International Business Management

Q.1 Write down the difference between international Vs global business? And
what are the benefits of globalization?
Answer. Most of us assume that international and global business are the same and
that any company that deals with another country for its business is an international
or global company. In fact, there is a considerable difference between the two terms.
International Companies: Companies that deal with foreign companies for their
business are considered as international companies. They can be exporters or
importers who may not have any investments in any other country, apart from their
home country.
Global Companies: Companies, which invest in other countries for business and
also operates from other countries, are considered as global companies. They have
multiple manufacturing plants across the globe, catering to multiple markets.
Differences between International and Global Strategies
Strategy
Location

International
Selected target countries and
trading areas

Global
Most global businesses operate in North
America, Europe, Asia Pacific, and Latin
America
Business
Custom strategies to fit the
Same basic strategy worldwide with
circumstances of each host country minor country customisation where
situation
necessary
Product-line Adopted to local culture and
Mostly standardised products sold
particular needs and expectations worldwide, moderate customisation
of local buyers
depending on the regulatory framework
Production
Plants scattered across many host Plants located on the basis of maximum
countries, each producing versions competitive advantage (in low cost
suitable for the surrounding
countries close to major markets,
environment
geographically scattered to minimise
shipping costs, or use of a few world
scale plants to maximise economies of
scale)
Source of
Suppliers in host country preferred Attractive suppliers from across the
supply of raw
world
materials
Marketing and Adapted to practices and culture of Much more worldwide coordination;
distribution
each host country
minor adaptation to host country
situations if required
Cross country Efforts made to transfer ideas,
Efforts made to use almost the same
connections technologies, competencies and
technologies, competencies, and
capabilities that work successfully capabilities in all country markets (to

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Company
organisation

in one country to another country promote use of a mostly standard

whenever such a transfer appears strategy), new successful competitive
advantageous
capabilities are transferred to different
country markets
Form subsidiary companies to
All major strategic decisions closely
handle operations in each host
coordinated at global headquarters; a
country; each subsidiary operates global organisational structure is used
more or less autonomously to fit
to unify the operations in each country
host country conditions

Benefits of Globalization:
The merits and demerits of globalization are highly debatable. While globalization
creates employment opportunities in the host countries, it also exploits labour at a
very low cost compared to home country.
Some of the benefits of globalization are as follows:

Commerce as a percentage of gross world product has increased in 1986

from 15% to nearly 27% in recent years.

The stock of foreign direct investment resources has increased rapidly as a

percentage of gross world product in the past twenty years.

For the purpose of commerce and pleasure, more and more people are
crossing national borders. Globally, on average nations in 1950 witnessed just
one overseas visitor for every 100 citizens. By the mid-1980s it increased to
six and ever since the number has doubled to 12.

Worldwide telephone traffic has tripled since 1991. The number of mobile
subscribers has elevated from almost zero to 1.8 billion indicating around 30%
of the world population. Internet users will quickly touch 1 billion.

Promotes foreign trade and liberalization of economies.

Increases the living standards of people in several developing countries

through the capital investments in developing countries by developed
countries.

Benefits customers as companies outsource to low wage countries.

Outsourcing helps the companies to be competitive by keeping the cost low
with increased productivity.

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Promotes better education and jobs.

Leads to free flow of information and wide acceptance of foreign products,

ideas, ethics, best practices and culture.

Provides better quality of products, customer services and standardised

delivery model across countries.

Give better access to finance for corporate and sovereign borrowers.

Q.2 Elaborate in detail comparative study on cultures of Japan, China, Brazil

and France.
Answer. Companies with prospects of business in other countries should be
sensitive to that particular countrys culture and business environment. Every country
has its own style of communication, the way they treat women in business and
dressing style. Let us now discuss the business culture followed by different nations
with respect to communication styles, women in business, and dress code.

Comparison of cultures in different nations

Country

Communication
style

Women in
Business

Business dress
code

Japan

It is difficult if
Japanese
language is not
known. The
combination of
vagueness and
lack of
understanding of
the language
results in problems
which make
decision-making
very difficult. Body
language is very
minimal and hence
difficult to read for
an untrained

Discrimination
towards women in
the workplace still
exists. Women are
assigned to
perform lower
grade tasks.
Women from
western countries
working in Japan
probably face
difficulties working
with Japanese
male co-workers.

