Global B E

TABLE OF CONTENTS S.NO.

1.

CONTENT

PAGE NO.

ACKNOWLEDGEMENT

i

ABSTRACT

ii

CHAPTER 1: INTRODUCTION

1

1.1 MICRO ENVIRONMENT 1.2 MACRO ENVIRONMENT 2.

CHAPTER 2: THE DRIVERS OF GLOBAL BUSINESS

17

ENVIRONMENT 3. CHAPTER 3: VARIOUS METHODS USED FOR ENTERING IN GLOBAL MARKET 19 4.

CHAPTER 4: BARRIERS IN GLOBAL BUSINESS ENVIRONMENT 28

5.

CHAPTER 5: Impact of Global Recession on Indian Market

34

6.

CHAPTER 6: CASE STUDY

36

CONCLUSION

38

BIBLIOGRAPHY

40

1

CHAPTER 1: INTRODUCTION The global business environment can be defined as the environment in different sovereign countries, with factors exogenous to the home environment of the organization, influencing decision making on resource use and capabilities. The global business environment can be classified into the environment external to the firm and the environment internal to the firm. The external environment includes the social, political, economic, regulatory, tax, cultural, legal, and technological environments. To function effectively and efficiently, companies operating internationally must understand the social environment of the host country they are operating in. Today there are thousands of MNCs which operate in many parts of the globe. Such companies should acquaint themselves with the language and culture of the country in which they are operating. Religion and its philosophies influence the working habits of people, which in turn affect business Values determine attitudes, which have a significant impact on the conduct of international business. Social customs and manners differ from country to country. MNCs need to understand them to conduct business smoothly in the countries in which they operate. The diversity of languages used in different countries poses a problem in ensuring effective communication between the employees of an MNC. Such companies should be very careful when translating advertisements and other communication messages. The quality of education in the host country also plays a key role in determining the prospects of an international business. Every company faces political constraints in the form of antitrust laws, fair trade decisions, tax programs, minimum usage legislation, pollution and pricing policies, administrative activities and many other actions, aimed at protecting the consumers and the local environment. These laws, rules and regulations affect a company’s profits. Every market is unique and consumption patterns change as the wealth of consumers changes in various segments of the market.

2

Certain crucial macroeconomic trends have to be taken into consideration for strategic planning. These include the growth of the Gross National Product (GNP), the volume of trade, and the level of FDI. Every country in the world follows its own system of law. A foreign company operating in a particular country has to abide by the country’s laws as long as it is operating in that country. In order to monitor and control the behavior of foreign businesses, host countries enact laws. The laws relating to the conduct of trade take the form of tariffs, subsidies, quantitative restrictions, voluntary export restraint, licensing, and administered protection. The regulatory environment relates to the factors that dealing with the planning and promotion by governments; these may affect the economic activities of a business or an organization. Regulatory bodies exist both at the national and the international levels. The technological environment comprises factors related to the materials and machines used in manufacturing goods and services. The receptivity to new technology in organizations and its adoption by consumers influence decisions made in an organization. The tax system of a country influences the performance of an organization operating in that country to a significant extent.

1.1 MICRO ENVIRONMENT "The micro environment consists of the actors in the company's immediate environment" that effect the performance of the company. These include the suppliers, marketing intermediaries, competitors, customers, and publics. "The macro environment consists of the larger societal forces that affect all the actors in the company's micro environment namely, the demographic, economic, natural, technological, political and cultural forces". It is quite obvious that the micro environmental factors are more intimately linked with the company than the macro factors. The micro forces need not necessarily affect all the firms in a particular industry in the same way. Some of the micro factors may be particular to a firm.

For example, a firm, which depends on a supplier, may have a

supplier environment, which is entirely different from that of a firm whose supply source is different. When competing firms in an industry have the same microelements, the relative success of the firms depends on their relative effectiveness in dealing with these

3

elements.

