Globalization (1) 001

8/13/2019 Globalization (1) 001

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Globalization in Management

Rachna Agrawal

Department of Management

(New Delhi Institute For Information Technology)


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Globalization

To give the students an understanding of thelo!ali"ation process# the principal mechanisms ofinternational economic connections through which it wor$sand an idea of some of the de!ates it has evo$ed% &'pectedearning utcome* +aving studied this course theundergraduate students can e,uip themselves with some$nowledge of the happenings in the field of economy#

finance and politics that will provide them with a !etterperspective on developments in the world around them%

-nit .

lo!ali"ation an overview# meaning and concept#history of lo!ali"ation# /haracteristics#0ositive and negative aspects of lo!ali"ation% Impact oflo!ali"ation# Is lo!ali"ation good or 1ad2

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Aspects of Domestic 4 Foreign &nvironment# lo!alMar$eting# lo!al mar$et evolution# Trade 1arriers inlo!al Mar$eting# India5s Foreign Trade%


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-nit 6

Types of Mar$et &ntry* &'porting# licensing# Franchising#

Advantages and disadvantages of franchising# legal aspectsof franchising# 7oint 8enture# /riteria for selecting 7oint8enture 0artners# /hoice of mar$et entry methods%0rotection of Trade mar$s%

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lo!ali"ation 0rocess* TN/s and FDI and technology

flows#Intra:firm and inter:firm trade# instruments of internationalasset transaction# offshore !an$ing# &urocurrencies and&urocurrency trading# glo!al finance and hot money flows%

-nit ;

Regional and multilateral agreements* 1rief +istoryMultilateral Institutions# their

Issues in lo!ali"ation* Alternative perspectives on itsnature and character% /ritical dimensions*&conomic# political# strategic# cultural and informatics%


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Globalization an Overview

If you loo$ at the tag on your shirt# chances are you wouldsee that it was made in a country other than the one inwhich you sit right now% =hat?s more# !efore it reachedyour wardro!e# this shirt could have very well !een madewith /hinese cotton sewed !y Thai hands# shipped acrossthe 0acific on a French freighter crewed !y


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Definition of Globalization

Globalization is the system of interaction among thecountries of the world in order to develop the glo!aleconomy% lo!ali"ation refers to the integration ofeconomics and societies all over the world% lo!ali"ationinvolves technological# economic# political# and culturale'changes made possi!le largely !y advances incommunication# transportation# and infrastructure%

History of Globalization

lo!ali"ation involves the interplay of mar$ets# technologyand


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=ith near universal poverty a structural constraint ondemand# mar$ets were neigh!orhood:trading places# with

long distance trade mostly limited to lu'ury goods for thesmall power elite% New ideas# information and technologyspread slowly since transportation and communication were!ased on animal traction% Four distinct phases ofglo!ali"ation can !e discerned in modern history% The firstphase !egan in the si'teenth century with the passing ofpre:modern localism# improvements in maritimetechnology leading to the great age of maritime

e'ploration# discovery and mercantilism# the &uropeanRenaissance# centrali"ing tendencies associated witha!solute monarchy and the emergence of modern nationstates following the 0eace of =estphalia of .>9# and thespread of the ideals of the American and FrenchRevolutions from the eighteenth century%

The second phase from the late eighteenth century wasmar$ed !y the spread of the Industrial Revolution and vastimprovements in human technology# inanimate traction#productivity and demand# which led to mass production andconveyance of merchandise goods and people# cross:!orderintegration through !ul$ long:distance trade# colonialplunder# investment flows and empire during a phase of&uropean imperial e'pansion which saw the flag followtrade across the glo!e% The Industrial Revolution opened upa rapidly widening income gap !etween &urope andAmerica on the one hand# and the rest of the world on theother%


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Globalization and Its Characteristics

lo!ali"ation is the process of increasedinterconnectedness among countries most nota!ly in theareas of economics# politics# and culture% McDonalds in7apan# French films !eing played in Minneapolis# andthe -nited Nations# are all representations of glo!ali"ation%

The idea of glo!ali"ation may !e simplified !y identifying

several $ey characteristics*

Improved Technology in Transportation and

Telecommunications

=hat ma$es the rest of this list possi!le is the ever:increasing capacity for and efficiency of how people andthings move and communicate% In years past# people across

the glo!e did not have the a!ility to communicate and couldnot interact without difficulty% Nowadays# a phone# instantmessage# fa'# or video conference call can easily !e used toconnect people% Additionally# anyone with the funds can!oo$ a plane flight and show up half way across the worldin a matter of hours% In short# the Bfriction of distanceB islessened# and the world !egins to metaphorically shrin$%

Movement of eople and Capital

A general increase in awareness# opportunity# andtransportation technology has allowed for people to movea!out the world in search of a new home# a new @o!# or to
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flee a place of danger% Most migration ta$es place within or!etween developing countries# possi!ly !ecause lowerstandards of living and lower wages push individuals to

places with a greater chance for economic success%

Additionally# capital (money) is !eing moved glo!ally withthe ease of electronic transference and a rise in perceivedinvestment opportunities% Developing countries are apopular place for investors to place their capital !ecause ofthe enormous room for growth%

Diffusion of !nowledge

The word ?diffusion? simply means to spread out# and that ise'actly what any new found $nowledge does% =hen a newinvention or way of doing something pops up# it does notstay secret for long% A good e'ample of this is theappearance of automotive farming machines in


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deal with issues that do not pay attention to !orders (suchas glo!al climate change# energy use# or child la!orregulations)% &'amples of Ns include Amnesty

International or Doctors without 1orders%

As countries are connected to the rest of the world (throughincreased communication and transportation) theyimmediately form what a !usiness would call a mar$et%=hat this means is that a particular population representsmore people to !uy a particular product or service% As moreand more mar$ets are opening up# !usiness people from

around the glo!e are coming together to form multinationalcorporations in order to access these new mar$ets% Anotherreason that !usinesses are going glo!al is that some @o!scan !e done !y foreign wor$ers for a much cheaper costthan domestic wor$ersC this is called outsourcing%

At its core glo!ali"ation is an easing of !orders# ma$ing

them less important as countries !ecome dependent on eachother to thrive%


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ositive &spects of Globalization

As more money is poured in to developing countries#there is a greater chance for the people in thosecountries to economically succeed and increase theirstandard of living%

lo!al competition encourages creativity andinnovation and $eeps prices for commoditiesservices

in chec$%

Developing countries are a!le to reap the !enefits ofcurrent technology without undergoing many of thegrowing pains associated with development of thesetechnologies%

overnments are a!le to !etter wor$ together towardscommon goals now that there is an advantage incooperation# an improved a!ility to interact andcoordinate# and a glo!al awareness of issues%

There is a greater access to foreign culture in the formof movies# music# food# clothing# and more% In short#

the world has more choices%


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"egative &spects of Globalization

utsourcing# while it provides @o!s to a population inone country# ta$es away those @o!s from anothercountry# leaving many without opportunities%

Although different cultures from around the world are

a!le to interact# they !egin to meld# and the contoursand individuality of each !egin to fade%

There may !e a greater chance of disease spreadingworldwide# as well as invasive species that couldprove devastating in non:native ecosystems%

There is little international regulation# an unfortunatefact that could have dire conse,uences for the safetyof people and the environment%

arge =estern:driven organi"ations such as theInternational Monetary Fund and the =orld 1an$

ma$e it easy for a developing country to o!tain a loan%+owever# a =estern:focus is often applied to a non:=estern situation# resulting in failed progress%


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Impact Of Globalization

The present era is said to !e an age of glo!ali"ation%lo!ali"ation is a !road term and encompasses variedperspectives% It refers to the glo!al outloo$ of differentnations of the world coming closer and @oining hands interms of economy# education# society and politics%lo!ali"ation empowers a view for the entire world as a

whole irrespective of the national identity and thusglo!ali"ation has narrowed the world !y !ringing people ofall nations closer%


