Q.1 What is globalization? What are its benefits?

How does globalization help in international

business? Give some instances.
--------Economic "globalization" is a historical process, the result of human innovation and
technological progress. It refers to the increasing integration of economies around the world,
particularly through trade and financial flows. The term sometimes also refers to the movement of
people (labor) and knowledge (technology) across international borders. There are also broader
cultural, political and environmental dimensions of globalization that are not covered here.
At its most basic, there is nothing mysterious about globalization. The term has come into
common usage since the 1980s, reflecting technological advances that have made it easier and
quicker to complete international transactions – both trade and financial flows. It refers to an
extension beyond national borders of the same market forces that have operated for centuries at
all levels of human economic activity – village markets, urban industries, or financial centers.
Here are several benefits of globalization that you should know: opportunity costs, trade terms,
balance trades, comparative advantages, changes in consumption and production, and how much
cheaper it is to purchase than to produce.
The United States of America is a primary exporter of agricultural products and raw materials,
import large volumes of various services. The market is very efficient when it comes to trading as
it concentrates mostly on specialization. Due to concentration, the costs are minimized while
profits, production and efficiency are all maximized. Specialization can be achieved whenever
participating countries choose to shift their rare resources to creating services and goods where
they have comparative advantages over other countries, in turn increasing their goods
consumption.
When it comes to workers, this might not make a lot of sense, most of all if they lose jobs;
however, organizations happen to be in business, so they can make money. Therefore, they
understand what needs to be done and how long it would take to break-even and make these
profits. Businesses never intentionally hurt their workers by firing them. They would rather keep
their jobs within the United States of America since, by keeping them here, they can save
themselves from the hassles of talking to multi-lingual people worldwide and moving there.
However, organizations operate businesses as if they were puzzles. For every puzzle, many pieces
are required to complete the puzzle. Therefore, going global would be of the utmost essence for
the majority of organizations in order to properly compete and control both produce and costs in
an efficient manner.
Nothing is created within global trading but winners since selling products creates increase in
demand for those products because the foreigners’ net demand will be added onto the
domestic demand. So, with a demand increase, prices will rise. Still, purchasing products will
create increases within product supply since net foreign supply will be added onto the domestic
supply. Therefore, with this supply increase, the prices will drop. Nobody will lose. It is definitely a
win-win situation for every country that participates.
Because of technological changes, continuous development and research, the market economy
remains to be dynamic. Because of this, people have to keep up with this overall movement and
change, as well, by attending seminars and going through training on a regular basis. The
traditional kind of static markets is long gone.
There are worries regarding exploitation of poorer people within developing countries, however.
This even went further as their wages were compared to slave’s wages. The truth is: whenever
developing countries get the chance to get jobs to earn more than before, improvement happens.
A lot of people from these countries happen to be illiterate and have no idea how important
education is. Because of this, they send their kids off to work at production plants. Before sending
their kids to school, however, they have to be educated on how important education is and stop
sending their kids these production plants.
Q.2 What is culture and in the context of international business environment how does it
impact international business decisions?

Culture is defined as the shared patterns of behaviors and interactions, cognitive constructs, and
affective understanding that are learned through a process of socialization. These shared patterns
identify the members of a culture group while also distinguishing those of another group.
the word "culture" is most commonly used in three basic senses:
* Excellence of taste in the fine arts and humanities, also known as high culture
* An integrated pattern of human knowledge, belief, and behavior that depends upon the capacity
for symbolic thought and social learning
* The set of shared attitudes, values, goals, and practices that characterizes an institution,
organization or group

In this new millennium, few executives can afford to turn a blind eye to global business
opportunities. Japanese auto-executives monitor carefully what their European and Korean
competitors are up to in getting a bigger slice of the Chinese auto-market. Executives of Hollywood
movie studios need to weigh the appeal of an expensive movie in Europe and Asia as much as in
the US before a firm commitment. The globalizing wind has broadened the mindsets of executives,
extended the geographical reach of firms, and nudged international business (IB) research into
some new trajectories. One such new trajectory is the concern with national culture. Whereas
traditional IB research has been concerned with economic/ legal issues and organizational forms
and structures, the importance of national culture – broadly defined as values, beliefs, norms, and
behavioural patterns of a national group – has become increasingly important in the last two
decades, largely as a result of the classic work of Hofstede (1980). National culture has been
shown to impact on major business activities, from capital structure (Chui et al., 2002) to group
performance (Gibson, 1999). For reviews, see’ Boyacigiller and Adler’ (1991) and ‘Earley and
Gibson’ (2002).