Suppliers An important force in the microenvironment of a company is the supplier, i.e., those who supply the inputs like raw materials and components to the company. The importance of reliable source/sources of supply to the smooth functioning of the business is obvious. Uncertainty regarding the supply or other supply constraints often compels companies to maintain high inventories causing cost increases. It has been pointed out that factories in India maintain indigenous stocks of 3-4 months and imported stocks of 9 months as against an average of a few hours to two weeks in Japan. Because of the sensitivity of the supply, many companies give high importance to vendor development. Vertical integration, where feasible, helps solve the supply problem. It is very risky to depend on a single because a strike, lock out or any other production problem with that supplier may seriously affect the company. Similarly, a change in the attitude or behavior ofthe supplier may also affect the company. Hence, multiple sources ofsupply often help reduce such risks. The supply management assumes more importance in a scarcity environment. "Company purchasing agents are learning how to "wine and dine" suppliers to obtain favorable treatment during periods of shortages. In other words, the purchasing department might have to "market" itself to suppliers". CUSTOMERS As it is often, exhorted, the major task of a business is to create and sustain customers. A business exists only because of its customers. Monitoring the customer sensitivity is, therefore, a prerequisite for the business success. A company may have different categories of consumers like individuals, households, industries and other commercial establishments, and government and other institutions. For example, the customers of a tyre company may include individual automobile owners, automobile manufacturers, public sector transport undertakings and other transport operators. Depending on a single customer is often too risky because it may place the company in a poor bargaining position, apart from the risks of losing business consequent to the winding up of business by the customer or due to the customer's switching over the 4

competitors of the company. The choice of the customer segments should be made by considering a number of factors including the relative profitability, dependability, stability of demand, growth prospects and the extent ofcompetition. COMPETITORS A firm's competitors include not only the other firms, which market the same or similar products, but also all those who compete for the discretionary income of the consumers. For example, the competition for a company's televisions may come not only from other T.V. manufacturers but also from two-wheelers, refrigerators, cooking ranges, stereo sets and so on and from firms offering savings and investment schemes like banks, Unit Trust of India, companies accepting public deposits or issuing shares or debentures etc. This competition among these products may be described as desire competition as the primary task here is to influence the basic desire of the consumer. Such desire competition is generally very high in countries characterized by limited disposable incomes and many unsatisfied desires (and, of course, with many alternatives for spending/investing the disposable income). If the consumer decides to spend his discretionary income on recreation (or recreation cum education) he will still confronted with a number of alternatives choose from like T.V., stereo, two-in-one, three -in-one etc. The competition among such alternatives, which satisfy a particular category of desire, is called generic competition. If the consumer decides to go in for a T.V. the next question is which form of the T.V. - black and white or colour, with remote-control or without it etc. In other words, there is a product form competition. Finally the consumer encounters the brand competition i.e., the competition between the different brands ofthe same product form. An implication of these different demands is that a marketer should strive to create primary and selective demand for his products. MARKETING INTERMEDIARIES The immediate environment of a company may consist of a number of marketing intermediaries which are "firms that aid the company in promoting, selling and distributing its goods to final buyers".

5

The marketing intermediaries include middlemen such as agents and merchants who "help the company find customers or close sales with them", physical distribution firms which "assist the company in stocking and moving goods form their origin to their destination" such as warehouses and transportation firms; marketing service agencies which "assist the company in targeting and promoting its products to the right markets" such as advertising agencies, marketing research firms, media firms and consulting firms; and financial intermediaries which finance marketing activities and insure business risks. Marketing intermediaries are vital links between the company and the final consumers. A dislocation or disturbance of this link, or a wrong choice of the link, may cost the company very heavily. Retail chemists and druggists in India once decided to boycott the products of a leading company on some issue such as poor retail margin. This move for collective boycott was, however, objected to by the MRTP commission; but for this company would, perhaps, have been in trouble.

