What is International Business?

Meaning
Ans: International Business conducts business transactions all over the world. These
transactions include the transfer of goods, services, technology, managerial knowledge, and
capital to other countries. International business involves exports and imports.
International Business is also known, called or referred as a Global Business or
an International Marketing.
An international business has many options for doing business, it includes,
1. Exporting goods and services.
2. Giving license to produce goods in the host country.
3. Starting a joint venture with a company.
4. Opening a branch for producing & distributing goods in the host country.
5. Providing managerial services to companies in the host country.

Features of International Business

Ans:The nature and characteristics or features of international business are:-

1. Large scale operations : In international business, all the operations are conducted on
a very huge scale. Production and marketing activities are conducted on a large scale.
It first sells its goods in the local market. Then the surplus goods are exported.
2. Intergration of economies : International business integrates (combines) the
economies of many countries. This is because it uses finance from one country, labour
from another country, and infrastructure from another country. It designs the product
in one country, produces its parts in many different countries and assembles the
 product in another country. It sells the product in many countries, i.e. in the
international market.
3. Dominated by developed countries and MNCs : International business is dominated
by developed countries and their multinational corporations (MNCs). At present,
MNCs from USA, Europe and Japan dominate (fully control) foreign trade. This is
because they have large financial and other resources. They also have the best
technology and research and development (R & D). They have highly skilled
employees and managers because they give very high salaries and other benefits.
Therefore, they produce good quality goods and services at low prices. This helps
them to capture and dominate the world market.
4. Benefits to participating countries : International business gives benefits to all
participating countries. However, the developed (rich) countries get the maximum
benefits. The developing (poor) countries also get benefits. They get foreign capital
and technology. They get rapid industrial development. They get more employment
opportunities. All this results in economic development of the developing countries.
Therefore, developing countries open up their economies through liberal economic
policies.
5. Keen competition : International business has to face keen (too much) competition in
the world market. The competition is between unequal partners i.e. developed and
developing countries. In this keen competition, developed countries and their MNCs
are in a favourable position because they produce superior quality goods and services
at very low prices. Developed countries also have many contacts in the world market.
So, developing countries find it very difficult to face competition from developed
countries.
6. Special role of science and technology : International business gives a lot of
importance to science and technology. Science and Technology (S & T) help the
business to have large-scale production. Developed countries use high technologies.
Therefore, they dominate global business. International business helps them to transfer
such top high-end technologies to the developing countries.
7. International restrictions : International business faces many restrictions on the
inflow and outflow of capital, technology and goods. Many governments do not allow
international businesses to enter their countries. They have many trade blocks, tariff
barriers, foreign exchange restrictions, etc. All this is harmful to international
business.
8. Sensitive nature : The international business is very sensitive in nature. Any changes
in the economic policies, technology, political environment, etc. has a huge impact on
it. Therefore, international business must conduct marketing research to find out and
study these changes. They must adjust their business activities and adapt accordingly
to survive changes.
International Business: Advantages and Disadvantages
Ans :1. Advantages of International business
2. Disadvantages of International business.
Advantages of International Business:
The advantages of international business are as follows:
1. A Country can Consume those Goods which it cannot Produce:
Commodities produced in India can be found in England and vice-versa. This helps England
to enjoy those goods which he cannot produce in his country.
2. The Productive Resources of the World are Utilised to the Best Advantage of the
Country:
Every country expects highest return from its resources and this lead to fall in price and
better goods for consumption.
3. Heavy Price Fluctuations are Controlled:
If the price of any commodity goes up, the goods can be imported from abroad and its price
can be brought down.
4. Shortages in Times of Famine and Scarcity can be met from Imports from Other
Countries:
Surplus produce can be sent out to needy countries. Food scarcity in India and Europe in
often met by surplus food-grains from the U.S.A.
5. Countries Economically Backward but Rich in Resources may Develop their
Industries:
Indian people are opening industries with the idea of sending produced goods to foreign
countries.
6. International Business Promotes Peace and Friendship:
No country however big it may be can claim to be self-sufficient. It will have to depend on
other country for something. Free international business is essential for goodwill, peace and
to meet any requirements of the nation.

Dis-Advantages of International Business:

The dis-advantages of international business are as follows:
1. The Worst Part of Foreign or International Business is the Destruction of Cottage
and Home Industries:
Indian industries need protection. If there will be no protection from the side of the
government, Indian industries cannot prosper.
2. Dependence on Foreign Business Creates Difficulties in Times of Need:
In the past, India had to face great trouble and difficulty in getting ordinary and simple
articles like medicine and tools during need or during the war.
3. The Extreme Specialization which makes a Country Depend on One or Two
Industries is Bad:
Because if at any time the industry suffers the economic life of the people would be
endangered.
4. Countries which Sell Raw Materials and Buy Manufactured Goods in Return are
always Loser and cannot Improve the Country Economy:
The standard of living of the people cannot improve. International business under such
conditions leads more to discontent and unrest than to peace and goodwill.
5. International Business may Completely Exhaust a Country’s Natural Resources like
Coal and Oil which are Irreplaceable:
These goods are exported just for the sake of earning money and profit. But the country will
have to suffer in the long run when their source will be dried up completely.
6. Imports of Harmful Drugs and Luxuries Goods ruin the Health of the Nation:
For this people blame international business which is not correct.
7. International Business Rivalry Leads to Friction and War:
Example of this kind it the last two world war. Commercial competition often brings strain
relations between countries. Thus, it can be said that International Business is not unmixed
blessing. But to measure advantages always outweigh the dis-advantages. At any rate, it is
better if it is helpful in improving the economy of the country.

