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Assignment # 01 2013

Why Do Companies go globally or Invest in Overseas? Companies choose to invest in foreign markets for a number of reasons, often the same reasons for expanding their operations within their home country. The economist John Dunning has identified four primary reasons for corporate foreign investments (Global Capitalism, FDI and Competitiveness, 2002): Market seeking: Firms may go overseas to find new buyers for their goods and services. The top executives or owners of a company may realize that their product is unique or superior to the competition in foreign markets and seek to take advantage of this opportunity. Another motivation for market-seeking occurs when producers have saturated sales in their home market, or when they believe investments overseas will bring higher returns than additional investments at home. This is often the case with high technology goods. As one analyst noted, The minimum size of market needed to support technological development in certain industries is now larger than the largest national market (Sutherland 1998). Resource seeking: Put simply, a company may find it cheaper to produce its product in a foreign subsidiary- for the purpose of selling it either at home or in foreign markets. The foreign facility may be able to obtain superior or less costly access to the inputs of production (land, labor, capital, and natural resources) than at home. Strategic asset seeking: Firms may seek to invest in other companies abroad to help build strategic assets, such as distribution networks or new technology. This may involve the establishment of partnerships with other existing foreign firms that specialize in certain aspects of production. Efficiency seeking: Multinational companies may also seek to reorganize their overseas holdings in response to broader economic changes. For example, the creation of a new free trade agreement among a group of countries may suddenly make a facility located in one of those countries more competitive, because of access for the facility to lower tariff rates within the group. Fluctuations in exchange rates may also change the profit calculations of a firm, leading the firm to shift the allocation of its resources.

International Trade Agreements:A trade agreement is classified as bilateral (BTA) when signed between two sides, where each side could be a country (or other customs territory), a trade bloc or an informal group of countries (or other customs territories). A trade agreement signed between more than two sides (typically neighboring or in the same region) is classified as multilateral.

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Assignment # 01 2013
The creation of economic commonwealths is one of the great developments of international public policy in the twentieth century. The largest economic commonwealth is that created by the agreements of the World Trade Organization (WTO). The Organization is not well understood. Unique among international organizations, it administers several international agreements, foremost among them the General Agreement on Tariffs and Trade (GATT). When members apply the rules of the GATT, they create global markets for trade and give every member an opportunity to increase economic growth. This opportunity is greater than the opportunity each would have acting on their own. The economic benefits are secured when all members apply the same rules. The rules contain obligations to apply them and rights to enforce compliance with them. It is an enforceable system of global international law.

The status of permanent normal trade relations (PNTR) is a legal designation in the United States for free trade with a foreign nation. In the U.S. the name was changed from most favored nation (MFN) to PNTR in 1998. In international trade, MFN status (or treatment) is awarded by one nation to another. It means that the receiving nation will be granted all trade advantages, such as low tariffs, that any other nation also receives. Thus, a nation with MFN status will not be discriminated against and will not be treated worse than any other nation with MFN status.

The Asia-Pacific Trade Agreement (APTA), previously known as the Bangkok Agreement and renamed 2 November 2005, was signed in 1975. It is the oldest preferential trade agreement between developing countries in the Asia-Pacific region. Its aim is to promote economic development and cooperation through the adoption of mutually beneficial trade liberalization measures. APTA is open to all developing members of the United Nations Economic and Social Commission for Asia and the Pacific, which serves as the APTA Secretariat. Members of APTA are currently participating in the Fourth Round of Tariff Concessions, which are expected to conclude in October 2009.

Asean Free Trade Area (AFTA) is a trade bloc agreement by the Association of Southeast Asian Nations supporting local manufacturing in all ASEAN countries. The AFTA agreement was signed on 28 January 1992 in Singapore. When the AFTA agreement was originally signed, ASEAN had six members, namely, Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand. Vietnam j oined in 1995, Laos and Myanmar in 1997 and Cambodia in 1999. AFTA now comprises the ten countries of ASEAN. All the four latecomers were required to sign the AFTA agreement in order to join ASEAN, but were given longer time frames in

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Assignment # 01 2013
which to meet AFTA's tariff reduction obligations. The primary goals of AFTA seek to:

Increase ASEAN's competitive edge as a production base in the world market through the elimination, within ASEAN, of tariffs and non-tariff barriers; and Attract more foreign direct investment to ASEAN.