PUBLIC A company may encounter certain publics in its environment. "A public is any group that has an actual or potential interest in or impact on an organisation's ability to achieve its interests. Media publics, citizens action publics and local publics are some examples. For example, one ofthe leading companies in India was frequently under attack by the media public, particularly by a leading daily, which was allegedly bent on bringing down the share prices of the company by tarnishing its image. Such exposures or campaigns by the media might even influence the government decisions affecting the company. The local public also affects many companies. Environmental pollution is an issue often taken up by a number oflocal publics. Actions by local publics on the issue have caused some companies to suspend operations and/or take pollution abatement measures. GROWTH OF CONSUMER PUBLIC IS AN IMPORTANT DEVELOPMENT AFFECTING BUSINESS. It is wrong to think that all publics are threats to business. Some ofthe actions of the publics may cause problems for companies. However, some publics are an opportunity for the business. Some businessmen, for example, regard consumerism as an opportunity 6

for the business. The media public may be used to disseminate useful information. Similarly, fruitful cooperation between a company and the local publics may be established for the mutual benefit of the company and the local community.

1.2 MACRO ENVIRONMENT As stated earlier, a company and the forces in its microenvironment operate in a larger macro environment of forces that shape opportunities and pose threats to the company. The macro forces are, generally, more uncontrollable than the micro forces. A sketch picture of the important macro-environmental forces is given below.

ECONOMIC ENVIRONMENT Economic conditions, economic policies and the economic system are the important external factors that constitute the economic environment of a business. The economic conditions of a country-for example, the nature of the economy, the stage of development of the economy, economic resources, the level of income, the distribution of income and assets, etc- are among the very important determinants of business strategies. In a developing country, the low income may be the reason for the very low demand for a product. The sale of a product for which the demand is income-elastic naturally increases with an increase in income. But a firm is unable to increase the purchasing power of the people to generate a higher demand for its product. Hence, it may have to reduce the price of the product to increase the sales. The reduction in the cost of production may have to be effected to facilitate price reduction. It may even be necessary to invent or develop a new low-cost product to suit the low-income market. Thus Colgate designed a simple, hand-driven, inexpensive ($10) washing machine for low-income buyers in less developed countries. Similarly, the National Cash Register Company took an innovative step backward by developing a crank-operated cash register that would sell at half the cost of a modern cash register and this was well received in a number of developing countries. In countries where investment and income are steadily and rapidly rising, business prospects are generally bright, and further investments are encouraged. There are a number of economists and businessmen who feel that the developed countries are no 7

longer worthwhile propositions for investment because these economies have reached more or less saturation levels in certain respects. In developed economies, replacement demand accounts for a considerable part of the total demand for many consumer durables whereas the replacement demand is negligible in the developing economies. The economic policy ofthe government, needless to say, has a very great impact on business. Some types or categories of business are favorably affected by government policy, some adversely affected, while it is neutral in respect of others. For example, a restrictive import policy, or a policy of protecting the home industries, may greatly help the import-competing industries. Similarly, an industry that falls within the priority sector in terms of the government policy may get a number of incentives and other positive support from the government, whereas those industries which are regarded as inessential may have the odds against them. In India, the government's concern about the concentration ofeconomic power restricted the role ofthe large industrial houses and foreign concerns to the core sector, the heavy investment sector, the export sector and backward regions. The monetary and fiscal policies, by the incentives and disincentives they offer and by their neutrality, also affect the business in different ways. An industrial undertaking may be able to take advantage of external economies by locating itself in a large city; but the Government of India's policy was to discourage industrial location in such places and constrain or persuade industries undertaking, a backward area location may have many disadvantages. However, the incentives available for units located in these backward areas many compensate them for these disadvantages, at least to some extent. According to the industrial policy of the Government of India until July 1991, the development of 17 of the most important industries were reserved for the state. In the development of another 12 major industries, the state was to play a dominant role. In the remaining industries, cooperative enterprises, joint sector enterprises and small scale units were to get preferential treatment over large entrepreneurs in the private sector. The government policy, thus limited the scope of private business. However, the new policy ushered in since July 1991 has wide opened many of the industries for the private sector. The scope of international

8

business depends, to a large extent, on the economic system.

At one end, there are the

free market economies or capitalist economies, and at the other end are the centrally planned economies or communist countries. In between these two are the mixed economies. Within the mixed economic system itself, there are wide variations. The freedom of private enterprise is the greatest in the free market economy, which is characterized by the following assumptions: (i)

The factors of production (labor, land, capital) are privately owned, and production occurs at the initiative of the private enterprise.

