry in the domestic business environment. Competitive posturing is thus a non-entity among most Indian businesses. Additionally, prolonged government protection has

left them feeling complacent and illprepared to wage competitive battles of global proportions.

Achieving worldclass competitiveness is a long-term goal for Indian firms. It requires significant upgrading in R&D, design and manufacturing competence, marketing savvy, and cultural transformation. But several steps can be taken in the interim that can have a beneficial impact.

Question 11. Impact of weakening rupee

The rupees depreciation against the dollar is seen to be beneficial to the Indian economy in some ways, and detrimental in other ways. The rupee fell to 48 against the dollar, its weakest in nearly 2 years, early on Wednesday as worries Europe could be heading for another banking crisis rattled global markets. Let

us quickly analyze the impact of Weak Indian currency on different institutions.

Impact on Inflation

Weaker rupee complicates governments battle against runaway inflation. Imports become more expensive. The dramatic dip in rupees value has a very bad impact on the economy. While many

currencies have been weakening against the dollar, India has been the worst performer in Asia. With the increase in dollar rate, the rupee remains weak & Indian imports of Crude Oil, edible oil, pulses & Capital goods becomes more expensive. The rise in dollar rate adversely impacts governments efforts to curb inflation.

Impact on FII inflows

The focus is particularly on crude oil price. Due to the Financial market turmoil, foreign capital inflows have almost dried up, but the demand for Dollars is rising. Indias crude oil import bill has become staggering. Due to rise in the Crude Oil Price, the Oil Marketing companies are shelling out 40/50 dollars more/barrel. Hence there is an increase in the Dollar demand, which have been almost sucked.

Impact on Crude Oil

Higher oil prices put pressure on inflation, but it helps some importers to import Capital Goods. Input costs go up across import-intensive industries. With the increase in dollar rate, the rupee remains weak & Indian imports of Crude Oil, edible oil, pulses & Capital goods becomes

more expensive. The prices of petrol may increase from tonight. This will be the 8th increase in last one & half year.

Impact on Indian IT companies

Despite the global financial turmoil, the Indian IT industry is expected to see some growth owing to the depreciating rupee during the third quarter of FY11. The sharp rupee depreciation against the dollar during the quarter is expected to boost top lines quarter on quarter. The depreciating rupee is the only positive sign for the Indian IT industry amidst the shadow cast due to global financial meltdown. This a welcome signs for the companies which are exporting out of India. A dip in the rupee helps Industry; particularly exporters, to meet the cost & wage bill better. In the times of global slowdown, the exports get the edge. Higher exports stimulate better jobs & discourage imports.

Impact on the price of Gold

Even if the gold price remains stable in terms of dollar price, depreciating Rupee means gold price will increase in terms of rupee terms as Gold price (In Rs.) is directly proportional to Dollar

Strengthening, Gold price(in $) & inversely proportional to Indian Rupee Strengthening. Click here to check out how gold is related with Indian economy.

Impact on companies which have loans in terms of Dollar

The depreciation also hurts Indian companies that have taken out loans in dollars. The interest on those loans, which is valued in dollars, effectively becomes more expensive as the rupee weakens. Indian companies hold about $221 billion of such loans

Impact on Indian Stock market

Weak rupee means that Indian stock market will remain down as FII will keep away from the Indian markets Indian Rupee strengthens.

India has around 44 Billion $ of bond reserves in terms of Dollar. RBI will have to step in at some point of time & start buying dollars to stem the rupee weakening. This means that reserves of India will increase. 10 year yield on bonds in US is at the lowest. Indian sovereign has to satiate with almost no returns from the investments in Dollar bonds just to stabilize the Indian rupee weakening.

Question 1. FROST & DAVAR

HOW INDIAN FIRMS CAN GLOBALISE

In today's open economy with foreign companies coming to India, local companies have to not only defend their turf but also enter markets outside India. Currently most Indian companies operate at the bottom of the global value chain by selling components or unbranded products; their challenge is to develop business capabilities that equip them to compete at the top of the value chain. In this article we shall focus on global strategies that will help companies participate in international markets.

But how does a company decide whether it is ready for global expansion? N Dawar and T Frost of Harvard Business School have developed a framework that can help companies make this decision.

According to this matrix (Figure 1) companies should first consider whether the pressure to globalise is high or low. Whether their industry is a local industry or can it go global? Then they should consider the competitive assets of the company. Are the assets customised to the local market or can they be transferred abroad? This framework throws up four positions that emerging market companies can adopt in the open economy.

1. Defender: Companies should adopt this position when they have low pressure to globalise and their competitive

assets are customised to the local market. This is a defensive strategy that focuses on leveraging local assets in market segments where multinationals are weak.

