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International Business Nov 2011

Q.1 Define Globalization. Explain with exa ples! the "rivin# an" restrainin# for$es of Globalization.
%ns. Globalization refers to inte#ration of the worl" e$ono ies throu#h re"u$tion of barriers to the ove ent of tra"e! $apital! te$hnolo#& an" people. 'he "rivin# for$es of Globalization are as follows 1. In$rease in an" expansion of te$hnolo#& %"van$e ents in te$hnolo#& in various areas su$h as transportation an" $o uni$ation have a"e the worl" a s aller pla$e. I prove" eans of transportation an" $o uni$ation help spee" up intera$tions an" enhan$e a ana#er(s abilit& to oversee forei#n operations. 'he internet allows even s all $o panies to rea$h #lobal $usto ers an" suppliers. E#. 'ra"itional In"ian han"i$rafts are sol" in $ountries abora" throu#h the internet. 'he pa$e at whi$h new pro"u$ts are "evelope" an" intro"u$e" in the ar)etpla$e has a$$elerate" $onsi"erabl& an" pro"u$t life $&$les are #ettin# shorter.

2. *iberalization of $ross bor"er tra"e an" +esour$e

ove ents

% lot of the restri$tions i pose" b& $ountries on free tra"e an" ove ent of #oo"s an" servi$es in the past have now been lifte" "ue to the followin# reasons 'he $itizens want a #reater variet& of #oo"s an" servi$es at lower pri$es ,o petition spurs "o esti$ pro"u$ers to be$o e It ore effi$ient tra"e

a& also push other $ountries to re"u$e barriers in turn

-. Develop ent of servi$es that support international business 'o"a&! we see the #rowth an" "evelop ent of various servi$es that fa$ilitate the s ooth $on"u$t of international business. E#. Ban)s have a"e $ross bor"er tra"e easier throu#h ban) $re"it a#ree ents! $learin# arran#e ents that $onvert one $urren$& to another et$. Besi"es ban)in# servi$es! Insuran$e an" international pa$)a#e "eliver& servi$es have also pla&e" a a.or role in the expansion of international tra"e.

/. Growin# $onsu er pressures 'o"a& $onsu ers are ore aware than aware before. %lso pur$hasin# power has in$rease" $onsi"erabl& a$ross the #lobe with the e er#en$e of "evelopin# nations su$h as In"ia! ,hina! Brazil et$. 0en$e ore an" ore people $an now affor" to bu& pro"u$ts that were earlier $onsi"ere" luxuries. %lso the #rowth of the internet has otivate" $onsu ers to s$our a$ross the #lobe for their nee"s. E#. 12 $onsu ers re#ularl& sear$h for lower pri$e" pres$ription "ru#s fro forei#n sellers.

3. In$rease" Global ,o petition 'he pressures! both present an" potential of in$rease" forei#n $o petition are a a.or fa$tor persua"in# $usto ers to bu& an" sell abroa". E#. ,o panies a& want to intro"u$e pro"u$ts in ar)ets where their $o petitors are a)in# in roa"s or see) $heaper supplies fro $ountries abroa". In re$ent ti es! a lot of $o panies have $o panies abroa". er#e" with or a$4uire"

'he nu ber of 5born #lobal $o panies( are on the rise as well. 'hese $o panies have a #lobal fo$us fro the ver& be#innin#.

6. ,han#in# politi$al situation International business has seen $onsi"erable pro#ress in the post $ol" war perio". %lso! a 'ransfor ation of politi$al an" e$ono i$ poli$ies in $ountries li)e In"ia! ,hina! 7ietna ! 8or er 2oviet 1nion have resulte" in in$rease" international tra"e. Govern ents a$ross the #lobe to"a& are pro otin# in$rease" liberalization an" #lobalization an" have intro"u$e" several pro#ra s to support international business.

9. Expan"e" $ross national $o:operation International $o:operation between #overn ents has in$rease" throu#h the i ple entation of treaties! a#ree ents an" $onsultation in or"er to #ain re$ipro$al a"vanta#es.

