Q1. Write a note on Globalization.

Ans:- According to business terminologies, globalization is defined as the worldwide trend of businesses
expanding beyond their domestic boundaries. It is advantageous for the economy of countries because it promotes prosperity in the countries that embrace globalization. In this section, we will understand globalization, its benefits and challenges. Benefits of globalization The merits and demerits of globalization are highly debatable. hile globalization creates employment opportunities in the host countries, it also exploits labour at a very low cost compared to the home country. !et us consider the benefits and ill"effects of globalization. #ome of the benefits of globalization are as follows$ %. &romotes foreign trade and liberalization of economies. '. Increases the living standards of people in several developing countries through capital investments in developing countries by developed countries.

(. )enefits customers as companies outsource to low wage countries. *utsourcing helps the companies to be competitive by +eeping the cost low, with increased productivity. ,. &romotes better education and -obs. .. !eads to free flow of information and wide acceptance of foreign products, ideas, ethics, best practices, and culture. /. &rovides better 0uality of products, customer services, and standardized delivery models across countries. 1. 2ives better access to finance for corporate and sovereign borrowers. 3. Increases business travel, which in turn leads to a flourishing travel and hospitality industry across the world. 4. Increases sales as the availability of cutting edge technologies and production techni0ues decrease the cost of production. %5. &rovides several platforms for international dispute resolutions in business, which facilitates international trade. In spite of its disadvantages, globalisation has improved our lives through various fields li+e communication, transportation, healthcare, and education.

Q2. Why do nations trade? Discuss the rele ance of !orter"s dia#ond #odel in today"s business conte$t.
Ans:- The answer to the above 0uestions would be that countries world over are endowed with different natural, human, and capital resources. 6ach country varies from the other in combining these resources 7land, labour and capital8. In a globalised set"up, every country cannot be as efficient as the best in producing the goods and services that their residents demand. As a result, they have to trade off their decisions to produce any good or service based on opportunity cost. *pportunity cost model helps us understand the choice of producing one good or another. The production decision of the country depends on whether it is more efficient to produce the goods and services with lower opportunity cost with increased and specialized production, or to trade those goods, with goods of higher opportunity cost. If a country can produce more of any goods or services with the same resources used by any other country, it is said to have an absolute cost advantage in the production of those goods or services. 9or example, India has absolute cost advantage in cutting and polishing of diamond. Around /3: of the diamonds from all over the world are cut and polished in India. India is the largest producer of diamond -ewellery in the world. *n the other hand, India would import items which can be imported at a lower cost than it would ta+e to manufacture

these items locally, for example #wiss watches where #witzerland has absolute advantage. Thus countries trade their production decision based on absolute cost advantages. Trade in globalised set"up has been used as an instrument for enhancing a countrys economic growth and is usually beneficial to both the exporting and importing countries. ;ations even if they have an absolute cost advantage in the production of goods that are to be traded vis a vis its counterpart, would li+e to specialize in higher opportunity cost products. The production size and scale may be limited by other constraints. 9or example India and Thailand have signed a 9ree Trade Agreement. Thailand is cost efficient in both auto component and pharmaceuticals. India would li+e to import auto component and would export pharmaceuticals to Thailand. This will be beneficial to India as it will benefit from economies of scale with higher production of pharmaceuticals. *pportunity cost and efficiency in production varies from country to country as countries have different endowments of productive resources li+e land, labour and capital. 9or example, <#, a capital rich country will specialize in production of aeroplanes and India, rich in labour pool will specialize in rendering of information technology services. Trade is also affected as different countries are endowed with different natural resources and climate zones, longer growing seasons for a produce, abundance of natural resources such as oil, mica, coal, iron ore, and highly educated and s+illed wor+ers, and larger 0uantities of sophisticated machinery. 9or example #audi Arabia will export oil, India will export mica, iron ore and information technology, )razil will export coffee and Thailand will export rice. !orter"s dia#ond #odel In %445, =ichael &orter analysed the reason behind some nations success and others failure in international competition. >is thesis outlined four broad attributes that shape the environment in which local firms compete and these attributes promote the creation of competitive advantage. They are explained as follows$ %actor endo&#ents ? @haracteristics of production were analysed in detail. There are basic factors li+e natural resources, climate, and location and so on and advanced factors li+e communications infrastructure, research facilities. De#and conditions ? The role of home demand in improving competitive advantage is emphasised since firms are most sensitive about the needs of their closest customers. 9or example, the Aapanese camera industry which caters to a sophisticated and +nowledgeable local mar+et. 'elating and su((orting industries ? The presence of suppliers or related industries is advantageous since the benefits of investment in advanced factors of production spill over to these supporting industries. #uccessful industries within a country tend to be grouped into clusters of related industries. 9or example #ilicon Balley. %ir# strategy) structure and ri alry ? Comestic rivalry creates pressure to innovate, improve 0uality, and reduce costs which in turn helps create world"class competitors. >e said that these four attributes constituted the diamond and he argued that firms are most li+ely to succeed in industries where the diamond is most favorable. >e also stated that the diamond is a mutually reinforcing system and the effect of one attribute depends on the state of others. 9or example, favourable demand conditions will not result in a competitive advantage unless the state of rivalry is enough to elicit a response from the firms.

