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Q1. Explain various barriers in International Business with example . Ans.. The various barriers are: Negotiating Environment Despite apparent similarities and a shrinking globe, some degree of culture shock is an inevitable part of doing business in a new country. Everything from language differences to new food, to conflicting business styles can make negotiations more difficult. Travel is of course an issue during the very necessary face-to-face meetings. No matter what, someone is away from home, often suffering from jet lag or a time change that can be disconcerting to even the most experienced traveler. Cultural Issues Most people in the U.S. are familiar with what can be defined as New York style, a style that implies speed, directness and often impatience. Indeed, while mot experienced foreign counterparts expect that style it can be disconcerting at best to a businessperson from an Asian or European culture where it is common to show reticence to say or accept things that may be difficult. Ideology Basic ideologies play a critical role in how negotiations are conducted. For instance, do the business people in your potential markets(s) tend to be more adversarial in their negotiations or do they rely on consensus-building? Are communications complicated because decision makers deal through subordinates to express, generally passively, the position of the company? And, perhaps most important, it is essential to understand which ideologies are central to your partners business and personal life. That is, which positions are in fact negotiable and which are not. For example, a union environment is a reality in most European countries. In France, even the unemployed have a union. So, having a business or social conversation that is critical of unions is not only counter-productive but also potentially insulting as at least one of the attendees at the meeting is probably a union member. Without knowing what is or isnt negotiable, you may well find yourself heading down very unproductive paths. Foreign Bureaucracies In many countries there are well-established and accepted ways of doing business that are simply difficult and dangerous. Silent partners, gratuities, commissions and joint ventures are often

a virtual necessity and make business deals in a particular country not only difficult but potentially illegal. It is useful to have an advisor knowledgeable in the inner workings of other nations to guide you in these areas. Know the bureaucratic line-up. That is, know which agencies and bureaucracies you might have to deal with and, be prepared to deal with multiple bureaucracies as you establish and conduct your business. Understand too, that many sophisticated companies have spent extensive time working with one bureaucracy only to find out that it was not the one they needed to reach their goal. Or that the individual with whom they have spent hours has, in fact, no authority. Foreign Governments As much as people might complain about governmental interference in the United States, in fact, in many countries, the governments influence on day-to-day business operations can be much more intense. For example, in some countries the government owns a golden share, that is, the government retains veto power over key transactions. In other countries, the government is intimately involved in the business every step of the way. And in other nations, socialistic traditions make the interface between the government and the company seem as if the two are almost one entity. Even a relationship between a client and a lawyer in another country can be very different from the legal relationships to which American companies have become accustomed. Most companies are well-advised to used a U.S. attorney with international expertise to manage the international team. While the U.S. attorney may not be able to advise on local law, it is far more comfortable for a U.S. businessperson to know that their attorney thinks in a particular way, understands the client and his business, and, most importantly, knows the questions to ask of the local attorney and how to interpret the advice. The local attorney can be viewed as the black box, that is, the concerns and objectives of the company are packaged by the U.S. attorney and fed into the local lawyers office for processing and then is output to the U.S. attorney for interpretation to the client. Keep an eye on the political situation in any country in which you plan to do business. As governments change, so do the people who have control over your business. Currencies While the European Community and the Eurodollar has taken out some of the currency risks, companies must still be careful. For instance, to compensate for the revenue that they used to charge for currency exchanges, many banks are now charging transfer fees. A joint venture partner should be able to assist in developing banking relationships that are in your best interest. Counter-purchases are common in many countries as well. In these situations, there has to be an associated export for an import. That is, a foreign company may agree to buy a specified number of products but, in return, the seller must agree to buy, for example, a certain percentage of raw material from that country and to pay in U.S. currency. This is a common practice in large

industrial transactions. For example, if your company is going to sell a ship to such a country, it may be necessary to purchase steel from that country or if that is not possible, to enter into a transaction with a third party to buy products using hard currency, whether or not related to your deal Instability of the Relationship Typically, joint ventures are not, and are not meant to be, permanent relationships. Strategies, management, interests, business environments all change over time and these changes are often compounded and accelerated by the fact that two or more countries are involved. In addition, joint ventures are often managed by both partners a situation that may be untenable as a longterm strategy. In our experience, joint ventures are more appropriately viewed as an interim step towards a business entity that is 100 percent controlled by either one of the partners or, in some cases, a third entity. Thus, it is critical that both companies take a long hard, look at the relationship and carefully outline issues of control, make an effort to anticipate and predict the natural life of the venture, and make sure that the agreement includes a well-defined exit strategy.

