SET 1.

SUB CODE. 0046 SUBJECT. International Business Management. 01561 PATIL YOGENDRA ASHOK ROLL NO. CLASS. 520837702 MBA 4th Sem ( MarketingWeekend) MB 0037 / MH





Q1. Are crises, as the recent recession of 2008 shows, the essential feature of globalization?
Ans.: After four years of average annual global real GDP growth of better than 4 1/2 percent, recent data indicate that the pace of advance is slowing in the major industrial countries, with the US economy on the verge of, and perhaps already in, outright recession. So far, the evidence points to less of a slowdown in other industrial countries, while most emerging-market economies appear likely to maintain quite strong, albeit somewhat slower, growth. Meanwhile, world consumer price inflation (on a 12-month basis) is up from barely 2 percent seven years ago to nearly 5 percent as of February 2008. Among both industrial (except for Japan) and major emergingmarket countries, inflation is now running at, or in most cases somewhat above, rates consistent with policy objectives. Driven by persistently rising global demand, commodity prices continue to surge upward across the board, especially measured in US dollars but also in terms of the rapidly appreciating euro. In this situation, the world economy really needs what is now forecast for 2008/2009: a significant slowing of economic growth, down to 3.8 percent (year over year) in 2008 from 4.7 percent in 2007. 1 This slowdown will be led by a decline of demand growth in the US economy, which is both pronounced and extends over a considerable period. Indeed, in view of the exceptionally aggressive easing of macroeconomic policies already in place in the United States and the likelihood of monetary policy remaining highly accommodative so long as US financial markets remain under stress, it is now desirable that real GDP growth for 2008 fall to a forecasted rate of barely more than 1 percent (year over year)—an outcome consistent with a very mild and brief recession. Reflecting some risk of a somewhat deeper and more prolonged recession in the United States, the growth forecast for 2009 (year over year) is set at 2 percent.

For the rest of the world, a mild US recession in 2008 will have a modest negative effect on real GDP growth, with more significant impacts in Mexico and Canada. In countries where the slowdown threatens to become excessive and inflation is under control, some easing of monetary and perhaps fiscal policy is both likely and appropriate. More generally, however, it is too soon to call for a general and significant easing of macroeconomic policies. A general slowdown in global economic growth is needed to cool the clearly apparent upsurge in worldwide inflation. Some countries, including Australia, China, and Sweden, have recently tightened monetary policies in efforts to forestall inflation. Other countries, including Canada and the United Kingdom, have eased monetary policies modestly in response to weakening economic growth. Quite appropriately, however, no country has so far followed the lead of the Federal Reserve in aggressive monetary easing. As the custodian of the world's second most important currency, the policy of the European Central Bank (ECB) is particularly noteworthy. Inflation in the euro area is running more than a percentage point above the ECB's announced objective. The euro area economy has recently been growing significantly more rapidly than its potential rate of about 1 1/2 percent. The unemployment rate has fallen half a percentage point below the minimum reached in the last expansion. Key monetary aggregates are surging at rates well above their desired target ranges. In this situation, one would normally have expected the ECB to have raised its key policy interest rate a further 100 basis points since last summer. Instead, with financial turbulence spreading to some extent from the United States to euro area financial markets and institutions, with evidence that euro area economies are beginning to slow, and with a sharp appreciation of the euro against the dollar, which is likely to slow growth and impede inflation, the ECB has wisely held back from further interest rate increases. With the euro area economy now expected to expand by about 1 1/2 percent this year (in line with potential), the timing and direction of future adjustments in ECB interest rates remain— appropriately—dependent upon the evolving balance of risks for inflation and economic growth. For Japan, the strengthening of the yen against the dollar in recent months and weakening of exports to the United States, together with likely weakness in domestic demand growth, suggest a further write-down in the forecast for real GDP growth for 2008 to 1.2 percent (from 1¾ percent forecast last October). This reflects the assumption that the surprising upsurge of GDP growth in the final quarter of 2007 will be partly offset in the first half of this year. For the industrial countries as a group, real GDP growth this year is now forecast to be 1.5 percent, and growth for 2009 is projected to be moderately stronger at about 1.9 percent.

In emerging-market economies, circumstances vary and so do appropriate policies, but the general prospect is for continued quite strong economic growth, despite the slowdown in the industrial countries. Is this "decoupling?" Not really. Mexico, Caribbean and Central American countries, and Asian economies that are particularly dependent on exports to the United States are already feeling and will continue to feel the effects of the US economic slowdown. More broadly, however, strong growth of domestic demand in many emerging-market economies will sustain reasonably strong GDP growth, and rising demand for raw materials by key emerging-market economies, most importantly China, will help keep commodity prices strong and aid growth in other emergingmarket economies. Overall, I forecast that growth for developing and emerging-market economies as a group this year will be about 6 1/2 percent, down from almost a 7 1/2 percent advance in 2007. For 2009, I now project slightly slower growth. The slowdown will be more severe, however, if growth in the industrial countries, especially the United States, turns out to be meaningfully below the present forecast. Exports from emerging-market countries would then be hit in volume terms, and prices of commodity exports could take a serious tumble. Some developing countries, especially among the primary commodity exporters, could face serious economic challenges and potential crises. On this occasion, Arvind Subramanian is available to share his expertise on emerging-market economies, particularly in Asia and especially India. Accordingly, I will limit my remarks on these economies to selected observations on some key emerging-market countries. Then, in view of the departure from the Institute of my colleague Martin Baily and the (at least) temporary absence of Douglas Holtz-Eakin, I will turn to discuss growth prospects in the industrial countries, especially the United States. This should provide background for Morris Goldstein's more in-depth observations on the present financial crisis and proposals for reform. Sustained Growth in Emerging Markets China's economy continues to surge forward, so much so that the authorities are tightening policies to cool down inflation. Growth will likely slow from 11 1/2 percent last year to about 10 percent this year and next. On the policy front, the key action that should be taken—but that the Chinese authorities have so far refused—is a significant step appreciation of the renminbi against the dollar and in real effective terms, combined with policies to stimulate domestic demand. In the rest of emerging Asia, growth will likely moderate somewhat in 2008 and 2009 but stay above 6 percent, with India continuing to grow at nearly 8 percent. In Latin America, Mexico will suffer spillover effects from the slowing US economy, and growth this year is likely to fall to about 2 1/2 percent

