International Business.

Assignment-1

1. Explain the scope and Importance of International Business.

Scope of International Business
International business is the process of implying business across the boundary of the country
at a global level. International business refers to global trade of goods/services outside the
boundaries of a country.
International Marketing: The international marketing is the application of marketing
principles to satisfy varied needs and wants of different people residing across the national
borders. For example, KFC offer veg and nonveg meals in India.
International Finance and Investment: International finance is a section of financial
economics that deals with the monetary interactions that occur between two or more
countries like IMF and IBRD
Foreign Exchange: Foreign exchange is the trading of one currency for another. For
example, one can swap the U.S dollar for the euro.
Global HR: It is an umbrella term that includes all aspects of an organization’s HR, payroll
and talent management processes operating on a global scale. For example, salaries and
compensation packages, training and development, employee, and labor relations.
Exports and Imports of Merchandise: Merchandise are the goods which are tangible (those
which can be seen and touched). As mentioned above merchandise export means sending the
home country’s goods to other countries, which are tangible and merchandise imports means
bringing tangible goods to the home country.
Importance of International Business
Market Expansion: International businesses are established to conduct business in many
nations across the world. These companies continue to extend their operations and seek new
markets to sell more and more items. International businesses make a lot of money, which
helps them extend their market share.
Brings Foreign Exchange: By selling its products in multiple nations, international business
obtains a big quantity of foreign exchange. All payments are made in foreign currency, which
is utilized by the home nation to pay for imports. The foreign exchange gained by these firms
contributes to the country's overall economic development.
Economies of Scale: Because of their massive scale production, these companies may
benefit from economies of scale. International enterprises create a vast quantity of
commodities for sale in several nations. As the volume of manufacturing increases, the per
unit cost of creating items decreases, allowing them to generate significant profits.
Improves International Relations: International business contributes to the improvement of
international economic ties. These companies assist other countries by exporting
commodities that meet their needs. It aids in the development of stronger mutual
understanding among countries, allowing them to support one another in times of need.
Provide Employment Opportunities: International business employs a big number of
individuals to carry out its activities globally. They carry out big-scale activities in several
nations, necessitating a significant number of human resources.

2. Describe the reactive and proactive reasons that prompt a firm to go global.
Reactive Reasons
 Market: The corporation is reacting to demand discovered elsewhere. It might have
discovered this by chance or from a tip from a related firm.
 Competitive Environment - it sees competitors going to a particular place. For
example, when Honda set up shop in Ohio, some other Japanese auto parts companies
also moved to Ohio to continue supplying Honda
 Political Environment changes - Trade Barriers:
o Tariff or non-tariff obstacles: If an exporting firm discovers that the
government in the receiving country is erecting tariff or non-tariff barriers to
obstruct the export, the exporter may decide to establish a manufacturing unit
elsewhere to avoid tariffs.
o "Buy-local" rules: Exporting enterprises may discover that "buy-local"
regulations limit their exports, prompting the exporter to form a local alliance
or partnership.

 Political Environment changes – Regulations: environmental regulations or

changes in work/safety regulations may cause the company to go overseas to a less
restrictive location
 some Asian companies (selling in to the U.S. market) have moved manufacturing and
assembly operations from the southern U.S. to Mexico where pollution and labour
regulations are not so restrictive as in the U.S.
  Economic Environment Changes: Domestic manufacturing prices rise, causing the
corporation to look for a cheaper location to produce. Many Canadian garment
manufacturing businesses shifted production out of Canada in the 1990s for the
simple reason that labour is a big cost in clothing production and cheaper areas to
create clothes have been identified in Asia, South-Asia, and portions of Latin
America.