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&na!ling people of one nation to communicate with thoseof the other nation(s) is the !iggest achievement in terms ofglo!ali"ation and development% The culture# trade#!usiness# ethics and conduct of one group in one part of theworld can influence others may or may not !e of samenation% It is irrespective of the time and space and language!indings as these communications are in terms of trade#

social internet forums% The interaction not only influencespeople and their welfare in terms of civili"ation# traditions#political structure# financial growth and affluences !ut alsoaffects the environment as a whole%


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lo!ali"ation has tremendously affected world in various

different aspects:

'( Industrial: it has provided the surface to the productionmar$et with an enhanced access to a wide variety of foreignproducts and therefore glo!ali"ation has increased largenum!er of customers for itself% This has helped in themovement of goods and materials !etween and within the

national !oundaries%

)( *inancial: lo!ali"ation has opened the way to procuree'ternal financing opportunities to the !orrowers%

+( ,conomic: the freedom of e'change of goods andcapitals tells us that the mar$ets are interrelated and any

$ind of economic collapse in one country could !emanaged !y others%

-( olitical# the -nited


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/( Competition#glo!ali"ation has given !irth totremendous competition and has made the mar$et an openplace to e'cel with s$ills and ,uality%

0( ,cological# the most neglected part after glo!ali"ationC itis inade,uately affected !ecause of the climate changes thatare occurring due to pollution made !y the industrial set up%The areas around the industries are !ecoming slums and thewaste released from the industries is affecting the flora andfauna of the domain% It is forcing the inha!itants to inhalepolluted and o!no'ious air which not only contains high of

car!on:di:o'ide !ut also contains methane# halogen gasesand various other particulates responsi!le for altering thephysiology of the inha!itants%

1( Cultural#/ross:cultural contacts are the result ofglo!ali"ation% It has generated !etter understanding towards

cultural diversity and has promoted travels and tourism tounderstand each other to a greater e'tent% This hasenhanced greater consumer products at the same time it hasgenerated a pseudo:cultural patterns%

2( 3ocial#due to glo!ali"ation the social networ$ of peopleis widening and people are a!le to understand each other ina !etter way howsoever distant geographically they may!e%

'4( Technical: Any $ind of technological advances can !ecommunicated to other parts of the world and thusfeed!ac$ to further enhance it can !e procured%


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''( 5egal or ,thical: the guidelines are laid down for any$ind of legal issuesC international criminal court and

international @ustice movements%

Is Globalization good or 6ad7

=ith the concept of glo!ali"ation @ust coming in andsweeping the world up li$e that# there has not even !een the

time to ponder on the issueC is glo!ali"ation good or !ad forthe world2 It has !een running more on the terms of : Itcame% It saw% It con,uered% And no one really had the timeto stop and thin$ what was happening% At least that?s what Ithin$%


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&dvantages of Globalization

There are many overt advantages of glo!ali"ation that wecan spea$ of*

rovides 8ide Choices

lo!ali"ation is responsi!le for the wide range of choices

that are availa!le in the mar$et today% If you thin$ !ac$ to atime .; years ago# you?ll remem!er that foreign goods werea rarity and if at all they were availa!le they weree'tremely e'pensive% Fast forward to today and you?ll seethat the scene has completely changed% =e see varietiesand varieties of goods from groceries to !eauty products toother consumer goods in all sections of the mar$et and

they?ve @ust made a home for themselves into our lives%


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6oosts ,conomy

lo!ali"ation ma$es it possi!le to not only e'port andimport goods# !ut it also allows for outsourcing servicesand @o!s% 7o!s in the information technology sector areespecially outsourced as an important section ofglo!ali"ation% Many American companies set up !ranchesin the Indian su!continent !ecause the la!or is relativelycheap there as compared to their country%


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1efore glo!ali"ation# li$e I said# it would not have !eenpossi!le to $now a!out other countries and the cultures% 1ut

due to important tools of glo!ali"ation li$e the Internet# it ispossi!le today to $now what is happening in hana# to$now their culture and food ha!its as well% And not @ustcultures# !ut even as far as education and world $nowledgeand current events are concerned% The world shares films#serials# !oo$s# recipes and so much moreE All this ispossi!le only due to glo!ali"ation%

romotes rogressive Thin:ing

lo!ali"ation is not merely limited to e'changing food#recipes# and the li$es# !ut runs deeper in the way of

!ringing a!out a change in the attitudes and thoughts ofpeople% It ma$es people tolerant of varied views fromdifferent parts of the world and there!y promotesprogressive thin$ing and to !ring a!out social reforms insociety% It also helps in the political field !y ma$ingdifferent governments aware of the varied ways in whichgovernments are run%

Disadvantages of Globalization

The following are some !ad effects of glo!ali"ation that wehave come to understand over the past years*


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romotes Commercialism Traits

If you loo$ at the teens of today# of any country that is#you?ll find that most of them will !e in the same type ofapparel# listening to the same $ind of music# eating thesame $ind of food and fre,uenting the usual @oints% All thisis the result of glo!ali"ation and there is nothing localanymore% =hen an idea runs li$e : so and so !rands are the!est !rands# everyone !uys them !ecause they can% Thisresults in the same type of lifestyles% It does not leave any

room for local products%

Destroys ,thnic Cultures

=ith so much emphasis on !eing glo!al# people areforgetting what is local% They are disregarding their culture#

ethnicity# and local traits in preference for foreign practices%It won?t !e long !efore countries lose out on their culturesand heritage%

&ffects 5ocal Mar:ets

=hen foreign goods flood the mar$et and people !egin to!uy them# it is done at the cost of the local goods#especially in developing countries%For e'ample small time !usinessmen who do not have theresources to e'port their goods and only depend on thelocals to !uy them# go through varied degrees of losses!ecause their goods are not sold%


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!usinessman whether glo!ali"ation is good or !ad fordeveloping countries# he?ll pro!a!ly answer in the negative%

8astage of ;esources

To import and e'port products# a country ma$es use of itsprecious resources even when the product is manufacturedin its own country% Instead# if that same money was utili"edin improving the product we could promote !usiness forour own country and save on resources%

&spects of Domestic < *oreign ,nvironment

The international mar$eter5s tas$ is more complicated than

that of the domestic mar$eter !ecause the internationalmar$eter must deal with at least two levels of !arriersinstead of one% -ncertainty is created !y the aspects of all!usiness environments !ut each foreign country in which acompany operates adds its own peculiar set ofuncontrolla!le factors%


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The total environment of an international mar$eter depictsthe controlla!le elements that constitute a mar$eter5sdecision area% &nvironmental elements at home that havesome effect on foreign operation decisions%&ach foreign mar$et in which the company does !usinesscan (and usually does) present separate pro!lems involvingsome or all of the uncontrolla!le elements% The moreforeign mar$ets in which a company operates# the greater isthe possi!ility of foreign environmental factors with whichto deal with% Fre,uently# a solution to a pro!lem in acountry mar$et is not applica!le to a pro!lem in countrymar$et G%


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In addition to uncontrolla!le domestic !arriers# a significantsource of uncertainty is the num!er of factors in foreignenvironment that are often uncontrolla!le% A !usiness

operating in its home country feels more comforta!le inforecasting the !usiness climate and ad@usting !usinessdecisions to these elements% The process of analy"ing theuncontrolla!le elements in an international mar$etingprogram# however# it often involves su!stantial doses ofcultural# political and economic shoc$%

A !usiness operating in a num!er of foreign countries

might find e'tremes in sta!ility# structure and economicclimate as important parameters in !usiness decisions% Thedynamic ups and downs in some countries further show thepro!lems of change in cultural# political# and economicclimates over relatively short periods of time%

The domestic economic climate is another important home!ased uncontrolla!le factor with far reaching effects on acompany5s competitive position in foreign mar$ets% Thecapacity to invest in plants and facilities either in domesticor foreign mar$ets is to a large e'tent a function ofdomestic financial strength% It is generally true that capitaltends to flow towards optimum useC however# capital must!e generated !efore it can have mo!ility% Furthermore# ifinternal economic conditions deteriorate restrictions againstforeign investment and purchasing may !e imposed tostrengthen the domestic economy% /ompetition within thehome country can also have !usiness repercussions on theinternational mar$eter5s tas$%