before recovering modestly in 2009. In contrast, Brazil should be able to sustain growth of nearly 5 percent, despite the strong appreciation of the real against the dollar. Growth in Argentina and Venezuela is expected to slow from the high rates of recent years, bringing down the growth rate for all of Latin America to about 4 1/2 percent this year and slightly less in 2009. For Central and Eastern Europe, weak growth in Hungary and Turkey hurt regional performance in 2007 and partly offset strong results in Bulgaria, the Czech Republic, Poland, and Slovakia. For 2008 and 2009, regional growth will likely run about 4 percent, reflecting partly the impact of slower growth in Western Europe. In the Commonwealth of Independent States, the dominant Russian economy should continue to grow at about 7 percent, and growth rates will likely remain somewhat higher (on average) in the smaller economies. For the Middle East, high oil prices will help keep growth strong in the energy-exporting countries. The larger and more diversified economies of Egypt and Israel should also maintain growth rates in the 5 percent range. High commodity prices will continue to benefit many African countries, and growth in the region appears likely to continue at least at a 5 percent rate. Slowing in Other Industrial Countries Among the industrial countries other than the United States, growth will slow significantly from the 2 3/4 percent advance of 2007 to barely more than 1 1/2 percent this year. However, aside from the United States, I see significant risk of recession this year only in Japan and possibly Italy. The impact of the yen's recent appreciation and weakening of exports to the United States, together with deteriorating sentiment among Japanese businesses and consumers, could push GDP into a couple of quarters of negative growth, even if year-over-year growth remains slightly positive. And the Japanese policy authorities have little room to provide offsetting stimulus. The second quarter may see moderation in the pace of decline of residential investment, but the other elements of domestic demand are likely to remain weak. Another quarter of modestly negative real GDP growth now seems to be the most likely outcome. Whether this will be enough to persuade the National Bureau of Economic Research (NBER) to proclaim an official recession is not clear, but I would now put the likelihood of such a recession at over 50 percent. By June, the tax cuts from the recently passed fiscal package will be flowing into consumers pockets, bumping up consumer spending mainly in the third quarter. Some, not unreasonable, forecasts suggest that the stimulus could induce as much as a 5 percent annualized gain of real consumer spending in the third quarter, implying a considerable

temporary boost to GDP growth. My view is more restrained, partly because I expect that businesses will absorb some of any surge in consumption spending (particularly for durables) into reductions in inventories. On the other hand, businesses have kept inventories quite lean for the past three years, and there is no indication of a general inventory overhang (aside from the stockpile of unsold homes, which is not counted in business inventories). Sharp declines of inventory investment into negative territory have been a feature of all ten postwar recessions. It is a positive sign that the magnitude of any inventory correction in the present episode appears likely to be limited. In sum, the prospect is that with the benefit of the fiscal stimulus, the US economy will bounce back to moderately positive growth this summer. By then the massive contraction of residential investment, which began two years ago, should be complete—with new home building running just below one million units, less than half of its recent peak level. Growth of consumer spending is likely to be weak after the effects of the stimulus are spent, but inventory investment should bounce back, and net exports may be expected to continue to make positive contributions to GDP growth. During the second half of 2008, it is reasonable to expect growth to rebound to 2 to 3 percent. The suggested pattern of modestly falling GDP in the first half and moderate rebound in the second half implies that real GDP will show a very meager advance of about one-half percent on a fourth-quarter-tofourth-quarter basis. Year-over-year real GDP growth would be barely more than 1 percent. In comparison, in the 2001 recession—the mildest of the postwar era—fourth-quarter-to-fourth-quarter growth was 0.4 percent and year-over-year growth was 0.8 percent. The 2001 recession was followed by an initially weak recovery, with real GDP growing at only a 1.7 percent rate during the six quarters after the official end of recession, and with the unemployment rate continuing to rise to a peak of 6.3 percent in May 2003. On this occasion, I expect that the economy will remain quite sluggish through 2009, with growth proceeding at about a 2 percent annual rate. Weak growth of consumer spending in the face of significant losses of household net worth associated with lower real home values will be the key reason for this sluggishness.

Q2. Will culture be eroded in the wake of globalization? Ans.:
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. Cultural change, convergence and divergence in an era of partial globalization An issue of considerable theoretical significance is concerned with cultural changes and transformations taking place in different parts of the world. In fact, since the landmark study of Haire et al. (1966) and the publication of Industrialism and Industrial Man by Kerr et al. (1960), researchers have continued to search for similarities in culture-specific beliefs and attitudes in various aspects of work related attitudes and behaviours, consumption patterns, and the like. If cultures of the various locales of the world are indeed converging (e.g., Heuer et al., 1999), IB-related practices would indeed become increasingly similar. Standard, culture-free business practices would eventually emerge, and inefficiencies and complexities associated with divergent beliefs and practices in the past era would disappear. In the following section, we review the evidence on the issue and conclude that such an outlook pertaining to the convergence of various IB practices is overly optimistic. Evolution of partial globalization Globalization refers to a ‘growing economic interdependence among countries, as reflected in the increased cross-border flow of three types of entities: goods and services, capital, and know-how’ (Govindarajan and Gupta, 2001, 4). Few spoke of ‘world economy’ 25 years ago, and the prevalent term was ‘international trade’ (Drucker, 1995). However today, international trade has culminated in the emergence of a global economy, consisting of flows of information, technology, money, and people, and is conducted via government international organizations such as the North American Free Trade Agreement (NAFTA) and the European Community; global organizations such as the International Organization for Standardization (ISO); multinational companies (MNCs); and cross – border alliances in the form of joint ventures, international mergers, and acquisitions. These inter – relationships have enhanced participation in the world economy, and have become a key to domestic economic growth and prosperity. Yet, globalization is not without its misgivings and discontents. A vivid image associated with the G8 summits is the fervent protests against globalization in many parts of the world, as shown in television and

