International Trade

https://blog.upskillist.com/everything-you-need-to-know-about-international-trade/#:~:text=Entrepot%20trad
e%2C%20in%20simple%20terms,be%20exported%20to%20another%20country.
DOMESTIC VS INTERNATIONAL BUSINESS

https://visionarybusinessperson.com/how-does-international-business-differ-from-domes
tic-business/
Transnational Companies

https://study.com/learn/lesson/transnational-corporation-overview-examples.html#:~:text
=Some%20examples%20of%20TNCs%20include,multiple%20countries%20around%20
the%20world.
JVC - Pros , Cons & Examples

https://www.thethrive.in/business-article/five-successful-joint-venture-companies-jvc-in-
india/#:~:text=There%20are%20many%20successful%20joint,its%20presence%20aroun
d%20the%20globe.
 Turnkey Projects
● Projects that involve rendering of services like designing, civil construction and
erection and commissioning of plants/factories along with supply of machinery,
equipment and materials are known as turnkey projects.
● Turnkey (or turn-key) project is a term typically used with reference to construction
projects for which the developer undertakes the whole responsibility from design to
completion so that the building is available to the buyer in a ready-to-use condition.
● origins in the construction industry to refer to the day when a job is finished to the last
detail and the owner just has to turn the key in the door to begin using the facility.
Example

A majority of government-funded, large-scale infrastructure projects are developed on a

turnkey basis. The upcoming Jewar Airport project, for example, is a turnkey project. It
is being developed by Swiss company Zurich Airport International. Once it is fully
developed, the airport will be handed over to the local authorities to operate. In the
housing market, a turnkey property is a fully-furnished flat or apartment that you can
buy and rent immediately.
 Example
There are many examples of successful turnkey projects in India. One such project is the Delhi
International Airport, which was completed in 2010. The airport was built under a public-private
partnership between the Delhi International Airport Limited and the Airports Authority of India

The project cost approximately US$2.5 billion and was completed on time and within budget.
Another successful turnkey project in India is the Mumbai International Airport, which was
completed in 2014. The airport was built under a public-private partnership between the GVK
Group and the Airports Authority of India. The project cost approximately US$1.8 billion and
was completed on time and within budget.

The Delhi Metro is another successful turnkey project in India. The metro system was built
under a public-private partnership between the Delhi Metro Rail Corporation and Reliance
Infrastructure
https://www.investo
pedia.com/articles/
markets/032015/ho
w-mcdonalds-make
s-its-money-mcd.as
p
Licensing is one of the few profitable ways to grow your business. You can
boost your profit by licensing your intellectual properties like trademarks,
designs, and copyrights to other companies.
Licensing is a great way to enter into that existing production, distribution, and
markets that other companies might spend decades to establish their business.
In this way, you can get a share in profit generated by other companies by
letting them use your licensed products and services.
The license fee varies depending on the demand for your product and service in
the market. It can be a small percentage in sales and the percentage increases
with the increased value.
Calvin Klein Inc. makes 90% of its total annual profit through licensing
its designer name.
Their designer name is used by various makers of perfume, innerwear,
jeans, men’s apparel, etc. The New York Based company generates its
direct profit by the sales of women’s clothing only. On the other hand,
IBM, a giant company, has recently licensed its various technology
patents only a few years back, and it is generating approximately $1
billion of its total annual revenue through licensing .
Strategic Alliance

https://www.wallstreetmojo.com/strategic-alliances/
Assembling Mode oas entry attract certain business engaged in
manufacturing, importing raw materials or components to use in
assembling of the products for low tariffs or charges barriers ,
cutting down costs
Mostly, technical businesses like of aircraft, automobile & ship
manufacturing as these products assembled are bulky & large
that involve high transportation costs.
Can handle local management, development support, reduces
administration cost.
Hughes Electronics Corp., GM Locomotive Group and Allison Transmission
Division were GM's major subsidiaries.

To facilitate growth across the world, GM had strategic alliances with Fuji Heavy
Industries Ltd., Suzuki Motor Corp., Fiat Auto SpA and Isuzu Motors Ltd.

It also had vehicle ventures with Toyota Motor Corp. and Renault SA, and
technical collaborations with Toyota Motor Corp. and Honda Motor Co.. GM
managed to build a huge loyal customer base over the decades and went from
strength to strength, retaining its world leader crown (Refer Exhibit II for GM's
financials).

The first cars manufactured were constructed individually and a single person
assembled all the parts together. However, with the advent of the conveyor-belt
based assembly line technique in 1913-14 (at a Ford plant), car manufacturing
became much more efficient.
The first cars manufactured were constructed individually and a single person assembled
all the parts together. However, with the advent of the conveyor-belt based assembly line
technique in 1913-14 (at a Ford plant), car manufacturing became much more efficient.