'he restrainin# for$es of #lobalization are as follows 1. 'hreats to National 2overei#nt& a; *o$al ob.e$tives an" poli$ies Ever& nation loo)s to pro ote its own e$ono i$! so$ial an" politi$al ob.e$tives. <penin# up bor"ers to the ove ent of free tra"e $an un"er ine the priorities of in"ivi"ual nations.

b; *o$al over "epen"en$e % point of $on$ern for s aller $ountries $oul" be that over "epen"en$e on lar#er $ountries for supplies an" sales a)es the vulnerable to "e an"s b& lar#er suppliers an" sellers.

$; ,ultural 0o o#eneit& Globalization also ten"s to ho o#enize pro"u$ts! $o panies! wor) etho"s! so$ial stru$ture an" even lan#ua#es. %s a result! $ountries fin" it "iffi$ult to aintain tra"itional wa&s of life that unif& an" "ifferentiate lo$al $ultures.

2. E$ono i$ #rowth an" Environ ental stress a; %s #lobalization brin#s #rowth! it $onsu es ore nonrenewable resour$es $ausin# $onsi"erable environ ental "a a#e "espoliation throu#h toxi$ an" pesti$i"e run offs into water bo"ies! air pollution fro fa$tor& an" vehi$le e issions an" "eforestation $an $onsi"erabl& affe$t weather an" $li ate. b; Growin# In$o e Ine4ualit& Even if overall worl"wi"e #ains fro boun" to be losers. #lobalization are positive! there are

'he $hallen#e is to axi ize #ains fro #lobalization while si ultaneousl& ini izin# the $osts borne b& losers. Globalization also fosters ine4ualit& that a& not be easureable stri$tl& in e$ono i$ ter s.

Q.-. Export or ph&si$al ove ent of #oo"s an" servi$es alone $an(t .ustif& international business. Des$ribe various other ar)et entr& strate#ies with exa ples.
%ns. =hile pursuin# international business! an or#anization ust on a suitable o"e of operation. Exports an" i ports is the first o"e use" b& ost $o panies as the& start with international business. 0owever the& are not the onl& two o"es use" b& $o panies. Exports a& not be feasible when::

=hen production abroad is cheaper than at ho e =hen transportation costs to too expensive ove #oo"s or servi$es internationall& are

=hen $o panies lack domestic capacity =hen products and services need to be altered substantially to #ain suffi$ient $onsu er "e an" abroa" =hen governments inhibit the import of forei#n pro"u$ts =hen buyers prefer products originating from a particular country ar)ets. 2o e of

'o"a& $o panies use several other strate#ies to enter forei#n the are as follows>

1. Invest ents Invest ents $an be in the for invest ents. of "ire$t invest ents or portfolio

In Dire$t invest ents! also referre" to as 8DI! the investor ta)es a $ontrollin# sta)e in a forei#n $o pan&. % portfolio invest ent refers to a non:$ontrollin# sta)e in a $o pan& or ownership of a loan a"e to another part&. It a& be in the for of sto$) in a $o pan& or bon"s! bills! notes et$ pur$hase" b& the investor. 'he& are pri aril& use" for short ter finan$ial #ain as a relativel& safe eans of earnin# ore one& on a fir (s invest ent. In or"er to earn hi#her &iel"s on short ter invest ents! $o panies routinel& ove fun"s fro $ountr& to $ountr&.

2. ,ollaborative arran#e ents ?oint venture> ,o panies enter into allian$es su$h as .oint ventures with "o esti$ $o panies whi$h are ai e" at provi"in# effi$ien$& throu#h poolin# of si ilar assets so that partners $an $arr& out business a$tivities in whi$h the& alrea"& have experien$e. E#. @aruti 2uzu)i.

-. 8ran$hisin# an" *i$ensin# 8ran$hisin# is a for of li$ensin# in whi$h the fran$hisor not onl& sells an in"epen"ent fran$hisee the use of intan#ible propert& essential to the fran$hisee(s business but also operationall& assists the business on a $ontinuous basis su$h as throu#h sales pro otion an" trainin#. E#.Do inos Aizza #rants to fran$hisees the #oo"will of the "o inos na e an" support servi$es to #et starte" su$h as store e4uip ent la&out an" a ana#er trainin# pro#ra . 1n"er a li$ensin# a#ree ent! a $o pan& Bthe li$ensor; #rants ri#hts to intan#lible propert& to another $o pan& Bthe li$ensee; to use in a spe$ifi$ #eo#raphi$ area for a spe$ifi$ perio". In ex$han#e the li$ensee pa&s a ro&alt& to the li$ensor. Intan#ible propert& a& in$lu"e patents! $op&ri#hts! tra"e ar)s! li$enses! $ontra$ts et$.