reported in the popular media. Strong opposition to globalization usually originates from developing countries that have been hurt by the destabilizing effects of globalization, but in recent times we have also seen heated debates in Western economies triggered by significant loss of professional jobs as a result of off shoring to low – wage countries. Indeed, workers in manufacturing and farming in advanced economies are becoming increasingly wary of globalization, as their income continues to decline significantly. In parallel to the angry protests against globalization, the flow of goods, services, and investments across national borders has continued to fall after the rapid gains of the 1990s. Furthermore, the creation of regional trade blocs, such as NAFTA, the European Union, and the Association of Southeast Asian Nations, have stimulated discussions about creating other trade zones involving countries in South Asia, Africa, and other parts of the world. Although it is often assumed that countries belonging to the World Trade Organization (WTO) have embraced globalization, the fact is that the world is only partially globalized, at best .Many parts of Central Asia and Eastern Europe, including the former republics of the Soviet Union, parts of Latin America, Africa, and parts of South Asia, have been sceptical of globalization (Greider, 1997). In fact, less than 10% of the world’s population is fully globalized (i.e., being active participants in the consumption of global products and services) (Schaeffer, 2003). Therefore, it is imperative that we analyze the issues of cultural convergence and divergence in this partially globalized world. ‘Universal culture’ often refers to the assumptions, values, and practices of people in the West and some elites in non-Western cultures. Huntington (1996) suggested that it originates from the intellectual elites from a selected group of countries who meet annually in the World Economic Forum in Davos, Switzerland. These individuals are highly educated, work with symbols and numbers, are fluent in English, are extensively involved with international commitments, and travel frequently outside their country. They share the cultural value of individualism, and believe strongly in market economics and political democracy. Although those belonging to the Davos group control virtually all of the world’s important international institutions, many of the world’s governments, and a great majority of the world’s economic and military capabilities, the cultural values of the Davos group are probably embraced by only a small fraction of the six billion people of the world. Popular culture, again mostly Western European and American in origin, also contributes to a convergence of consumption patterns and leisure activities around the world. However, the convergence may be superficial, and have only a small influence on fundamental issues such as beliefs, norms, and ideas about how individuals, groups, institutions, and other important social agencies ought to function. In fact, Huntington (1996, 58) noted that ‘The essence of Western civilization is the Magna Carta, not the Magna Mac. The fact that non-Westerners may bite into the latter has no implications for their accepting the former’. This argument is obvious if we reverse the typical situation and put Western Europeans and Americans in

the shoes of recipients of cultural influence. For instance, while Chinese Kung Fu dominates fight scenes in Hollywood movies such as Matrix Reloaded, and Chinese restaurants abound in the West, it seems implausible that Americans and Europeans have espoused more Chinese values because of their fondness of Chinese Kung Fu and food. A major argument against cultural convergence is that traditionalism and modernity may be unrelated (Smith and Bond, 1998). Strong traditional values, such as group solidarity, interpersonal harmony, paternalism, and feminism, can co-exist with modern values of individual achievement and competition. A case in point is the findings that Chinese in Singapore and China indeed endorsed both traditional and modern values (Chang et al., 2003; Zhang et al., 2003). It is also conceivable that, just as we talk about Westernization of cultural values around the world, we may also talk about Easternization of values in response to forces of modernity and consumption values imposed by globalization (Marsella and Choi, 1993). Although the argument that the world is becoming one culture seems untenable, there are some areas that do show signs of convergence. We explore in the following the roles of several factors that simultaneously cause cultures of the world to either converge or diverge, in an attempt to identify several productive avenues for future research. Role of multiculturalism and cultural identity The broad ideological framework of a country, corporation, or situation is the most important determinant of the cultural identity that people develop in a given locale (Triandis, 1994). The ‘melting pot’ ideology suggests that each cultural group loses some of its dominant characteristics in order to become the mainstream: this is assimilation, or what Triandis (1994) calls subtractive multiculturalism. In contrast, when people from a cultural group add appropriate skills and characteristics of other groups, it may be called integration, or additive multiculturalism. Both of these processes are essential for cultural convergence to proceed. However, if there is a significant history of conflict between the cultural groups, it is hard to initiate these processes, as in the case of Israelis and Palestinians. In general, although there has been some research on the typology of animosity against other nations (e.g., Jung et al., 2002), we do not know much about how emotional antagonism against other cultural groups affects trade patterns and intercultural cooperation in a business context. The issues of cultural identity and emotional reactions to other cultural groups in an IB context constitute a significant gap in our research effort in this area. Implications of convergence and divergence issues One message is clear: while convergence in some domains of IB activity is easily noticeable, especially in consumer values and lifestyles, significant divergence of cultures persists. In fact, Hofstede (2001) asserts that mental programs of people around the world do not change rapidly, but remain rather consistent over time. His findings indicate that cultural