Globalization 
Ans : Globalization is the integration of national economies through
trade, investment, capital flow, labor migration, and technology.
HOW IT WORKS (EXAMPLE):
Ans : Globalization results from the removal of barriers between national economies to
encourage the flow of goods, services, capital, and labor.  While the lowering or removal of
tariffs and quotas (see General Agreement on Trade and Tariffs, or GATT) that restrict free
and open trade among nations has helped globalize the world economy, transportation and
communication technologies have had the strongest impact on accelerating the pace of
globalization.
Thomas L. Friedman describes the "flattening" of the world economy through globalized
trade, outsourcing, supply-chaining and political liberalization.  The use of technologies
allows businesses, such as large multi-national corporations, to maintain customers, suppliers
and even competitors on a world-wide basis.  The breakdown of businesses into components
along its value-chain creates opportunities for multiple businesses located at various spots on
the globe to participate in the production of a single good or service.  This global network,
even for a single enterprise, is part of globalization.
Several organizations have either been created or have evolved into key roles in the process
of globalization.  The World Bank and the International Monetary Fund, for instance, deal
primarily with issues of free trade in developing economies and with international monetary
policy, including debtand trade balances between dbieloping and industrialized countries. 
The World Trade Organization, along with the General Agreement on Trade and Tariffs
(GATT), has been involved with removing trade barriers and reducing the cost of trading.
WHY IT MATTERS:
Ans : Increasingly, businesses must recognize that their
success depends on efficiency and scalability – being able
to quickly mobilize global resources and reach world
markets.   Globalization is the key to growing businesses in
the 21st Century.
At the same time, globalization has led economic decision-making away from local control. 
As a result, decisions about a company's plans, including expansions, relocations, or closings
are increasingly made independently of the considerations of local markets or local
managers.  
ADVANTAGES OF GLOBALIZATION
1- Market diffusion
About 500 years ago it was unthinkable that sugar and cloves could be bought for cooking at
home, both of which were extremely expensive products that did not enter the table if there
was no purchasing power or if the government did not allow it.
There were parts of the world where sugar or cloves were not even known since they were
not consumed or unknown. The market, therefore, was limited and, incidentally, expensive.
With globalization, the economy flows at a more spontaneous pace, where goods and
services can be enjoyed around the world.
Although it is true that some imported products can be somewhat expensive, it can not be
denied that they can be enjoyed in a short time, anywhere and many times at reasonable
prices. There are even offers on pages like Amazon or Aliexpress. Globalization, then, does
the free market a favor.
2- Great ideological diversification
Without globalization, it is very likely that Marxism would never have reached China and
that Japan would have stalled in the feudalism of the Tokugawa Period .
In addition, it is also very likely that Latin America would have known (or known later) the
works of Pasteur , the inventions of Edison or the novels of Faulkner . Therefore,
globalization is a weapon against scientific, technological, philosophical and even literary
backwardness.

3- Transmission of cultural values

Globalization makes it possible to spread cultures that were previously unknown, or of
which only a handful of prejudices were known.
Thanks to the Internet you can listen to music from India from Colombia; the same way you
can read gauchesque poetry in Finland, or you can see a Kurosawa film in the United States.
In fact, it was this globalization that made George Lucas inspire his Star Wars from a
Japanese samurai-themed film.
4- Language exchange
The use of an international language is of old date, a reason why in its history it was spoken
Latin, Koine Greek, French, and German.
Currently, the most vivid example is in English, which communicates millions of people
around the world, far more than the Chinese do.
With globalization, it is possible for an Italian and a Czech to understand each other in
English without the need for Italian to speak Czech and without Czech speaking Italian.
5- Unification of moral values
Previously it was believed that morality was in religion, but lay values proved that a world
where respected the beliefs of others as possible.
This is so because, in a globalized world, it is necessary to recognize and accept that people
living in distant countries like Rwanda are also human beings and must be treated as
such. Ethical ideas, therefore, are universal and apply equally for all, without distinction of
any kind.
6- Decreased social tensions
On the basis of the previous point, globalization is the way to reduce the tensions between
societies completely dissimilar to each other.
With a more universalized morality, the result is that the rivalries of yesteryear are
transformed into friendships, that there may be dialogue and Concord in gentiles that were
formerly sworn enemies from time immemorial. This may be the formula for peace between
Israelis and Palestinians, for example.
7- Greater human sensitivity
Considering the foregoing advantages, it can be said that globalization makes the world a
space where people fight for equality and justice in any place. International tribunals will be
the best way to prevent impunity.
Similarly, globalized information in the media creates a consciousness in which, for
example, Mexicans can express their solidarity for those killed in the terrorist attacks in
Paris.