(ii)

Income is received in monetary form by the sale of services of the factors of production and from the profits of the private enterprise.

(iii)

Members of the free market economy have freedom of choice in so far

as

consumption,

occupation,

savings

and

investment

are

concerned. (iv)

The free market economy is not planned controlled or regulated by the

government.

The

government

satisfies

community

or

collective

wants, but does not compete with private firms, nor does it tell the people where to work or what to produce. The completely free market economy, however, is an abstract system rather than a real one. Today, even the so-called market economies are subject to a number of government regulations. Countries like the United States, Japan, Australia, Canada and member countries of the EEC are regarded as market economies. The communist countries have, by and large, a centrally planned economic system. Under the rule of a communist or authoritarian socialist government, the state owns all the means of production, determines the goals of production and controls the economy according to a central master plan. There is hardly any consumer sovereignty in a centrally planned economy, unlike in the free market economy. The consumption pattern in a centrally planned economy is dictated by the state. China, East Germany Soviet Union, Czechoslovakia, Hungary, Poland etc., had centrally planned economies. However, recently several of these countries have discarded communist system and have moved towards the market economy. In between the capitalist system and the centrally planned system falls the system of the mixed economy,

9

under which both the public and private sectors co-exist, as in India. The extent of state participation varies widely between the mixed economies. However, in many mixed economies, the strategic and other nationally very important industries are fully owned or dominated by the state. The economic system, thus, is a very important determinant of the scope of private business. The economic system and policy are, therefore, very important external constraints on business. POLITICAL AND LEGAL ENVIRONMENT Political and government environment has close relationship with the economic system and economic policy. For example, the communist countries had a centrally planned economic system. In most countries, apart from those laws that control investment and related matters, there are a number of laws that regulate the conduct of the business. These laws cover such matters as standards of products, packaging, promotion etc. In many countries, with a view to protecting consumer interests, regulations have become stronger. Regulations to protect the purity of the environment and preserve the ecological balance have assumed great importance in many countries. Some governments specify certain standards for the products (including packaging) to be marketed in the country; some even prohibit the marketing of certain products. In most nations, promotional activities are subject to various types of controls. Media advertising is not permitted in Libya. Several European countries restrain the use of children in commercial advertisements. In a number of countries, including India, the advertisement of alcoholic liquor is prohibited. Advertisements, including packaging, of cigarettes must carry the statutory warning that "cigarette smoking is injurious to health". Similarly, advertisements of baby food must necessarily inform the potential buyer that breast-feeding in the best. In countries like Germany, product comparison advertisements and the use of superlatives like 'best' or 'excellent' in advertisements is not allowed In the United States, the Federal Trade Commission is empowered to require a company to provide the quality, performance or comparative prices ofits products.

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SOCIO-CULTURAL ENVIRONMENT The socio-cultural fabric is an important environmental factor that should be analysed while formulating business strategies. The cost of ignoring the customs, traditions, taboos, tastes and preferences, etc., of people could be very high. The buying and consumption habits of the people, their language, beliefs and values, customs and traditions, tastes and preferences, education are all factors that affect business. For a business to be successful, its strategy should be the one that is appropriate in the socio-cultural environment. The marketing mix will have to be so designed as best to suit the environmental characteristics of the market. In Thailand, Helene Curtis switched to black shampoo because Thai women felt that it made their hair look glossier. Nestle, a Swiss multinational company, today brews more than forty varieties of instant coffee to satisfy different national tastes. Even when people of different cultures use the same basic product, the mode of consumption, conditions of use, purpose of use or the perceptions of the product attributes may vary so much so that the product attributes method of presentation, positioning, or method of promoting the product may have to be varied to suit the characteristics of different markets. For example, the two most important foreign markets for Indian shrimp are the U. S and Japan. The product attributes for the success of the product in these two markets differ. In the U.S. market, correct weight and bacteriological factors are more important rather than eye appeal, colour, uniformity of size and arrangement of the shrimp which are very important in Japan. Similarly, the mode of consumption of tuna, another seafood export from India, differs between the U.S. and European countries. Tuna fish sandwiches, an American favourite which accounts for about 80 per cent of American tuna consumption, have little appeal in high tuna consumption European countries where people eat it right from the can. A very interesting example is that of the Vicks Vaporub, the popular pain balm, which is used as a mosquito repellant in some of the tropical areas. The differences in languages sometimes pose a serious problem, even necessitating a change in the brand name. Preett was, perhaps, a good brand name in India, but it did not suit in the overseas market; and hence it was appropriate to adopt 'Prestige' for the