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Global Mar:eting

A company5s mar$eting plan has a standardi"ed product!ut country specific advertising# or has a standardi"edtheme in all countries with country or cultural specificappeals to uni,ue mar$et characteristics# or has astandardi"ed !rand or image !ut has adapted products to

meet specific country needs and so on% In other words themar$eting planning and mar$eting mi' are approachedfrom a glo!al perspective# and where feasi!le in themar$eting mi'# efficiencies of standardi"ation are sought%=herever cultural uni,ueness dictates the need for


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adaptation of the product# its image# and so on# it isaccommodated% For e'ample# McDonald5s standardi"es itsprocesses# logo in most of its advertising and store dHcor

and layouts whenever and wherever possi!le%

Definition

Theprocessof conceptuali"ing and then conveying a finalproduct or serviceworldwide with the hopes of reaching the

international mar$etingcommunity% 0roper glo!al mar$etinghas the a!ilityto catapult a company to the ne't level# if theydo it correctly% Different strategiesare implemented !ased onthe regionthe company is mar$eting to% For e'ample# themenu at McDonald?s varies !ased on the locationof therestaurant% The company focuses on mar$etingpopular itemswithin the country% lo!al mar$eting isespecially importantto companiesthatprovideproductsor servicesthat have auniversal demandsuch as automo!ilesand food%
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Global Mar:eting ,volution


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Rather than treating the phenomenon of glo!alisation as arevolution# the continuing development of glo!al mar$etingmeans only one thing# that it is still revolving into its ne't

evolution%


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Trade 6arriers in Global Mar:eting

Trade barriersare government:induced restrictions oninternational trade% The !arriers can ta$e many forms#including the following*

Tariffs

Non:tariff !arriers to trade

o Import licenseso &'port licenses

o Import ,uotas

o


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countries promoting free trade heavily su!sidi"e certainindustries# such as agricultureand steel%

Trade !arriers are often critici"ed for the effect they have

on the developing world% 1ecause rich:country players callmost of the shots and set trade policies# goods such as cropsthat developing countries are !est at producing still facehigh !arriers% Trade !arriers such as ta'es on food importsor su!sidies for farmers in developed economies lead tooverproduction and dumping on world mar$ets# thuslowering prices and hurting poor:country farmers% Tariffsalso tend to !e anti:poor# with low rates for rawcommodities and high rates for la!or:intensive processedgoods% The /ommitment to Development Inde'measuresthe effect that rich country trade policies actually have onthe developing world%

Another negative aspect of trade !arriers is that it wouldcause a limited choice of products and would thereforeforce customers to pay higher prices and accept inferior,uality%
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Examples of free trade areas

North American Free Trade Agreement (NAFTA)


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India=s *oreign Trade policy

To !ecome a ma@or player in world trade# a comprehensiveapproach needs to !e ta$en through the *oreign Tradeolicy of India% Increment of e'ports is of utmostimportance# India will have to facilitate imports which# arere,uired for the growth Indian economy% Rationality andconsistency among trade and other economic policies isimportant for ma'imi"ing the contri!ution of such policiesto development% Thus# while incorporating thenew *oreign Trade olicy of India# the past policiesshould also !e integrated to allow developmental scope ofIndia5s foreign trade% This is the main mantra of the*oreign Trade olicy of India%


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Ob>ectives of the *oreign Trade olicy of India :

Trade propels economic growth and national development%

The primary purpose is not the mere earning of foreigne'change# !ut the stimulation of greater economicactivity% The *oreign Trade olicy of India is !ased ontwo ma@or o!@ectives# they are :

To dou!le the percentage share of globalmerchandise tradewithin the ne't five years%

To act as an effective instrument of economicgrowth!y giving a thrust to employment generation%

3trategies of *oreign Trade olicy of India #

Removing government controls and creating anatmosphere of trust and transparency to promoteentrepreneurship# industriali"ation and trades%


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developing a series of KInitiatives5 for each of thesesectors%

Facilitating technological and infrastructural up

gradation of all the sectors of the Indian economy#especially through imports and there!y increasingvalue addition and productivity# while attainingglo!al standards of ,uality%

Neutrali"ing inverted duty structures and ensuringthat India?s domestic sectors are not disadvantaged inthe

Free Trade Agreements Regional Trade

Agreements 0referential Trade Agreements thatIndia enters into in order to enhance e'ports%

-pgradation of infrastructural networ$# !othphysical and virtual# related to the entire ForeignTrade chain# to glo!al standards%

Revitali"ing the 1oard of Trade !y redefining itsrole# giving it due recognition and inducting foreign

trade e'perts while drafting Trade 0olicy% Involving Indian &m!assies as an important

mem!er of e'port strategy and lin$ing all commercialhouses at international locations through an electronicplatform for real time trade intelligence# in,uiry andinformation dissemination%

artnership:

*oreign Trade olicy of Indiaforesees merchante'porters and manufacturer e'porters# !usiness andindustry as partners of overnment in the achievement of


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its stated o!@ectives and goals%

;oad ahead of Indian foreign trade policy:

This *oreign Trade olicy of Indiais a stepping stone forthe development of India5s foreign trade% It contains the!asic principles and points the direction in which it proposeto go% A trade policy cannot !e fully comprehensive in allits details it would naturally re,uire modification from timeto time with changing dynamics of international trade%

Indian olicy

India economic policy

India ?3 olicy

Drug olicy Industrial olicy

Civil &viation olicy

India Mineral policy

5iberalization@ rivatization and Globalization

in India

*;D& 6ill )4''

;6IAs &nnual olicy

India Telecom olicy

India foreign policy

,Bim policy india
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*oreign trade policy of india

Types of Mar:et ,ntry

*oreign mar:et entry modesdiffer in degree of ris$ theypresent# the control and commitment of resources theyre,uire and the return on investment they promise%

There are two ma@or types of entry modes* e,uity and non:e,uity modes% The non:e,uity modes category includese'portand contractual agreements% The e,uity modescategory includes*@oint ventureand wholly ownedsu!sidiaries%

. &'porting 3 icensing 6 Franchising 9 Turn$ey pro@ects ; =holly owned su!sidiaries (= 7oint venture L


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Exporting

&'portingis the process of selling of goods and servicesproduced in one country to other countries%

There are two types of e'porting* direct and indirect%

Direct eBports

Direct e'ports represent the most !asic mode of e'porting#capitali"ing on economies of scalein productionconcentrated in the home country and affording !ettercontrol over distri!ution% Direct e'port wor$s the !est if thevolumes are small% arge volumes of e'port may triggerprotectionism% Types of Direct &'porting%

3ales representativesrepresent foreignsuppliersmanufacturers in their local mar$ets for anesta!lished commission on sales% 0rovide supportservices to a manufacturer regarding local advertising#local sales presentations# customs clearanceformalities# legal re,uirements% Manufacturers ofhighly technical services or products such asproduction machinery# !enefit the most form sales

representation%

Importing distributorspurchase product in their ownright and resell it in their local mar$ets to wholesalers#retailers# or !oth% Importing distri!utors are a good
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mar$et entry strategy for products that are carried ininventory# such as toys# appliances# prepared food%

Advantages of direct e'porting*

/ontrol over selection of foreign mar$ets and choiceof foreign representative companies

ood information feed!ac$ from target mar$et 1etter protection of trademar$s# patents# goodwill# and

other intangi!le property 0otentially greater sales than with indirect e'porting%

Disadvantages of direct e'porting*

+igher start:up costs and higher ris$s as opposed toindirect e'porting

reater information re,uirements onger time:to:mar$et as opposed to indirect

e'porting%

Indirect eBports


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Indirect e'port is the process of e'porting throughdomestically !ased e'port intermediaries% The e'porter hasno control over its products in the foreign mar$et%

Types of indirect e'porting*

,Bport trading companies(&T/s) provide supportservices of the entire e'port process for one or moresuppliers% Attractive to suppliers that are not familiarwith e'porting as &T/s usually perform all thenecessary wor$* locate overseas trading partners#

present the product# ,uote on specific en,uiries# etc% ,Bport management companies(&M/s) are similar

to &T/s in the way that they usually e'port forproducers% -nli$e &T/s# they rarely ta$e on e'portcredit ris$s and carry one type of product# notrepresenting competing ones% -sually# &M/s trade on!ehalf of their suppliers as their e'port departments%