DISADVANTAGES OF GLOBALIZATION
1- Threat to local and national economies
It has been criticized that globalization is a way for larger economies to impose themselves
on smaller economies.
Although there is a free market all over the world, this does not mean that developed
countries do not find the means to take advantage of this situation to wage trade wars and to
use the battlefields of developing countries or underdeveloped countries.
2- Imposition of foreign ideas
This is a controversial point since it was globalization that allowed many countries to leave
the nineteenth century. The Arab Spring could not have been achieved without the power of
the Internet.
But countries such as those that host Islamic culture sometimes prefer to refrain from using
Western fashion, and in several regions of Latin America, models of thought are sought that
are not Eurocentric, but those coming from Asia.
Transculturization: cultural contamination?
This disadvantage is strictly linked to the previous one. While it is true that in the twenty-
first-century countries like Japan export their culture to levels they had never imagined in
the Meiji Period , it is also true that Latin American populations adopt cultural precepts and
set aside their own.
This is also a polemic point in which national identity is put on the table. In fact, the
Japanese talk about the dilemma of “modernization versus Westernization”.
4- Extinction of minority languages
Languages have disappeared for centuries and many of them have only limited
data. However, since the twentieth century many neologisms have been imported from the
English-speaking world that penetrate other languages, such as Spanish, from which
even Spanglish comes .
On the other hand, minority languages disappear faster with globalization, since their
communities, unable to use them abroad, abandon them for a more spoken language, such as
English.
5. Universal morality: a danger to religions?
In a globalized world, the moral is for the Vietnamese as well as for the Panamanians: the
one based on the human rights subscribed to the UN.
However, neither Vietnamese nor Panamanians have been brought up in the same religions,
so one wonders whether globalization is really a means of sweeping the boundaries between
Christianity and Eastern creeds, or whether it is a way of securing them through
multiculturalism, in which both beliefs must be respected.

6- Tolerance, but for convenience

Taking into account that with globalization comes to a more universal morality, it remains to
know if the reduction of social tensions is sincere or is only made as a formalism that can be
easily broken with feigned pacts between the parties concerned.
It is not to sew and to sing, nor to tell them that they are brothers, is to disarticulate one by
one the motives that led them to fight in the past.
7- Neo-imperialism and neocolonialism
With a more global morality, economy, ideas and precepts, a new form of imperialism and
colonialism can come from countries that are capable of producing all those beliefs, such as
China and the United States.
On the other hand, less affluent nations and cultures with less creative contributions must
conform to the fact of consuming and accepting them, because that is the tendency and must
be accepted under penalty of being outside the international circle.

Drivers of globalization
Ans :The media and almost every book on globalization and international business speak
about different drivers of globalization and they can basically be separated into five different
groups:
1) Technological drivers
Technology shaped and set the foundation for modern globalization. Innovations in the
transportation technology revolutionized the industry. The most important developments
among these are the commercial jet aircraft and the concept of containerisation in the late
1970s and 1980s. Inventions in the area of microprocessors and telecommunications enabled
highly effective computing and communication at a low-cost level. Finally the rapid growth
of the Internet[1] is the latest technological driver that created global e-business and e-
commerce.
2) Political drivers
Liberalized trading rules and deregulated markets lead to lowered tariffs and allowed foreign
direct investments in almost all over the world. The institution of GATT (General
Agreement on Tariffs and Trade) 1947 and the WTO (World Trade Organization) 1995 as
well as the ongoing opening and privatization in Eastern Europe are only some examples of
latest developments.
3) Market drivers
As domestic markets become more and more saturated, the opportunities for growth are
limited and global expanding is a way most organizations choose to overcome this situation.
Common customer needs and the opportunity to use global marketing channels and transfer
marketing to some extent are also incentives to choose internationalization. (Ferrier, 2004)

4) Cost drivers
Sourcing efficiency and costs vary from country to country and global firms can take
advantage of this fact. Other cost drivers to globalization are the opportunity to build global
scale economies and the high product development costs nowadays. (Ferrier, 2004)
5) Competitive drivers
With the global market, global inter-firm competition increases and organizations are forced
to “play” international. Strong interdependences among countries and high two-way trades
and FDI actions also support this driver.

Globalization Impacts: positive and negative impacts

Ans ; As a result of globalization, the economic growth of both developing and developed
countries is impacted positively and negatively.  Here are some of the positive and negative
effects of globalization.
POSITIVE EFFECTS OF GLOBALIZATION.
It is not easier to discuss the extent of positive globalization in the world.  However, the
positive impacts have been experienced in various societal demographic segments. For
example
 Global market
The privatization of industries owned by the state has enabled the emerging markets to be
successful.  Most of the companies are increasing the consumer demand through extension
and expansion of their value chain to international levels.  As a result, the positive effects of
globalization are expressed by the rising transactions across the borders.
Globalization has resulted in the formation of multinational corporations.  The concentration
of corporations in specific geographical economies has led to investment in other new
geographical areas, where market competition is very high.  Due to increased competition,
the corporations continue to enlarge their market, in order to enjoy the economies of scale.
This is because globalization enables economies to compete fairly at all levels, hence
attracting investors.
 Competition
Competition in the market is largely due to globalization.  As a result, the positive effects are
visible, since global competition leads to products of high quality.  The enhanced quality of
both products and services are based on production approaches of customer demands and
customer services.
For domestic companies to survive in the market, they are forced to raise their customer
satisfaction levels, as well as their standards, while fighting competition from foreign
companies.  Besides, a global product must live to its goodwill when it gets into a new
country.  For example, the competition between Samsung and Apple has raised the market
standards, as well as the customer service.  Also, the two brands are living on their goodwill
to survive the competition.
 Culture
Globalization has resulted in numerous positive effects on culture. There is no single
civilization that had all good practices. Instead, the coming together of various cultures has
made the world today a better place.  The welcoming of people from various backgrounds
and civilizations has resulted in the creation of new cultures, thus leading societal growth.
 Legal effects
Human rights have been improved as a result of globalization since media coverage on
violations of the rights receives attention from all over the world.  It is through globalization
that leaders address inequalities since information and openness get promoted. In most cases,
the result is enhanced prosperity and democracy.
 Stable security
Although the effect cannot be seen directly, globalization has contributed greatly in
enhancing the world security. For example, it is extremely difficult to see two countries
attacking each other if the economy of one of the countries depends largely on the economy
of the other country.
Irrespective of the many violence that is being experienced in the world today, it is evidently
clear that if some countries were not depending on each other’s  economy, deadlier conflicts
could have or would occur, but all have been halted by globalization.