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overseas markets. Chevrolet's brand name 'Nova' in Spanish means "it doesn't go". In Japanese, General Motors' "Body by Fisher" translates as corpse by Fisher". In Japanese, again, 3M's slogan "sticks like crazy "translates as "sticks foolishly". In some languages, Pepsi-Cola's slogan "come alive" translates as "come out of the grave". The values and beliefs associated with colour vary significantly between different cultures. Blue, considered feminine and warm in Holland, is regarded as masculine and cold in Sweden. Green is a favourite colour in the Muslim world; but in Malaysia, it is associated with illness. White indicates death and mourning in China and Korea; but in some countries, it expresses happiness and is the colour of the wedding dress of the bride. Red is a popular colour in the communist countries; but many African countries have a national distaste for red colour. DEMOGRAPHIC ENVIRONMENT Demographic factors like the size, growth rate, age composition, sex composition, etc. of the population, family size, economic stratification of the population, educational levels, languages, caste, religion etc. Are all factors that are relevant to business? Demographic factors such as size of the population, population growth rate, age composition, life expectancy, family size, spatial dispersal, occupational status, employment pattern etc, affect the demand for goods and services. Markets with growing population and income are growth markets. But the decline in the birth rates in countries like the United States have affected the demand for baby products. Johnson and Johnson have overcome this problem by repositioning their products like baby shampoo and baby soap, promoting them also to the adult segment, particularly to the females. A rapidly increasing population indicates a growing demand for many products. High population growth rate also indicates an enormous increase in labour supply. When the Western countries experienced the industrial revolution, they had the problem of labour supply, for the population growth rate was comparatively low. Labour shortage and rising wages encouraged the growth of labour-saving technologies and automation. But most developing countries of today are experiencing a population explosion and a situation of labour surplus. The governments of developing countries, therefore, encourage labour intensive methods of production. Capital intensive methods, automation and even

12

rationalization are apposed by labour and many sociologists, politicians and economists in these countries. The population growth rate, thus, is an important environmental factor which affects business.

Cheap labour and a growing market have encouraged many

multinational corporations to invest in developing countries. The occupational and spatial mobilities of population have implications for business. If labour is easily mobile between different occupations and regions, its supply will be relatively smooth, and this will affect the wage rate. If labour is highly heterogeneous in respect of language, caste and religion, ethnicity, etc., personnel management is likely to become a more complex task. The heterogeneous population with its varied tastes, preferences, beliefs, temperaments, etc. gives rise to differing demand patterns and calls for different marketing strategies. NATURAL ENVIRONMENT Geographical and ecological factors, such as natural resource endowments, weather and climatic conditions, topographical factors, locational aspects in the global context, port facilities, etc., are all relevant to business. Differences in geographical conditions between markets may sometimes call for changes in the marketing mix.

Geographical

and ecological factors also influence the location of certain industries. For example, industries with high material index tend to be located near the raw material sources. Climatic and weather conditions affect the location of certain industries like the cotton textile industry. Topographical factors may, affect the demand pattern. For example, in hilly areas with a difficult terrain, jeeps may be in greater demand than cars. Ecological factors have recently assumed great importance. The depletion of natural resources, environmental pollution and the disturbance of the ecological balance has caused great concern.

