Global Business Management

Study of Concepts, Principles & Strategies of running cross-border business.

Global Business
Module 1: Globalisation is the process of social, political, economic, cultural and technological integration among countries around the world. Evidence is seen in increased levels of trade, capital flows and migration.

Global & Regional Integration

1994 Uruguay Round dramatically reduced tariff and non-tariff barriers among countries. GATT - WTO NAFTA CAFTA FTAA EU 2003 15 Countries+10 in 2004 SAARC India, Pakistan, Bangladesh, Bhutan, Sri Lanka, Maldives & Nepal GCC- Bahrain, Kuwait, Oman, Qatar, Saudi Arabia & UAE OPEC

GLOBALISATION
DRIVERS OF GLOBALISATION: 1. Decline in barriers to the free flow of goods, services, and capital. 2. Technological changes in communication, information and transportation technologies. National markets are merging into one huge marketplace.

GLOBALISATION
Globalisation of production- firms are basing individual productive activities at the optimal world locations. Irrelevant to talk about American products, Japanese products or German products global products. World trade grow faster than world output. FDI surging imports penetrating more deeply into the worlds industrial nations & competitive pressure increasing in industry after industry.

GLOBALISATION
Communication & IT link worldwide operations. Similarly shrinking travel time. Enables firms to achieve tight coordination for global business. In 1960s, the US economy was dominant & accounted for most FDI / MNCs. In 1990s, US share cut to half. European & South-east Asian economies grown. Collapse of Communist power in Eastern Europe created enormous global businesses.

GLOBALISATION
Free market economies in China, India & Latin America creating opportunities for global business. Benefits and Costs of the global economy hotly debated by all. Managing global business differ on 4: Countries are different Range of problems wider & complex Must work within limits imposed by govts. Currency exchanges

1. 2. 3. 4.

Political economy
Socialism- manage state-owned enterprise to benefit society rather than individual capitalists Individualism opposite to collectivism refers to a philosophy that an individual should have freedom for economic and political pursuits Democracy Totalitarianism all the constitutional guarantees on which representative democracies are built are denied to the citizens party exercises absolute control.

Economic Systems
Market economy-all productive activities are privately owned & not by state. Command economy- all are planned by the govt. Mixed economy- certain sectors are left to private & certain sectors to state State-Directed economy state plays a significant role in directing the investment activities of private enterprise through industrial policy

Legal Systems
Property rights Private action thefts, piracy, blackmail by individuals or groups Public action and corruption Intellectual Property Product safety and product liability Contract law

Determinants of Economic Development

Differences in economic development GNP yardstick Human Development Index (HDI) based on life expectancy, educational attainment & average income Political economy & economic progress Innovations & entrepreneurship are the engines of growth new processes, new organisations, new management practices & new strategies.

Determinants of Economic Development

Innovations & entrepreneurship require market economy study provides compelling evidence of a strong relationship between economic freedom (as provided by a market economy) and economic growth. Innovations & entrepreneurship require strong property rights The required political system Economic progress begets democracy Education emerges as another important determinant (Amartya Sen emphasises)

States in Transition
The spread of democracy 3 reasons 1) Many totalitarian regimes failed to deliver economic progress 2) New information & communication technologies created new conduits for the spread of democratic ideals 3) Emergence of increasingly prosperous middle & working class have pushed for democratic reforms The global spread of democracy will continue unchallenged.

The new world order

The spread of market-based systems The nature of economic transformation: Deregulation removing legal restrictions to the free play of markets Privatisation Legal systems to protect property rights

Implications for Business

Attractiveness Benefits long-run monetary benefits firstmover advantages & late-mover disadvantages Costs a number of political, economic & legal factors determine the costs of doing business in a country Risks political, economic & legal Ethics and regulations human rights corruption

Differences in culture
Culture a system of values and norms shared among a group of people. Values mean abstract ideas about what a group believes to be good, right & desirable Norms mean the social rules & guidelines that prescribe appropriate behavior in particular situations