NEGATIVE EFFECTS OF GLOBALIZATION

 Environmental Damage
Increased production means increased utilization of natural resources.  Besides, increased
trade results to increased transport, which uses fossil fuels.  As a result, pollution has
increased, leading to climate change.  The changes in climate are now a serious threat to
humanity and the future of the world, all because of globalization.
 Fluctuation in prices
Globalization has led to increased market competition, hence leading to fluctuation in
prices.  For example, developed countries like the USA have been forced to reduce their
products prices, because countries such as China offer the same products at cheaper prices. 
This is because the production cost in China is lower than in the USA. As a result, for
developed countries like the US to withstand the competition and have customers, they are
forced to lower their prices.  The impact is adverse, as the ability to sustain social welfare in
the US gets reduced.
 Job insecurity
Due to globalization, most global economy jobs are insecure and temporary.  The impact is
mostly felt in developed countries since they can outsource cheaper white collar and
manufacturing jobs.   For example, wages and manufacturing costs are lower in India and
China, making countries like US and UK to outsource cheaper labor.  The effect is people in
developed countries losing or having fewer jobs.

Factors Influencing Globalization

Ans : Factors influencing Globalization are as follows: (1) Historical (2) Economy (3)
Resources and Markets (4) Production Issues (5) Political (6) Industrial Organisation (7)
Technologies.
(1) Historical:
The trade routes were made over the years so that goods from one kingdom or country
moved to another. The well known silk-route from east to west is an example of historical
factor.
(2) Economy:
The cost of goods and values to the end user determine the movement of goods and value
addition. The overall economics of a particular industry or trade is an important factor in
globalisation.
(3) Resources and Markets:
The natural resources like minerals, coal, oil, gas, human resources, water, etc. make an
important contribution in globalisation.
India’s Strengths and Weaknesses:
Strengths Scale Rank
Stock Market    
Stock market is important for new financing 5.42 13
Science and Engineering    
Schools excel in basic science and maths Country has a large pool 5.27 16
of competent scientists and engineers    
Engineering as a profession greatly attracts young talent 6.37 1
ADVERTISEMENTS:    
Labour Force 6.26 1
Country has first-class business schools to train managers    
Country has an abundant labour force 5.05 8
Rate of Law    
Judiciary is independent of the government 6.77 1
Compliance with court ruling is high 5.40 9
Firms have recourse to courts for challenging government actions 5.37 14
5.56 19
Weakness    
Financial Markets    
Citizens prohibited from investing in foreign stocks, bonds and 1.60 53
bank accounts 2.74 43
Financial sector sophistication is lower than international norms 2.63 50
Venture capital is scarce
Public Administration    
Administrative regulations that constrain business are pervasive 2.90 47
Government subsidies keep old industries alive 2.68 52
Civil Service is subject to political pressures 2.65 43
Tax evasion is rampant 2.27 48
Infrastructure 1.92 53
Overall infrastructure is far worse than major trading partners    
Road infrastructure constraints business development 1.85 53
Port facilities are underdeveloped 2.18 53
Direct dial phone service is prohibitively expensive 2.94 53
Country suffers from severe power shortage 1.94 53
Research and Development    
The business sector spends little on R & D    
Firms fail to commercialise academic research    
Companies are poorly adopted to absorbing new technologies 2.11 52
Labour Regulations 2.66 51
Average workers are unproductive 2.29 34
Hiring and firing practices are severely restricted    
Labour regulations impede adjustment of working hours to meet    
changes in demand 2.94 51
Corruption and Bribery 2.16 53
Extra payment connected with permits and licenses are common 2.58 49
   
2.79 48
The mineral based industries like steel, aluminium, coal in Australia are examples. Few of
these Australian mining and metal companies are owned by European / Japanese / American
companies.
Near distance to end user or consumer also is an important factor in globalisation. The large
markets as consumer bases in Asian countries have led many European, Korean to Japanese
manufacturing conglomerates and shift their manufacturing and trading bases in Asian
countries.
That is going near the customer makes globalisation. The Table 16.1 gives the strengths and
weakness of India in global level. The details are based on expert survey on globalisation. As
may be seen from the table low on scale is lack or shortfall and hence, ranking is low.
(4) Production Issues:
Utilisation of built up capacities of production, sluggishness in domestic market and over
production makes a manufacturing company look outward and go global. The development
of overseas markets and manufacturing plants in autos, four wheelers and two wheelers is a
classical example.