The purpose of this Unit is to provide a state-of-the-art review of several recent advances in
culture and IB research, with an eye toward productive avenues for future research. It is not our
purpose to be comprehensive; our goal is to spotlight a few highly promising areas for
leapfrogging the field in an increasingly boundary-less business world. We first review the issues
surrounding cultural convergence and divergence, and the processes underlying cultural changes.
We then examine novel constructs for characterizing cultures, and how to enhance the precision of
cultural models by pinpointing when the effects of culture are important. Finally, we examine the
usefulness of experimental methods, which are rarely employed in the field of culture and IB. A
schematic summary of our coverage is given in Table 2.1, which suggests that the topics reviewed
are loosely related, and that their juxtaposition in the present paper represents our attempt to
highlight their importance rather than their coherence as elements of an integrative framework.

Q.3 Explain the meaning of the term ‘trade liberalization’ and advantages. Also, identify some
commonly observed mistakes in international trade
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Trade Liberalization is the removal or reduction of restrictions or barriers on the free exchange of
goods between nations. This includes the removal or reduction of both tariff (duties and
surcharges) and non-tariff obstacles (like licensing rules, quotas and other requirements). The
easing or eradication of these restrictions is often referred to as promoting "free trade."
The Benefits of Trade Liberalization
Policies that make an economy open to trade and investment with the rest of the world are needed
for sustained economic growth. The evidence on this is clear. No country in recent decades has
achieved economic success, in terms of substantial increases in living standards for its people,
without being open to the rest of the world. In contrast, trade opening (along with opening to
foreign direct investment) has been an important element in the economic success of East Asia,
where the average import tariff has fallen from 30 percent to 10 percent over the past 20 years.
Opening up their economies to the global economy has been essential in enabling many
developing countries to develop competitive advantages in the manufacture of certain products. In
these countries, defined by the World Bank as the "new globalizers," the number of people in
absolute poverty declined by over 120 million (14 percent) between 1993 and 1998.
There is considerable evidence that more outward-oriented countries tend consistently to grow
faster than ones that are inward-looking. Indeed, one finding is that the benefits of trade
liberalization can exceed the costs by more than a factor of 10. Countries that have opened their
economies in recent years, including India, Vietnam, and Uganda, have experienced faster growth
and more poverty reduction. On average, those developing countries that lowered tariffs sharply in
the 1980s grew more quickly in the 1990s than those that did not.
Freeing trade frequently benefits the poor especially. Developing countries can ill-afford the large
implicit subsidies, often channeled to narrow privileged interests that trade protection provides.
Moreover, the increased growth that results from free trade itself tends to increase the incomes of
the poor in roughly the same proportion as those of the population as a whole. New jobs are
created for unskilled workers, raising them into the middle class. Overall, inequality among
countries has been on the decline since 1990, reflecting more rapid economic growth in developing
countries, in part the result of trade liberalization.
The potential gains from eliminating remaining trade barriers are considerable. Estimate of the
gains from eliminating all barriers to merchandise trade range from US$250 billion to US$680
billion per year. About two-thirds of these gains would accrue to industrial countries. But the
amount accruing to developing countries would still be more than twice the level of aid they
currently receive. Moreover, developing countries would gain more from global trade liberalization
as a percentage of their GDP than industrial countries, because their economies are more highly
protected and because they face higher barriers.
Although there are benefits from improved access to other countries’ markets, countries benefit
most from liberalizing their own markets. The main benefits for industrial countries would come
from the liberalization of their agricultural markets. Developing countries would gain about equally
from liberalization of manufacturing and agriculture. The group of low-income countries, however,
would gain most from agricultural liberalization in industrial countries because of the greater
relative importance of agriculture in their economies.
Mistakes:
· Failure to obtain export counselling and to develop a master international marketing plan before
starting an export business:
· Insufficient commitment to overcome the initial difficulties and financial requirements of
exporting:
· Failure to have a solid agent and or distributor’s agreement:
· Blindly chasing orders from around the world
· Failure to understand the connection between country risk and the probability of getting export
financing
· Failure to understand Intellectual Property Rights (IPR):
· Insufficient attention to marketing and advertising requirements:
· Lack of attention to product adaptation and preparation needs
· Failure to obtain legal advice
· Failure to understand export licensing requirements
Q.4 Explain the product life cycle theory.