/. 'urn)e& operations 'urn)e& operations are a t&pe of $ollaborative arran#e ent in whi$h one $o pan& $ontra$ts with another to buil" $o plete! rea"& to operate fa$ilities. 'hese in$lu"e in"ustrial e4uip ent anufa$turers an" $onstru$tion $o panies. 'hese operations are often perfor e" for a #overn ent a#en$&. @ost lar#e pro.e$ts in "evelopin# $ountries are ovin# towar"s infrastru$ture "evelop ent an" in"ustrialization.

Q./. =h& is 8DI i portant for host an" ho e $ountr&C Dis$uss the 8DI environ ent in In"ia. %lso su##est how to in$rease inwar" 8DI for 4ui$)er e$ono i$ "evelop ent.
%ns. In Dire$t invest ents! also referre" to as 8DI! the investor ta)es a $ontrollin# sta)e in a forei#n $o pan&. Govern ents of ost $ountries en$oura#e 8DI. 8DI has $ertain benefits for both the ho e an" host $ountr&.

Benefits to the ho e $ountr&

1. Cost Advantages Foreign direct investment helps investors from foreign countries to invest and take advantage of certain resources which may be available in abundance in another geography or location for a much cheaper. The MNCs can utili e the host country!s natural resources and harvest such resources efficiently and manage to keep their costs low and thus increase their price competency. ". New Markets F#$ provides foreign investors with access to new markets as these foreign investors can produce and markets their products and services in the domestic market of these hosts! countries. This is especially true for MNCs from developed economies like the %& and %' who invests in emerging economies like $ndia and China which have robust domestic markets. Firms from developed countries look at e(panding their market by tapping new markets as many)a)times* the markets in developed countries are saturated or have a very slow growth.

+. ,(posure to other countries- MNCs prefer to have e(posure to many countries. An MNC by definition is a company which operates in many countries* so carrying out operations in other countries help them get e(posure to such country related economic cycles. The reason to get this e(posure can also be attributed to the fact that as the number of countries the company operates in* that much more it becomes diversified* so diversification leads to the company having minimi ed its operational risks. Thus this diversification helps protect the interests of the shareholders of the foreign investing entity. .. $nternational /elations- $nternational relations between countries tend to improve when there e(ists a good amount of trade and investment flow which can be of strategic importance to the home country. 0. $mproves e(port The other vital advantage of F#$ to the home country is that it enables these nations to enhance their e(port resources. Furthermore* research shows that nations who get F#$ from other international organi ations usually have lower interest rates. This means that their e(ported products are much cheaper and thus enhances e(port.

Benefits of 8DI to the host $ountr&

1. Technological 1ap- 1enerally* it is seen that underdeveloped economies or developing economies have a very low level of technology. Although there may be opportunities and resources which can be used to have economically viable production* however* technology may be a huge constraint to utili e such resources. 2ere* foreign investors from developed countries can provide the needed technical assistance to such countries in the form of new capital e3uipment* industrial upgrading* /4# etc. This helps to improve efficiency* increae productivity and capital formation. 2. ,mployment 1eneration F#$ in a host country results in the generation of 5obs for both skilled and unskilled labor. The foreign investors open offices and factories which re3uire people to work. ,mployment ultimately leads to better living conditions and higher standards of living among the workers. 3. #evelopment of Managerial 6ool 7ften it is seen that such MNCs develop managerial talent. Firstly* these companies provide their own seasoned and developed managers to setup and run the entity in the host country*

while doing so* these managers also seek to develop the ne(t set of managers who will take over the reins . 4. Trade F#$ enables the home country to increase its e(ports as products become more economical. 5. ,nvironment F#$ enables companies in the host country to gain access to cleaner technologies* pollution abatement skills and international standards.