For example, when Western cosmetic giants entered the Chinese market, Shanghai Jahwa, the local cosmetic company did not compete with them head on by targeting their global product ranges. Instead they responded by developing products that would suit the local complexion and appeal to local people.

Similarly Grupo Industrial Bimbo, a Mexican food company responded to global competition by defending their distribution system, which could reach the remote rural areas of the country.

In India Videocon developed semi-automatic washing machines that were targeted at the value conscious Indian consumer and has successfully countered MNC competition by focusing on this segment.

2. Extender: Companies that possess competitive assets, that can be transferred abroad, can adopt this position

when the pressure to globalise is low. They focus on expanding into markets similar to those of the home base, using competencies developed at home. Televisa, a Mexican media company globalised by making their Spanish language products available to the Spanish speaking population across the world.

Another good example would be the case of Jollibee foods, a Philip-pines fast food chain that faced off McDonald's

by developing spicier products better suited to the Filipino palate. They then followed the Filipino population across the world to globalise.

3. Dodger: Companies that have a high pressure to globalise, or are vulnerable to global competition, and do not have a transferable competitive advantage, have no other option but to dodge competition. These companies focus on a locally oriented link in the value chain, enter a joint venture, or sell out to a multinational.

For example, Kwality, a dominant player in the Indian ice-cream market sold its brands and manufacturing assets to Unilever, making Kwality-Walls the market leader in the Indian ice-cream market. Similarly, when the Iron Curtain came down, Vist , a Russian PC manufacturer did not compete with American or Japanese companies, but shifted focus to PC distribution.

This was an artful move because distribution in Russia was ridden with corruption and foreign companies faced difficulties in distributing products. As a result of this today they form an important link and support the Japanese and American MNCs in their business.

4. Contender: Companies that have competitive advantages that can be leveraged abroad and also have a high pressure to globalise can compete aggressively in global markets. They focus on upgrading capabilities and resources to match multinationals globally, often by keeping to niche markets.

For example, Sundram Fasteners competes in global markets for niche auto components like radiator caps. A measure of its global competitiveness is the fact that it won the General Motors', 'Supplier of the Year' award for five consecutive years.

Similarly, Bharat Forge, the second largest forging company in the world, competes by being a global supplier of specialized engine and chassis components for trucks and passenger cars. One out of every two trucks in the US uses front axles made at Bharat Forge.

Question 7. SELF REFERENCE CRITERIA

The self reference criterion (SRC)

Perception of market needs can be blocked by one's own cultural experience. Lee (1965)4 suggested a way, whereby one could systematically reduce this perception. He suggested a four point approach.

a) Define the problem or goal in terms of home country traits, habits and norms.

b) Define the problem or goal in terms of the foreign culture traits, habits and norms.

c) Isolate the SRC influence in the problem and examine it carefully to see how it complicates the pattern.

d) Redefine the problem without the SRC influence and solve for the foreign market situation.

The problem with this approach is that, as stated earlier, culture may be hidden or non apparent. Uneartherning the factors in b) may, therefore, be difficult. Nonetheless, the approach gives useful guidelines on the extent for the need of standardisation or adaption in marketing planning.

Diffusion theory

Many studies have been made since the 1930's to assess how new innovations are diffused in a society. One of the most prolific writers was Everett Rogers8. In his book, "Diffusion of Innovations" (1962) he suggested that adoption

was a social phenomenon, characterised by a normal distribution. See figure 3.2.

In this case the innovators are a small percentage who like to be seen to lead, then the others, increasingly more conservative, take the innovation on. The adoption process itself is done in a series of stages from awareness of the product, through to interest, evaluation, trial and either adoption or rejection (in the case of non adopters). The speed of the adoption process depends on the relative advantage provided by the product, how compatible or not it is with current values or experiences, its complexity, divisibility (how quickly it can be tried) and how quickly it can be communicated to the potential market. In international marketing an assessment of the product or service

in terms of these latter factors is very useful to the speed of its adoption. Most horticultural products, for example, have no problem in transfer from one culture to another, however specific types may have. It is unlikely that produce like "squash" would sell well in Europe, but it does in Zimbabwe.

High and low context cultures

Hall2 (1977) has suggested the concept of high and low context cultures as a way of understanding different cultural orientations. In low context cultures messages have to be explicit, in high context cultures less information is required in the verbal message. In low context cultures, for example like Northern Europe, a person's word is not to be relied on, things must be written. On the other hand, in high context cultures, like Japan and the Middle East, a person's word is their bond. It is primarily a question of trust.

Perception

Perception is the ability to see what is in culture. The SRC can be a very powerful negative force. High perceptual skills need to be developed so that no one misperceive a situation, which could lead to negative consequences

Many of these theories and approaches have been "borrowed" from other contexts themselves, but they do give a useful insight into how one might avoid a number of pitfalls of culture in doing business overseas.