(5) Political:
The political issues of a country make globalisation channelised as per political bosses. The
regional trade understandings or agreements determine the scope of globalization. Trading in
European Union and special agreement in the erstwhile Soviet block and SAARC are
examples.
(6) Industrial Organisation:
The technological development in the areas of production, product mix and firms are helping
organisations to expand their operations. The hiring of services and procurement of sub-
assemblies and components have a strong influence in the globalisation process.
(7) Technologies:
The stage of technology in a particular field gives rise to import or export of products or
services from or to the country. European countries like England and Germany exported
their chemical, electrical, mechanical plants in 50s and 60s and exports high tech (then)
goods to under developed countries. Today India is exporting computer / software related
services to advanced counties like UK, USA,

What is Country Attractiveness?

Ans : Various factors such as social, political, cultural, technological which loop the
business organization in other nations is referred to as International business environment.
These factors are the factors which create the organization in the international environment
to feel like home environment. Whether the resources and the capabilities are being used or
not is being determined by these factors. These factors determine whether a country is
suitable for doing business or not.
Some of the factors that have a significant impact on the operations of the business are as
follows -
Country Attractiveness
The attractiveness of the international investors towards the country is known as country
attractiveness. It is very essential o determine the suitability of the country for taking up the
external business environments.
Before starting a business in a particular country, it is very essential to analyse the risk and
profitability associated for starting business in that particular country by considering the
environmental factors as well.
The most profitable country is being selected for doing a business. The profitability of any
country depends on the investment, cost and the available resource of the country.
The country which has the political, legal, Economic conditions stable, that country is
selected for doing business.

What are business environments and factors ?

Ans : Business environments are of many types. The internal business can be determined by
the most important factors such as economic, cultural and political factors. Added to these, it
is to be noted that all these factors are interlinked to each other.
1)THE POLITICAL FACTORS
All the rules relating to the government and legal issues that a business has to understand for
starting the business in that particular country are considered as the political factors. These
government and legal rules differ from country to country. When a foreign company enters
into another country for doing business, then it has to follow the regulations of that particular
country in which the business is being started.
There are some other environmental factors that have an impact on the political environment.
They are as follows -
 The economic environment is affected by the political decisions
 The socio-cultural environment is affected by the political decisions
 The adoption of the new technology is affected by politicians
 The adoption of the technology need to be accepted by the politicians.
The political environment of the business effects the business in the following ways -
  Impact on Economy – The economic status of the company bear an impact by the
political factors of a particular country. For instance, the norms relating to spending of
the taxes and other government related expenditure are being influenced by the
Democratic and Republican policies of US, which differ from country to country.
 Changes in Regulation – The decisions with respect to business control are often
changed by the governments of the country. For instance, the incidence of the
corporate accounting scandal has made the US SEC to be more stringent about the
corporate compliance in that particular country. Accordingly Sarbanes-Oxley Act
came into existence.
 Political Stability – The business operations of the companies going international is
being affected by the political stability of the nation. The operations of the business
may be troublesome when the environment turns out disorder.
 Mitigation of Risk – The risk is mitigated by several risk insurance policies taken up
by the government. In order to reduce the exposure of risk, the insurances are being
leveraged by the companies that are into international operations.
2)THE ECONOMIC FACTORS
The international business is being immensely affected by the economic factors as well. The
attractiveness of the country for doing business in that country is also affected by most of the
economic factors.
 The countries and their economies that depend on the business in terms of financial
aspects seem to be very beneficial for the company to do business. The company has a
growth when the economy displays stability, growth and fairness in prosperity.
 The attractiveness of the company is mainly determined by the inflation of that
particular country. Increased cost of loans is the result for high rate of inflation and
thus which results in decreasing the revenue with respect to the home currency. The
business is being exposed to the risk associated with foreign-exchange.
 One more important factor is purchasing power parity. The ratio of the prices in two
different countries is similar to the ratio of the exchange rate. According to the law of
one price, all the nations maintain the same price for a particular product.
 For the organizations that go international, purchasing power parity is very essential to
consider. This determines the money that is required for purchasing the same goods
and services in two different countries.
3)THE CULTURAL FACTORS
The educational, social, religious factors all together constitute the cultural factors of a
country. In order to go global with the business, it is mandatory that the culture of that
particular country is being understood. The firms that maintain differences in the culture has
to face some risks and thus have to fail.
  Language – In order to develop and design all the marketing material, it is very
essential to know the language of that particular country. Unless the country has same
language throughout the country, it should be problematic.
 Colors – It is very essential to understand the reaction of the people to colours. For
instance, in Hispanic countries, the colour purple resembles death and therefore is not
accepted.
 Customs and Taboos – Added, it is also important to understand the customs of that
particular country for better and effective marketing.
 Values – Values are the outcomes of the religious beliefs. Even they constitute
important to be understood for marketing a product in that particular country. For
instance, as beef is not consumed in India, some of the international food restaurants
have to modify the items they offer in India according to the values of India.
 Aesthetics – Different cultures have different aesthetics. The aesthetics liked by the
Indians may not be liked by Europeans.
 Time – Time and punctuality is not strictly followed in some of the countries while
some countries are strictly bound to time and punctuality.
 Religious Beliefs – While labelling and designing the product, it is essential to
consider the religious beliefs of that particular country a it has a major impact on the
values of the consumers.
Some of the instances of cultural differences are as follows –
 In Ireland, dinner is termed as tea and not dinner.
 Nodding is usually considered “yes” but it’s vice versa in Bulgaria.
 In the countries like Southeast Asia, yellow teeth is considered prestigious and hence
the toothpaste that assure white teeth is not being accepted and sold in Southeast Asia
What is 'Protectionism'
Ans : Protectionism refers to government actions and policies that restrict or restrain
international trade, often with the intent of protecting local businesses and jobs from foreign
competition.