FDI in India
8orei#n "ire$t invest ent in In"ia has #rown i ensel& over the last few &ears "ue tostron# support fro the 1nion Govern ent. 'his #rowth has in turn helpe" in thepro#ress of the national e$ono &. 8orei#n "ire$t invest ent in In"ia in 2010 was D//.E billion! an" in 2011 experien$e" an in$rease of 1-F to D30.E billion. In"ia has seen an ei#htfol" in$rease in its 8DI in @ar$h 2012. +e$entl&! the Government of India allowed FDI; in
aviation upto 49%, in Broadcast sector upto 74%, in multi- rand retail upto !"% and in sin#le- rand retail upto "$$%

In the last few &ears the followin# se$tors have attra$te" the 2ervi$es %uto obile ,o puter har"ware an" software Aower 'ele$o uni$ations

axi u


@etallur#i$al in"ustries +eal estate an" housin# Aetroleu an" natural #as

,onstru$tion ,he i$als with the ex$eption of fertilizers.

'he 8DI laws forbi" invest ent in the followin# se$tors> %r s ,oal Nu$lear Ener#& @inin# +ailwa&

Q.5. How can the orter!s Diamond model of national competitive advantage he used to assess strategic advantage for India in agro based products"
AorterGs "ia on" o"el su##ests that there are inherent reasons wh& so e nations! an" in"ustries within nations! are ore $o petitive than others on a #lobal s$ale. 'he ar#u ent is that the national ho e base of an or#anization provi"es or#anizations with spe$ifi$ fa$tors! whi$h will potentiall& $reate $o petitive a"vanta#es on a #lobal s$ale.B& usin# AorterGs "ia on"! $o panies a& anal&ze whi$h $o petitive fa$tors a& resi"e in their $o pan&Gs ho e $ountr&! an" whi$h of these fa$tors a& be exploite" to #ain #lobal $o petitive a"vanta#es. Business lea"ers $an also use the AorterGs "ia on" o"el "urin# a phase of internationalization! in whi$h the& a& use the o"el to anal&ze whether or not the ho e ar)et fa$tors support the pro$ess of internationalization! an" whether or not the $on"itions foun" in the ho e $ountr& are able to $reate $o petitive a"vanta#es on a #lobal s$ale.


o"el in$lu"es / "eter inants of national a"vanta#e as follows>

#. 8a$tor ,on"itions 8a$tor $on"itions in$lu"e those fa$tors that $an be exploite" b& $o panies in a #iven nation. 8a$tor $on"itions $an be seen as a"vanta#eous fa$tors foun" within a $ountr& that are subse4uentl& buil" upon b& $o panies to ore a"van$e" fa$tors of $o petition. 8a$tors not nor all& seen as a"vanta#eous! su$h as wor)for$e shorta#e! $an also be seen as a fa$tor potentiall& stren#thenin#

$o petitiveness! be$ause this fa$tor on auto ation an" zero "efe$ts. 2o e exa ples of fa$tor $on"itions>

a& hei#hten $o paniesG fo$us

0i#hl& s)ille" wor)for$e *in#uisti$ abilities of wor)for$e +i$h a ount of raw =or)for$e shorta#e aterials

$. De an" $on"itions If the lo$al ar)et for a pro"u$t is lar#er an" ore "e an"in# at ho e than in forei#n ar)ets! lo$al fir s potentiall& put ore e phasis on i prove ents than forei#n $o panies. 'his will potentiall& in$rease the #lobal $o petitiveness of lo$al exportin# $o panies. % ore "e an"in# ho e ar)et $an thus be seen as a "river of #rowth! innovation an" 4ualit& i prove ents.

%. +elate" an" 2upportin# In"ustries =hen lo$al supportin# in"ustries an" suppliers are $o petitive! ho e $ountr& $o panies will potentiall& #et ore $ost effi$ient an" re$eive ore innovative parts an" pro"u$ts. 'his will potentiall& lea" to #reater $o petitiveness for national fir s.

&. 2trate#&! 2tru$ture! an" +ivalr& 'he stru$ture an" ana#e ent s&ste s of fir s in "ifferent $ountries $an potentiall& affe$t $o petitiveness. *i)ewise! if rivalr& in the "o esti$ ar)et is ver& fier$e! $o panies a& buil" up $apabilities that $an a$t as $o petitive a"vanta#es on a #lobal s$ale. 0o e ar)ets with less rivalr& a& therefore be $ounterpro"u$tive! an" a$t as a barrier in the #eneratin# of #lobal $o petitive a"vanta#es su$h as innovation an" "evelop ent.