GM also adopted the assembly line technique. The company had 160 plants across the
world and more than 300,000 employees. The manufacturing process was categorized
into powertrain1, metal fabrication and assembly (Refer Table II). However, GM's cost
of production in terms of time and labor was more than any other automakers in the
world.
Globalisation

Concept - file:///C:/Users/91997/Downloads/CONCEPT%20OF
%20GLOBALISATION.pdf

Case Studies

1. Coca Cola -
https://study.com/academy/lesson/business-case-study-globalization-of-coca-cola.ht
ml
2. Apple Inc -
https://www.scribd.com/doc/61951649/Impact-of-Globalization-on-Apple-Inc#
Survival of a business depends upon its strengths and adaptability to the environment. The
internal strengths represent its internal environment. It consists of financial, physical, human
and technological resources.
● Financial resources represent financial strength of the company. Funds are allocated over
activities that maximise output at minimum cost, that is, optimum allocation of financial
resources.
● Physical resources represent physical assets such as plant, machinery, building etc. that
convert inputs into outputs.
● Human resources represent the manpower with specialised knowledge that performs the
business activities.
● Technological capabilities of a firm determine its competitive strength, which is an
important factor determining its efficiency and unit cost of production. R and D
capabilities of a company determine its ability to introduce innovations which enhance
productivity of workers.
Internal Environment: The factors which exist within the organisation imparting strength
or causing weakness to the organisation, comes under internal environment. It includes:
● Value System
● Vision and Mission
● Objectives
● Corporate Culture
● Human Resources
● Labor Union
External Environment

The external environment consists of legal, political, socio-cultural,

demographic factors etc. These are uncontrollable factors and firms
adapt to this environment. They adjust internal environment with the
external environment to take advantage of the environmental
opportunities and strive against environmental threats. Business
decisions are affected by both internal and external environment.
External Environment: External Environment consists of those factors which provide an
opportunity or pose threats to the business. It is further classified as:

● Micro Environment: The immediate periphery of the business that has a continuous
and direct impact on it is called Micro Environment. It includes suppliers, customers,
competitors, market, intermediaries, etc. which are specific to the business.
● Macro Environment: Macro Environment, is one such environment that influences the
functioning and performance of every business organisation, in general. It comprises
of the demographic, socio-cultural, legal, political, technological, and global
environment.
https://www.linkedin.com/pulse/pestel-analysis-amazon-case-study-yoann-coraboeuf
https://www.academia.edu/36092153/CASE_STUDY_-ZARA_-PESTLE
Principles of WTO

Non - Discrimination - Principle of Most Favoured Nation - Concession to trading

partner extending to all other member nations, no special status.

Free Trade - reduce tariff & non- tariff barriers, quantitative restrictions prohibited

Consultation - resolve disagreements

Fair Competition - Open, Fair & Undistorted competition & IP

Developments & Reforms

WTO Criticism

The following point explains the WTO criticism in detail-

International organisations have often been heavily criticised for supporting powerful
countries and allowing them to exploit less developed countries. It has failed to address the
problems of developing countries on many levels. Poor countries are sometimes forced to
adopt so-called “free trade” practices by removing tariffs from the WTO and other
international bodies. The WTO has a history of promoting "free trade" only when it benefits
rich countries and promoting it to benefit poor countries is slow at best and slow at worst.
Recklessly careless.

Several agreements on agricultural products and medicines have reduced access to food and
medical care, resulting in many deaths.

One of the major disadvantages of WTO is that many policymakers tend to prefer more GDP
growth due to trade products rather than the Environmental hazard it is creating.
Many criticise the WTO philosophy that the main economic goal is to maximise GDP. In
an age of global warming and potential environmental disasters, perhaps the least
important thing is an increase in GDP. The WTO should probably do more to promote
environmental considerations.

Free trade ignores cultural and social factors. National companies tend to reduce
cultural diversity and overwhelm local industries and businesses.The WTO has been
criticised as undemocratic.

The structure is claimed to allow wealthy countries to get what they want. They probably
benefit the most. Progress is slow. Trade rounds were notoriously slow, and difficult to
reach an agreement.
LIMITATIONS
India's quota in the IMF, which determines voting shares in the multi-lateral lending
agency, is 2.75 per cent. China's quota is 6.4 per cent and that of the US is 17.43 per
cent.