,Bport merchantsare wholesale companies that !uyunpac$aged products from suppliersmanufacturers forresale overseas under their own !rand names% Theadvantage of e'port merchants is promotion% ne ofthe disadvantages for using e'port merchants result inpresence of identical products under different !randnames and pricing on the mar$et# meaning that e'port

merchant5s activities may hinder manufacturer5se'porting efforts%

Confirming housesare intermediate sellers that wor$for foreign !uyers% They receive the product


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re,uirements from their clients# negotiate purchases#ma$e delivery# and pay the suppliersmanufacturers%An opportunity here arises in the fact that if the client

li$es the product it may !ecome a trade representative%A potential disadvantage includes supplier5sunawareness and lac$ of control over what aconfirming house does with their product%

"onconforming purchasing agentsare similar toconfirming houses with the e'ception that they do notpay the suppliers directly payments ta$e place

!etween a suppliermanufacturer and a foreign !uyer%

&dvantages of indirect eBporting

Fast mar$et access /oncentration of resources for production

ittle or no financial commitment% The e'port partnerusually covers most e'penses associated withinternational sales

ow ris$ e'ists for those companies who considertheir domestic mar$et to !e more important and forthose companies that are still developing their R4D#mar$eting# and sales strategies%

The management team is not distracted No direct handle of e'port processes%

Disadvantages of indirect eBporting


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+igher ris$ than with direct e'porting ittle or no control over distri!ution# sales# mar$eting#

etc% as opposed to direct e'porting

Ina!ility to learn how to operate overseas =rong choice of mar$et and distri!utor may lead to

inade,uate mar$et feed!ac$ affecting the internationalsuccess of the company

0otentially lower sales as compared to directe'porting# due to wrong choice of mar$et anddistri!utors !y e'port partners%

Those companies that seriously consider internationalmar$ets as a crucial part of their success would li$elyconsider direct e'porting as the mar$et entry tool% Indirecte'porting is preferred !y companies who would want toavoid financial ris$ as a threat to their other goals%

Licensing

An international licensing agreement allows foreign firms#either e'clusively or non:e'clusively to manufacture aproprietor5s product for a fi'ed term in a specific mar$et%


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producing and selling in the home country withoutre,uiring the licensor to open a new operation overseas%The licensor earnings usually ta$e forms of one time

payments# technical fees and royalty payments usuallycalculated as a percentage of sales%

As in this mode of entry the transference of $nowledge!etween the parental company and the licensee is stronglypresent# the decision of ma$ing an international licenseagreement depend on the respect the host government showfor intellectual property and on the a!ility of the licensor to

choose the right partners and avoid them to compete ineach other mar$et% icensing is a relatively fle'i!le wor$agreement that can !e customi"ed to fit the needs andinterests of !oth# licensor and licensee%

Following are the main advantages and reasons to use aninternational licensing for e'panding internationally*

!tain e'tra income for technical $now:how andservices

Reach new mar$ets not accessi!le !y e'port frome'isting facilities

uic$ly e'pand without much ris$ and large capitalinvestment

0ave the way for future investments in the mar$et Retain esta!lished mar$ets closed !y trade restrictions 0olitical ris$ is minimi"ed as the licensee is usually

.OOP locally owned Is highly attractive for companies that are new in

international !usiness%


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n the other hand# international licensing is a foreignmar$et entry mode that presents some disadvantages andreasons why companies should not use it as*

ower income than in other entry modes oss of control of the licensee manufacture and

mar$eting operations and practices dealing to loss of,uality

Ris$ of having the trademar$ and reputation ruined !ya incompetent partner

The foreign partner can also !ecome a competitor !y

selling its production in places where the parentalcompany is already in%

Franchising

The Franchisingsystem can !e defined as* QA system inwhich semi:independent !usiness owners (franchisees) payfees and royalties to a parent company (franchiser) in returnfor the right to !ecome identified with its trademar$# to sellits products or services# and often to use its !usiness formatand system%

/ompared to licensing# franchising agreements tends to !elonger and the franchisor offers a !roader pac$age of rights

and resources which usually includes* e,uipments#managerial systems# operation manual# initial trainings# siteapproval and all the support necessary for the franchisee torun its !usiness in the same way it is done !y thefranchisor% In addition to that# while a licensing agreementinvolves things such as intellectual property# trade secrets
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and others while in franchising it is limited to trademar$sand operating $now:how of the !usiness%

&dvantages of the international franchising mode

ow political ris$ ow cost Allows simultaneous e'pansion into different regions

of the world =ell selected partners !ring financial investment as

well as managerial capa!ilities to the operation%

Disadvantages of the international franchising mode

Franchisees may turn into future competitors Demand of franchisees may !e scarce when starting to

franchise a company# which can lead to ma$ingagreements with the wrong candidates

A wrong franchisee may ruin the company5s name andreputation in the mar$et

/omparing to other modes such as e'porting and evenlicensing# international franchising re,uires a greaterfinancial investment to attract prospects and support

and manage franchisees%The $ey success for franchising is to avoid sharing thestrategic activity with any franchisee especially if thatactivity is considered importance to the company%


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franchisee to !e our future competitor due to the $nowledgeand strategic spill over%

5egal &spects of *ranchising

The *ranchise ;ule was put into effect in '201 to give

consumers more information about the ris:s of investing in a

franchise business( The rule reuires franchise sellers to

provide all potential franchisees with a disclosure document

containing )4 categories of information about the franchise@ its

officials@ and other franchisees( These categories include

$'% the name@ trade name and mar:s used by the

franchisor and its parent firm or holding companyE

$)% the business eBperience@ principal occupations and

employers of directors and eBecutive officersE

$+% the business eBperience of the franchisor and its

parentE$-% litigation information@ including $a% felony convictions

for certain dishonesty or restraint of trade@ $b% civil

actions for the same and any actions by franchisees that

involved their franchise relationship@ and $c% state or

federal orders or applications for orders involving the

sameE

$.% information about ban:ruptciesE

$/% a factual description of the franchise being soldE$0% the fees payable to commence operationsE

$1% any recurring fees the franchisee must payE

$2% the identities of any persons affiliated with the

franchisor with whom the franchisee is reuired to do

businessE


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$'4% a statement of certain property the franchisee will be

reuired to buy or rent and the names of any persons

from whom the lease of purchase must be madeE

$''% information about the calculation and amount of any

consideration payable to the franchisor or its affiliates forgoods the franchisee is reuired or advised to obtain from

themE

$')% information on any financing arrangements in which

the franchisor or its affiliates are involvedE

$'+% material facts regarding limitations on the

franchisee@ such as territorial restrictionsE

$'-% a statement of any personal participation in the

business that is reuired of the franchiseeE$'.% a description of certain terms and conditions of the

franchise agreement and related agreementsE

$'/% information about the franchise system and

company#owned storesE

$'0% the range of time between signing of the franchise

agreement and $a% site selection and $b% commencement of

businessE

$'1% disclosures about initial training programsE$'2% information about public figures recommending the

purchase of the franchise or involved with the

management of the franchisorE and

$)4% financial information(

The *TC does allow for certain eBemptions and eBclusions

from the *TC rule( If@ however@ the *TC does not eBempt the

franchisor@ they must ma:e the disclosures listed above in a

legible@ written document(FThe *ederal Trade Commission does allow for the

substitution of the *TC rule for the ?niform *ranchising

Offering Circular@ more commonly referred to as the ?*OC@

due to the fact that '1 of the .4 states reuire the same


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registration andor disclosure of the came categories listed in

the *TC rule(

Turnkey projects

A turn$ey pro@ect refers to a pro@ect in which clients paycontractors to design and construct new facilities and trainpersonnel% A turn$ey pro@ect is way for a foreign companyto e'port its process and technology to other countries !y

!uilding a plant in that country% Industrial companies thatspeciali"e in comple' production technologies normally useturn$ey pro@ects as an entry strategy%

ne of the ma@or advantages of turn$ey pro@ects is thepossi!ility for a company to esta!lish a plant and earnprofits in a foreign country especially in which foreigndirect investment opportunities are limited and lac$ ofe'pertise in a specific area e'ists%