Government policies aimed at the preservation of environmental

purity and ecological balance, conservation of non-replenishale resources, etc., have resulted in additional responsibilities and problems for business, and some of these have the effect of increasing the cost of production and marketing. Externalities have become an important problem the business has to confront with.

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PHYSICAL AND TECHNOLOGICAL ENVIRONMENT Physical Factors, such as geographical factors, weather and climatic conditions may call for modifications in the product, etc., to suit the environment because these environmental factors are uncontrollable. For example, Esso adapted its gasoline formulations to suit the weather conditions prevailing in different markets. Business prospects depend also on the availability of certain physical facilities. Some products, like many consumer durables, have certain use facility characteristics. The sale of television sets, for example, is limited by the extent of the coverage of the telecasting. Similarly, the demand for refrigerators and other electrical appliances is affected by the extent of electrification and the reliability of power supply. The demand for LPG gas stoves is affected by the rate of growth of gas connections. Technological factors sometimes pose problems. A firm, which is unable to cope with the technological changes, may not survive. Further, the differing technological environment of different markets or countires may call for product modifications. For example, many appliances and instruments in the U.S.A. are designed for 110 volts but this needs to be converted into 240 volts in countries which have that power system. Technological developments may increase the demand for some existing products. For example, voltage stabilisers help increase the sale of electrical appliances in markets characterised by frequent voltage fluctuations I power supply. However, the introduction of TV's, Fridges etc, with in built voltage stabilizer adversely affects the demand for voltage stabilizers. Advances in the technologies of food processing and preservation, packaging etc., have facilitated product improvements and introduction of new products and have considerably improved the marketability ofproducts. The television has added a new dimension to product promotion. The advent of TV and VCP/VCR has, however, adversely affected the cinema theatres. The fast changes in technologies also create problems for enterprises as they render plants and products obsolete quickly. Productmarket-technology matrix generally has a much shorter life today than in the past. It is particularly so in the international marketing context. It may be interesting to note that almost half of Hindustan Lever's 1980 export business did not exist in 1987. In fact, as

14

much as a third of the company's 1987 turnover was from products and markets, which were under three years ofage. INTERNATIONAL ENVIRONMENT The international environment is very important from the point of view of certain categories of business. It is particularly important for industries directly depending on imports or exports and import-competing industries. For example, a recession in foreign markets, or the adoption of protectionist policies by foreign nations, may create difficulties for industries depending on exports. On the other hand, a boom in the export market or a relaxation of the protectionist policies may help the export-oriented industries. A liberalization of imports may help some industries which use imported items, but may adversely affect import-competing industries. It has been observed that major international developments have their spread effects on domestic business. The Great Depression in the United States sent its shock waves to a number of other countries.

Oil price hikes have seriously affected a number of

economies. These hikes have increased the cost of production and the prices of certain products, such as fertilizers, synthetic fibres, etc. The high oil price has led to an increase in the demand for automobile models that economise energy consumption. The demand for natural fibres increased because of the oil crisis. The oil crisis also prompted some companies to resort to demarketing. "Demarketing refers to the process of cutting consumer demand for a product back to level that can be supplied by the firm". Some oil companies-the Indian Oil Corporation, for example-have publicized tips o how to cut oil consumption. When the fertilizer price shot up following the oil crisis, some fertilizer companies appealed to the farmers to use fertilizers only for important and remunerative crops. The importance of natural manure like compost as a substitute for chemical fertilizers was also emphasized. The oil crisis led to a reorientation of the Government of India's energy policy. Such developments affect the demand, consumption and investment pattern. A good export market enables a firm to develop a more profitable product mix and to consolidate its position in the domestic market. Many companies now plan production capacities and investment taking into account also the foreign markets. Export marketing facilitates the

15

attainment of optimum capacity utilization; a company may be able to mitigate the effects of domestic recession by exporting. However, a company which depends on the export market to a considerable extent has also to face the impact of adverse developments in foreign markets. International business is a necessity in today's world.