Proactive Reasons

 Expanding sales by strategically seeking out advantages:

o Access to resources which may save on shipping or processing costs.
o Creating inside freshly established political or regulatory limits (such as free-
trade zones or multi-lateral groupings of countries like the EU or ASEAN)
 launch an offensive into a new market before competitor does (eg. like Pepsi into
Russia, before Coke)
 Power & prestige: eg. in the early 1990's, a lot of Canadian law firms merged to
form bigger firms, and boasted about having affiliated law offices in other countries)
 Incentives: To lure an investment, the host government may give preferential tax
benefits.
 cheaper labour, manufacturing, and energy costs.
 Less rigorous pollution and labour norms and regulations

3. Examine the different forms of Strategic Alliances and conflicts that may
arise in Strategic Alliances.
Strategic Alliances
Strategic alliance refers to cooperative agreements between potential or actual
competitors. Strategic alliances run the range from formal join ventures in which two or
more forms have equity stakes, to short term contractual agreements, in which two
companies agree to cooperate on a particular task.
 Types
 Scale Alliances: Aims at providing efficiency through the pooling of similar
assets so that the partners can carryout business activities in which they already
have experience.
 Link Alliance: Use complementary resources to expand into new business areas.
 Joint ventures: A type of ownership sharing popular among international
companies is Joint venture, in which more than one organization owns the
company. The type of legal organization may be a partnership, a corporation, or
some other form permitted in the country of operation. When more than two
organizations participate, the joint venture is sometimes called as Consortium.
 Equity Alliance: is a collaborative arrangement in which atleast one of the
collaborating companies takes an ownership position (almost always minority) in
the others. The purpose of the equity ownership is to solidify a collaborating
contract, such as a supplier-buyer contract, so it is more difficult to break.
 Licensing Arrangements: The least sophisticated and easiest to manage type of
alliance.
Conflicts that may arise in Strategic Alliances:
 Relative importance to partners.
 Divergent objectives.
 Control Problems
 Comparative contributions and appropriations
 Differences in culture.
4. Discuss the role of International Culture for a Company conducting
International Business.
Culture represents the specific learned norms of a society, based on attitudes, values and
beliefs.
Role of International Culture
Culture has a significant impact on international commerce. Entry into new markets
necessitates an awareness of the local market's values, beliefs, and habits. Ads with
unsuitable language or imagery, for example, might entirely derail efforts to reach new
markets. Even fast-food restaurants, such as McDonald's, have had to demonstrate
cultural awareness to enter a foreign market successfully.
 Overcoming ethnocentricity - The inclination to see one's own race or social
group as the paradigm of human experience is known as ethnocentrism.
Ethnocentricity includes the acceptance of internal cultural disputes as the norm.
The wrong assumption can lead to serious misunderstanding in the conduct of
international business. Ethnocentricity is dangerous in the context of international
ethical behavior as it involves contempt, blind assumptions, same as self-
attributions. Overcoming ethnocentric and parochial attitudes begins with an
understanding of one’s own culture and how it is similar or different from other
cultures. The focus must be on cultural underpinnings that affect global
operations. Global firms initially focus on national cultural environments and
incorporate information on subcultures at a later stage 
 Communication: Communication plays an important role in international
business, and sometimes effective communication can be the difference between
succeeding or failing in a new market. Effective communication is particularly
important for international businesses as there is a risk of your messages getting
‘lost in translation’. There are several things that need to be considered when
looking at how effective your business’ communication is at an international level.
 Attitude: Businesses also need to be aware that different cultures have different
attitudes towards business.
Scandinavian countries such as Sweden emphasize social equality and therefore,
they tend to have a relatively flat organizational hierarchy. This relates to their
informal approach to communication and cooperation normally at the heart of
their organizations. In Japan, their traditional values of relative status and respect
 for seniority are reflected in their organizations and there is a very clear
organizational structure. This always means that senior management command
respect and expect a level of formality from junior members of their teams.
 Etiquette: Workplace etiquette is something else that businesses need to be aware
of if they are working internationally. Another important factor to consider in
international company while engaging with colleagues and clients from different
cultures is the formality of address.