0otential disadvantages of a turn$ey pro@ect for a companyinclude ris$ of revealing companies secrets to rivals# andta$eover of their plant !y the host country% 1y entering amar$et with a turn$ey pro@ect proves that a company has nolong:term interest in the country which can !ecome a

disadvantage if the country proves to !e the main mar$etfor the output of the e'ported process%


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Wholly owned subsidiaries W!"#

A wholly owned su!sidiaryincludes two types ofstrategies* reenfield investmentand Ac,uisitions%reenfield investmentand ac,uisitioninclude !othadvantages and disadvantages% To decide which entrymodes to use is depending on situations%

reenfield investmentis the esta!lishment of a new whollyowned su!sidiary% It is often comple' and potentiallycostly# !ut it is a!le to full control to the firm and has the

most potential to provide a!ove average return% Q=hollyowned su!sidiariesand e'patriate staff are preferred inservice industries where close contact with end customersand high levels of professional s$ills# speciali"ed $nowhow# and customi"ation are re,uired% reenfield investmentis more li$ely preferred where physical capital intensiveplants are planned% This strategy is attractive if there are nocompetitors to !uy or the transfer competitive advantages

that consists of em!edded competencies# s$ills# routines#and culture%

reenfield investmentis high ris$ due to the costs ofesta!lishing a new !usiness in a new country% A firm mayneed to ac,uire $nowledge and e'pertise of the e'istingmar$et !y third parties# such consultant# competitors# or

!usiness partners% This entry strategy ta$es much time dueto the need of esta!lishing new operations# distri!utionnetwor$s# and the necessity to learn and implementappropriate mar$eting strategies to compete with rivals in anew mar$et%
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Ac,uisitionhas !ecome a popular mode of entering foreignmar$ets mainly due to its ,uic$ access% Ac,uisition strategyoffers the fastest# and the largest# initial international

e'pansion of any of the alternative%Ac,uisition has !een increasing !ecause it is a way toachieve greater power% The mar$et shareusually is affected!y mar$et power% Therefore# many multinationalcorporationsapply ac,uisitions to achieve their greatermar$et power re,uire !uying a competitor# a supplier# adistri!utor# or a !usiness in highly related industry to allow

e'ercise of a core competency and capture competitiveadvantagein the mar$et%

Ac,uisition is lower ris$ than reenfield investment!ecause of the outcomes of an ac,uisition can !e estimatedmore easily and accurately% In overall# ac,uisition isattractive if there are well esta!lished firms already inoperations or competitors want to enter the region%

n the other hand# there are many disadvantages andpro!lems in achieving ac,uisition success%

Integrating two organi"ations can !e ,uite difficultdue to different organi"ation cultures# control system#and relationships% Integration is a comple' issue# !ut itis one of the most important things for organi"ations%

1y applying ac,uisitions# some companiessignificantly increased their levels of de!t which canhave negative effects on the firms !ecause high de!tmay cause !an$ruptcy%
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Too much diversification may cause pro!lems% &venwhen a firm is not too over diversified# a high level ofdiversification can have a negative effect on the firm

in the long term performance due to a lac$ ofmanagement of diversification%

$oint %enture

There are five common o!@ectives in a@oint venture*mar$et entry# ris$reward sharing# technology sharing and@oint product development# and conforming to governmentregulations% ther !enefits include political connectionsand distri!ution channel access that may depend onrelationships%


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/onflict over asymmetric new investments Mistrust over proprietary $nowledge 0erformance am!iguity : how to split the pie

ac$ of parent firm support /ultural clashes If# how# and when to terminate the relationship

7oint ventures have conflicting pressures to cooperate andcompete*


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artner 3election criteria for oint entures


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prospective partners cannot provide these capa!ilities# thenformation of a 78 is a ,uestiona!le proposition% Therefore#technical complementarily should !e viewed as a minimum

,ualification for selecting a partner%Technical complementarily is determined !y analy"ing the$ey success factors : those few areas strongly influencingcompetitive position and performance : confronting theproposed 78% &valuation of your firm?s current andanticipated competitive position relative to these factorsshould then !e performed% Areas where deficiencies e'ist

can serve as the !asis for assessing technicalcomplementarily of a partner% +owever# the analysis shouldidentify more than merely a financial deficiencyC suchresources are often !e accessed via other options which willnot entail the e'tensive managerial involvement of apartner% Although initially appealing% a 78 !ased solely ona partner?s financial contri!ution is unli$ely to foster long

term compati!ility%Mutual Dependency & "ecessary ,vil


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some non:78 form of investment% There should !e someidentifia!le mutual need# with each partner supplyinguni,ue capa!ilities or resources critical to 78 success%

=hen one partner is strong in areas where the other is wea$and vice versa# mutual respect is fostered and secondguessing and conflict can !e mitigated%

There should !e a Bmiddle levelB of dependency !etweenpartners% If the level of dependency is too small# the 78 isunli$ely to survive difficult times% Set# too muchdependency# such as when small firms enter 78s with muchlarger partners# may prove unsta!le !ecause of potentialconse,uences of loss of a partner% 78 termination mightseverely disa!le the small firm !y causing customers#employees# and stoc$ mar$et to ,uestion the firm?s

via!ility% The resulting damage to its reputation could causea precipitous decline in its stoc$ value# harm morale# andlimit the availa!le strategic options%


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;elative Company 3ize The ,lephant and the &nt

compleB

78?s often have the !est chance of long term success if !oth

parties are compara!le in sophistication and si"e# prefera!lylarge% If a small firm decides to enter into a 78 with asimilarly si"ed partner# the firms may magnify each other?swea$ness% This is less often the case !etween two largefirms# which are li$ely to have similar values and controlsystems# similar tolerances for losses# and similar appetitesfor ris$% /risis are less common in large firms# particularly

in regard to short:term cash flow% Thus# larger companiestypically offer greater Bstaying powerB !eing a!le tocommit a greater volume of resources over a longer timehori"on%

Set there are numerous e'ceptions of successful 78s!etween firms of different si"es% A smaller firm withuni,ue capa!ilities may venture with a large corporation to

e'ploit new opportunities which otherwise was impossi!leto e'ploit it alone%

&void *inancial Dependency

=hen contemplating a 78# !e sure the prospective partnercan generate sufficient financial resources to maintain theventure?s efforts% Managers fre,uently note their avoidance


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of potential BanchorsB :: partners li$ely to slow venturegrowth and development due to ina!ility or unwillingnessto provide their share of the funding% It must !e noted that

partners will always have differences of opinion regardinge'pansion% A small company may have fewer financialresources availa!le for shouldering its portion if ane'pansion or to pay a higher financing rate than does thelarger partner% This can not only cause operating pro!lems#!ut might also result in !ruised egos# which can furtherintensify the difficulty%

3trategic Complimentarily & rereuisite for 5ongTerm 3uccess

Although a ma@or concern# relative si"e tends not to !e asimportant as achieving a fit !etween partners? strategicgoals for the 78% Form the onset of discussions# eachpartner must try to understand what other participantsdesire from the 78% +aving different o!@ectives in forming

the 78# including the timing and level of returns on theirinvestments# fre,uently produces conflicts of interestsamong partners% As partners? o!@ectives diverge# there isincreasing ris$ of dissatisfaction and associated pro!lems%The ris$ may !e heightened when the 78?s environment ischaracteri"ed !y a high level of uncertainty# since# underthe circumstances# changes on a 78?s operations are most

li$ely% -ne'pected events can cause pro!lems !ecause ofthe difficulty on formulating a mutually accepta!leresponse to change% A power game can result and the 78can collapse id the partners cannot reach agreement on anappropriate course of action%


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Operating olicies Compatibility and fit

Another consideration during partner selection is similarityof partner?s operating policies% There are several instances

of 78 !eing dissolved !ecause of inconsistencies !etweenpartners? accounting systems# employee !enefits policies#de!t:to:e,uity ratios# cultural !iases etc% Differences inoperating policies in an international 78 are often due tocultural !iases% ften times one partner wants the 78 tofollow its methods even of the 78 is located in anothercountry% ften times# -< firms want their 78s to adapt