shifts are relative as opposed to absolute. Although clusters of some countries in given geographical locales (e.g., Argentina, Brazil, Chile) might indicate significant culture shifts towards embracing Anglo values, the changes do not diminish the absolute differences between such countries and those of the Anglo countries (i.e., US, Canada, UK). Huntington, in his ‘The Clash of Civilizations’ (1996), presents the view that there is indeed a resurgence of non-Western cultures around the world, which could result in the redistribution of national power in the conduct of international affairs. The attempt by the Davos group to bring about uniform practices in various aspects of IB and work culture, thereby sustaining the forces of globalization, is certainly worthwhile. However, our analysis suggests that there is no guarantee that such convergence will come about easily, or without long periods of resistance. IB scholars need to understand that although some countries might exhibit strong tendencies toward cultural convergence, as is found in Western countries, there are countries that will reject globalization, not only because of its adverse economic impacts (Greider, 1997) but also because globalization tends to introduce distortions (in their view) in profound cultural syndromes that characterize their national character. Furthermore, reactions to globalization may take other forms. Bhagat et al. (2003) have recently argued that adaptation is another approach that could characterize the tendencies of some cultures in the face of mounting pressures to globalize. Other approaches are rejection, creative synthesis, and innovation (Bhagat et al., 2003). These different approaches highlight once again the complex dynamics that underlie cultural convergence and divergence in a partially globalized world. Also, in discussing issues of convergence and divergence, it is necessary to recognize that the shift in values is not always from Western society to others, but can result in the change of Western cultural values as well. For example, the emphasis on quality and teamwork in the West is partly a result of the popularity of Japanese management two decades ago. Scholars of IB should recognize that the issue of convergence and divergence in this era of partial globalization will remain as a persistent and complex issue whose direction might only be assessed on a regionby-region basis. It is also wise to adopt an interdisciplinary perspective in understanding the forces that create both convergence and divergence of cultures in different parts of the world. For instance, in Understanding Globalization, Schaeffer (2003) has provided an insightful discussion of the social consequences of political, economic and other changes, which have significant implications for IB. The cause-effect relationships of globalization and its various outcomes, especially the cultural outcomes, are not only characterized by bi-directional arrows, but are embedded in a complex web of relationships. How these complex relationships and processes play out on the stage of IB remains to be uncovered by IB researchers.

Processes of cultural changes In the previous section, we make the point that, through the process of globalization, cultures influence each other and change, but whether or not these changes will bring about cultural convergence is yet to be seen. In this section, we delineate a general model that describes and explains the complex processes underlying cultural changes. As explained before, IB is both an agent and a recipient of cultural change, and for international business to flourish it is important to understand its complex, reciprocal relationships with cultural change. In line with the view of Hofstede (2001) that culture changes very slowly, culture has been treated as a relatively stable characteristic, reflecting a shared knowledge structure that attenuates variability in values, behavioral norms, and patterns of behaviors (Erez and Earley, 1993). Cultural stability helps to reduce ambiguity, and leads to more control over expected behavioural outcomes (Weick and Quinn, 1999; Leana and Barry, 2000). For instance, most existing models of culture and work behaviour assume cultural stability and emphasize the fit between a given culture and certain managerial and motivational practices (Erez and Earley, 1993). High fit means high adaptation of managerial practices to a given culture and, therefore, high effectiveness. The assumption of cultural stability is valid as long as there are no environmental changes that precipitate adaptation and cultural change. Yet, the end of the 20 th century and the beginning of the new millennium have been characterized by turbulent political and economical changes, which instigate cultural changes. In line with this argument, Lewin and Kim (2004), in their comprehensive chapter on adaptation and selection in strategy and change, distinguished between theories driven by the underlying assumption that adaptation is the mechanism to cope with change, and theories driven by the underlying assumption of selection and the survival of the fittest, suggesting that ineffective forms of organization disappear, and new forms emerge. However, although organizational changes as a reaction to environmental changes have been subjected to considerable conceptual analyses, the issue of cultural change at the national level has rarely been addressed. There are relatively few theories of culture that pertain to the dynamic aspect of culture. One exception is the eco-cultural model by Berry et al. (2002), which views culture as evolving adaptations to ecological and socio-political influences, and views individual psychological characteristics in a population as adaptive to their cultural context, as well as to the broader ecological and socio-political influences. Similarly, Kitayama (2002) proposes a system view to understanding the dynamic nature of culture, as opposed to the entity view that sees culture as a static entity. This system view suggests that each person’s psychological processes are organized through the active effort to coordinate one’s behaviours with the pertinent cultural systems of practices and public

meanings. Yet, concurrently, many aspects of the psychological systems develop rather flexibly as they are attuned to the surrounding sociocultural environment, and are likely to be configured in different ways across different socio-cultural groups. These adaptive views of culture are supported by empirical evidence. For example, Van de Vliert et al. (1999) identified curvilinear relationships between temperature, masculinity and domestic political violence across 53 countries. Their findings showed that masculinity and domestic violence are higher in moderately warm countries than in countries with extreme temperatures. Inglehart and Baker (2000) examined cultural change as reflected by changes in basic values in three waves of the World Values Surveys, which included 65 societies and 75% of the world’s population. Their analysis showed that economic development was associated with shifts away from traditional norms and values toward values that are increasingly rational, tolerant, trusting, and participatory. However, the data also showed that the broad cultural heritage of a society, whether it is Protestant, Roman Catholic, Orthodox, Confucian, or Communist, leaves an enduring imprint on traditional values despite the forces of modernization. The process of globalization described before has introduced the most significant change in IB, with its effects filtering down to the national, organizational, group and individual levels. Reciprocally, changes at micro-levels of culture, when shared by the members of the society, culminate into macro level phenomena and change the macro-levels of culture.

Q3. ‘A world wide standardization is a major issue in the wake of globalization’ Discuss.
Ans.: With start-ups going global earlier than ever before, companies are rethinking management of their international operations. In particular, they are giving special consideration to localization, the process of translating text and reengineering software components of a particular product to operate in other languages. As demand for localized products increases, everyone from established multinational technology vendors, to consumer electronics companies, and small start-ups are reviewing their internal product globalization processes. They are finding that localization projects are fragmented and dispersed throughout the organization and that activities are inconsistent, unresponsive and unwieldy. As a result, international roll-outs are delayed, and revenues are unpredictable. Overall globalization strategy should include a repeatable globalization methodology, independent of target language that becomes part of the product release cycle.