5. Outline the main agreements underlying TRIPs and TRIMs under the
purview of W.T.O.
The TRIPs Agreement:
The TRIPS Agreement, which came into effect on 1 January 1995, is to date the most
comprehensive multilateral agreement on intellectual property.
It protects the following areas of intellectual property: copyright and related rights (i.e., the
rights of performers, producers of sound recordings, and broadcasting organizations);
trademarks including service marks; geographical indications including appellations of
origin; industrial designs; patents including the protection of new varieties of plants;
integrated circuit layout-designs; and undisclosed information including trade secrets and test
data.
The following are the Agreement's three key features:

 Standards: The TRIPS Agreement establishes basic standards of protection for

each of the major categories of intellectual property covered by the TRIPS
Agreement. The subject-matter to be protected, the rights to be bestowed and
possible limitations to those rights, and the minimum length of protection are all
defined. The Agreement establishes these standards by first requiring that the
substantive obligations of the WIPO's main conventions, the Paris Convention for
the Protection of Industrial Property (Paris Convention) and the Berne Convention
for the Protection of Literary and Artistic Works (Berne Convention), in their
most recent versions, be met. The TRIPS Agreement adds a substantial number of
additional obligations on matters where the pre-existing conventions are silent or
were seen as being inadequate. The TRIPS Agreement is thus sometimes referred
to as a Berne and Paris-plus agreement.
  Enforcement: The second main set of provisions deals with domestic procedures
and remedies for the enforcement of intellectual property rights. The Agreement
lays down certain general principles applicable to all IPR enforcement procedures.
In addition, it contains provisions on civil and administrative procedures and
remedies, provisional measures, special requirements related to border measures
and criminal procedures, which specify, in a certain amount of detail, the
procedures and remedies that must be available so that right holders can
effectively enforce their rights.
 Dispute settlement: The Agreement makes disputes between WTO Members
about the respect of the TRIPS obligations subject to the WTO's dispute
settlement procedures.

In addition the Agreement provides for certain basic principles, such as national and most-
favoured-nation treatment, and some general rules to ensure that procedural difficulties in
acquiring or maintaining IPRs do not nullify the substantive benefits that should flow from
the Agreement. The obligations under the Agreement will apply equally to all Member
countries, but developing countries will have a longer period to phase them in. 

The TRIMs Agreement:

This Agreement, negotiated during the Uruguay Round, applies only to measures that affect
trade in goods. Recognizing that certain investment measures can have trade-restrictive and
distorting effects, it states that no Member shall apply a measure that is prohibited by the
provisions of GATT Article III (national treatment) or Article XI (quantitative restrictions).
Objectives: The objectives of the Agreement, as defined in its preamble, include “the
expansion and progressive liberalization of world trade and to facilitate investment across
international frontiers so as to increase the economic growth of all trading partners,
particularly developing country members, while ensuring free competition”.

Limitation of Coverage to Trade in Goods: The coverage of the Agreement is defined in

Article 1, which states that the Agreement applies to investment measures related to trade in
goods only. Thus, the TRIMs Agreement does not apply to services.

The term “trade-related investment measures” (“TRIMs”) is not defined in the Agreement.
However, the Agreement contains in an annex an Illustrative List of measures that are
inconsistent with GATT Article III:4 or Article XI:1 of GATT 1994.
The TRIMs Agreement and Regulation of Foreign Investment: As an agreement that is
based on existing GATT disciplines on trade in goods, the Agreement is not concerned with
the regulation of foreign investment. The disciplines of the TRIMs Agreement focus on
investment measures that infringe GATT Articles III and XI, in other words, that discriminate
between imported and exported products and/or create import or export restrictions. For
example, a local content requirement imposed in a non-discriminatory manner on domestic
and foreign enterprises is inconsistent with the TRIMs Agreement because it involves
discriminatory treatment of imported products in favour of domestic products. The fact that
there is no discrimination between domestic and foreign investors in the imposition of the
requirement is irrelevant under the TRIMs Agreement.

Basic Substantive Obligations: Article 2 and the Illustrative List: Article 2.1 of the
TRIMs Agreement requires Members not to apply any TRIM that is inconsistent with the
provisions of Article III (national treatment of imported products) or Article XI (prohibition
of quantitative restrictions on imports or exports) of GATT 1994. An Illustrative List annexed
to the TRIMs Agreement lists measures that are inconsistent with paragraph 4 of Article III
and paragraph 1 of Article XI.

Mandatory and Non-mandatory Measures: The Illustrative List covers both TRIMs which
are mandatory or enforceable under domestic law or under administrative rulings and TRIMs
compliance with which is necessary to obtain an advantage.

2001091
VISHAL KUMAR
PGDM-B