Determinants of culture
Social structure-stratification-mobility Religious & ethical systems Islam, Christianity, Hinduism, Buddhism Languages Education Political philosophy Economic philosophy

Theories of Global Trade & investment

Smiths theory of FREE TRADE refers to a situation where a government does not attempt to influence through quotas or duties. Ricardos theory is the basis of the modern argument for unrestricted free trade. Heckscher-Ohlin theory identifies with precision the specific benefits of global trade. Ex: Iceland can produce low cost fish but not oranges / US can export commercial jet aircrafts but not textiles

Theories of Global Trade & investment

Mercantilism: the main tenet is to maintain a trade surplus, to export more than it imported. Smiths theory of Absolute advantage a country has an absolute advantage in the production of a product when it is more efficient than any other country in producing it. Ricardos theory of Comparative advantage, it makes sense for a country to specialise in the production of those goods that it produces more efficiently and to buy the goods that it produces less efficiently from other countries, even if this means buying goods from other countries that it could produce more efficiently itself.

Theories of Global Trade & investment

Heckscher-Ohlin endowment theory argues that comparative advantage arises from differences in national factor endowments such as land, labor & capital. Nations have varying factor endowments that explain differences in factor costs. Ex: US has long been exporter of agricultural goods reflecting abundance of arable land. China excels in the export of goods produced in the labor-intensive textiles and footwear.

Theories of Global Trade & investment

Product life-cycle theory by Raymond Vernon argue that early in the life cycle of a new product, while demand is starting to grow rapidly in the US, demand in other advanced countries is limited to high-income groups. Apparently, it was better to keep production facilities close to the market and to the firms center of decision making. Ex: Photocopiers & Laptops

Theories of Global Trade & investment

The New Trade Theory: Economies of Scale are unit cost reductions associated with a large scale of output - ex: aerospace/Boeing/Airbus Learner effects are cost savings that come from learning by doing

The Competitive Advantages of Nations-Porters Diamond

Porters national competitive advantage suggests that the pattern of trade is influenced by four attributes of a nation: a) factor endowments-skilled labor, land etc., b) domestic demand conditions-home demand for the product or service c) relating & supporting industriessupplier/ancillary units - clusters d) firm strategy, structure and rivalry.

Implications for business - 3

Location implications example laptop production 1. Basic R&D in US or Japan 2. Manufacture of standard components in Taiwan/Korea/Singapore 3. Manufacture of advanced components in US or Japan 4. Final assembly in Mexico First-Mover implications the global market can profitably support only a limited number of firms such as the aerospace market Policy implications is in the best interests of a country but may not always be in the interest of a firm- ex: LCD screens used by IBM & Apple

The Political Economy of global Trade

Instruments of Trade Policy: Tariff is a tax levied on imports, specific tariff (levied as a fixed charge) & Ad valorem tariff (as a proportion of the value). Tariffs are pro-producer and anti-consumer; they reduce the overall efficiency of the world economy. Subsidy is a government payment to a domestic producer like cash grants, loans, tax breaks mainly on agriculture - global competitiveness is increased, encourage to overproduce, encourage to avoid imports thereby reduce global trade.

Instruments of Trade Policy:

Import quota direct restriction on the quantity of some good that may be imported into a country. Voluntary Export Restraint is a quota on trade imposed by the exporting country, typically at the request of the importing countrys Govt. Local Content Requirement is a requirement that specific fraction of a good be produced domestically. Administrative Trade Policies are bureaucratic rules that are designed to make it difficult for imports to enter a country. Antidumping policies are designed to punish foreign firms that engage in dumping- selling products in a foreign market at below their costs of production

Political arguments for intervention

Protecting jobs and industries National security Retaliation Protecting consumers Furthering foreign policy objectives Protecting human rights MFN status

Economic arguments for intervention

The infant industry argument handholding support protectionism to make efficient long-term investments Strategic trade policy to raise national income & to help domestic firms overcome the barriers to entry created by foreign firms with first-mover advantages.