In fact, one software company estimates that today about 20 percent of all computer documentation is now translated into 30 languages, but by 2005, the figure will be 60 percent in 80 languages. As demand for localized products increases, everyone from established multinational technology vendors, to consumer electronics companies, and small start-ups are reviewing their internal product globalization processes. They are finding that localization projects are fragmented and dispersed throughout the organization and that activities are inconsistent, unresponsive and unwieldy. As a result, international rollouts are delayed, and revenues are unpredictable. In the software industry, "simultaneous worldwide release" has become a mantra to keep increasingly Internet-enabled consumers buying. In the recreational products industry, companies want a "global brand" and position, regardless of local eccentricities. Instituting a consistent, dependable localization methodology is a sure-fire way to maintain high global standards for product introductions and continued high levels of product service. Whether outsourcing, vending, or managing the process internally, leading companies are consolidating their previously disparate localization activities into one coordinated process with a senior management sponsor. They are reaping paybacks in lower costs, higher velocity, and sustainable quality. Successful global companies have recognized the need for localized product user interfaces. They know that the days are gone when Americans heavy manufactured exports only needed their "on-off" switch translated into different languages. With software and semiconductors permeating everything from PCs to refrigerators to automobiles, companies must adopt more pervasive product localization programs than ever before. For instance, a 1998 sports utility vehicle has more computing power than the original PC. As a result, dashboard displays, controls, brochures and the traditional glove box material all constitute part of the "user interface." The challenge for automotive manufacturers is to break the localization activities for each of these parts away from their production or functional operating groups, and centralize localization in order to achieve consistent terminology and an even "look and feel" for the product. By internationalizing products at the design phase, companies can communicate the need for consistent standardization to their R& D organization, development partners, and subcontractors. Engineers can design everything from product screens, to help files, and systems diagnostics to be double byte enabled in order to accommodate the extra space needs of Asian characters. This will ensure speedy product

deployment for that "big Asian order" without expensive and episodic internationalization campaigns. Product globalization also includes every step in the sales channel. This means that both hard copy and on-line versions of sales, dealer and service/support materials will contribute to the "feel" of your corporation and reinforce the "ethic" of your product. This attention also ensures consistent terminology, which reinforces the verbal "identity" of the company, throughout the book-to-deliver process. Since the purchase and delivery process constitutes an increasingly large percentage of a product’s perceived value, a consistent channel experience will directly affect product pricing leverage and after-sale customer satisfaction. When a company decides to open a direct office or establish new market segments, the worst case scenario is the discovery that its individual distributors now "own" the localized version. Equally disconcerting is a localized product that is undocumented, inconsistent and imprecise. Distributors’ efforts are nearly always under-managed, which results in variations from release to release, a tarnished image and uncoordinated release dates from country to country. Altogether, these drawbacks will undermine a corporate globalization focus. By centralizing localization activities, a company can avoid the confusion that results when individual distributors try to localize a product on a site-by-site basis.

Q4. How has WTO benefitted economies? Discuss briefly
Ans.:  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. Peace is partly an outcome of two of the most fundamental principles of the trading system: helping trade to flow smoothly and providing countries with a constructive and fair outlet for dealing with disputes over trade issues. It is also an outcome of the international confidence and cooperation that the system creates and reinforces. History is littered with examples of trade disputes turning into war. One of the most vivid is the trade war of the 1930s when countries competed to raise trade barriers in order to protect domestic producers and retaliate against each others’ barriers. This worsened the Great Depression and eventually played a part in the outbreak of World War 2. Two developments immediately after the Second World War helped to avoid a repeat of the pre-war trade tensions. In Europe, international cooperation developed in coal, and in iron and steel. Globally, the General Agreement on Tariffs and Trade (GATT) was created. Both have proved successful, so much so that they are now considerably expanded – one has become the European Union, the other the World Trade Organization (WTO). The WTO trading system plays a vital role in creating and reinforcing that confidence. Particularly important are negotiations that lead to agreement by consensus and a focus on abiding by the rules.  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. There could be a down side to trade liberalization and expansion. More trade means more possibilities for disputes to arise. Left to themselves, those disputes could lead to serious conflict. But in reality, a lot of international trade tension is reduced because countries can turn to organizations, in particular the WTO, to settle their trade disputes. Before World War 2 that option was not available. After the war, the world’s community of trading nations negotiated trade rules which are now entrusted to the WTO. Those rules include an obligation for members to bring their disputes to the WTO and not to act unilaterally. When they bring disputes to the WTO, the WTO’s procedure focuses their attention on the rules. Once a ruling has been made, countries concentrate on trying to comply with the rules, and perhaps later renegotiating the rules – not on declaring war on each other.

Around 300 disputes have been brought to the WTO since it was set up in 1995. Without a means of tackling these constructively and harmoniously, some could have led to more serious political conflict. The fact that the disputes are based on WTO agreements means that there is a clear basis for judging who is right or wrong. Once the judgement has been made, the agreements provide the focus for any further actions that need to be taken. The increasing number of disputes brought to GATT and its successor, the WTO, does not reflect increasing tension in the world. Rather, it reflects the closer economic ties throughout the world, the GATT/WTO’s expanding membership and the fact that countries have faith in the system to solve their differences. Sometimes the exchanges between the countries in conflict can be acrimonious, but they always aim to conform to the agreements and commitments that they themselves negotiated.  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 Decisions in the WTO are made by consensus. The WTO agreements were negotiated by all members, were approved by consensus and were ratified in all members’ parliaments. The agreements apply to everyone. Rich and poor countries alike have an equal right to challenge each other in the WTO’s dispute settlement procedures. This makes life easier for all, in several different ways. Smaller countries can enjoy some increased bargaining power. Without a multilateral regime such as the WTO’s system, the more powerful countries would be freer to impose their will unilaterally on their smaller trading partners. Smaller countries would have to deal with each of the major economic powers individually, and would be much less able to resist unwanted pressure. In addition, smaller countries can perform more effectively if they make use of the opportunities to form alliances and to pool resources. Several are already doing this. There are matching benefits for larger countries. The major economic powers can use the single forum of the WTO to negotiate with all or most of their trading partners at the same time. This makes life much simpler for the bigger trading countries. The alternative would be continuous and complicated bilateral negotiations with dozens of countries simultaneously. And each country could end up with different conditions