Q2.Few days back, Mr.Ratan Tata handed over his work to a person. Name that person and evaluate the work done by him. Ratan Tatas legacy and achievements over the last few weeks as RNT, as he is popularly referred to within the Tata group, hung his boots and handed over the baton to Cyrus Mistry. In his typical understated manner, RNT spent his last day as chairman of the group in Pune, away from the limelight and not at Bombay House. The Tata patriarch has told Mistry, 31 years younger, "you should be your own person, you should take your own call and you should decide what you want to". Tata spoke about his 50 years with the group, 21 as its chairman, the highs and lows of his tenure, his equation with Mistry and his post-retirement plans during an expansive interview to PTI in his office at "Bombay House", the group headquarters. Mistry, currently Deputy Chairman of the conglomerate that spans automobiles, IT, hotels, tea and steel across 80 countries, has been working closely with Tata to prepare for the transition. "No, I told him the same things that I told myself when JRD (late J R D Tata) handed over the mantle to me. The first reaction of anybody is to be Mr J R D Tata because you are filling his shoes. "I instantly told myself, 'I can never do that'. I will never be him much as I try to imitate him. So I took a decision to be myself and to do what I thought was the right thing. I told Cyrus the same thing," he said.

During the transition, Mistry had asked him from time to time, 'is this ok, that ok'. He had responded by telling him that he should look at things as "if I were not there because you should be your own person". He had told Mistry, "if you want my inputs I will give it to you but be your own man and be yourself and just be driven by the fact that every act you do and every move you make has to stand the test of public scrutiny". That, he said, was the test he had given himself. "If it stands the test of public scrutiny, do it....if it doesn't stand the test of public scrutiny then don't do it." Asked if his counsel would be available to his successor, Tata replied, "Yes, certainly. He knows where to reach me and, we in fact, would talk business and stay in touch after I leave." He then disclosed that the two of them would have lunch every couple of weeks "over something and we will talk about whatever he wants to talk about". Tata, who will remain Chairman of the various Tata trusts, which hold 66 per cent shares of Tata Sons, was asked as to whether this would not give him a large influence over the group.

Q3. As per Foreign Exchange Ministry of India, how Companies can expand their outside the boundaries. Discuss with products. The main reason for making such overseas investments is to explore business opportunities abroad and take advantage of such opportunities. Foreign markets in both developed and developing countries provide enormous growth opportunities. For example, a number of Indian pharmaceuticals firms have achieved a much faster growth of their overseas business. The various other reasons for investing abroad are:

Competition is the main driving force behind internationalism. Until liberalisation in 1991, the Indian economy was a highly protected market. Not only that the domestic producers were protected from foreign competition, but also domestic competition was restricted by several policy induced entry barriers. The economic liberalisation and globalisation has ushered in increased competition both domestically and internationally.

Government policies and regulations also motivate internationalism. Many Governments offer a number of incentives and other positive support in order to encourage foreign investments. Restrictive domestic Government policies which limit the scope of business expansion in domestic country and undermines their competitiveness is also an important factor for entering overseas markets. Domestic demand constraints drive many companies to expand their markets beyond the national borders. If the domestic market potential is fully tapped, the market for such products tends to be saturated. Another type of domestic market constraint arises from the scale-economies. The technological advances has increased the size of optimal scale of

operations in many industries, thus making it necessary to have foreign markets in addition to domestic ones. Domestic recession often provokes the companies to explore foreign markets.

It may also help the company to improve its domestic business, increase its market share and help establish the image of the company.

Business strategy relating to overseas investment differs from that of domestic investment due to the differences in business environment:

The political environment includes the characteristics and policies of the political parties, nature of the constitution and the governmental system. These factors vary considerably between different nations.

The legal system that exists in different countries across the world may be classified into common law, civil law or code law and theocratic law. Common law is based on tradition, past practices and legal precedents set by the courts through interpretation of statutes, legal legislations and past rulings. Code law, on the other hand, is based on an all-inclusive system of written rules of law. While the theocratic law is based on religious precepts. These differences in the legal framework play a very important role in overseas investment strategy.

Cultural differences are one of the most important factors influencing international investments. The cultural or social environment of any country encompasses language, religion, customs, traditions and beliefs, tastes and preferences, social stratification, social institutions,etc. Economic environment also varies from country to country. It broadly includes the nature and level of development of the economy, economic resources, size of the economy, economic systems and economic policies, economic conditions,trends in various economic indicators like national income, per capita income, foreign trade, inflation rate, industry production, etc.

However, a firm which plans to invest abroad has to make a series of strategic decisions:

The first decision a company has to make is whether to expand its business abroad or not. This decision is based on consideration of number of important factors like:

Present and future opportunities Present and future market opportunities

The resources of the company like skill,experience, financial support, production and marketing capabilities,etc.

Once the company has decided to invest abroad, the next important decision is the selection of the most appropriate market. For this, a thorough analysis of the potentials of the various overseas markets and their respective marketing environment is essential.