Development of the world trading system

1947-1979: GATT, Trade Liberalisation & Economic Growth. The GATT was a multilateral agreement whose objective was to liberlise trade by eliminating tariffs, subsidies, import quotas etc., Uruguay Round -1986 to 1993- mutual tariff reductions were negotiated among all members.

Uruguay round contained the following provisions:

1.Tariffs on goods to be reduced or scrapped 2. Average tariff rates imposed by developed nations to be reduced to <4% 3. Substantial reduction in agricultural subsidies 4. GATT fair trade & market access rules to cover a wide range of services 5. Extended to provide enhanced protection of IPR 6. Textiles trade barriers were reduced significantly 7. WTO was created to implement the GATT agreements

Global Strategic Management

Strategy can be defined as the actions that managers take to attain the goals of the firm. For most firms, the preeminent goal is to maximize long-term profitability. Maximizing profitability requires firms to focus on value creation by focusing on the attainment of location economies global expansion can assist a firm in moving down the experience curve, to earn greater returns by transferring its core competencies to markets lacking them

Global Strategic Management

Creation of additional value by honing skills created in foreign subsidiaries & using them commercially/globally The best strategy for a firm to pursue is the pressure for cost reductions & local responsiveness Pressures for cost reductions are greatest in industries producing commodity-type products where price is the main competitive weapon Pressures for local responsiveness arise from differences in consumer tastes & preferences, infrastructure, traditional practices, distribution channels & host govt. demands

Global Strategic Management

Firms pursuing an global strategy transfer the skills and products derived from distinctive competencies to foreign markets, while undertaking some limited local customisation Firms pursuing a multidomestic strategy customize their product offering, marketing strategy & business strategy to national conditions Global strategy focus on cost reduction that come from experience curve effects & location economies. Many industries are so competitive that implementing such strategy is not easy

Organising Global Business

Organisation architecture used by MNCs to manage & direct their global business Architecture refers to the totality of a firms organisation including structure, control systems & incentives, processes, culture & people Different strategies require different architecture strategy is implemented through architecture they should match & fit lest performance problem experienced Profitability requires 3 conditions fulfilled: Architecture must be internally consistent, must fit the strategy & both must be consistent with competitive conditions of the market

Organising Global Business -Strategies

Multidomestic firms: focus on local responsiveness. global firms: create value by transferring core competencies from home to foreign subsidiaries. Global firms: focus on the realisation of location & experience curve economies. Transnational firms: focus on the simultaneous attainment of location & experience curve economies, local responsiveness & global learning (the multidimensional transfer of core competencies or skills)

Organisational structure 4 dimensions

1. Horizontal differentiation: formal divisions of
the firm into subunits 2. Vertical differentiation: the location of decision making responsibilities within that structure 3. Integration 4. Control systems: the metrics used to measure the performance of subunits & evaluate managers

Organising Global Business

Incentives are to reward employee behavior & closely tied to performance Processes refer to decision making & performing. Efficient & effective processes lower the costs of value creation Culture refers to values & norms shared among employees & expressed as pattern or style of an organisation People must be oriented to the architecture & strategy of the firm Therefore firms should see that the architecture matches the strategy-It is particularly difficult for MNCs but no way out

Managing business functions globally:Marketing/R&D

Theodore Levitt consumer tastes & preferences are becoming global due to modern communication & transport technology- creates global markets for standardised consumer products although differences exist between countries ex: Hollywood movies, Revlon, Sony, Levis jeans, MTV, CNN Segmentation:1) differences between countries in the structure of market segments 2) segments that transcend national borders ex:Toyota Corolla Product as a bundle of attributes variable from country to country to satisfy consumer tastes & preferences because of culture & economic development forced to customise the product ex: hamburgers do not sell in Islamic countries

Managing business functions globally:Marketing/R&D

Distribution strategy- to choose optimal channel The retail system either concentrated or fragmented / either short or long ex: Wal-Mart, Carrefour, HLL Communication strategy barriers to global communication include cultural differences, source effects & noise levels-EX: P&Gs Tampons Push strategy emphasises personal selling & push strategy mass media advertising optimal strategy depends on product type, consumer sophistication, channel length & media availability. No globally standardised advertising campaign is possible shampoo sachets