for trading with each of its trading partners, making life extremely complicated for its importers and exporters. The principle of non-discrimination built into the WTO agreements avoids that complexity. The fact that there is a single set of rules applying to all members greatly simplifies the entire trade regime. And these agreed rules give governments a clearer view of which trade policies are acceptable.  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. Protectionism is expensive: it raises prices. The WTO’s global system lowers trade barriers through negotiation and applies the principle of nondiscrimination. The result is reduced costs of production (because imports used in production are cheaper) and reduced prices of finished goods and services, and ultimately a lower cost of living.  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. Think also of the things people in other countries can have because they buy exports from us and elsewhere. Look around and consider all the things that would disappear if all our imports were taken away from us. Imports allow us more choice – both more goods and services to choose from, and a wider range of qualities. Even the quality of locally – produced goods can improve because of the competition from imports. The wider choice isn’t simply a question of consumers buying foreign finished products. Imports are used as materials, components and equipment for local production. This expands the range of final products and services that are made by domestic producers, and it increases the range of technologies they can use. When mobile telephone equipment became available, services sprang up even in the countries that did not make the equipment, for example. Sometimes, the success of an imported product or service on the domestic market can also encourage new local producers to compete, increasing the choice of brands available to consumers as well as increasing the range of goods and services produced locally.

If trade allows us to import more, it also allows others to buy more of our exports. It increases our incomes, providing us with the means of enjoying the increased choice.  Trade raises incomes Lowering trade barriers allows trade to increase, which adds to incomes – national incomes and personal incomes. But some adjustment is necessary. The WTO’s own estimates for the impact of the 1994 Uruguay Round trade deal were between $109 billion and $510 billion added to world income (depending on the assumptions of the calculations and allowing for margins of error). More recent research has produced similar figures. Economists estimate that cutting trade barriers in agriculture, manufacturing and services by one third would boost the world economy by $613 billion – equivalent to adding an economy the size of Canada to the world economy. In Europe, the EU Commission calculates that over 1989 – 93 EU incomes increased by 1.1–1.5% more than they would have done without the Single Market. So trade clearly boosts incomes.Trade also poses challenges as domestic producers face competition from imports. But the fact that there is additional income means that resources are available for governments to redistribute the benefits from those who gain the most – for example to help companies and workers adapt by becoming more productive and competitive in what they were already doing, or by switching to new activities.  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. This is a difficult subject to tackle in simple terms. There is strong evidence that trade boosts economic growth, and that economic growth means more jobs. It is also true that some jobs are lost even when trade is expanding. But a reliable analysis of this poses at least two problems.  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. Trade allows a division of labour between countries. It allows resources to be used more appropriately and effectively for production. But the WTO’s trading system offers more than that. It helps to increase efficiency and to cut costs even more because of important principles enshrined in the system. Imagine a situation where each country sets different rules and different customs duty rates for imports coming from different trading partners. Imagine that a company in one country wants to import raw materials or components – copper for wiring or printed circuit boards for electrical goods, for example – for its own production. It would not be enough for this company to look at the prices offered by suppliers around the world. The company would also have to make separate calculations about the different duty rates it would be charged on the imports (which would depend on where the imports came from), and it would have to study each of the regulations that apply to products from each country. Buying some copper or circuit boards would become very complicated.  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 One of the lessons of the protectionism that dominated the early decades of the 20th Century was the damage that can be caused if narrow sectoral interests gain an unbalanced share of political influence. The result was increasingly restrictive policy which turned into a trade war that no one won and everyone lost. Superficially, restricting imports looks like an effective way of supporting an economic sector. But it biases the economy against other sectors which shouldn’t be penalized – if you protect your clothing industry, everyone else has to pay for more expensive clothes, which puts pressure on wages in all sectors, for example. Protectionism can also escalate as other countries retaliate by raising their own trade barriers. That’s exactly what happened in the 1920s and 30s with disastrous effects. Even the sectors demanding protection ended up losing.

Governments need to be armed against pressure from narrow interest groups, and the WTO system can help. The GATT – WTO system covers a wide range of sectors. So, if during a GATT – WTO trade negotiation one pressure group lobbies its government to be considered as a special case in need of protection, the government can reject the protectionist pressure by arguing that it needs a broadranging agreement that will benefit all sectors of the economy. Governments do just that, regularly.  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. The rules include commitments not to backslide into unwise policies. Protectionism in general is unwise because of the damage it causes domestically and internationally, as we have already seen.

Q5. Show your understanding of regional economic integration. Ans.:
Regional integration can take many forms, and nowhere is this more evident than in the vastly different integration processes taking place in the regions of Europe and East Asia. The subject of this paper is regional integration as it has developed in East Asia with a focus on the drivers of that integration. While the paper is not intended as a direct comparison of integration in East Asia and Europe, it will include some comparisons between the two regions. Integration in East Asia has progressed very slowly and is still in an early stage despite that the process has continued for decades. In fact, it could be said that the process began centuries ago – even as far back as the 15th century. By comparison, European integration has progressed steadily and has gradually deepened over the last 50 years to reach an advanced stage today with a common currency and well-developed regional institutions. Thus, the speed of progression and the level of integration attained in the two regions are quite dissimilar.