The Japanese
mainstream
business follows a
conventional
business dress
code of dark suit,
shirt and tie.
Business dress
must be restrained
and formal for
women. In
business, women
do not wear
trousers.

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observer. The
Japanese sit in a
formal upright
posture and look
still. Visibility of
reaction or
emotion is rare.
China

Translators are
required if Chinese
language is not
known. The body
language of
people from
Chinese is very
restricted.

Women have
equal rights in the
workplace-e. But,
traditional
Confucian thinking
does not agree to
gender equality.
Businesswomen
from foreign
countries are
treated with great
respect and
courtesy.

Men wear suits

and ties and
women wear skirts
and blouses. It is
sensible to have
smart business
clothing.

Brazil

Ability to speak
Brazilian is an
advantage, even
though English is
spoken and
understood by
people in Brazil.
The body
language plays a
vital role in normal
communication.
Eye contact is also
very important
while speaking to
people.

Businesswomen
from foreign
countries are
treated fairly and
with respect.

Men are advised

to wear
conservative dark
suits. Women are
less conservative
in their dressing
when compared
with women from
other countries.

France

The French have

great love and
respect for the use
of language. The
logical exposition
of well-defined

Women are
gaining high
position in French
business life,
particularly with
strong

With position,
dress codes differ
within the
company,
industrial sector,

International Business Management

ideas is admired
by the French. The
comment given by
them clearly states
their mind. It is
important that
anything sent in
writing is
thoroughly
checked.

representation in
retail and service
industries. The
requirement for
success is to have
a suitable level of
education for
women.

and region in
France. People in
higher positions
within a larger
organisation follow
a very formal
dress code. In
southern region
the business dress
code is informal.

Q.3 Write a short note on Advantages of foreign direct investment and types of
foreign direct investment.
Answer.

Q.4 What are the key objectives and function of World Trade organization?
Answer.
Objectives

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The key objective of WTO is to promote and ensure international trade in developing
countries. The other major functions include:

Helping trade flows by encouraging nations to adopt discriminatory trade

policies.

Promoting employment, expanding productions and trade and raising

standard of living and income and utilizing the worlds resources.

Ensuring that developing countries secure a better share of growth in world

trade.

Providing forum for trade negotiations.

Resolving trade disputes.

Functions: The important functions of the WTO as stated in the WTO agreement are the
following:

Developing transitional economies Majority of the WTO members belong

to developing countries. The developing countries such as India, China,
Mexico, Brazil and others have an important role in the organization. The
WTO helps in solving the problems of developing economies. The developing
states are provided with trade and tariff data. This depends on the countrys
individual export interest and their participation in WTO-bodies. The new
members benefit hugely from these services.

Providing help for export promotion The WTO provides specialized help
for export promotion to its members. The export promotion is done through
the International Trade Centre established by the GATT in 1964. It is operated
by the WTO and the United Nations. The centre accepts requests from
member countries, usually developing countries for support in formulating and
implementing export promotion programmes. The centre provides information
on export market and marketing techniques. The centre also provides
assistance in establishing export promotion and marketing services. Through
this WTO proves its commitment in the upliftment of the world economy.

Cooperating in global economic policy-making The main function of the

WTO is to cooperate in global economic policy-making. In the Marrakesh
Ministerial Meeting in April 1994, a separate declaration was adopted to
achieve this objective. The declaration specifies the responsibility of WTO as,
to improve and maintain the cooperation with international organizations such

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as the World Bank, International Monetary Fund (IMF) that are involved in
monetary and financial matters. WTO analyses the impact of liberalization on
the growth and development of national economies which is the important
factor in the success of the economy.

Monitoring implementation of the agreement The WTO administers sixty

different agreements that have the statue of international legal documents.
The member-governments sign and confirm all WTO agreements on
attainment.

Providing forum for negotiations The WTO provides a permanent forum

for negotiations among members. The negotiations can be on matters already
in the WTO agreements or matters not addressed in the WTO law.

Administrating dispute settlement The important function of WTO is the

administration of the WTO dispute settlement system. It helps in settling
multilateral trading dispute. A dispute arises when a member country adopts a
trade policy and other fellow members consider it as a violation of WTO
agreements. The Dispute Settlement Body (DSB) is responsible for the
settlement of disputes. The dispute settlement system is prohibited from
adding or deleting the rights and obligations provided in the WTO
agreements. The WTO dispute settlement system helps to:
Preserve the rights and responsibilities of the members.
Clarify the current provisions of the agreements.