American policies even if the 78 is located outside -


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In many cultures# esta!lishing a personal rapport is theessential first thing in !usiness !efore agreeing onanything% To reduce prospects for such difficulties# firms

should loo$ for continuity among the critical personnelwithin a partner?s management team%

Trust and Commitment between partners

Forming and operating a 78 over a long term re,uires morethan cordial relations !etween partner?s management teams%The partner?s perceived trustworthiness and commitment

are also pivotal considerations# especially if the proposed78 involves firm?s core technologies or other proprietarilycapa!ilities which are the essence of the firm?s competitiveadvantage% It must !e remem!ered that today?s partnerscould !e tomorrow?s competitors and managers have toreact with some initial distrust regarding potential partners?motives% As one /& noted# BSou?ve got to !e sure you?rewor$ing with earnest and ethical people who aren?t trying

to undermine your company% -sually# a partner will haveaccess to your trade secrets% +e might attempt to completea few pro@ects# learn what you do# then e'clude you fromfuture deals%B

Closing Thoughts

The preceding discussion presents a rather long list ofcriteria# !ut e'perienced managers pro!a!ly can add others%In International 78# cultural differences and communication


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!arriers have to !e given e'tra attention% The criteriadiscussed a!ove are very much relevant to International7oint 8entures and provides a foundation for identifying

and evaluating the potential long term compati!ility ofprospective 78 partners%

"trategic alliance

A strategic alliance is a term used to descri!e a variety ofcooperative agreements !etween different firms# such asshared research# formal @oint ventures# or minority e,uityparticipation% The modern form of strategic alliances is!ecoming increasingly popular and has three distinguishingcharacteristics*

.% They are fre,uently !etween firms in industriali"ednations

3% The focus is often on creating new products andortechnologies rather than distri!uting e'isting ones6% They are often only created for short term durations

&dvantages of a strategic alliance

Technology &'change

This is a ma@or o!@ective for many strategic alliances%The reason for this is that many !rea$throughs and


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ma@or technological innovations are !ased oninterdisciplinary andor inter:industrial advances%1ecause of this# it is increasingly difficult for a single

firm to possess the necessary resources or capa!ilitiesto conduct their own effective R4D efforts% This isalso perpetuated !y shorter product life cycles and theneed for many companies to stay competitive throughinnovation%


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As industries converge and the traditional lines!etween different industrial sectors !lur# strategicalliances are sometimes the only way to develop the

comple' s$ills necessary in the time frame re,uired%Alliances !ecome a way of shaping competition !ydecreasing competitive intensity# e'cluding potentialentrants# and isolating players# and !uilding comple'value chains that can act as !arriers%

&conomies of scale and reduction of ris$ 0ooling resources can contri!ute greatly to economies

of scale# and smaller companies especially can !enefitgreatly from strategic alliances in terms of costreduction !ecause of increased economies of scale%

In terms on ris$ reduction# in strategic alliances no one firm

!ears the full ris$# and cost of# a @oint activity% This ise'tremely advantageous to !usinesses involved in highris$ cost activities such as R4D% This is alsoadvantageous to smaller organi"ations which are moreaffected !y ris$y activities%

Alliance as an alternative to merger


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Alliances often lead to full:scale integration ifrestrictions are lifted !y one or !oth countries%

Disadvantages of strategic alliances

The ris$s of competitive colla!oration


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gain a competitive advantage against the companythey may !e wor$ing with%

Firms may use alliances to ac,uire its partner% ne

firm may target a firm and ally with them to use the$nowledge gained and trust !uilt in the alliance to ta$eover the other%

,ffects of M"C=s in Globalization

Mirroring the world5s condition with reference to our

postmodern consciousness is something that is !orderless#

encompassing# limitless and even groundless% This


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consciousness pasted into our mind is an offshoot of the

proliferation of modern science# political and social

tric$eries# and more so economical maneuvering of most

powerful elites and multinational organi"ations across the

continents% This phenomenon recogni"es no frontiers not

only geographical !ut cultural% This is !est $nown as

glo!ali"ation%

The omnipresence of glo!al trends and innovations

de!un$ the idea of !usiness monopoly and empire states%Today# the trends are set to ma'imi"e the potential of

human powers !y triviali"ing simple phenomena in order to

fashion comple' and su!tle effects% In the minds of

prominent sociologists and philosophers

these trivializationof occurrences !rought a!out !y man5s

deepest desire of uncovering the truth and meaning of life%+owever# our correspondence and connection with the truth

is indirect and diluted which can only !e accessi!le via

representations and constructs%

The flourishing of multinationals spar: by global trends

Today# multi:companies and corporations are

e'panding their !usiness in the glo!al mar$ets% The

increasing demand of e'panding !usiness outlets in various


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countries is inargua!ly phenomenal% The rapid movement

of !usinesses !rought a!out !y the increase of demands !y

consumers surfaced all sides of the glo!e% The demand for

supplies of any goods !eyond necessity highlighted the

definitive mindset and !ehavior of the people%

/onsumerism and materialism a!orted people5s inclination

to spirituality and dogmatism% The fast:paced

developments of the world due to industrial and scientific

revolutions made multinationals too$ ris$s to !argain and

trade their products considering the slim chance of survival%

+owever# as it moves forward# multinationals o!tained

multiple !onds of profit%


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,ffects of M"Cs to the ,conomy

There are three different fields of capital in a

society# the politics# economic and social fields% Theinterplay of these fields posits the insepara!ility of

connections !etween each field% This can go without saying

that what affects a certain field rever!erates to other fields%

+ence# MN/s effects to economy can !e also relegated to

the rest societal fields%

+owever# let us not focus deeply in the two

remaining fields !ut let us fi' our ga"e to the economic

field wherein the most o!vious is perceived%

There are five ma@or effects MN/s possi!ly

contri!ute to the growth of economy%

First# MN/s !ring !onds of revenues to the

government%


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First# multinational corporations !ring !onds of

revenues to the government in which in turn used it to

su!sidi"e and allocate sufficient !udget to various agencies

and institutions to implement programs and services% -nder

government5s economic regulations and policies# each

!usiness esta!lishment must adhere to its responsi!ility of

paying ta'es% In this sense# multi companies covered !y

governmental economic policies and regulations should

a!ide and are o!liged to pay its ta'es% Moreover# since

multi companies are considered to !e international some

considerations are !eing upheld# li$e giving them higher

payment on ta'es and other !illing compared to local

!usiness outlets and mar$ets%


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engaged in various pro@ects that would !asically ma$e the

economy strong% For e'ample# in many third world

countries# one very important in which MN/s assumed is

its support to give good opportunities to the citi"ens#

allowing them to find and give @o!s suita!le to their

e'pertise# a!ilities and s$ills%

Fourth# MN/s are primary players in the world5s

most dynamic industries and the driving force !eyond the

glo!al economy% This ascri!ed status of MN/s purportedly

affects country5s economy% As !eing dynamic and highly

competitive industries drive country5s economic in !oth

polarities% This could !e a harm and !eneficial in !oth

polarities% +owever# let us consider the fact that although

MN/s loo$s into the development of the glo!al economy#

the way it will reach the pinnacle of such status# can !e

only through ta$ing a step !y step method% In order that a

glo!al economy can gain power and sta!ility# MN/s

should loo$ into the smaller parts that composed the glo!al

economy%


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ground to push up the glo!al economy unless regions are

strong enough to hold and support the glo!al sphere%

astly# MN/s overpower the local !usiness ormar$ets% !viously# although MN/s !rought significant

effects to the economy of a country# we cannot sideline the

fact that local mar$et5s world is getting smaller and smaller

!ecause of MN/s domination% +owever# MN/s are not

totally cruel and egotistic with regards to gaining profits# in

fact# help local and small !usiness to gain more $nowledgeand e'pertise in management in order to progress%

Nevertheless# the fact that it overpowers local !usiness

units# we can sure how long small !usiness will continue to

e'ist%


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*oreign Direct Investment$*DI%