BREAKING DOWN 'Protectionism'

The merits of protectionism are the subject of fierce debate. Critics argue that over the long
term, protectionism often hurts the people it is intended to protect by slowing economic
growth and pushing up prices, making free trade a better alternative. Proponents of
protectionism argue that the policies provide competitive advantages and create jobs.
Protectionist policies can be implemented in four main ways: tariffs, import quotas,
product standards and government subsidies.

1)Tariffs
There are three types of tariffs, also referred to as import duties, that can be implemented for
protective measures. All forms of tariff are charged and collected by governments to raise
the price of imports to equal or exceed local prices. Scientific tariffs are imposed to raise the
prices of products to end users. Peril point tariffs are implemented when less-efficient
industries are in jeopardy of closure due to an inability to compete on pricing. Retaliatory
tariffs can be used as a response to excessive tariffs being charged by trading partners.

2)Import Quotas
Trade quotas are non-tariff barriers that are put in place to limit the number of products that
can be imported over a set period of time. The purpose of quotas is to limit the supply of
specified products, which typically raises prices and allows local businesses to capitalize on
unmet demand. Quotas are also put in place to prevent dumping, which occurs when foreign
producers export products at prices lower than production costs. An embargo, in which the
importation of designated products is forbidden, is the most severe type of quota.

3)Product Standards
Limitations based on product standards are implemented for a variety of reasons, including
concerns over product safety, sub-standard materials or labeling. Whether these concerns are
valid or exaggerated, limiting imports benefits local producers. For example, French cheeses
made with raw, instead of pasteurized, milk must be aged at least 60 days prior to being
imported to the U.S. Because the process for producing young cheeses is often 50 days or
fewer, some of the most popular French cheeses are banned, providing local producers the
opportunity to compete with pasteurized versions.

4)Government Subsidies
Governments can help domestic businesses compete by providing subsidies, which lower the
cost of production and enable the generation of profits at lower price levels. Examples
include U.S. agricultural subsidies and subsidies paid by the Chinese government to help
grow the country's automotive industry.

What is GST and explain briefly ?

Ans : GST is an Indirect Tax which has replaced many Indirect Taxes in India. The Goods
and Service Tax Act was passed in the Parliament on 29th March 2017. The Act came into
effect on 1st July 2017; Goods & Services Tax Law in India is a comprehensive, multi-
stage, destination-based tax that is levied on every value addition.
In simple words, Goods and Service Tax (GST) is an indirect tax levied on the supply of
goods and services. This law has replaced many indirect tax laws that previously existed in
India.
GST is one indirect tax for the entire country.
So, before Goods and Service Tax, the pattern of tax levy was as follows:
Under the GST regime, the tax will be levied at every point of sale. In case of intra-state
sales, Central GST and State GST will be charged. Inter-state sales will be chargeable to
Integrated GST.
Now let us try to understand the definition of Goods and Service Tax – “GST is
a comprehensive, multi-stage, destination-based tax that will be levied on every value
addition.”

Multi-stage
There are multiple change-of-hands an item goes through along its supply chain: from
manufacture to final sale to the consumer.
Let us consider the following case:

 Purchase of raw materials

 Production or manufacture
 Warehousing of finished goods
 Sale to wholesaler
 Sale of the product to the retailer
 Sale to the end consumer
Goods and Services Tax will be levied on each of these stages which makes it a multi-stage
tax.

Value Addition
 

The manufacturer who makes biscuits buys flour, sugar and other material. The value of the
inputs increases when the sugar and flour are mixed and baked into biscuits.
The manufacturer then sells the biscuits to the warehousing agent who packs large quantities
of biscuits and labels it. That is another addition of value after which the warehouse sells it
to the retailer.
The retailer packages the biscuits in smaller quantities and invests in the marketing of the
biscuits thus increasing its value.
GST will be levied on these value additions i.e. the monetary worth added at each stage to
achieve the final sale to the end customer.

Destination-Based
Consider goods manufactured in Maharashtra and are sold to the final consumer in
Karnataka. Since Goods & Service Tax is levied at the point of consumption, in this case,
Karnataka, the entire tax revenue will go to Karnataka and not Maharashtra.
2. Journey of GST in India
The GST journey began in the year 2000 when a committee was set up to draft law. It took
17 years from then for the Law to evolve. In 2017 the GST Bill was passed in the Lok Sabha
and Rajya Sabha. On 1st July 2017 the GST Law came into force.