The gains for

greater awareness and knowledge of international business fare immense for nations, multi-national enterprises, trading companies, exporters and even individuals. To go global, the first step would be to understand the international business environment. International business in nothing but extending the areas of activities of business across the boundaries. We have discussed about the importance of understanding international business environment in detail. The concepts of microenvironment and macro environment with reference to the political, legal, economical and cultural background are also discussed. Understanding international business environment requires greater research and information. The fulfillment of this research could happen with greater understanding of the framework for analyzing the international business environment .

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CHAPTER

2:

THE

DRIVERS

OF

GLOBAL

BUSINESS

ENVIRONMENT What factors spur globalization? Are there driving forces that facilitate or promote the spread of globalization? Considering that globalization has accelerated in the last decades, answers to these questions can be sought by identifying changes that have occurred over the latter part of the last century that may have magnified the globalization trend. Among the many possible changes that have profoundly affected our world, four are most prominent: Technology: The incremental process of technological innovations punctuated by occasional breakthroughs has accelerated to levels unprecedented in human history. The advent of the Internet has opened up immense possibilities that could not even be imagined, let alone realized, in earlier times. The speed and reliability of international communication has given a new impetus to globalization, while vast advances in transportation have made speedy and cost-efficient global sourcing possible. Trade: World exchanges of goods of services have been growing in leaps and bounds, over the last decades, thanks to the continuous technological improvement in communications and transportation, but also as a result of the lowering of barriers to trade. Whereas in the past countries imposed high taxes on imports (tariffs) on imported goods or limited imports in other ways, trade agreements between countries have led to a general lowering of barriers to trade that has made further globalization possible. Movement of Capital: Exports and imports are only one facet of international business. The other activity linked to globalization of business activities is international investment. The liberalization of capital markets has led to a tremendous increase in the flow of cross-border capital movements. In search of higher return, investors have bought foreign stocks and bonds (portfolio investment) or have invested in acquiring or building productive facilities overseas (foreign direct investment). Foreign direct investment is an

17

important resource for the economic development of many countries. Foreign Direct Investment (FDI) can come about as a result of foreign companies establishing either manufacturing facilities or marketing\sales facilities in the host country for the purpose of managerial control. Movement of People: Along with capital, labor is the other major factor of production. Developed countries increasingly face little or no population growth and a rise in the average age of their citizens, as people decide to have fewer children and the older generation lives longer. By contrast, developing countries continue to experience a fast increasing young population, for whom there are few employment opportunities. These imbalances create the conditions for legal and illegal immigration from developing countries toward developed countries. However, the movement of people is not limited to economic immigration. Wars and other conflicts, as well as failing harvests and famine, trigger floods of refugees that seek the relative safety of neighboring countries. People also travel to foreign countries for short periods for a variety of reasons including visiting places of interest, exploring business opportunities, attending training programs, etc. Together, these movements of people constitute the fourth driver of globalization. The four drivers can be viewed as engines of globalization: technological improvements, expanded trade and increased movements of capital and people make it possible to globalize more, and faster. However, as globalization unfolds, it also influences the drivers. More globalization leads to more technological innovations, as ideas are shared across borders; more trade, since new opportunities are created through globalization; and finally more movement of capital and people, as factors of production— in an increasingly integrated and transparent world market— flow to where they are best rewarded.

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CHAPTER 3: VARIOUS METHODS USED FOR ENTERING IN GLOBAL MARKET EXPORTING The simplest way to enter a foreign market is through exporting. The company may passively export its surpluses from time to time, or it may make an active commitment to expand exports to a particular market. In either case, the company produces all its goods in its home country. It may or may not modify them for the export market. Exporting involves the least change in the company product lines, organization, investments, or mission. Companies typically start with indirect exporting, working through independent international marketing intermediaries. Indirect exporting involves less investment because the firm does not require an overseas marketing organization or network. It also involves less risk. International marketing intermediaries bring know-how and services to the relationship, so the seller normally makes fewer mistakes. Sellers may eventually move into direct exporting, whereby they handle their own exports. The investment and risk are somewhat greater in this strategy, but so is the potential return. A company can conduct direct exporting in several ways: It can set up a domestic export department that carries out export activities. It can set up an overseas sales branch that handles sales, distribution, and perhaps promotion. The sales branch gives the seller more presence and program control in the foreign market and often serves as a display center and customer service center. The company can also send home-based salespeople

abroad

at

certain

times

in

order.