*oreign direct investment(*DI) is direct investment !y a

company in production located in another country either !y!uying a company in the country or !y e'pandingoperations of an e'isting !usiness in the country% Foreigndirect investment is done for many reasons including tota$e advantage of cheaper wages in the country# specialinvestment privileges such as ta' e'emptions offered !y thecountry as an incentive for investment or to gain tariff:freeaccess to the mar$ets of the country or the region% Foreigndirect investment is in contrast toportfolioinvestmentwhich is a passive investment in the securitiesof another country such as stoc$sand!onds%
http://en.wikipedia.org/wiki/Portfolio_investmenthttp://en.wikipedia.org/wiki/Portfolio_investmenthttp://en.wikipedia.org/wiki/Stockshttp://en.wikipedia.org/wiki/Bondshttp://en.wikipedia.org/wiki/Portfolio_investmenthttp://en.wikipedia.org/wiki/Portfolio_investmenthttp://en.wikipedia.org/wiki/Stockshttp://en.wikipedia.org/wiki/Bonds


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As a part of the national accountsof a country FDI refers tothe net inflows of investment to ac,uire a lastingmanagement interest (.O percent or more of voting stoc$)

in an enterprise operating in an economy other than that ofthe investor% It is the sum of e,uity capital# other long:termcapital# and short:term capital as shown the!alance ofpayments% It usually involves participation in management#@oint :venture# transfer of technologyand e'pertise% Thereare two types of FDI* inward foreign direct investment andoutward foreign direct investment# resulting ina netFDI inflow(positive or negative) and Bstoc$ of

foreign direct investmentB# which is the cumulative num!erfor a given period% Direct investment e'cludes investmentthrough purchase of shares% FDI is one e'ampleof international factor movements%

Trends in *oreign Direct Investment $*DI%

+istorically# FDI has !een directed at developing nations

as firms from advanced economies invested in other

mar$ets# with the -< capturing most of the FDI inflows%

=hile developed countries still account for the largest share

of FDI inflows# data shows that the stoc$ and flow of *DI

has increased and is moving towards developingnations@ especially in the emerging economies around

the world(
http://en.wikipedia.org/wiki/National_accountshttp://en.wikipedia.org/wiki/Balance_of_paymentshttp://en.wikipedia.org/wiki/Balance_of_paymentshttp://en.wikipedia.org/wiki/Joint-venturehttp://en.wikipedia.org/wiki/Transfer_of_technologyhttp://en.wikipedia.org/wiki/Foreign_portfolio_investmenthttp://en.wikipedia.org/wiki/Foreign_portfolio_investmenthttp://en.wikipedia.org/wiki/International_factor_movementshttp://en.wikipedia.org/wiki/National_accountshttp://en.wikipedia.org/wiki/Balance_of_paymentshttp://en.wikipedia.org/wiki/Balance_of_paymentshttp://en.wikipedia.org/wiki/Joint-venturehttp://en.wikipedia.org/wiki/Transfer_of_technologyhttp://en.wikipedia.org/wiki/Foreign_portfolio_investmenthttp://en.wikipedia.org/wiki/Foreign_portfolio_investmenthttp://en.wikipedia.org/wiki/International_factor_movements


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Aside from using FDIs as investment channel and a method

to reduce operating costs# many companies and

organizations are now loo:ing at *DI was a way to

internationalize(FDIs allow companies to avoidgovernmental pressure on local production and cope with

protectionist measures !y circumventing trade !arriers% The

move into local mar$ets also ensures that companies are

closer to their consumer mar$et# especially if companies set

up locally:!ased (national) sales offices%

Foreign direct in%estment in &ndia


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The world5s largest retailer =al:Mart has termed India5sdecision to allow ;.P FDI in multi:!rand retail as a Qfirstimportant step and said it will study the finer details of the

new policy to determine the impact on its a!ility to do!usiness in India% +owever this decision of the governmentis currently under suspension due to opposition frommultiple political ,uarters%

Offshore 6an:ing

8hen it comes to the safety of your financial resources

and the protection of your assets@ we recommend the

safest and most secure financial institutions in the

world(Depending on the @urisdiction you choose# we haverelationships with secure offshore !an$s that offer ourcustomers security# sta!ility and safety%

Bffshore !an$ing or ffshore !an$s refers to the many!an$ing and investment institutions availa!le in countriesand @urisdictions other than the depositor5s home country%=hile technically any !an$ can !e considered an ffshore!an$ when it meets the a!ove criteria# the term is generallyreserved for the !an$ing institutions located in what areconsidered @urisdictions that have a high regard for theprivacy and security of their depositors%


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=hat is ffshore 1an$ing2

The !road definition of an offshore !an$ is that of a !an$that is located in a @urisdiction or country that is differentfrom the @urisdiction or country that the depositor orinvestor resides% ne of the many !enefits of holding anoffshore !an$ing account is that they are usually located in

financial havens that provide su!stantial asset protectionand confidentiality !enefits to the !an$ account signatory%These @urisdictions also often allow for a rela'ation ofrestrictions with respect to the types of offshore !an$ingaccounts availa!le to depositors or investors# and how thencan !e invested% This amounts to decreased regulation andgreater fle'i!ility for the depositor% The more popularoffshore @urisdictions often provide a su!stantial increase in

financial privacy%

=here


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environment# it !ears consideration to outline what one?s!an$ing goals are and then choose the @urisdictionaccordingly% A very small minority of the offshore

@urisdictions does a poor @o! of managing and regulatingtheir !an$ing institutions# !ut the informed investor oradvisor will deem these as unsuita!le for themselves ortheir clients% Further# these poorly organi"ed and run@urisdictions are often manipulated !y illicit depositors andhence prove easy targets of the FATF (Financial ActionTas$ Force) loo$ing for money laundering or other criminalactivity%

+istory of ffshore 1an$ Accounts

It is an unfortunate fact that &uropeans have long !eensu!@ected to relatively heavy ta' !urdens% This was as truein the 1ritish Isles as it was on the continent% Faced with

the prospect of watching their hard:earned assets andwealth diminish with every reach of the ta' collector5shand# they were ripe for a solution% And a solution came%The small# island nation state $nown as the /hannel Islandsconvinced these frustrated depositors that funds placed inits !an$s could !e free from scrutiny the hence the heavy:handed ta'ation !urden% The &uropeans were convinced

and soon this service thrived# with other small @urisdictions!ecoming savvy to this foreign capital:attracting strategy%


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And soon the term Qffshore !an$ing !ecamesynonymous with any smaller# haven @urisdiction thatoffered safe# secure# confidential !an$ing with practical

regulations%


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3outh &sian &ssociation for ;egional

Cooperation $ 3&&;C %

The 3outh &sian &ssociation for ;egionalCooperation(3&&;C) is an organi"ation of


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The o!@ectives of the Association are*

o to promote the welfare of the people of


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o Non:interference in the internal matters is one of its

o!@ectiveso /ooperation for mutual !enefit

o All decisions to !e ta$en unanimously and need a,uorum of all eight mem!ers

o All !ilateral issues to !e $ept aside and only

multilateral(involving many countries) issues to !ediscussed without !eing pre@udiced !y !ilateral issues

o Afghanistan was added to the regional grouping on .6Novem!er 3OO;# =ith the addition of Afghanistan# the

total num!er of mem!er states were raised to eight ()%In April 3OO># the -nited


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and


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Current

members

Afghanistan

1angladesh 1hutan

India

Maldives

Nepal

0a$istan


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I// considers multilateral agreements in the =orld Tradergani"ation (=T) to !e the preferred instruments forli!erali"ing international trade% 3


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regional trade agreements notified under the ATT and the=T are in force today% 1etween .OO and 3OO newregional trade formations are anticipated !y 3OO;% Regional

or !ilateral agreements may !ring faster results than themultilateral process# may ena!le parties to conclude levelsof li!erali"ation !eyond the multilateral consensus# andmay !e a!le to address specific issues that do not registeron the multilateral menu% The resulting achievements intrade li!erali"ation can !e su!stantial complements to the=T system# and they can !e important !uilding !loc$sfor future multilateral li!erali"ation%

otential negative effects of regional trade agreements

The most powerful economic arguments against regionaland !ilateral trade agreements are that they can cause trade

diversion and trade distortions and ultimately underminethe multilateral system !ecause of their discriminatorynature% In some cases# preferential rules of origin haveproven to stifle technological developments# networ$s and@oint manufacturing# and to unduly restrict third:countrysourcing# leading to trade diversion% Moreover# they cancreate o!stacles to trade facilitation !y increasingadministrative comple'ity at customs%