The IMF's largest member is the United States, with a quota (as of April 30, 2016) of
SDR 83 billion (about $118 billion), and the smallest member is Tuvalu, with a quota of
SDR 2.5 million (about $3.5 million).
 The World Bank Group actually consists of five institutions
● The International Bank for Reconstruction and Development (IBRD), established in
1945, which provides debt financing on the basis of sovereign guarantees.
● The International Finance Corporation (IFC), established in 1956, which provides
various forms of financing without sovereign guarantees, primarily to the private
sector.
● The International Development Association (IDA), established in 1960, which
provides concessional financing.
● The Multilateral Investment Guarantee Agency (MIGA), established in 1988, which
provides insurance against certain types of risk, including political risk, primarily to
the private sector.
● The International Centre for Settlement of Investment Disputes (ICSID), established in
1966, which works with governments to reduce investment risk.
The Board looks forward to working with Mr. Banga on the World Bank Group
Evolution process, as discussed at the April 2023 Spring Meetings, and on all the
World Bank Group’s ambitions and efforts aimed at tackling the toughest
development challenges facing developing countries.
https://www.worldbank.org/en/news/press-release/2022/06/29/world-bank-approves-750
-million-loan-to-india-to-catalyze-private-financing-and-support-economic-growth#:~:te
xt=WASHINGTON%2C%20June%2029%2C%202022%E2%80%94,businesses%2C%2
0and%20the%20green%20finance
https://www.worldbank.org/en/news/press-release/2022/06/28/world-bank-approves-1-billion-to-support-in
dia-s-health-sector-for-pandemic-preparedness-and-enhanced-health-service-del
Developed by an Italian Economist, Antonio Serra

Mercantilism is the starting point of the development of the

international business which was initially originated in French as
“Mercantile” and “Marchant” meaning a general currency
system. During the mercantilism period, treasure, usually gold
and silver were the only currency of trade between the countries.

By mercantilism theory, a country should increase exports and

restrict imports to generate wealth and strengthen power. The
government must maintain their export greater than the imports.
A country’s best interest should be to maintain a trade surplus,
encourage exports through subsidies, and reduce imports
through tariffs, quotas, and non-tariff barriers.
Absolute advantage is when a producer can provide a good
or service in greater quantity for the same cost, or the
same quantity at a lower cost, than its competitors.

A concept developed by Adam Smith, absolute advantage

can be the basis for large gains from trade between
producers of different goods with different absolute
advantages.

By specialization, division of labor, and trade, producers

with different absolute advantages can always gain more
than producing and consuming in isolation.
Assumptions

● Barriers to Trade

Both theories assume that there are no barriers to trade. They do not account for any
costs of shipping or additional tariffs that a country might raise on another's
imported goods. In the real world, though, shipping costs impact how likely both
the importer and exporter are to engage in trade. Countries can also leverage tariffs
to create advantages for themselves or disadvantages for competitors.
● Factors of Production

Both theories also assume that the factors of production are immobile. In these models,
workers and businesses do not relocate in search of better opportunities. This assumption
was realistic in the 1700s.
 ● Trade Balance

Adam believes that imports and exports must be the same. Because of this premise, we
can’t have a trade imbalance, deficit, or surplus. A trade imbalance is created when the
opposite is true, namely when imports exceed exports.

● Always Finding Its Way Back To Scale

It is assumed that one will obtain the same rewards regardless of how much is produced.
For instance, if the production of one computer by Sam takes two hours, then the
production of two computers should take four hours. As a direct result of this, the
production of four computers would require a total of eight hours.
In our absolute advantage example, we assume that there are two countries, which are
represented by a blue and red line. They are called Blue Country and Red Country respectively.

The Blue country has an Absolute Advantage in the production of

Good A (2 hours). Blue county has an absolute advantage because
it takes fewer hours to produce a unit of Good A than Red country,
which takes 10 hours.
Red Country takes fewer hours to produce Good B (4 hours).
Therefore Red Country has an Absolute Advantage in the
production of Good B.
As a result, Blue Country will be better off if it specializes in the
production of Good A.
Red Country will be better off if it specializes in Good B.
Criticism

The theory of absolute advantage postulated that the only type of commerce that could take place
between countries was bilateral trade and that there could only be two different goods being traded.
However, when the volume of commerce and the requirements of individual nations began to rise,
this premise was called into serious question. As a result, the concept did not consider the
possibility of countries engaging in international commerce.

The assumption of unfettered commerce between states was another important tenet of the Absolute
Advantage Theory. However, it didn’t take into consideration the restrictive actions taken by
governments throughout the world. The restrictions comprised numeric limits, technical trade
obstacles, and trade restrictions that were imposed for the sake of protecting the environment or
adhering to public policy.
Adam Smith’s “Vent for Surplus” theory is not satisfying, bringing us to our third point.
This philosophy can potentially have significant unfavorable implications on the growth
process of underdeveloped countries. These nations cannot profit from selling their
surplus output on international markets because they are required to export goods to
bring their balance of payments into a neutral position despite food shortages at home.
https://www.investopedia.com/terms/c/comparativeadvantage.asp