3. Advantages Of GST
GST will mainly remove the Cascading effect on the sale of goods and services. Removal of
cascading effect will directly impact the cost of goods. Since tax on tax is eliminated in this
regime, the cost of goods decreases.
GST is also mainly technologically driven. All activities like registration, return filing,
application for refund and response to notice needs to be done online on the GST Portal. This
will speed up the processes.

4. What are the components of GST

There are 3 taxes applicable under this system: CGST, SGST & IGST.

 CGST: Collected by the Central Government on an intra-state sale (Eg: transaction

happening within Maharashtra)
 SGST: Collected by the State Government on an intra-state sale (Eg: transaction
happening within Maharashtra)
 IGST: Collected by the Central Government for inter-state sale (Eg: Maharashtra to
Tamil Nadu)

In most cases, the tax structure under the new regime will be as follows:
 Transaction New Old Regime
Regime

Sale within CGST + VAT + Central Revenue will be shared equally

the State SGST Excise/Service between the Centre and the
tax State

Sale to IGST Central Sales Tax There will only be one type of
another State + Excise/Service tax (central) in case of inter-
Tax state sales. The Center will
then share the IGST revenue
based on the destination of
goods.

5. Tax Laws before GST

In the earlier indirect tax regime, there were many indirect taxes levied by both state and
center. States mainly collected taxes in the form of Value Added Tax (VAT). Every state had
a different set of rules and regulations.
Interstate sale of goods was taxed by the Center. CST (Central State Tax) was applicable in
case of interstate sale of goods.  Other than above there were many indirect taxes like
entertainment tax, octroi and local tax that was levied by state and center.
This lead to a lot of overlapping of taxes levied by both state and center.
For example, when goods were manufactured and sold Excise Duty charged by the center
was charged by the center. Over and above Excise Duty, VAT was also charged by the State.
This lead to a tax on tax also known as cascading effect of taxes.
The following is the list of indirect taxes in the pre-GST regime:

 Central Excise Duty

 Duties of Excise
 Additional Duties of Excise
 Additional Duties of Customs
 Special Additional Duty of Customs
 Cess
 State VAT
 Central Sales Tax
 Purchase Tax
 Luxury Tax
 Entertainment Tax
 Entry Tax
 Taxes on advertisements
 Taxes on lotteries, betting, and gambling

CGST, SGST, and IGST has replaced all the above taxes.
However, the chargeability of CST for Inter-state purchase at a concessional rate of 2%, by
issue and utilisation of c-Form is still prevalent for certain Non-GST goods such as:
(i) Petroleum crude;
(ii) High-speed diesel;
(iii) Motor spirit (commonly known as petrol);
(iv) Natural gas;
(v) Aviation turbine fuel; and
(vi) Alcoholic liquor for human consumption.
in respect of following transactions only:

 Resale
 Use in manufacturing or processing
 Use in the telecommunication network or in mining or in the generation or distribution
of electricity or any other power

6. What changes has GST brought in

In the pre-GST regime, every purchaser including the final consumer paid tax on tax. This
tax on tax is called Cascading Effect of Taxes.
GST avoids this cascading effect as the tax is calculated only on the value-add at each stage
of transfer of ownership. Understand what the cascading effect is and how GST helps by
watching this simple video:
This indirect tax system under GST improve the collection of taxes as well as boost the
development of Indian economy by removing the indirect tax barriers between states and
integrating the country through a uniform tax rate.

Define benefit of globalization and Costs of globalisation ?

Ans: BENEFITS OF GLOBALIZATION

1. Free trade Free trade is a way for countries to exchange goods and resources. This means
countries can specialise in producing goods where they have a comparative advantage (this
means they can produce goods at a lower opportunity cost). When countries specialise there
will be several gains from trade:

1. Lower prices for consumers

2. Greater choice of goods, e.g food imports enable a more extensive diet.

3. Bigger export markets for domestic manufacturers

4. Economies of scale through being able to specialise in certain goods

5. Greater competition
2. Free movement of labour

Increased labour migration gives advantages to both workers and recipient countries. If a
country experiences high unemployment, there are increased opportunities to look for work
elsewhere. This process of labour migration also helps reduce geographical inequality. This
has been quite effective in the EU, with many Eastern European workers migrating west.

Also, it helps countries with labour shortages fill important posts. For example, the UK
needed to recruit nurses from the far east to fill shortages.

 However, this issue is also quite controversial. Some are concerned that free
movement of labour can cause excess pressure on housing and social services in some
countries. Countries like the US have responded to this process by actively trying to
prevent migrants from other countries.

3. Increased economies of scale

Production is increasingly specialised. Globalisation enables goods to be produced in

different parts of the world. This greater specialisation enables lower average costs and lower
prices for consumers.

4. Greater competition

Domestic monopolies used to be protected by a lack of competition. However, globalisation

means that firms face greater competition from foreign firms.

5. Increased investment

Globalisation has also enabled increased levels of investment. It has made it easier for
countries to attract short-term and long-term investment. Investment by multinational
companies can play a big role in improving the economies of developing countries.

COSTS OF GLOBALISATION
1. Free trade can harm developing economies.