Product Life Cycle Theory

Life cycle theory has been used since the 1970s to describe the behaviour of a product or service
from design to obsolescence.
The typical pattern of a product is represented by a curve divided into four distinct phases:
introduction, growth, maturity, and decline. Recent research in the area has focused on its use in
decision making in areas ranging from those as broad as overall strategy to those as narrow as
equipment replacement.
But does the product life cycle, or PLC, really tell the entire story? Consider the Ford Mustang.
Since its 1964 introduction, the automobile has undergone several changes. Performance was
increased with the addition of the 428 CobraJet in 1968 and Mach I styling in 1969. Another
substantial change took place in 1971 with the introduction of the high-performance Boss 351.
Then a true muscle car, the Mustang was detuned in 1974, when oil prices forced a more fuel-
efficient redesign, called Mustang II. The fourth generation Mustang, introduced as the 1994
model, has been further refined and is more aerodynamic than its immediate predecessor. Yet it
still shares roots with earlier models. A 302 V-8 is still offered, the wheelbase is similar, and if one
looks closely enough, one can see its genesis in the 1964 model. The pattern evidenced by the life
of the Mustang, then, is several curves of introduction, growth, maturity, and decline.

. Conventional Life Cycle Theory

In the introductory phase, sales are slow. The strategy is to create widespread awareness. Costs
are incurred in building distribution and increasing awareness through heavy promotion. It is
hoped that the investments made in new product introduction pay off and the product or service
moves to the growth phase.
The firm may either build market share or profitability in the growth phase. Strategies here are to
make differential changes that add value to the product and to target new markets. Marketing
moves away from promotion through personal selling toward more mass media advertising. Just
as predators react to attractive targets, competition begins to build as awareness increases and
sales momentum builds. Unit manufacturing costs begin to fall as fixed costs are spread over more
production units and workers move down the learning curve. The firm attempts to stay in the
growth stage as long as possible.
Sales growth slows at maturity and the firm moves to defend market position. This is where
marketing managers must pay the most attention. Promotion costs increase significantly. Cost
reduction is crucial as competitors begin to lower prices and introduce improved versions of the
product. With the lower prices come lower profits, and competitors begin to drop out. This is
typically the longest lasting stage, with some market leaders holding their position over several
decades.
The final stage is decline. Here the firm may continue to market the product hoping that
competitors will discontinue their products. Other strategies are to maximize profit by eliminating
as many product costs as possible as sales slow, or else to eliminate the product altogether.

· Life Cycle Elements

Design engineering, process engineering, product marketing, and production have been recurring
elements in each stage of the product life cycle. In addition, end-of-life (EOL) issues must be
addressed when the product approaches obsolescence. These elements vary in importance as the
product or service moves through its life, thus creating waves of activity. The fact that they
change in importance and magnitude requires that they be closely managed. Let’s begin our
discussion of the individual elements with design engineering.
· Design Engineering
Design engineering is involved in the five phases of the new product introduction (NPI) process.
Idea validation is first. Engineers take informal ideas and study the market for needs that are not
being met by products currently being offered or planned. Technology, manufacturing capabilities,
competition, and potential revenues are analyzed in the review.

· Process Engineering
The process engineering function is responsible for the production system. To that end, process
engineers specify the type of system, equipment, tooling, layout, and flow used in manufacturing
or service operations. Their task is to ensure the efficient production of each part or component.
Traditionally, the first step is a review of the end item bill of materials, which identifies all the
separate parts that make up the product or service to be produced in, or to flow through, the
operation area. Once the bill of materials analysis is completed, the problem of which type of
production system to employ may be tackled.