Q*. Why do fir#s (ay so #uch attention to econo#ic factors &hile entering in (articular #ar+et? ,ustify your ans&er &ith (ractical e$a#(les. Ans:- The economic environment refers to the economic conditions under which a business operates and ta+es
into account all factors that have affected it. It includes prime interest rates, legislation concerning employment of foreigners, return of profits, safety of country, political stability and so on. -ational econo#ic (olicies ;ational economic policies depend on a countrys socio"economic and cultural bac+ground. All governments aspire to achieve four ma-or economic ob-ectives$ %. 9ull employment. '. A high economic growth rate. (. A low rate of inflation.

,. Absence of deficit in the countrys balance of payments. The basic problem is that the first two ob-ectives wor+ against the last two. =easures such as low interest rates, tax cuts and increase in public spending creates -obs and stimulates growth but also causes inflation, increase in wage, and higher imports. Cue to increased consumer expenditure the countrys balance of trade worsens. .cono#ic structure International )usiness managers need to understand and assess international economic forces at wor+. Dey variables that need to be examined include 2ross Comestic &roduct 72C&8 per capita, regional distribution of 2C&, levels of investment, consumer expenditure, labour costs, inflation and unemployment. Bariables that are examined when assessing national economic environments include$ .cono#ic structure ? The structure of a nations economy is determined by the size and rate of its population growth, income levels and distribution of income, natural resources, agricultural, manufacturing and services sector. 6conomic infrastructure is the sum of all the external facilities and services that support the wor+ of firms including communication, transportation, electricity supply, ban+ing and financial services. /ndustry structure ? The structure of an industry is determined by factors such as$ 6ntry and exit barriers. ;umber of competing firms. =ar+et share among firms in that sector. Average size of competing units. 0ar+et gro&th ? It is measured in terms of local currency and ad-usted for inflation. !ocal currency is used because conversions into other currencies are affected by exchange rate fluctuations. /nco#e le els ? It is ta+en as the 2C& per capita and 2C& is directly proportional to the productivity of the country. ;et income is another important variable and is without tax payments from individual gross incomes. 1ector &ise trends ? 2rowth activity in a country might vary significantly among certain industries. 9or example, India has a vibrant software services industry. 2(enness of the econo#y ? The ratio of a countrys imports and exports to its 2ross ;ational &roduct 72;&8 indicates its vulnerability to fluctuations in international trade. A nation with a high foreign trade or 2;& depends heavily on the economic well"being of the nations it exports to. @onversely, closed economies have a high degree of control over the economy. /nternational debt ? An outstanding loan that one country owes to another country or institutions within that country. 9oreign debt also includes due payments to international organizations. 9oreign exchange reserves should not be less than outstanding short"term foreign debts. *n the other hand, a high foreign debt servicing re0uirement maybe a positive indicator, suggesting that a country has borrowed heavily to invest in its future. Degree of urbanization ? This is an important factor because there are ma-or differences in incomes and lifestyles between urban and rural areas in most countries such as$ #hopping patterns ? shopping fre0uency, average purchase value. ;ature of goods bought 6xpectations in 0uality and technical sophistication. 6ducation levels. 6ase of distribution . Q3. 4o& has /ndia reacted to&ards regional integration? Discuss briefly the trade agree#ents

signed by /ndia. Ans:- /ndia and 5rade Agree#ents

After learning about regional trading arrangements in the previous section, we shall now discuss the trading agreements conducted by India. India considers Eegional Trading Arrangements 7ETAFs8 as the building bloc+s towards the ob-ective of trade liberalization. Therefore, India participates in a number of ETAs, which include 9ree Trade Agreements 79TAs8, &referential Trade Agreements 7&TAs8 and so on. These agreements ta+e place bilaterally or in a regional grouping. e shall now discuss some of the ma-or agreements signed by India. Asia-!acific 5rade Agree#ent 6A!5A7 The Asia"&acific Trade Agreement 7A&TA8, previously +nown as the )ang+o+ Agreement, was signed on (%st of