Q.6. H='< ai s at re ovin# on tariff barriers an" re"u$in# tariff barriers.I If so! $riti$all& evaluate a$hieve ents an" proble areas whi$h ='< has to en$ounter in or"er to su$$ee" in the above ob.e$tive.
The 8orld Trade 7rgani ation 98T7: was established to supervise and liberali e world trade. The 8T7 is the successor to the 1eneral Agreement on Tariffs and Trade91ATT: the 8T7 began operations on ;anuary 1* 1<<0. $t has over 10= member nations including China that collectively account for over <>? of international trade. The entire membership makes significant decisions through consensus. 7b5ectives of the 8T7 To set and enforce rules for international trade To provide a forum for negotiating and monitoring further trade liberali ation To resolve trade disputes To increase the transparency of decision)making processes To cooperate with other ma5or international economic institutions involved in global economic management To help developing countries benefit fully from the global trading system.

Q.'. Discuss International (usiness

a) Intellectual roperty rights
IA+ $onstitutes a le#all& enfor$eable but li ite" onopol& #rante" b& a $ountr& to an innovator. It spe$ifies a perio" "urin# whi$h other parties a& not $op& an i"ea. 'he innovator $an thus $o er$ialize it to re$oup his invest ents an" $apture potential profits. 'he $o panies $an thus safe#uar" potential sales an" profits b& prote$tin# intan#ible assets throu#h enfor$eable patents! tra"e ar)s an" $op&ri#hts. 0owever! the extent of pro"u$t pira$& in"i$ates .ust how har" it is to eenfor$e su$h prote$tions as IA+s. 'he reasons for the sa e in$lu"e poor $o plian$e an" enfor$e ent in $ertain .uris"i$tions an" proble s arise be$ause not all $ountries for all& support the various a#ree ents

"evelope" to prote$t IA+s. 'here is no wa& to re#ister so e sort of #lobal patent! tra"e ar) or $op&ri#ht. E#! In"ian $o panies $an anufa$ture "ru#s patente" in other $ountries b& si pl& followin# a pro$ess that is "ifferent fro the innovators pro$ess. 'he role of lo$al attitu"e Aira$& is roote" in fun"a ental le#al! e$ono i$ an" $ultural fa$tors. Not onl& are a few $ountries less in$line" to prote$t IA+s but $ertain lo$al attitu"es also en$oura#e violations. *e#al *e#a$ies ost e er#in# e$ono ies have been unable to prote$t IA+s. @axi u nu ber of $ounterfeit #oo"s $o e fro $ountries in e er#in# e$ono ies. ,hina is )nown for its propensit& to a)e $ounterfeit #oo"s an" relu$tan$e to prote$t IA+s vi#orousl&. E$ono i$ Develop ent t&pi$all& poor $ountries provi"e wea)er le#al prote$tion than ri$her $ountries. 'he& $ounter with three ar#u ents a#ainst IA+s 1. it restri$ts the "iffusion of te$hnolo#& 2. inflates pri$es of pro"u$ts that poor nations $annot affor" -. Inhibits e$ono i$ "evelop ent b& $onstrainin# the use of existin# )nowle"#e. ,ultural %ttitu"es $ountries with in"ivi"ualist orientation ten" to re#ar" the $on$ept of in"ivi"ual ownership. In $ontrast! $ountries li)e ,hina whi$h are $olle$tivist believe in sharin# over in"ivi"ualis .

b) *urrent trends and application of theory

urchasing power parity

Aur$hasin# power parit& BAAA; is a theor& an" a te$hni4ue use" to "eter ine the relative value of$urren$ies. It helps in esti atin# the a ount of a".ust ent nee"e" on the ex$han#e rate between $ountries in or"er for the ex$han#e to be e4uivalent to Bor on par with; ea$h $urren$&Gs pur$hasin# power. It as)s how u$h one& woul" be nee"e" to pur$hase the sa e bas)et of #oo"s an" servi$es in two $ountries! an" uses that to $al$ulate an i pli$it forei#n ex$han#e rate. 1sin# that AAA rate! an a ount of one& thus has the sa e pur$hasin# power in "ifferent $ountries.