· Production
Production activity follows demand for the product or service; both are linked by manufacturing
planning and control systems. Activity begins in earnest during production ramp-up. Equipment
processes, and trained production personnel must be in place. Targets for product cost,
conformance to specification, and overall quality must be met. As customer sales begin to speed
up production, overhead per-unit costs decrease and direct costs increase.

· Relationships
Design engineering, process engineering, and production are all related. The purpose of presenting
the traditional relationship here is to facilitate later comparisons with the five-element wave. The
model is illustrated in Figure 3, which shows that traditional product engineering follows a linear
path. The first step is design engineering, in which the good or service is taken from concept and
detail design to prototyping. The product moves to process engineering, where technologies and
production methods are evaluated as a system is set into motion. Finally, the product flows to
production, where down-stream manufacturing activities, such as production planning and
scheduling, take place. This is known as the over-the-wall method of product design and
development, with each stage separate from the next.

· Product Marketing
New products are usually supported with high advertising budgets to build awareness and
encourage an initial purchase. If the target is the entire market, a typical first strategy is to attack
it with one theme. When resources are relatively limited, the business may choose to identify
smaller, more homogenous concentrations within the market and tailor the advertising to those
groups. Once the product becomes established, fewer advertising dollars per sales unit are
required to encourage demand.

· End of Life
This element considers what happens when sales decline to the point at which revenues drop to a
level that supposedly precludes continued production of a good by the firm. One strategy is to
cease production and allow inventory levels to drop to zero. An alternative tactic is to attempt to
give new life to the product and risk succumbing to what is known as "The Thomas Lawson
Syndrome."

Q.6 Do you think WTO is helpful for promoting international business? Give reasons for
your answer.
WTO is helpful for promoting international business in the following ways:

1. The system helps to keep the peace

This sounds like an exaggerated claim, and it would be wrong to make too much of it.
Nevertheless, the system does contribute to international peace, and if we understand why, we
have a clearer picture of what the system actually does.

2. The system allows disputes to be handled constructively

As trade expands in volume, in the number of products traded, and in the numbers of countries
and companies trading, there is a greater chance that disputes will arise. The WTO system helps
resolve these disputes peacefully and constructively.

3. A system based on rules rather than power makes life easier for all
The WTO cannot claim to make all countries equal. But it does reduce some inequalities, giving
smaller countries more voice, and at the same time freeing the major powers from the complexity
of having to negotiate trade agreements with each of their numerous trading partners

4. Freer trade cuts the cost of living

We are all consumers. The prices we pay for our food and clothing, our necessities and luxuries,
and everything else in between, are affected by trade policies.

5. It gives consumers more choice and a broader range of qualities to choose from
Think of all the things we can now have because we can import them: fruits and vegetables out of
season, foods, clothing and other products that used to be considered exotic, cut flowers from any
part of the world, all sorts of household goods, books, music, movies, and so on.

6. Trade raises incomes

Lowering trade barriers allows trade to increase, which adds to incomes – national incomes and
personal incomes. But some adjustment is necessary.

7. Trade stimulates economic growth and that can be good news for employment
Trade clearly has the potential to create jobs. In practice there is often factual evidence that lower
trade barriers have been good for employment. But the picture is complicated by a number of
factors. Nevertheless, the alternative – protectionism – is not the way to tackle employment
problems.

8. The basic principles make the system economically more efficient, and they cut costs
Many of the benefits of the trading system are more difficult to summarize in numbers, but they
are still important. They are the result of essential principles at the heart of the system, and they
make life simpler for the enterprises directly involved in trade and for the producers of goods and
services.

9. The system shields governments from narrow interests

The GATT – WTO system which evolved in the second half of the 20th Century helps governments
take a more balanced view of trade policy. Governments are better – placed to defend themselves
against lobbying from narrow interest groups by focusing on trade – offs that are made in the
interests of everyone in the economy

10. The system encourages good government

Under WTO rules, once a commitment has been made to liberalize a sector of trade, it is difficult to
reverse. The rules also discourage a range of unwise policies. For businesses, that means greater
certainty and clarity about trading conditions. For governments it can often mean good discipline.