Consumer products are likely to be more culturally sensitive than business to business products, primarily because technology can be universally learned. However there are dangers in over generalisations. For example, drink can be very universal and yet culture bound. Whilst appealing to a very universal physiological need - thirst - different drink can satiate the same need. Tea is a very English habit, coffee American but neither are universals in African culture. However, Coca Cola may be acceptable in all three cultures, with even the same advertising appeal.

Nationalism

Nationalism is a cultural trait which is increasingly surfacing. The break-up of Yugoslavia and the USSR are witness to the fact. In Western, developed countries a high degree of interdependence exists, so it is not so easy to be all that independent. In fact, blocs like NAFTA and the EU are, if anything, becoming more economically independent. However, less developed countries do not yet have the same interdependence in general, and so organisations need to reassess their contribution to the development of nations to make sure that they are not holding them "to hostage".

Culture is a very powerful variable and cannot be ignored. Whilst "universals" are sought there is still a need to understand local customs and attitudes. These are usually no better understood than by the making use of in country personnel.

Question 12. Discuss all the five Product and communication strategies of

Warren Keegan as the firm moves from least risk to maximum risk in International Business.

This answer is in the pdf format plz refer the pdf

Short notes

Question 4. MAIN PRINCIPLES UNDERLYING THE WTO SYSTEM

Non-discrimination - ???????????

Most-Favored Nation treatment (MFN) All WTO Members are bound to grant to each other treatment as favorable as they give to any other Member in treatment as favorable as they give to any other Member in the application and administration of import and export duties the application and administration of import and export duties and charges.

National Treatment The national treatment principle outlaws discrimination between imports and locally-produced goods, or services and service suppliers or between foreign and national holders of service suppliers or between foreign and national holders of intellectual property rights. Once duties have been paid, imported goods must be given the same treatment as like domestic products in relation to any charges, taxes or domestic products in relation to any charges, taxes or administrative or other regulations (GATT Article III).

Most-Favored-Nation (MFN) principle There are two notable exceptions: Customs unions and free-trade areas which should cover substantially all trade and not create barriers to trade with third countries; and Special and differential treatment given to developing and least-developed countries.

Transparency WTO Members are obliged to publish and notify to the WTO Secretariat their trade-related laws and regulations. Notification requirements. Trade Policy Review Mechanism.

Stability and predictability of trade regulations Predictable and growing access to markets is ensured through binding of tariffs. Bindings are undertakings under the WTO legal framework NOT to raise tariffs beyond an agreed level.

Tariff Bindings Tariff bindings are the central guarantee of market access within the WTO legal framework. Once a rate of duty is bound, it may not be raised without compensating the affected parties. Binding is particularly important to free trade because it gives some assurance to importers and exporters that they would not be subject to arbitrary tariff changes. Ceiling Bindings-- bindings at levels higher than applied rates

Article XXVIII Renegotiations Concern modification of WTO schedules. First, bilateral consultations with the main supplier having INR Then, bilateral consultations with countries having substantial interest in the goods concerned or with at least 10% share of the market. Next, compensate the main supplier with INR say, in cameras. Other countries with substantial interest may not want compensation in cameras, but say, in watches The third country may want compensation in a different product say, in television. You are then obliged to compensate the third country with substantial interest in television before the modification of your bound tariffs can be accepted.

Use of tariffs as instruments of protection Any protection must be provided in the most visible and transparent form Ad valorem tariffs have the important advantage of transparency, more predictability, non-discrimination, being

easier to bind or reduce, and less susceptibility to corruption than QRs.

Elimination of unfair competition A safeguard measure can be adopted in emergency circumstances, when imports have increased to such levels and conditions that they are the cause of serious injury or threat of such injury to a domestic industry producing like or directly competing product

Measures affecting prices (i.e. tariffs) are preferable to QRs QRs can be applied as safeguard measures in specific cases, e.g. as shortterm response to disturbances in the current account, or as a way of protecting domestic industries from foreign competition.

Short notes question 5. Push and pull factors for going international

Short notes Question 1. EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LIMITED

Export Credit Guarantee Corporation of India Limited was established in the year 1957 by the Government of India to strengthen the export promotion drive by covering the risk of exporting on credit. Being essentially an export promotion organization, it functions under the administrative control of the Ministry of Commerce, Government of India. It is managed by a Board of Directors comprising representatives of the Government, Reserve Bank of India, banking, and insurance and exporting community. ECGC is the fifth largest credit insurer of the world in terms of coverage of national exports.