Auly %41., as an initiative of the <nited ;ations 6conomic and #ocial @ommission for Asia and the &acific 76#@A&8. The <nited ;ations 6conomic and #ocial @ommission for Asia and the &acific 76#@A&8 is the regional development arm of the <nited ;ations for the Asia"&acific region. It focuses on issues that are most effectively addressed through regional cooperation and includes issues oft$ %. All or a group of countries in the region face, for which it is necessary to learn from each other. '. )enefit from regional or multi"country involvement. (. @ut across boundaries, or that would benefit from collaborative inter"country approaches. ,. Are sensitive or emerging and re0uire further advocacy and negotiation. The first agreement on trade negotiations among the developing member countries of 6#@A& was the A&TAG )ang+o+ agreement. It is basically a preferential tariff agreement that aims at promoting intra"regional trade through exchange of mutually agreed concessions by the members of the 6#@A& region. The first signatories to the agreement were )angladesh, India, !ao &eoples Cemocratic Eepublic, the Eepublic of Dorea and #ri !an+a. @hinaFs accession to the agreement was accepted at the %/th #ession of the #tanding @ommittee of the )ang+o+ Agreement in April '555. The ob-ective of this agreement is to encourage economic development gradually through trade expansion among the developing member countries of 6#@A& and to further international economic cooperation through the adoption of mutually beneficial trade liberalization measures. The following general principles govern the agreement$ %. The Agreement shall be based on overall cooperation and mutuality of advantages in such a way, to benefit all participating states e0ually. '. The principles of transparency, national treatment and most"favored"nation treatment shall apply to the trade relations among the participating states. (. The special needs of least developed country participating states shall be clearly recognized and concrete preferential measures in their favor shall be agreed upon. Bay of Bengal /nitiati e for 0ulti-1ectoral 5echnical and .cono#ic 8oo(eration 6B/015.87 )angladesh India =yanmar #ri !an+a and Thailand Technical and 6conomic @ooperation 7)I=#T6@8, a sub" regional economic cooperation grouping, was formed in )ang+o+ in Aune %441. =yanmar -oined the grouping later in Cecember %441. )hutan and ;epal too -oined in 9ebruary '55,. 9ive members of #AAE@ 7India, )angladesh, )hutan, ;epal and #ri !an+a8 and two members of A#6A; 7Thailand, =yanmar8 are members of this agreement. Thus, it is considered as a bridging lin+F between the two ma-or regional groupings that is, A#6A; and #AAE@. The chairmanship of )I=#T6@ rotates among the member countries in alphabetical order. The immediate priority of the grouping is to merge its activities to ma+e it attractive for economic cooperation. Initially, cooperation was proposed into six sectors. )ut, during the %%th #enior *fficial =eeting in ;ew Celhi on August '55/, it was agreed that the areas of cooperation should be expanded to %( sectors and each sector will be led by members in a voluntary manner. The member countries proposed cooperation in the following sectors$ %. Trade and Investment 7)angladesh8. '. Technology 7#ri !an+a8. (. 6nergy 7=yanmar8. ,. Transport and @ommunication 7India8. .. Tourism 7India8. /. 3. 9isheries 7Thailand8. @ultural @o"operation 7)hutan8. 1. Agriculture 7=yanmar8. 4. 6nvironment and Cisaster =anagement 7India8. %5. &ublic >ealth 7Thailand8.