E#. 2uppose a $ertain bas)et of #oo"s an" servi$es $ost D10 in the 12 an" +s. /30 in In"ia! then the value of D1J+s./3. Be$ause this is the parit& at whi$h the pur$hasin# power of two nations is aintaine". % ,han#e in pur$hasin# power of an& $urren$& will refle$t in the ex$han#e rate also. 0en$e in this s&ste ! the external value of the $urren$& "epen"s on the "o esti$ pur$hasin# power of that $urren$& in relation to another. Aur$hasin#:power parit& theor& tells us that pri$e "ifferentials between $ountries are not sustainable in the lon# run as ar)et for$es will e4ualize pri$es between $ountries an" $han#e ex$han#e rates in "oin# so. % fre4uent exa ple of pur$hasin# power parit& anifests itself in the for of the @$Donal"(s Bi# @a$ in"ex. 'his in"ex $o pares the pri$e of the bi# @a$ fro "ifferent $ountries in or"er to> B1; evaluate ex$han#e rates base" upon "ifferen$es in the pri$es. *i itations of the theor& 'ransportation $osts 'he theor& of the law of one pri$e assu e" that transportation $osts were ne#li#ible an" AAA re4uires the sa e assu ption. 0owever! #ettin# pro"u$ts to an" fro "ifferent ar)ets $an a"" si#nifi$ant $osts to #oo"s. 'his will $ause a""itional "iver#en$e in an& pri$e $o parison when the pro"u$t is applie" to the bas)et of #oo"s in a ,AI. 'ariffs an" 'axes <n$e a#ain! for AAA to hol"! another )e& assu ption un"erl&in# the law of one pri$e is the abstra$tion of taxes an" tariffs. 'here $an be no i position of une4ual taxes or tariffs in #oo"s i porte" or exporte" a$ross $ountries! otherwise this woul" ten" to $ause further separation of true pri$e levels between ar)ets.

,osts of Non:tra"able #oo"s 'he theor& of AAA asserts that after the barriers to tra"e are expun#e"! the $ost of a #oo" su$h as the Bi#@a$ shoul" be the sa e a$ross all $ountries in whi$h the Bi#@a$is tra"e". 0owever! the lo$al pri$e of a Bi#@a$ $onstitutes ore than si pl& the in#re"ients b& whi$h it is $o pose". %lso e be""e" in the lo$al pri$e is the $ost asso$iate" with sellin# an" ar)etin#. Even within the sa e$ountr&! the $ost of the Bi#@a$ $an var& "epen"in# upon $osts to lease or rent the restaurant spa$e an" pa& for utilities su$h as power! water! an" heat.

Ari$in# to @ar)et %nother $ontributin# fa$tor to "eviations fro AAA is a fir (sabilit& to ar) their pro"u$ts at "ifferent pri$e points a$ross "ifferent ar)ets. Basi$ business theor& states that profit axi ization $an be a$hieve" b& pri$in# as hi#h as is appropriate $onsi"erin# the elasti$it& of "e an" for a pro"u$t.


roduct +ife theory in International trade

,o panies anufa$ture pro"u$ts first in the $ountries in whi$h the& were resear$he" an" "evelope" whi$h in ost $ases happens to be a "evelope" nation <ver the pro"u$t(s life $&$le! pro"u$tion will shift to forei#n lo$ations! espe$iall& to "evelopin# e$ono ies as the pro"u$t rea$hes sta#es of aturit& an" "e$line.

'he pro"u$t life $&$le theor& states that

'he four sta#es of the pro"u$t life $&$le are as follows>

1. Intro"u$tion

Aro"u$tion ta)es pla$e in the innovatin# $ountr& @ar)et lo$ation is exports 'he $o pan& en.o&s a ainl& the innovatin# $ountr& with so e onopol& position.

2ales are base" on uni4ueness rather than the pri$e @etho"s of pro"u$tion are still evolvin#

2. Growth

In this phase! pro"u$tion ta)es pla$e in innovatin# nation an" other in"ustrial nations 8orei#n pro"u$tion a& repla$e exports in so e ar)ets ore an"

Nu ber of $o petitors in$rease an" pro"u$t be$o es ore stan"ar"ize" @etho"s of pro"u$tion also be$o e ore an"

ore stan"ar"ize"

-. @aturit&

Aro"u$tion ta)es pla$e in

ultiple $ountries

@ar)et for the pro"u$t wi"ens to "evelopin# $ointries <verall "e an" for the pro"u$t stabilizes Nu ber of $o petitors "e$rease Aro"u$tion be$o es hi#hl& stan"ar"ize"