What does ECGC do? ECGC provides a range of credit risk insurance covers to exporters against loss in export of goods and services offers guarantees to banks and financial institutions to enable exporters obtain better facilities from them provides Overseas Investment Insurance to Indian companies investing in joint ventures abroad in the form of equity or loan

ECGC provides insurance protection to exporters against payment risks provides guidance in export-related activities makes available information on different countries with its own credit ratings makes it easy to obtain export finance from banks/financial institutions assists exporters in recovering bad debts information on creditworthiness of overseas buyers

Need for export credit insurance Payments for exports are open to risks even at the best of times. The risks have assumed large proportions today due to the far-reaching political and economic changes that are sweeping the world. An outbreak of war or civil war may block or delay payment for goods exported. A coup or an insurrection may also bring about the same result. Economic difficulties or balance of payment problems may lead a country to impose restrictions on either import of certain goods or on transfer of payments for goods imported. In addition, the exporters have to face commercial risks of insolvency or protracted default of buyers. The commercial risks of a foreign buyer going bankrupt or losing his capacity to pay are aggravated due to the political and economic uncertainties. Export credit insurance is designed to protect exporters from the consequences of the payment risks, both political and commercial, and to enable them to expand their overseas business without fear of loss.

Short notes Question Duty Drawback

Duty Drawback

Drawback is the refund of Customs duties, certain Internal Revenue taxes,and certain fees that have been paid to U.S. Customs at the time of importation. The refund is administered after the exportation or destructionof either the imported/substituted product or article that has beenmanufactured from the imported/substituted product. Drawback isrecognized as the most complex commercial program the U.S. CustomsService administers because it involves every facet of Customs business,including both exports and imports.There are several kinds of drawbacks, the main ones being: Unused Merchandise: Imported merchandise is unused and exported or destroyed under Customs supervision. 99percent of the duties, taxes or fees paid on the merchandise may be recovered as drawback.

Substitution Unused Merchandise: Merchandise that is commercially interchangeable with imported merchandise upon whichduties and taxes were paid and that has not been used, is exported or destroyed underCustoms supervision. 99 percent of the duties, taxes or fees paid on the merchandise maybe recovered as drawback. Rejected Merchandise: Merchandise is exported or destroyed because it does not conform with samples orspecifications, or has been shipped without the consent of the consignee, or has beendetermined to be defective as of the time of importation. 99 percent of the duties whichwere paid on the merchandise may be recovered as

drawback. Direct Identification Manufacturing: If articles manufactured in the United States withthe use of imported merchandise are subsequently exported or destroyed then drawbacknot exceeding 99 percent of the duties paid on the imported merchandise may berecoverable. Substitution Manufacturing: Both imported merchandise and any other merchandise of the same kind and quality areused to manufacture articles, some of which are exported or destroyed before use, thendrawback not exceeding 99 percent of the duty which was paid on the importedmerchandise may be payable on the exported/ destroyed articles. How to Obtain Drawback The guidelines for completing a drawback claim are provided in the Customs Regulations,more specifically 19 CFR 191 Subpart E. We can help you with the application process,prepare inventory record and file the claim.The locations for filing a drawback claim are Boston, Chicago, Houston, Los Angeles, Miami,New Orleans, Newark, and San Francisco. A drawback entry and all documents necessary to complete a claim generally must be filedwithin three years after exportation or destruction of the articles. Export Procedure Duty Drawback for Past Exports. Waiver form requirement of prior notice of intent toexport must be supported by a direct inventory identification method.The conditions for identification by accounting method are:1. The lots of merchandise must be fungible2. Inventory records

must establish that the lots so identified as being received into andwithdrawn from the same inventory are being used in the ordinary course of business.3. All receipts into and all withdrawals from the inventory must be recorded in theaccounting record.4. Subject to verification by CustomsIt must be used without variation for a period of at least one year unless approval is given byCustom for a shorter period Waiver of Prior Notice of Intent to Export You may be eligible for Waiver of Prior Notice under Section 191.91 of the CustomsRegulations. The approval is based on the submission of an application and compliance with the regulations. Claim Period In the case of unused merchandise drawback, it is necessary to establish that the merchandise was exported or destroyed within three years from the date of import In the case of rejected merchandise drawback, you must establish that the merchandise was returned to Customs custody within three years after it was originally released from Customs custody. In the case of manufacturing drawback, you must establish that manufactured articles onwhich drawback is being claimed were exported within five years from the date of import. Payment of Drawback Claims When a claim has been determined to be complete and satisfies all drawback requirements,the drawback amount is verified and the entry liquidated for the refund due. Drawback ispayable to the exporter/ destroyer unless the right to claim drawback has been transferred toa third party through a Certificate

of Delivery and/or Manufacture. Furthermore, theexporter/destroyer must certify that drawback on the particular exportation or destructionwill not be assigned to any other party.

Long answers Question 10. Payment terms

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*Note. Guys plz find the answers for two questions i.e. tariff barriers and Environmental Sensitivity. Rest all are given here.