%%. &eople"to"&eople @ontact 7Thailand8. %'. &overty Alleviation 7;epal8. %(. @ounter"Terrorism and Trans"national @rimes 7India8. )I=#T6@ member countries agreed to establish the )I=#T6@ 9ree Trade Area 9ramewor+ Agreement in order to encourage trade and investment in the countries party to the agreement, and attract outsiders to trade with and invest in )I=#T6@ at a higher level. The 9ramewor+ Agreement on the )I=#T"6@ 9TA was signed on 3th 9ebruary, '55, in &hu+et, Thailand. %ra#e&or+ Agree#ent on 8o#(rehensi e .cono#ic 8o-o(eration bet&een /ndia and the Association of 1outh .ast Asian -ations !oo+ 6ast &olicy led India to engage with the Association of #outh 6ast Asian ;ations 7A#6A;8 and it started in the year %44%. The A#6A;s political economic and strategic importance in the larger Asia"&acific Eegion and its capability to become a ma-or partner of India in trade and investment made India to -oin association with A#6A;. hile, A#6A; loo+s to utilize and access Indias technical and professional wealth, India and A#6A; loo+ forward to strengthen the security in the region. A#6A; was established on 3th August %4/1 in )ang+o+ by the five original member countries, namely, Indonesia, =alaysia, &hilippines, #ingapore, and Thailand. ;ow, it has a membership of %5 countries namely )runei Carussalam, @ambodia, Indonesia, !ao &CE, =alaysia, =yanmar, &hilippines, #ingapore, Thailand and Bietnam. India is one of the four F#ummit level Cialogue &artnersF of A#6A;. An agreement on @omprehensive 6conomic @ooperation between A#6A; and India was signed on 3th *ctober '55( in )ali 7Indonesia8. The +ey elements of the agreement are, 9TA in services, goods and investment as well as in the areas of economic cooperation. The ob-ectives of this agreement are to$ %. &romote and strengthen trade, economic and investment co"operation between the parties. '. &rogressively liberalize and promote trade in goods and services as well as create a transparent, liberal and facilitative investment regime. (. 6xplore new areas and develop appropriate measures for closer economic co"operation between the parties. ,. 9acilitate the more effective economic integration of the new A#6A; =ember #tates and bridge the development gap among the parties.

The areas where economic cooperation is re0uired are when appropriate parties$ %. Agree to strengthen their cooperation in the following areas$ '. Trade facilitation. (. #ectors of cooperation. ,. Trade and investment promotion. .. Agree to implement capacity building programmers and technical assistance, particularly for the ;ew A#6A; =ember #tates, in order to ad-ust their economic structure and expand their trade and investment with India. /. 6stablish other bodies, which may be necessary to coordinate and implement any economic cooperation activities underta+en pursuant to this Agreement. /ndia-0.'8219' !referential 5rade Agree#ent 6!5A7 India and =6E@*#<E signed a framewor+ agreement on %1th Aune '55(. The ob-ective of this agreement is to create an environment for negotiations in the first stage, by granting mutual tariff preferences, and in the second stage, to negotiate a 9TA between the two parties in conformity with the rules of the T*. As a follow up to the framewor+ agreement, a &referential Trade Agreement 7&TA8 was signed in ;ew Celhi on Aanuary '., '55,. The aim of this &TA is to expand and strengthen the existing relations between =6E@*#<E and India and promote the expansion of trade by granting mutual fixed tariff preferences with the ultimate ob-ective of creating a free trade area between the parties.

*ther agreements include$ India and #ingapore @omprehensive 6conomic @ooperation Agreement 7@6@A8. India"#ri !an+a 9ree Trade Agreement 7I#9TA8. India"@hile &referential Trade Agreement 7&TA8. India"Afghanistan &referential Trade Agreement 7&TA8. India")hutan Trade Agreement. India";epal Trade Treaty. 9ramewor+ Agreement for 6stablishing 9ree Trade between India and Thailand. 9ree Trade Agreement 79TA8 between India and 2ulf @ooperation @ouncil 72@@8. India" Aapan Trade Agreement. Aoint #tudy 2roup between India and Dorea. Trade Agreement between India and )angladesh. @omprehensive 6conomic @ooperation and &artnership Agreement 7@6@&A8 between India and =auritius.