/. De$line

Aro"u$tion in this phase ta)es pla$e $ountires 'he ar)et for the ppro"u$t is

ainl& in "evelopin#

ainl& the "evelopin# $ountries

<verall "e an" for the pro"u$t "e$lines Ari$e is )e& here Nu ber of pro"u$ers $ontinues to "e$line

8or exa ple @ost new pro"u$ts were $on$eive" K pro"u$e" in the 12 in 20th $entur&. 12 fir s )ept pro"u$tion $lose to their ar)et initiall&. 'his was "one with a view to ini ize ris) of new pro"u$t intro"u$tions. %lso! "e an" was not base" on pri$e an" hen$e low pro"u$t $ost was not an issue. %t the ti e there is *i ite" initial "e an" in other a"van$e" $ountries. 0en$e exportin# to su$h $ountries a"e ore e$ono i$ sense than overseas pro"u$tion. =hen "e an" in$reases in a"van$e" $ountries! pro"u$tion follows with "e an" expansion in se$on"ar& ar)ets.

d) ,$- and its impact on India!s foreign trade

G20 is a #roup of finan$e inisters an" $entral ban) #overnors fro 20 a.or e$ono ies> 1L $ountries plus the European 1nion! whi$h is represente" b& the Aresi"ent of the European ,oun$il an" b& the European ,entral Ban). Its

e bers in$lu"e> 'he ei#ht lea"in# in"ustrialize" nations : 1.2.! ?apan! Ger an&! 1M! 8ran$e! Ital&! ,ana"a an" +ussia. 'his #roup of $ountries also eets on their own! an" are )nown as the G:E;.

Eleven e er#in# ar)et an" s aller in"ustrialize" $ountries> %r#entina! %ustralia! Brazil!,hina! In"ia! In"onesia! @exi$o! 2au"i %rabia! 2outh %fri$a! 2outh Morea! 'ur)e&! plus the E1.

,olle$tivel&! the G:20 e$ono ies a$$ount for ore than E0 per$ent of the #ross worl" pro"u$t BG=A; E0 per$ent of worl" tra"e Bin$lu"in# E1 intra:tra"e;! an" two:thir"s of the worl" population.

e) .ost Favoured /ations 0.F/) status1 boon or bane"

@ost 8avore" Nation status is when a $ountr& en.o&s all the lowere" tariffs an" re"u$tions of tra"e barriers. It is $onferre" between two or ore $ountries that have a tra"e a#ree ent. %ll e bers of the =orl" 'ra"e <r#anization B='<; re$eive the @ost 8avore" Nation 2tatus. 'his eans the& all re$eive the sa e tra"e benefits as all other e bers. 'his is $riti$all& i portant for s aller e bers! be$ause it lowers the $ost of their exports an" a)es the ore $o petitive. 'his! in turn! in$reases their exports an" their $ountr&Gs e$ono i$ #rowth. 'he "ownsi"e of @ost 8avore" Nation status is the $ountr& ust also #rant the sa e to all other e bers of the a#ree ent! or of the ='<. 'his eans the& $annot prote$t their $ountr&Gs in"ustries fro $heaper #oo"s pro"u$e" b& forei#n $ountries.

Q.2. 34evolution in international logistics have shrunk the world into a global village5 *omment.
*o#isti$s ana#e ent is that part of the suppl& $hain whi$h plans! i ple ents an" $ontrols theeffi$ient! effe$tive! forwar" an" ba$)war" Breverse; flow an" stora#e of #oo"s! servi$es an"infor ation between the point of ori#in an" the point of $onsu ption in or"er to eet $usto ersG re4uire ents. Itinvolves the inte#ration of infor ation! transportation! inventor&! warehouse! aterial han"lin# et$.