Pakistan & International Trade Agreements:Pakistan has undertaken a number of trade diplomacy initiatives to support the country's economic goals. International Trade Agreements: Afghanistan-Pakistan Transit Trade Agreement:- In October 2010, Pakistan and Afghanistan signed a new transit trade agreement to boost economic activities and bring prosperity and stability in the region. The landmark deal will allow the countries to use each other's land routes for exports, upgrading a similar agreement from the 1960s. China-Pakistan Free Trade Agreement (FTA):- China and Pakistan signed an agreement in July 2010 on economic and technical cooperation. The Free Trade Agreement with China in Goods and Services ensures full security to Chinese investments in Pakistan. Pakistan provides a low-cost and hard-working labor force together with liberal incentives and access to regional markets. Pakistan offers unique opportunity to Chinese investors to invest in Pakistan. South Asian Free Trade Areas (SAFTA):- This agreement was reached by India, Pakistan, Nepal, Bangladesh, Sri Lanka, Maldives, and Bhutan on 6 January 2004 and entered into effect on 1 January 2006. It calls for tariff reductions for intraregional trade. Pakistan-Morocco PTA: - Pakistan and Morocco accelerated Preferential Trade Agreement and Free Trade Agreement negotiations at the First Session of the Joint Ministerial Commission (JMC) in 2008. Few Global Companies:-

Levis:Levis is a denim manufacturer company which is famous all over in the garment world named by Levis Jeans. They Work globally and act according to what their customers demand at their target market. This globalization increases the sale of
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the company and obviously profit too in a way that they are doing their manufacturing in that region or country where the labor is available at very cheap rate and furthermore the trade taxes are minimum according to other countries such as India. Afterwards they distribute their garments around all over this region like Pakistan, Bangladesh and Sirilanka etc. They also get best high quality and cheap raw material like cotton, Buttons, Labels, tags etc. from neighboring countries such as Pakistan etc. This simply means that they have very strong and best supply Chain system to their company. Because of this the Levis Company produces and provides best quality products to its customers.

Siemens:Siemens Company is one of the leading companies of engineering research and products. The Company produces their products in different part of the world and globally distributes it all over the world through their excellent channels of distribution. One of its manufacturing plant is in Pakistan, Karachi where they manufacturer various products of engineering with labor of Pakistan which is of cheap rates and save taxes expense as compare to other parts of the world. From this Manufacturing plant the company distributes commodities to the whole region of Asia such as India, Nepal, Sirilanka and Bangladesh etc... Their they also have other benefit that they attract and retain new talented employees of Pakistan at a low salary package as compare to America and Europe. The Company also applies and act global and international standard and operations in Pakistan with cheap resources.

Lays Chips:
Lays Chips is a leading company in snacks and chips business. They produce lays chips almost in all parts of the word. Through their strong channels of distribution the take raw material such as potatoes from the Asian countries like India, Pakistan, etc... And produce Lays chips for that targeted market according to customer demand and purchasing pattern. While from these potatoes they distribute this raw material to American and European countries and produce Lays chips to its consumer accordingly to that market. Raw potatoes from Asian countries reduces its cost when they produces for their European/American channel because the company buy various potatoes crops from these countries while European/American states are not self-sufficient in food items. On other hand they easily understand different markets, different people and their views and purchasing pattern of those regions.

Toyota:-

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Assignment # 01 2013
Toyota is one the most luxurious brand in automobile industry and the company perform world-wide. Almost in every part of the world, Toyota brand is used by its consumer. Specially, in Pakistan this company comes in giants companys category of automobile. In Pakistan they are not producing the whole car because of limited market. Instead they import parts of Cars from all over the world and simply assembled it and deliver cars to its consumers. This simply comes under the real example of globalization that they invest limited but delivered excellent to its customer through their best Supply chain system. Also they understand the market of Pakistan and delivered only that type of cars which is suitable and affordable to this target market. Also they use the advances and latest technology which they used internationally through the training of Pakistani employees and labors.

Unilever:Unilever is a FMCG (fast moving consumer goods) producer and their products are consumed in whole world on daily basis. The company believes in globalization and almost in every country they produce product according to what this market demand and also keep consider the cultural environment of that country. Like the company produce everything Halal in Pakistan and other Muslim countries while the company produce non-halal products in India. Production is based on the purchasing pattern of that environment. This definitely increases the sale of that company and also the efficiency to learn about different peoples of different markets. The company also attracts and retains the efficient employees from the country where the employees are available at low package as compare to other parts of the country and use their efficiency in world-wide plants.

References
http://www.globalization101.org/why-do-companies-invest-overseas http://www.apec.org.au/docs/oxley2002d.pdf http://en.wikipedia.org/wiki/Trade_agreement http://en.wikipedia.org/wiki/Permanent_Normal_Trade_Relations http://www.presidentofpakistan.gov.pk/index.php?lang=en&opc=6&sel=2 http://en.wikipedia.org/wiki/ASEAN_Free_Trade_Area

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