Q:. What is global sourcing? What #a+es /ndia so attracti e for global sourcing? Ans:- 2lobalization of the world economy under the
T* has opened abundant opportunities of cost cutting, gaining competitive advantage and saving time for industries worldwide. Indian industries have experienced such developments as India is a member of the T* since its inception in %44.. 2lobal sourcing is described as the practice of sourcing cost effective and best goods and services across geopolitical boundaries in order to cater to global markets. 2lobal sourcing strategy is aimed at exploiting global efficiencies in all areas of manufacturing, trading and services to enable offering clients and customer the best possible product or service. <sually, efficiencies that prompt firms for global sourcing are low cost s+illed labor, low cost raw material, proximity to +ey mar+ets, time zone differences and other economic factors such as tax exemption and low trade tariffs. Indian industries have successfully levered global sourcing strategies in their global trade operations and sourcing has been the driving force behind the development and expansion of Indian foreign trade in the recent past. 2lobal sourcing strategy has made Indian industry more globalised as buyers from all over the world are bidding for Indian goods, particularly services, to enable executing their contracts on time, reduce prices and generate efficiency in the system through increased competition. Indian industries, in order to reap the benefits of sourcing opportunities, has opened global offices and subsidiaries to tap opportunities on all fronts, i.e., manufacturing, trading, s+illed services and call centers. As we +now, manufacturing costs vary from country to country due to factors such as currency conversion and cost of living. Cue to different factor endowments of countries, the costs of labor and materials may differ, for example, labour cost is far lower in developing countries li+e India than in ;orth America and 6urope. 9or companies that have labour intensive wor+, this difference in costing results into significant savings in terms of salaries, wages, post retirement benefits, fringe benefits and other benefits. India is emerging as a global hub in gems and -ewellery, oil refining, engineering e0uipments, textiles, sports goods, auto components, etc. In a globalised set up, trade and commerce of s+illed services such as IT enabled services, software development and testing, purchasing, engineering and integrated chip designing, +nowledge process outsourcing 7D&*8, offshoring and home shoring is growing much faster than trade in merchandise. India, with its demographic dividends has been benefitted from all such developments as the level of s+ill and +nowledge held by Indian professional allows them to provide high 0uality services to their clients in developed countries. 9or example, India has been successful in software development, )&* services, D&* services and in the recent past in areas li+e 6ngineering &rocess *utsourcing, Analysis &rocess *utsourcing, content development and website designing. The main reasons for s+ills sourcing to India is represented pictorially as under$

2lobal sourcing has both benefits and ris+s for the Indian industry. 2lobal sourcing has helped Indian companies in the generation of additional revenue and profits, precious foreign exchange, scalable business operations and employment. There are spillover effects of outsourcing to India and its economy has grown additionally by emerging as lower cost suppliers of merchandise and services. )rand India is widely recognized in the silicon valley and the Indian governments bargaining power has increased due to the dependence of many countries for Indian services. !iving standards of the people has improved, higher wages, improved wor+ing conditions and learning transferable s+ills has helped thousands of Indians. Eis+s from global sourcing such as cultural and language related issues, withdrawal of tax benefits, accent problems, high labour attrition, diversification of business operations across different countries, increased business travel and local management issues are present. In addition to this, there also comes the ris+s related to logistics and transportation.

Q;. Write short notes on: 1. 8ross culture #anage#ent 2. W52

Ans:- 8ross cultural #anage#ent s+ills
The ability to demonstrate a series of behavior is called a s+ill. It is functionally lin+ed to achieving a performance goal. The most important aspect to 0ualify as a manager for positions of international responsibility is communication s+ills. The managers must adapt to other cultures and have the ability to lead its members. The managers cannot expect to force members of other culture to fit into their cultural customs. This is the main assumption of cross cultural s+ills learning. Any organization that tries to enforce its behavioral customs on unwilling wor+ers from another culture faces conflict. The manager has to possess the s+ills lin+ed with the following$ &roviding inspiration and appraisal systems. 6stablishing and applying formal structures. Identifying the importance of informal structures. 9ormulating and applying plans for modification. Identifying and solving disagreements. W52 In this section we will discuss about the orld Trade *rganisation 7 T*8. T* was established on %st Aanuary %44.. In April %44,, the 9inal Act was signed at a meeting in =arra+esh, =orocco. The =arra+esh Ceclaration of %.th April %44, was formed to strengthen the world economy that would lead to better investment, trade, income growth and employment throughout the world. The T* is the successor to the 2eneral Agreement of Tariffs and Trade 72ATT8. India is one of the founders of T*. T* represents the latest attempts to create an organisational focal point for liberal trade management and to consolidate a global organisational structure to govern world affairs.

T* has attempted to create various organisational attentions for regulation of international trade. T* created a 0ualitative change in international trade. It is the only international body that deals with the rules of trades between nations. 2b<ecti es and functions The +ey ob-ective of T* is to promote and ensure international trade in developing countries. The other ma-or functions include$ >elping trade flows by encouraging nations to adopt discriminatory trade policies. &romoting employment, expanding productions and trade and raising standard of living and income and utilising the worlds resources. 6nsuring that developing countries secure a better share of growth in world trade. &roviding forum for trade negotiations. Eesolving trade disputes.