+evolution in international lo#isti$s has enable" or#anizations to expan" their networ) of operations. Effe$tive suppl& $hain ana#e ent is one of the i portant tools in re"u$in# $osts an" in$reasin# revenues. % $o pan&(s suppl& $hain en$o passes the $o:or"ination of aterials! infor ation an" fun"s fro initial raw aterial supplier to ulti ate $usto er. 'o"a&! than)s to a"van$e ent in lo#isti$s! $o panies have their supplier networ)s sprea" a$ross the worl". In a #lobal $ontext suppliers $an be lo$ate" in a $ountr& where anufa$turin# or asse bl& ta)es pla$e or the& $an be lo$ate" in one $ountr& an" the& $an be shippe" to another $ountr& for anufa$turin# an" asse bl&. 7arious @NE(s have ex$elle" in ana#in# supplier networ)s fro a$ross the worl". 'hese in$lu"e %pple in the 1nite" 2tates! 2a sun# in Morea! No)ia in 8inlan"! 'o&ota in ?apan et$.

Q.6. 7xamine opportunities for Indian business houses to prosper in 8frican bloc.
%ns. 'he $ontinent of %fri$a has thrown up tre en"ous opportunities for $o panies a$ross the worl". %fri$a> Growth Enablers +isin# "e an" for infrastru$ture an" lo#isti$s han"lin# b& #overn ents. 7ast resour$es in ter s of a#ri$ulture! horti$ulture! show hi#h returns inin#! touris et$ whi$h

'here is also s$ope for "evelopin# $aptive input resour$es for In"ian $o panies whi$h ,hina has been "oin# for a lon# ti e now. %lso! In"ia %fri$a have stron# $ultural lin)a#es an" bi:lateral tra"e between the is onl& boun" to #row. 7arious $ountries li)e Men&a! 'anzania an" Na bia have relaxe" tax laws an" provi"e e$ono i$ benefits for for ulation of EANs

%fri$a> ,hallen#es *ow labour pro"u$tivit& in unsustainable. an& nations a)e settin# up of operations

0i#h prevalen$e of 0I7 %ID2 in $ountries.

an& $ountries espe$iall& 2outh %fri$an

Arevalen$e of a ver& hi#h $ri e rate ,o panies $oul" also fa$e $o petition fro "istribution. se$tors su$h as auto obile

Aoor infrastru$ture li its a$$essibilit& to $ertain re#ions affe$tin# %fri$a(s a bitions in inin#! power an" touris . Aoliti$al unrest an" unstable e$ono i$ $on"itions in $ountries li)e Ni babwe are a a.or hur"le

,han#in# 8a$e of %fri$a % lot of %fri$an nations are "ere#ulatin# their e$ono ies an" openin# their e$ono ies to the rest of the worl". Me& se$tors su$h as power! ban)in#! 8inan$ial servi$es are now privatize". It has a a"opte" a free ar)et s&ste % eri$an an" ,hinese $o panies. with stron# tra"e ties with European!

% lot of @N,s have alrea"& set up their operations in %fri$a

2=<' anal&sis 2tren#ths 'here is i ense potential for #rowth sin$e un"er"evelope". a.orit& of the $ontinent is

% lot of %fri$an $ountries allow unrestri$te" $apital an" "ivi"en" flows. 'he pro$ess of liberalization an" privatization has been initiate" It en.o&s an a""e" a"vanta#e in ter s of its proxi it& to European 'he $ontinent is ri$h in inerals ar)ets

It has preferential tra"e a$$ess to Europe *abour $osts are still low a$ross the $ontinent

%fri$a has tre en"ous s$ope for touris $oastline.

than)s to its wil"life an" lon#

%fri$a also has vast unutilize" lan" for a#ri$ulture

=ea)nesses Aoor #overnan$e an" $orruption is a nations a.or proble with ost %fri$an

Aoor infrastru$ture also restri$ts the #rowth of business in %fri$a *a$) of availiabilt& of s)ille" labor poses tre en"ous hur"les for business houses 'he e plo& ent ar)et is not well or#anize"

0ealth servi$es are "efi$ient a$ross the $ontinent Ea$h of the e$ono ies b& itself are not ver& lar#e 'here is ver& hi#h $ri e an" une plo& ent rate in the $ontinent

<pportunities 2e$tors in whi$h $o panies $an explore #rowth options in %fri$a are as follows @inin# Infrastru$ture Develop ent %#ri$ulture 1tilities

'hreats <ver "epen"en$e on forei#n tra"e 8oo" inse$urit& in ra pant a$ross the $ontinent 'here also several internal $onfli$ts ,ost of operations in %fri$a $an be ver& hi#h %lso there is a lot of issues re#ar"in# s u##lin# an" ille#al #oo"s