INTERNATIONAL BUSINESS ENVIRONMENT

GLOBALIZATION OF BUSSINESS
The term globalization describes the increased mobility of goods, services, labour, technology and capital throughout the world.
"Globalization is a term for the horizontal and vertical integration of manufacturing and trade on an international level"

CHARACTERISTICS OF GLOBALIZATION
Planning expansion of their business throughout the

world. Treating domestic market & foreign market as one. Transactions are not restricted within a country. Entire globe as a single market. World wide operation. Global orientation in strategies.

Strategies for going global

Exporting
Licensing Franchising

Contract manufacturing
Management contract Joint venture Foreign direct investment

ADVANTAGES OF GLOBALIZATION
Free flow of capital
Free flow of technology Growth of industrialization

Spread up of production facilities

Increase in production & consumption Lower price with higher quality Higher standard of living Innovations

DISADVANTAGES OF GLOBALIZATION
Kills domestic business
Exploits human resources leads under employment

Transfer of natural resources

Replacement of traditional products Take over of national firms Global dominance

Factors of Globalization Business:

The Globalization of Markets / Customers: The Globalization of Production:

The Globalization of Markets / Customers:

Globalization of markets refers to the "merging of historically distinct and separate national markets into one huge global marketplace"

The Globalization of Production:

Globalization of production refers to the "sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production like land, labor, and capital.

WTO
WORLD TRADE ORGANIZATION

ORIGIN
Established on 1st January 1995.
To over come problem of GATT. GATT is favor for developed countries.

WTO was proposed by developing countries &

proposal became reality on 1st January 1995.

Objectives of WTO:
Promote trade flows by encouraging nation to adopt

nondiscriminatory and predictable trade policies Raising standard of living and incomes, promoting full employment, expanding production and trade, and optimum utilization of worlds resources. introduce sustainable development a concept which envisages that development and environment can go together. Taking positive steps to ensure that developing countries, especially the least developed ones, secure a better share of growth in world trade. Establish procedures for resolving trade disputes among members

Function of WTO:
Acting as a watchdog of international trade, constantly

examining the trade regimes of individual members. Seeking to resolve trade disputes Overseeing national trade policies Cooperating with other international institutions involved in global economic policy making. Maintaining trade related database Acting as a management consultant for world trade. Technical assistance and training for developing countries.

EMERGING ISSUES
It seeks to eliminate tariffs to zero level by the year 2000 on the

rapidly growing $600 million world market in computer related product. Multilateral agreement on investment (MAI); the MAI aims to give MNCs the right to establish any business in any country without being discriminated against by virtue of being foreign MNCs. It would also give member state the right to settle any dispute arising out of compliance with the MAI at the WTO. Core labour standards; these provide that standardized international labour wages and working conditions must prevail. Trade and environment. Government procurement policies that should aim at weeding out corruption at governmental level.

IMPLICATIONS FOR INDIA

Arguments for joining WTO: Development of pursuing open market policies, based on WTO principles Dynamic export industry can play in the countrys development. Both in terms of job creation, skill development, and technological evolution Formulating and implementing export promotion programs WTO provides for a multilateral set of rules, which are beneficial to a country like India Supporting clothing, agriculture, forestry, and fishery products and food and beverages.

Arguments against Membership:

WTO, along with IMF, and World Bank, represents the

interest of developed countries. WTO will not ensure open trade for goods produced by developing countries The worst fears expressed about the WTO agreement relate to the steep hike in prices of drugs and agriculture inputs.

REGIONAL TRADE BLOCKS

It has an agreement among countries in a geographic region to reduce & ultimately remove tariff & non-tariff barriers to the free flow of goods, services & factors of production between each other.

Types of Regional Blocks

PREFERENTIAL TRADING AGREEMENT: where the member countries are lower barriers to imports of identified products from one another. 2. FREE TRADE AREA: where barriers to trade in respect of all items among member countries are completely eliminated its own policy in regard to trade with non-member countries.
1.

3. CUSTOMS UNION: where, apart from elimination of all barriers to trade among themselves, the member countries follow a common policy in their trade with non-members. 4. Common Market: where the region becomes market for all factors of production including labour, service and capital. 5. Economic community: where the member countries follow common policies in respect of all economic matters.

MAJOR INTER-REGION TRADING BLOCKS

The European union NAFTA North American Free Trade Agreements APEC Asia pacific economic co-operation ASEAN Association Of South-east Asian Nation SAARC South Asian Association For Regional Co-

operation.

Benefits Of Inter-regional Trade Among Trade Groups

Economic gains Political gains

Prices & competitions

Scale economies.

Trade liberalization
Reducing the limitations on trade that countries around the world have erected over a number of years. It is the process where by a country opens up its markets to international trade i.e., reduces the taxes (known as the tariffs) & other limits (such as quotas) on goods coming in.