ICC recommendations


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In cases where regional agreements increaseprotection against non:parties# compensation must !ein accordance with Article I8%>%

In cases where regional agreements do not meetATT criteria for customs unions and free tradeagreements# the parties should at least respect theMost Favored Nation (MFN) principle and lower trade!arriers on an MFN !asis e%g%# tariff cuttingagreements in the Asia 0acific &conomic /ooperationarea (A0&/)J%.#3#6%

=hile !ilateral agreements offer opportunities to

handle issues that cannot !e addressed throughmultilateral agreements# =T mem!ers should !ecircumspect a!out creating the potential for precedentson non:commercial# domestic governance issues thatwill hamper multilateral trade li!erali"ation%

=T mem!ers should see$ to develop multilateraldisciplines to simplify and harmoni"e preferential

rules of origin including the cumulating of origin% Recogni"ing that regional trade agreements will

continue in view of the considera!le potential !enefitsthat they can !ring# the overarching goal of =Tnegotiations in this area should !e to minimi"e thescope for such agreements to divert trade with ordiscriminate among non:parties%

I// su!mits these recommendations to all =T mem!ersas input into their timely negotiations on this importantissue for the multilateral trading system%


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&bout ICC

I// is the world !usiness organi"ation# the onlyrepresentative !ody that spea$s with authority on !ehalf of

enterprises from all sectors in every part of the world% I//promotes an open international trade and investmentsystem and the mar$et economy% 1usiness leaders ande'perts drawn from the I// mem!ership esta!lish the!usiness stance on !road issues of trade and investmentpolicy as well as on vital technical and pectoral su!@ects%I// was founded in .U.U and today it groups thousands ofmem!er companies and associations from over .6O

countries%

;ole of Multilateral Institutions

The role of multilateral institutions in financing andsupporting infrastructure activities in the developing world

is e'tremely important% The contri!ution of multilateralagencies li$e =orld 1an$# AD1# African Development1an$# Inter:American Development 1an$# and the&uropean 1an$ for Reconstruction and Development ininfrastructure development and its su!se,uent enhancementof economic growth and alleviating poverty is significant%+owever# given the growing demand for infrastructure inAsiaXmore specifically in


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8orld 6an:=s ;ole in Infrastructure Development in

3outh &sia

The =orld 1an$ has funded numerous pro@ects to developinfrastructure around the world% Recogni"ing that it mustplay a $ey role in meeting glo!al needs for infrastructure:related financing and policy advice# the =orld 1an$ hasplaced infrastructure at the front and center of itsdevelopment agenda to reduce poverty and stimulate

economic growth% The =orld 1an$ has developed anInfrastructure Action 0lan# which encompasses innovativeways to finance infrastructure pro@ects%

In the .UUOs# the =orld 1an$ reduced investment lendingfor infrastructure with the e'pectation that private sectorinvestment in infrastructure would rise% +owever# theanticipated rise in private lending never came% 0rivate

financing for infrastructure plummeted from -


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AD1 offers a variety of direct assistance to the privatesector%


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The importance of offsets in the glo!al defense trade has!een growing over the last two decades% Today mostdeveloped and developing nations have some sort of offset

programme# fre,uently either to protect their own defenseindustries# or to assist in the further development andenhancement of !urgeoning indigenous defense industrialcapa!ilities% In the modern defense !usiness industry# offsethas !ecome an essential part of any proposed defensee,uipment pac$age# with many nations increasingly payinggreater attention to the offset proposals contained withinthe supplier5s proposal pac$ages%

Fre,uently# offset pac$ages are the determining factor inthe decision:ta$ing process as far as to whom contracts areawarded% It is $nown that# in some countries# it is the detailsof the offset pac$ages put forward !y competingcontractors which is loo$ed at and assessed first# even!efore other parts of the tender are e'amined%

ffsets in defense trade can !e !oth direct and indirect%


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centers# purchase of defense components from thecustomer country%

Indirect

Industrial pro@ects# employment creation# s$illstransfer# student sponsorships# !uilding of schools andcolleges# infrastructure development# investmentpromotion# e'port development# management s$ills(ITC pac$agingC ,uality standardsC mar$eting)%

The importance of offsets for developing economies#li$e India5s# is immense% /urrently# more than .3Odeveloped and developing countries have some sort ofeconomic offset for purchase of aircraft5s and defensetechnology% ffsets account for !etween .O.;P ofworld trade and now applies to ma@or civil programssuch as commercial aircraft# telecommunications# and

power generation% It is a !uyer5s mar$et and India#with its huge import of defense:related e,uipment andcapital goods# must leverage from its defense deals%


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9% &ncourage FDI%;% Import su!stitution%>% /reate e'port mar$ets for goods produced

locally%L% New employment opportunities for localnationals%

% Technology transfer%

International Multilateral Organizations

o -nited Nations (-N)o International a!our rgani"ation (I)o Food and Agriculture rgani"ation of the -nited

Nations (FA)
http://www.un.org/http://www.ilo.org/http://www.fao.org/http://www.fao.org/http://www.un.org/http://www.ilo.org/http://www.fao.org/http://www.fao.org/


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The 8orld Health Organization(8HO) is a speciali"edagency of the -nited Nations(-N) that is concerned withinternationalpu!lic health% It was esta!lished on L April

.U9# with head,uarters in eneva#


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international pu!lication on health# the worldwide =orld+ealth


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The organi"ation is currently endeavoring to persist with atrade negotiation called the Doha Development Agenda(orDoha Round)# which was launched in 3OO. to enhance

e,uita!le participation of poorer countries which representa ma@ority of the world?s population% +owever# thenegotiation has !een dogged !y Bdisagreement !etweene'porters of agricultural !ul$ commodities and countrieswith large num!ers of su!sistence farmers on the preciseterms of a ?special safeguardmeasure? to protect farmersfrom surges in imports% As of March 3O.3 the future of the

Doha Round is uncertain%B
http://en.wikipedia.org/wiki/Doha_Development_Agendahttp://en.wikipedia.org/wiki/Safeguardhttp://en.wikipedia.org/wiki/Doha_Development_Agendahttp://en.wikipedia.org/wiki/Safeguard


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?nited "ations (?")

The ?nited "ations(?") is an internationalorgani"ationwhose stated aims are facilitating cooperation

in international law# international security# economicdevelopment# social progress# human rights# andachievement of world peace% The -N was founded in .U9;after =orld =ar II to replace the eague of Nations# to stopwars !etween countries# and to provide a platform fordialogue% It contains multiple su!sidiary organi"ations tocarry out its missions%

There are .U6 mem!er states# including everyinternationally recogni"edsovereign state in the world!ut 8atican /ity% From its offices around the world# the -Nand its speciali"ed agencies decide on su!stantive andadministrative issues in regular meetings held throughoutthe year% The organi"ation has si' principal organs*the eneral Assem!ly(the main deli!erative assem!ly)C the


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Top '4 donators to the ?" budget@ )4''

Member state Contribution$Jof ?" budget%

?3& 33%OOOP

apan .3%;6OP

Germany %O.P

?nited !ingdom >%>O9P

*rance >%.36P

Italy 9%UUUP

Canada 6%3OLP

China 6%.UP

3pain 6%.LLP

MeBico 3%6;>P

Other member states 3L%LULP
http://en.wikipedia.org/wiki/United_Nations_member_stateshttp://en.wikipedia.org/wiki/Percentagehttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Francehttp://en.wikipedia.org/wiki/Italyhttp://en.wikipedia.org/wiki/Canadahttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/Spainhttp://en.wikipedia.org/wiki/Mexicohttp://en.wikipedia.org/wiki/United_Nations_member_stateshttp://en.wikipedia.org/wiki/Percentagehttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Francehttp://en.wikipedia.org/wiki/Italyhttp://en.wikipedia.org/wiki/Canadahttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wik

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