Managing business functions globally:Marketing/R&D

Price discrimination different price in different countries to maximise profits Ford Escort For effective price discrimination, the national markets must be separate & their price elasticities of demand must differ Predatory pricing is the use of profit gained in one market to support aggressive pricing in another market to compete effectively ex: TV Multipoint pricing refers to a firms pricing strategy may affect rivals pricing strategy in another market-ex: Kodak Aggressive pricing in one market may elicit a competitive response from a rival in another market that is important to the firm

Managing business functions globally:Marketing/R&D

New product development is a high risk, potentially high return activity. Competencies required: 1) disperse R&D activities to countries where NP is pioneered 2) integrate R&D with marketing & manufacturing To achieve tight integration among R&D, marketing & manufacturing, cross- functional teams are required ex: Bayer, HP, P&G

Operations Management Manufacturing & materials mgmt

Optimal manufacturing location must consider country factors, technological factors & product factors Country factors include factor costs, political economy & national culture Toyota / Hundai Technological factors include fixed costs of setting up manufacturing facilities, the minimum efficient scale of production & the availability of flexible manufacturing technologies that allow for mass customisation ex: cell phones-low cost & product custmisation Product factors include the value-to-weight ratio of the product & whether the product serves universal needs

Operations Management Manufacturing & materials mgmt

Location strategies either concentrate or decentralise manufacturing. The choice should be made in light of country, technology & product factors. All location decisions involve trade-offs Foreign factories can improve their capabilities over time & this can be of immense strategic benefit to the firm as centres of excellence & to encourage & foster managers to upgrade foreign capabilities An essential issue in many global businesses is determining which component parts should be manufactured in-house & which should be outsourced to independent suppliers

Operations Management Manufacturing & materials mgmt

In-house manufacturing facilitates investments in specialised assets & helps the firm protect its proprietary technology & improve scheduling between adjacent stages in the value chain. In-house production also makes sense if the firm is an efficient, low-cost producer of a technology. Outsourcing facilitates strategic flexibility & helps the firm to avoid the organisational problems associated with extensive vertical integration. Outsourcing also employed to win more orders from a country by pushing some subcontracting work to that country. But its strategic flexibility is limited by commitments to alliance partners.

Operations Management Manufacturing & materials mgmt

Material management all activities that move materials to manufacturing facility, process & out through distribution to the end user. It is complicated in global business by distance, time, exchange rates, customer barriers. JIT generate cost savings from reducing warehousing / inventory holding / write off excess inventory. IT / Internet based electronic data interchange facilitates MM by tracking of inputs, optimising production schedule, communicating in real time & eliminating paperwork between a firm & its suppliers.

global financial management

Investment, financial & money management decisions are complicated due to different currencies, tax regimes, levels of political & economic risks etc., When using capital budgeting(quantifies the benefits, costs & risks of an investment) techniques, a distinction must be made between cash flows to the project & cash flows to the parent due to repatriation policy of the host country. Also political risks & economic risks including foreign exchange risk have to be recognised & can be incorporated by using a higher discount rate to evaluate risky projects or by forecasting lower cash flows for such projects

global financial management

The cost of capital is typically lower in the global capital market than in domestic markets; therefore firms prefer to finance their investments by borrowing from the global capital market this may be restricted by host-government regulations which will result in increasing the discount rate used in capital budgeting. The firm may consider local debt financing for investments in countries where the local currency is expected to depreciate. The principal objectives of global money mgmt are to utilise the firms cash resources in the most efficient manner & to minimise the firms global tax liabilities.