The next important decision relates to determining the appropriate modes of entering those foreign markets. The important foreign market entry strategies are:

Exporting: is the most traditional mode of entering a foreign market. It is an appropriate strategy when any of the following conditions prevail:- (i) the volume of foreign business is not large enough to justify production in the foreign market; (ii) cost of production in the foreign market is high; (iii) the foreign market is characterised by production bottlenecks like infrastructural problems, problems with materials supplies, etc; (iv) there are political or other risks of investment in the foreign country; (v) the company has no permanent interest in the foreign market concerned or that there is no guarantee of the market available for a long period; (vi) foreign investment is not favoured by the foreign country concerned; (vii) licensing or contract manufacturing is not a better alternative. Licensing and Franchising:- are easy ways of entering the foreign markets. Under international licensing, a firm in one country (the licensor) permits a firm in another country (the licensee) to use its intellectual property (such as patents, trade marks, copyrights, technology, technical know-how, marketing skill or some other specific skill). The monetary benefit to the licensor is the royalty or fees which the licensee pays. Franchising is a form of licensing in which a parent company (the franchiser) grants another independent entity (the franchisee) the right to do business in a prescribed manner. This right can take the form of selling the franchiser's products, using its name, production and marketing techniques, or general business approach. One of the common forms of franchising involves the franchiser supplying an important ingredient for the finished product, like the Coca Cola supplying the syrup to the bottlers.

Management Contracting:- is one in which the supplier brings together a package of skills that will provide an integrated service to the client without incurring the risk and benefit of ownership. It enables a firm to commercialise existing know-how that has been built up with significant investments and frequently the impact of fluctuations in business volumes can be reduced by making use of experienced personnel who otherwise would have to be laid off. Under it the firm providing the management know-how may not have any equity stake in the enterprise being managed. Turnkey Contracts:- are common in international business in the supply,erection and commissioning of plants like in the case of oil refineries, steel mills, cement

and fertilizer plants, etc. A turnkey operation is an agreement by the seller to supply a buyer with a facility fully equipped and ready to be operated by the buyer's personnel, who will be trained by the seller.

Fully Owned Manufacturing Facilities:- Companies with long term and substantial interest in the foreign market normally establish wholly owned manufacturing facilities there. It provides the firm with complete control over production and quality. It does not have the risk of developing potential competitors as in the case of licensing and contract manufacturing. Assembly Operations:- A manufacturer who wants to take advantages that are associated with overseas manufacturing facilities and yet does not want to go that far may establish overseas assembly facilities in selected markets. It represents a cross between exporting and overseas manufacturing. It is an ideal strategy when there are economies of scale in the manufacture of parts and components and when assembly operations are labour-intensive and labour is cheap in the foreign country. Joint ventures:- is a very common strategy of entering the foreign market. It represents a combination of subsets of assets contributed by two (or more) business entities for a specific business purpose and a limited duration. It generally has the following characteristics:- (i) contribution by partners of money, property, effort, knowledge, skill or other assets to the common undertaking; (ii) joint property interest in the subject matter of the venture; (iii) right of mutual control or management of the enterprise; (iv) right to share in the property. For more details visit our Section on 'Growing Business'

Mergers and Acquisitions:- have been a very important market entry strategy as well as expansion strategy for maximisation of a company's growth by enhancing its production and marketing operations. They are being used in a wide array of fields such as information technology, telecommunications, and business process outsourcing as well as in traditional businesses in order to gain strength, expand the customer base, cut competition or enter into a new market or product segment. Strategic Alliance:- has been becoming more and more popular in international business. This strategy seeks to enhance the long term competitive advantage of the firm by forming alliance with its competitors, existing or potential in critical areas, instead of competing with each other. It helps a company to leverage critical capabilities, increase the flow of innovation and increase flexibility in responding to market and technological changes. Countertrade:- has been successfully used by a number of companies as an entry strategy. It is a form of international trade in which certain export and import transactions are directly linked with each other and in which import of goods are paid for by export of goods, instead of money payments. Its main attraction is that

it can give a firm a way to finance an export deal when other means are not available. For example, Pepsico gained entry to the USSR by employing this strategy.

Decision regarding the nature of the organisational structure of the company internationally.This will depend on number of factors like:- Company's international orientation; nature of business; size of business; its future plans,etc. Designing a suitable marketing mix- production,promotion, price and physical distribution, so as to adopt to the characteristics of overseas markets.

Hence, a firm typically passes through different stages in its transition from local firm to a transnational firm. That is, a firm which is entirely domestic in its activities normally passes through different stages of internationalisation before it becomes a truly global one. A firm may start exporting its products on an experimental basis and if the results are satisfying, it would enlarge its international operations and in due course it would establishes its offices,branches or subsidiaries or joint ventures abroad. This expansionary process may also be characterised by increasing the product mix and the number of market segments and the number of countries of operation. Thus, the company becomes multinational or global. In other words, for many firms overseas business initially starts with a low degree of commitment and involvement, and gradually develops into a global business organisation.