Q.5 Explain in detail about international regulatory Bodies.

Answer. Certain regulatory bodies are active in bringing out harmonisation of
accounting standards. Efforts of some of the bodies are explained here.
European Union
European union is pro-active in the harmonisation process. European commission
sells directives, which are orders to the member countries, to bring their laws inline
with EU needs, within transition period. The earlier accounting directives are:

The nature and design of financial statements.

The measurement support on which the financial statements are to be
organised.
The significance of consolidated financial statements.
The need that auditors should ensure that the financial statements reflect a
true perspective of the organisations operations.

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United Nations
The United Nations is interested in international accounting since the early 1970s
and has been operating under a Group of Eminent persons. This further led to the
establishment of intergovernmental working group of experts on international
standards of Accounting and reporting (ISAR) by the UN Economic and Social
council.
The ISAR attempts to support the developing countries, by creating
recommendations on the accessibility and comparability of information disclosed by
international businesses.
The ISAR is presently concerned about developing discussions on the international
environment reporting, and the role and responsibilities of accountants and auditors.
Organization for Economic Cooperation and Development (OECD)
The OECD was established by worlds 24 developed countries, of which some are
Australia, Austria Belgium and Canada. This was set up for promoting world trade
and international economic growth. This looks at matters from the perspective of
economically developed countries.
The Working Group has recently published a Clarification of the OECD Guidelines,
and published reports as an element of an Accounting Standards harmonisation
series.
International Accounting Standards Committee (IASC)
IASC was created in the year 1973. it has issued a series of standards of harmonise
management of accounting issues globally. The chief objective of IASC id the
encouragement of comparability of financial statements between countries, by
establishing standards for inventory assessment, depreciation, delayed income
taxes, and so on.
The International Federation of Accountants (IFA)
The IFA was founded in the year 1977. It completely supports the work of the IASC,
and recognises the IASC as having responsibility and authority to issue rules on
international accounting standards.
Some of the other international regulatory bodies are:

Governmental Accounting Standards Board.

Independence Standards Board.
International Accounting Standards Board.
International organization for securities commission.
National Association of state boards of accountancy.
UK Accounting Standards Board.

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Q.6 What are the various export promotion schemes offered by government in
order to promote export from the country?
Answer. Government in order to promote the exports from the country, offers some
export assistance and export promotion schemes so that exporters can benefit from
them. They can improve their key weaknesses and stand up to compete in the
international market by offering quality Indian products and services.
As the economy of the country is progressing with the increase in terms of
population, there is a need for more number of imports. We need to have surplus
exports to pay our imports.

It is not wise to depend on the other external assistances for financing

essential imports, rather exportable surplus needs to be created.
In any country, there are some capital goods, machinery and raw materials
that cannot be produced for some more time and it has to be imported from
the other countries. In order to pay for such imports, the country needs to
have sufficient funds so that the country has to promote for its exports.
The earning of the exports need to be raised to create the purchasing power
in order to import the essential goods.
We need to explore the foreign markets in order to expand the capacities of
the existing units and find market for the new units.
To tap our export potentials completely, we need to focus on our strengths
like, price stability, low wages and the industrial bases to increase its exports.

Export promotion and assistance schemes in India

Export incentives and
benefits
a. Market focus scheme
Product focus scheme
b. Status holder scheme
c. Services from India
scheme
d. Services export
scheme
e. VKGUY scheme
f. Special focus initiatives
in agriculture and village

Duty neutralization
and remission
a. Advance
authorisation scheme
b. Duty free import
authorisation scheme
c. Duty drawback
scheme
d. Imprest license for
deemed export

Capacity building and

infrastructural support
a. Export promotion
capital goods scheme
b. EQU/STP/BTP/EHTP
scheme
c. Textiles and apparel
park scheme
d. Agri export zones
scheme
e. SEZ and FTWZ
scheme

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industry, handlooms,
handicrafts, gems and
jewellery, leather and
footwear, marine sector,
electronics and IT
hardware manufacturing
industries, sport goods and
toys, green products and
technologies, incentives for
exports from the North
Eastern Region

f. ASIDE scheme
g. Market access initiative
scheme
h. Market development
assistance scheme
i. Board of Trade
j. Town of export
excellence scheme
k. Brand promotion and
quality and test houses
scheme