In addition to these differences, the drivers behind the integration process in each region are different. In Europe, the origins of integration have been institutional in nature, and the development of institutions has been prominent throughout the process. Thus, regional institutions have been the driving force behind integration in Europe. In East Asia, the development of regional institutions has also occurred; however, progress in this area has been slow and the few existing institutions are fairly weak and ineffective. Nevertheless, regional integration is taking place in East Asia, but the driving force is the market rather than policy or institutions. Corporations and the production networks they have established are driving integration in East Asia. Until 1917 the Grand Duchy of Finland enjoyed a privileged position as a relatively advanced part of the Russian Empire, supplying metal products and ships in exchange for agricultural goods. These ties collapsed, however, when political tensions between the Bolshevik regime and the Finnish Republic precluded commercial agreements. The interwar pattern was reversed in the years following World War II, as reparations payments and barter trade grew into a close trading relationship in which Finland exported industrial goods, especially capital goods, in exchange for raw materials and fuels – an arrangement roughly parallel to that which had existed before 1917. Starting in the late 1950s, however, Finland broke away from its dependence on the Soviet market, successfully opening its economy to the two West European trading blocks, the European Economic Community (EEC – see Glossary) and the European Free Trade Association (EFTA – see Glossary). Expanded trade with the West did not imply renunciation of profitable exchanges with the East, however, because Finnish commercial ties with the Soviet Union and with the other members of the Council for Mutual Economic Assistance (CMEA, CEMA, or Comecon – see Glossary) deepened after 1960. By the late 1980s, Finland provided a unique example of a neutral country with a free-market economy that had developed increasing economic interdependence with both the market economies of Western Europe and the planned economies of Eastern Europe. Although many Western observers saw in Finnish foreign economic policy the dominance of security concerns over economic interests, close inspection revealed a mixture of motives. The guiding principles of postwar foreign policy – Finland’s need to assure the Soviet Union that it did not have to fear threats from (or through) Finnish territory as well as Finland’s practice of active neutrality – influenced trade policies toward the East, especially in the immediate postwar years. Such concerns blocked Finnish participation in the Marshall Plan and in the Organization for European Economic Co-operation (OEEC), which was established to coordinate the use of Marshall Plan aid Trade with the East also served important economic interests, however, driving the rapid development of the metalworking industries during the 1950s and helping to absorb labor

released from the modernizing farm sector. In the years after the 1973 oil crisis, Finnish exports to the Soviet Union also provided an essential market at a time of recession in Western markets. Commentators suggested that by the 1980s, the Finns, less concerned with security than they had been in the early postwar years, based policy decisions almost exclusively on market considerations.

Q6. Describe the current issues in globalization Ans.:
Nonfarm payrolls increased by 169,000 in March led by temporary and health services, as well as federal employment related to the 2010 Census. The Household Survey still was showing unemployment unchanged at 15 million, with 44% having been jobless for 27 weeks or more. The official rate of unemplyment remains at 9.7%.

The Bureau of Economic Analysis (BEA) early estimate that the GDP grew in Q4 of 2009 by 5.7% was, on February 26th, revised up to 5.9% and, as we expected, revised down to 5.6% on March 26th. We expected it to be a much lower figure. BEA admits that most of the increase was due to additional building of inventories and deceleration of imports. My interview on Jan. 31, 2010, with John Williams, pre-eminent expert on deconstructing US official statistics at confirmed my distrust of this revised Q4 2009 GDP-growth of 5.9%. Williams agrees with us that "GDP is the worst quality information from the US government." The inventory buildup accounts for over 3.6% of that 5.9% GDP-growth estimate; 1.5% as an over-statement of the Personal Consumption Expenditure which GDP states as up by 2% and another .5% as related to the actual widening of the overall trade deficit – even though BEA emphasized that the deceleration of imports is accounted for as part of its rise of 5.9% in GDP. The non-farm payroll jobs lost in February were 36,000, leaving the number of unemployed persons at 14.9 million and the official unemployment rate at 9.7%. Since the start of the recession in December 2007, payroll jobs have fallen by 8.4 million. Discouraged workers bring the total unemployment rate to approximately 16.8%. Many economic reports indicate that the US recovery was illusory .I have long explored the entire range of distortions that make GDP a perverse measure of US progress, and TIME's article agrees, pointing to our Calvert-Henderson Quality of Life Indicators and others including the United Nations Human Development Index (HDI). At last, better measures of human progress are gaining mainstream media attention: the excellent Canadian Index of Wellbeing (CIW) at and the new report by British researchers Richard Wilkinson and Kate Pickett linking equality with quality of life within and across countries. They find that countries with the most equal income distribution (by GINI) have the largest socially and politically prosperous middle class while unequal countries do worse on most quality of life indicators ( The USA scores poorly and confirms John Williams' and our view that a massive overhaul of GDP, unemployment, inflation, money supply and other US statistics is now urgent if we are to address the need for more jobs. Why has the weak US recovery produced so few jobs? Companies, big and small are not hiring, as January 2010's revised job losses of another 26,000 were reported by the BLS, after December's revised losses of another 104,000. This BLS "Establishment Survey" differed from the broader "Household Survey" which recorded the civilian labor force dropped in January by 661,000, due to small companies failing or unable to obtain financing, which the Establishment Survey cannot detect. For 20 years, I have pointed to reasons the USA has experienced "jobless growth" - rooted in the abstractions of macroeconomics theories and methods. The faith in "free trade" has prevented government agencies from making use of futurists' broader forecasting and planning methods used by most global corporations. Their economic advisors' market