global financial management

To transfer funds across borders, firms use a number of techniques like dividend remittances, royalty payments & fees, transfer prices & fronting loans. Dividend remittances are common but royalty & fees have certain tax advantages. The manipulation of transfer prices (the price at which goods & services are transferred between subsidiary companies of a corporation) is used by firms to move funds out of country to minimise tax liabilities, hedge (investment fund that not only buys financial assets like stocks,bonds,currencies, but also sells them short) against foreign exchange risk, circumvent govt. restrictions on capital flows & reduce tariff payments. Such manipulations run counter to govt. regulations in many countries, distort incentive systems & is ethically dubious

global financial management

Fronting loans involves channeling funds from a parent company to a foreign subsidiary through a third party, normally an global bank. This can circumvent host-government restrictions on the remittance of funds & provide certain tax advantages. By holding cash at a centralised depository, the firm may be able to invest its cash reserves more efficiently by reducing the total size of the cash pool in highly liquid accounts & thereby freeing cash for investment in higher-interest-bearing (less liquid) accounts or in tangible assets. Multilateral netting reduces the transaction costs (in terms of foreign exchange dealings & transfer prices) arising when a large number of transactions occur between a firms subsidiaries in the normal course of business.

global financial management

3 types of exposure to foreign exchange risks are: 1.Transaction exposure the extent to which income from individual transaction is affected by fluctuations in foreign exchange values 2.Translation exposure- the extent to which the reported consolidated results & balance sheets of a corporation are affected by fluctuations in foreign exchange values & 3.Economic exposure the extent to which a firms future global earning power is affected by changes in exchange rates

global financial management

Tactics that insure against transaction & translation exposure include buying forward, using currency swaps (simultaneous purchase & sale of a given amount of foreign exchange for two different value dates), leading and lagging payables and receivables (involve accelerating payments from weak-currency to strong-currency countries & delaying inflows from strong-currency to weak-currency countries), manipulating transfer prices, using local debt financing, accelerating dividend payments & adjusting capital budgeting to reflect foreign exchange exposure.

global financial management

Reducing a firms economic exposure requires strategic choices about how the firms productive assets are distributed around the globe. To manage foreign exchange exposure effectively, the firm must exercise centralised oversight over its foreign exchange hedging activities, recognize the difference between transaction exposure & economic exposure, forecast future exchange rate movements, establish good reporting systems within the firm to monitor exposure positions & produce regular foreign exposure reports that can be used as a basis of action.

global accounting
Accounting is the language of business: the means by which firms communicate their financial positions to the providers of capital & to govt. (for tax purpose). Also the means by which firms evaluate their own performance, control their expenditures & plan the future. Each countrys accounting has evolved in response to the local demands for accounting information & environment in which it operates. 5 factors influencing the type of accounting system a country has 1. The relationship between business & capital providers 2. The political & economic ties with other countries 3. The level of inflation 4. The level of countrys development & 5. The prevailing culture in a country

global accounting
National differences in accounting & auditing standards resulted in a general lack of comparability in countrys financial reports. Transnational financing & investment have grown rapidly now due to globalisation of capital market. Because of different accounting practices, firm has to explain why financial position looks very different on financial reports. Harmonisation of accounting standards across countries has come from global Accounting Standards Committee IASC but success is limited.

global accounting
Consolidated financial statements provide financial accounting information about a group of companies that recognises the companys economic interdependence. Transaction among the members of a corporate family are not included on such statements; only assets, liabilities, revenues & expenses generated with external third parties are shown.

global accounting
Foreign subsidiaries of a MNC normally keep their accounting records & prepare their financial statements in the currency of the host country. When the MN prepares its consolidated accounts, these financial statements must be translated into currency of its home country. Under the current rate translation method it will be incompatible with the historic cost principle. Under the temporal method, assets valued in a foreign currency are translated into the home currency using the exchange rate that existed when the assets were purchased. But the MNs balance sheet may not balance.

global accounting
In most global businesses, the annual budget is the main instrument by which headquarters controls foreign subsidiaries. Throughout the year, HO compares a subsidiarys performance against the budget goals, intervening selectively in its operation when shortfall occurs. All budgets & performance data are expressed in the corporate currency to enhance comparability but it distorts control process if the exchange rate changes between budgeting & performance evaluation To deal with this problem, Lessard-Lorange model use a projected spot exchange rate to translate both the figures into corporate currency.

global accounting
Transfer prices also can introduce significant distortions into control process & thus must be considered. Foreign subsidiaries do not operate in uniform environment & some environments are much tougher than others. Accordingly, the evaluation of a subsidiary should be kept separate from the evaluation of the subsidiary manager.