Developing countries often struggle to compete with developed countries, therefore it is

argued free trade benefits developed countries more. There is an infant industry
argument which says industries in developing countries need protection from free trade to be
able to develop. However, developing countries are often harmed by tariff protection, that
western economies have on agriculture. Paradox of Free Trade
2. Environmental costs

One problem of globalisation is that it has increased the use of non-renewable resources. It
has also contributed to increased pollution and global warming. Firms can also outsource
production to where environmental standards are less strict. However, arguably the problem
is not so much globalisation as a failure to set satisfactory environmental standards.

3. Labour drain
Globalisation enables workers to move more freely. Therefore, some countries find it
difficult to hold onto their best-skilled workers, who are attracted by higher wages
elsewhere.

4. Less cultural diversity

Globalisation has led to increased economic and cultural hegemony. With globalisation there
is arguably less cultural diversity; however, it is also led to more options for some people.

5. Tax competition and tax avoidance

Multinational companies like Amazon and Google, can set up offices in countries like
Bermuda and Luxembourg with very low rates of corporation tax and then funnel their
profits through these subsidiaries. This means they pay very little tax in the countries where
they do most of their business. This means governments have to increase taxes on VAT and
income tax. It is also seen as unfair competition for domestic firms who don’t use same tax
avoidance measures.

The greater mobility of capital means that countries have sought to encourage inward
investment by offering the lowest corporation tax. (e.g. Ireland offers very low tax rate). This
has encouraged lower corporation tax, which leads to higher forms of other tax.

Trade Liberalisation
Definition

Ans : Trade liberalisation involves removing barriers to trade between different countries

and encouraging free trade. Trade liberalisation involves:

 Reducing tariffs

 Reducing/eliminating quotas

 Reducing non-tariff barriers.

Non-tariff barriers are factors that make trade difficult and expensive. For example, having
specific regulations on making goods can give an unfair advantage to domestic producers.
Harmonising environmental and safety legislation makes it easier for international trade.

Advantages of Trade Liberalisation

 Comparative advantage. Trade liberalisation allows countries to specialise in

producing the goods and services where they have a comparative advantage (produce
at lowest opportunity cost). This enables a net gain in economic welfare.
Trade liberalisation leads to removal of tariff barriers and the market price will fall from P1
to P2. This leads to significant increase in consumer surplus of areas 1+2+3+4.

 Lower prices. The removal of tariff barriers can lead to lower prices for consumers.
E.g. removing food tariffs in West would help reduce the global price of agricultural
commodities. This would be particularly a benefit for countries who are importers of
food.

 Increased competition. Trade liberalisation means firms will face greater competition
from abroad. This should act as a spur to increase efficiency and cut costs, or it may
act as an incentive for an economy to shift resources into new industries where they
can maintain a competitive advantage. For example, trade liberalisation has been a
factor in encouraging the UK to concentrate less on manufacturing and more on the
service sector.

 Economies of scale. Trade liberalisation enables greater specialisation. Economies

concentrate on producing particular goods. This can enable big efficiency savings
from economies of scale.

 Inward investment. If a country liberalises its trade, it will make the country more
attractive for inward investment. For example, former Soviet countries who liberalise
trade will attract foreign multinationals who can produce and sell closer to these new
emerging markets. Inward investment leads to capital inflows but also helps the
economy through diffusion of more technology, management techniques and
knowledge.

Problems of Trade Liberalisation

 Structural unemployment. Trade liberalisation often leads to a shift in the balance of

an economy. Some industries grow, some decline. Therefore, there may often be
structural unemployment from certain industries closing. Trade liberalisation can often
be painful in the short run, as some industries and some workers suffer from the
decline in uncompetitive firms. Though net economic welfare improves, it can be
difficult to compensate those workers who lose out to international competition.
  Environmental costs. Trade liberalisation could lead to greater exploitation of the
environment, e.g. greater production of raw materials, trading toxic waste to countries
with lower environmental laws.

 Infant-industry argument. Trade liberalisation may be damaging for developing

economies who cannot compete against free trade. The infant industry argument
suggests that trade protection is justified to help developing economies diversify and
develop new industries. Most economies had a period of trade protectionism. It is
unfair to insist that developing economies cannot use some tariff protectionism.
Because of this argument, some argue that trade liberalisation often benefits developed
countries more than developing countries.

Difference between liberalization, privatization, globalisation?

Ans:
Liberalization
o Liberalization is a very broad term that usually refers to fewer government regulations
and restrictions in the economy in exchange for greater participation of private
entities.
o Liberalization refers to the relaxation of the previous government restriction usually in
area of social and economic policies.
o When government liberalized trade , it means it has removed the tariff ,subsidies and
other restriction on the flow of goods and services between the countries.
Privatization
o Privatization means transfer of ownership and/or management of an enterprise
from the public sector to the private sector. It also means the withdrawal of the
state from an industry or sector partially or fully.
o Privatization is opening up of an industry that has been reserved for public
sector to the private sector.
o Privatization means replacing government monopolies with the competitive
pressures of the marketplace to encourage efficiency, quality and innovation in
the delivery of goods and services.
Globalization
o Globalization implies integration of the economy of the country with the rest
of the world economy and opening up of the economy for foreign direct
investment by liberalizing the rules and regulations and by creating favorable
socio-economic and political climate for global business.