fundamentalism warned against "industrial policy" except for that covertly practiced by the Department of Defense and activities in the name of "national security." Thus, the "hollowing out" of US manufacturing has continued for two decades at the behest of global corporations and their investment bankers. President Bush I famously held that it did not matter whether the US manufactured computer chips or potato chips, while President Bush II's chair of the Council of Economic Advisors, Gregory Mankin, maintained that outsourcing was good for American workers who could take their severance pay and 401Ks and become day traders on the stock markets. Add to these idiocies the stout denials by economists that increasing capital-intensive technological change, automating manufacturing and services would create the structural unemployment we see today. Conventional measures of output per capita masked this technological unemployment as beneficial "increases in productivity" for decades, as we have pointed out. Unfortunately, Obama administration economic advisors are mostly steeped in conventional theories and models which continue to serve Wall Street and corporate interests at the expense of workers and individuals Much of the US GDP increase in 2009 was due to "cash for clunkers" and the $8,000 offered to first-time homebuyers. February 2010's job losses of another 36,000 kept the official unemployment rate 9.7%, still the highest since April 1983. Adding "discouraged" and "part-timers" still makes the total 16.8%. Although the recession is deemed officially ended, any recovery will be fragile until job creation picks up. This may not get big banks to step up lending to domestic companies since they make more money with proprietary trading, hoarding their bailout funds or sending them offshore. The good news of the 4th quarter’s GDP uptick must be seen in the context of four successive quarters of negative growth. These numbers underline what most Americans have experienced for the past years, along with the loss of over 8.4 million jobs since December 2007. States facing their new fiscal year are wrestling with budget shortfalls with California's at $24 billion, while Illinois and Arizona have much smaller deficits. North Dakota still stars with continuing budget surpluses, as we discuss later. Trickle down economics of bailing out Wall Street is colliding with the bottom-up demands of middle class voters for fairness, accountability and transparency. It's about time for this debate and the deeper debate about whether money is more important than the other forms of wealth that GDP counts and why Wall Street doesn't count: human "capital," knowledge, ecological assets and productivity. President Obama campaigned for recognition of these uncounted forms of wealth and of the higher values of Americans: trust in each other and our institutions and fairness in rewarding hard work in an economy designed to include opportunities for a better future for all. Many new investors see these opportunities, as I describe in "The New Financiers."

Now for the good news. The confluence of the financial meltdown and increasing threats to climate stability are leading to much creativity by these new financiers in devising new ways of investing in the needed global transition to a low carbon "re-industrialization." The weakness of the Waxman-Markey energy bill passed in the US Congress by 7 votes focused the critiques of its reliance on Wall Street-centric cap and trade markets which have so far failed to reduce carbon emissions. This rapid deployment of solar, wind, geothermal, ocean power sources as well as retro fitting for maximum energy efficiency over 10 years is projected to cost $10 trillion. This can be covered by issuance of several classes of new assets: long-bonds, zero coupon bonds, with hedging against the main risk: governments back-sliding on their greenhouse gas emissions targets under the Kyoto Protocol. While this seems like a large sum, it is less than 10% of the $120 trillion in pension funds and other institutional portfolios. Since pension funds and other government bonds focus on long maturities, they are ideally suited to finance climate prosperity bonds out of the savings they will produce: from energy efficiency and in reducing the cost of renewable energy (with free fuel sources from the Earth) over the costs of fossil fuels (projected to keep slowly rising). More good news is the collapse of gas prices due to the availability of gas deposits in shale in the USA and other countries. This allows coal-fired power plants to replace coal with cheaper natural gas for base loads as well as peak power. Thus, many coal-fired plants may be retired and few will now be built. Business leaders met in Copenhagen in May 2009 to address climate risks in their companies' fossil-fueled processes and agreed that the opportunities in shifting to a green, solar, wind, geothermal, ocean and energy-efficient global economy were enormous. The 700 business leaders participating in the meeting declared that immediate action would be cheaper than any further delays. While 193 governments failed to agree at the UN Conference in Climate in Copenhagen in December 2009, investments in low-carbon technology sectors continue to grow. The key will be to keep pressure on governments to stop back-sliding and pandering to the fossil-fueled industry sectors with toothless cap and trading which will only make Wall Street players richer. Downsizing bloated financial sectors will be imperative. Those on Wall Street and in London grew to 25% of U.S. and U.K. GDP. An efficient financial sector should be less than 10% of a country's GDP. Yet Washington has still to follow through with vital reforms, while Britain's head of their Financial Services Authority agrees that financial sectors must be downsized and recommended a tax on financial transactions. Debate is growing that such a tax is the best way to assess Wall Street for its cleanup costs – rather than taxpayers.

So today's GDP figures still force us to re-examine our rearview-mirror focus on the costly past and reformulate statistics themselves which only measure money transactions. They overlook the savings in shifting to the new green economy and the vast riches in our society from energyefficiency while ignoring the almost 50% of all productive work that is unpaid and therefore omitted from GDP. From caring for our homes, children, the elderly and sick and volunteering in our communities to exchanging and bartering goods and services, this vast unpaid "love economy" is thriving and increasingly electronically traded on e-Bay, Craigslist, Freecycle, time-banking and hundreds of other websites, flea markets and on radio programs and via cell phones. My monograph with physicist Fritjof Capra, "Qualitative Growth," published by Britain's Society of Chartered Accountants and Tomorrow's Company, was launched in the House of Lords in Britain's Parliament in November, 2009, co-sponsored by WWF, the World Wildlife Fund. President Obama's team includes Google CEO Eric Schmidt who understands the transition to the green economy and sees all the new possibilities in this explosion of internet and community trading such as Making Change Without Money, the title of a new series of papers by Gwendolyn Hallsmith and Edgar Cahn, both pioneer community organizers. I have been pointing to all these alternatives to governmentprinted money as well as all the local currencies helping to clear local markets: e.g., the Schumacher Society's Berkshares in Massachusetts and time-based currencies based on Paul Glover's Ithaca Hours China devised its own changes to GDP accounting to subtract pollution and resource depletion (The Economist, "Greening of China," Oct 22, 2005, p. 43). This "Green GDP" deducted 3% of environmental costs of the current GNP-growth economic model according to a Task Force Interim Report (2007). However, local officials still judged by GDP-growth managed to suspend the Green GDP. As China's pollution is now visible on TV worldwide, after the Olympic Games, we believe the Green GDP will be reinstated. The British government report by Sir Nicholas Stern, the former chief economist of the World Bank, states that stabilizing CO2 emissions at 550 parts per million could cost one percent of global GDP growth and would prevent a likely global depression and economic losses of from 5-20% of global GDP (Financial Times, Oct 20, 2006). China is moving rapidly to create its own green economy and is already the world's largest producer of solar panels, a leader in wind power and has the first plug-in hybrid car on sale now which will reach the US market in 2010 costing $22,000

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