Global Human Resource Management

Includes HR Strategy, staffing, performance evaluation, management development, compensation & labor relations that are appropriate to the firms strategy. Staffing policy is selecting right employees & can be a tool for developing & promoting a corporate culture An ethnocentric approach to staffing fills all key mgmt positions in an global business with parentcountry nationals. This is congruent with an global strategy but this can result in cultural myopia.

Global Human Resource Management

A polycentric staffing policy uses host-country nationals to manage foreign subsidiaries & parent-country nationals for the key positions at corporate headquarters. This minimise the dangers of cultural myopia, but can create a gap between home- & host-country operations. This policy is best suited to a multidomestic strategy (to be responsive to different national market conditions)

Global Human Resource Management

A geocentric staffing seeks the best people for key jobs throughout the organisation, regardless of their nationality. This approach is consistent with building a strong unifying culture & informal management network & is well suited to both global & transnational companies. Immigration policies of national governments may limit a firms ability to pursue such policy.

Global Human Resource Management

A prominent issue in global staffing is expatriate failure, defined as the premature return of an expatriate to his/her home country. The costs can be substantial. The most successful expatriates seem to be those who have high self-esteem & self-confidence, get along well with others, are willing to attempt to communicate in a foreign language and can empathise with people of other cultures. Proper selection & training can lower the probability of expatriate failure. Cultural, language & practical training should be provided to both the expatriate & the spouse.

Global Human Resource Management

MDPs attempt to increase the overall skill levels of managers through a mix of ongoing management education & job rotation. Management development is often used as a strategic tool to build a strong unifying culture & informal mgmt network, both of which support transnational & global strategies. Performance evaluation of expatriate managers is difficult because of unintentional bias. Country differences in compensation practices raise a difficult question for an global business. The most common approach is the balance sheet approach-to equalise purchasing power so employees enjoy the same living standard in foreign & at home.

Global Human Resource Management

Key issue in global labor relations is the degree to which organised labor can limit the choices available to an global business. A firms ability to pursue a transnational or global strategy can be significantly constrained by the actions of labor unions. Multinational can counter union bargaining power with threats to move production to another country. Attempts to form global labor organisation have not been effective.

Global Strategic Alliances & Entry Strategy

The optimal choice of entry mode to serve a foreign market & strategic alliances these 2 are related in that several entry modes like licensing & joint ventures are strategic alliances. Most strategic alliances involve more than just issues of market access. Basic entry decisions identifying which markets to enter, when to enter & on what scale. The most attractive foreign markets tend to be found in politically stable developed and developing nations that have free market systems & where there is not a dramatic upsurge in either inflation rates or privatesector debt.

Global Strategic Alliances & Entry Strategy

Several advantages for entering a national market early. They must be balanced against the pioneering costs that have to be borne, including the risk of failure. Large-scale entry means major strategic commitment that is likely to change the nature of competition in that market & limit the entrants future strategic flexibility. This can yield many benefits, but also risks. 6 modes of entry strategy: Exporting, creating turnkey projects, licensing, franchising, joint ventures & setting up wholly owned subsidiary.

Global Strategic Alliances & Entry Strategy

Exporting facilitates the realisation of experience curve economies & avoid the costs of setting up manufacturing operations. Disadvantages: high transport costs, trade barriers & problems with local marketing agents-can be overcome if the firm sets up a wholly owned marketing subsidiary. Turnkey projects allow firms to export their process know-how to countries where FDI is prohibited enables the firm to earn greater return. Disadvantage: the firm create efficient global competitors for itself

Global Strategic Alliances & Entry Strategy

Licensing: advantage the licensee bears the costs & risks of opening a foreign market. Disadvantages the risk of technological know-how & a lack of tight control over licensees. Franchising: advantage the franchisee bears the costs & risks of opening a foreign market. Disadvantage problems of quality control of distant franchisees. Joint ventures: advantages sharing the costs & risks of opening a foreign market & of gaining local knowledge & political influence. Disadvantage the risk of losing control over technology & a lack of tight control.

Global Strategic Alliances & Entry Strategy

Wholly owned subsidiaries: advantage tight control over technological know how. disadvantage the firm must bear all the costs & risks of opening a foreign market. The optimal choice of entry mode depends on the firms strategy. When technological know-how constitutes a firms core competence, wholly owned subsidiaries are preferred, since they best control technology.

Global Strategic Alliances & Entry Strategy

When management know-how constitutes a firms core competence, foreign franchises controlled by joint ventures seem to be optimal. This gives the firm the cost & risk benefits associated with franchising, while enabling it to monitor & control franchisee quality effectively. When the firm is pursuing a global or transnational strategy, the need for tight control over operations to realise location & experience curve economies suggests wholly owned subsidiaries are the best entry mode.

Global Strategic Alliances & Entry Strategy

When establishing a wholly owned subsidiary in a country, a firm must decide whether to do so by building a subsidiary from the ground up, the so-called green-field venture strategy, or by acquiring an established enterprise in the target market. Relative to green-field ventures, acquisitions are quick to execute, may enable a firm to preempt in global competitors, & involve buying a known revenue & profit stream.

Global Strategic Alliances & Entry Strategy

Acquisitions may fail when the acquiring firm overpays for the target, when the culture of the acquiring & acquired firms clash, when there is a high level of management attrition after the acquisition, & when there is a failure to integrate the operations of the acquiring & acquired firm. The big advantage of establishing a green-field venture in a foreign country is that it gives the firm a much greater ability to build the kind of subsidiary company that it wants. For example, it is much easier to build an organisation culture from scratch than it is to change the culture of an acquired unit.

Global Strategic Alliances & Entry Strategy

Strategic alliances are cooperative agreements between actual or potential competitors. Advantage they facilitate entry into foreign markets, enable partners to share the fixed costs & risks associated with new products & processes, facilitate the transfer of complimentary skills between companies & help firms establish technical standards. Disadvantage the firm risks giving away technological know-how & market access to its alliance partner in return for very little.

Global Strategic Alliances & Entry Strategy

The disadvantages can be reduced if the firm selects partners carefully, paying close attention to the firms reputation & the structure of the alliance so as to avoid unintended transfers of know-how. Two keys to making alliances work seem to be building trust & informal communications networks between partners & taking proactive steps to learn from alliance partners

World Trade Organisation-WTO

WTO is the legal & institutional foundation of the multilateral trading system. The GATT applied only to trade in merchandise goods but WTO covers goods, services & IPR WTO functions: Administering & implementing the multilateral trade agreements Forum for multilateral trade negotiations Seeking to resolve trade disputes Overseeing national trade policies Cooperating with other global institutions involved in global economic policy making

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WTO implications for India

Increase in world trade & income due to increased market access will help India Removal of quantitative restraints & reduced tariffs in agriculture bring gains for India Substantial reduction in non-tariff barriers will help Disciplined domestic subsidies & export subsidies will improve returns India, a low cost producer of apparels will gain Transport, travel / tourism & professional services will benefit TRIPs enhance access to foreign technology, FDI & development of knowledge based industries domestically

Social responsibility & ethical issues in global business

CAUX principles: global executives met in CAUX in Switzerland & arrived at the following: Responsibilities of business towards all stakeholders. Innovation, justice & world community Business behavior: beyond the letter of the law towards a spirit of trust Respect for the rules Support for multilateral trade Respect for the environment Avoidance of illicit operations

Global Business
Charles W.L.Hill, University of Washington Tata McGraw-Hill P.Co., New Delhi