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Joint Venturing A second method of entering a global market is joint venturing—joining with foreign companies to produce or market products or services. Joint venturing differs from exporting in that the company joins with a host country partner to sell or market abroad. It differs from direct investment in that an association is formed with someone in the foreign country. There are four types of joint venture licensing, contract manufacturing, and management contracting and joint ownership.

Licensing Licensing is a simple way for a manufacturer to enter international marketing. The company enters into agreement wit a licensee in the foreign market. For a fee or royalty, licensee buys the right to use the company's manufacturer process, trademark, patent, trade secret, or other item of vale The company thus gains entry into the, market at little risk; tl licensee gains production expertise or a well-known product or name without having to start from scratch. Coca-Cola markets internationally by licensing bottles around the world and supplying them with the syrup needed to produce the product. In Japan, Budweiser beer flows from Kirin breweries and Marlboro cigarettes roll off production lines at Japan Tobacco, Inc Tokyo Disneyland Resort is owned and operated by Oriental Land Company under license from The Walt Disney Company. Saks recently announced that it will enter the Chinese market through licensing. By licensing its name, Saks will become the first foreign luxury department store in this fat growing market, but without having to operate the store itself Licensing has potential disadvantages, however. The firm has less control over the licensee than it would over its own operations. Furthermore, if the licensee is very

20

successful, the firm has given up these profits, and if and when the contract ends, it mayfind it has created a competitor

Contract Manufacturing Another option is contract manufacturing—the company contracts with manufacturers in the foreign market to produce its product or provide its service. Sears used this method in opening up department stores in Mexico and Spain, where it found qualified local manufacture to produce many of the products it sells. The drawbacks of contract manufacturing a decreased control over the manufacturing process and loss of potential profits on manufacturing. The benefits are the chance to start faster, with less risk, and the later opportunity either to form a partnership with or to buy out the local manufacturer.

Management contracting Under management contracting, the domestic firm supplies management know-how to a foreign company that supplies the capital. The domestic firm exports management services rather than products. Hilton uses this arrangement in managing hotels around the world. Management contracting is a low-risk method of getting into a foreign market, and it yields income from the beginning. The arrangement is even more attractive if the contracting firm has an option to buy some share in the managed company later on. The arrangement not sensible, however, if the company can put its scarce management talent to better uses or it can make greater profits by undertaking the whole venture. Management contracting a prevents the company from setting up its own operations for a period of time

.

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Joint ownership Joint ownership ventures consist of one company joining forces with foreign investors to create a local business in which they the share joint ownership and control. A company may buy an interest in a local firm or the two parties may form a new business venture. Joint ownership may be needed for economic or political reasons. The firm may lack the financial, physical, or managerial resources to undertake the venture alone. Or a foreign government may require joint ownership as a condition for entry. KFC entered Japan through a joint ownership venture with Japanese conglomerate Mitsubishi. KFC sought a good way to enter the large but difficult Japanese fast-food market. In turn, Mitsubishi, one of Japan's largest poultry producers, understood the Japanese culture and had money to invest. Together, they helped KFC succeed in the semi closed Japanese market. Surprisingly, with Mitsubishi's guidance, KFC developed decidedly un-Japanese positioning for its Japanese restaurants Joint ownership has certain drawbacks. The partners may disagree over investment, marketing, or other policies. Whereas many U.S. firms like to reinvest earnings for growth, local firms often prefer to take out these earnings; and whereas U.S. firms emphasize

the

role

of

marketing,

local

investors

may

rely

on

selling.

Direct Investment The biggest involvement in a foreign market comes through direct investment—the development of foreign-based assembly or manufacturing facilities. If a company has gained experience in exporting and if the foreign market is large enough, foreign production facilities offer many advantages. The firm may have lower costs in the form of cheaper labor or raw materials, foreign government investment incentives, and freight savings. The firm may improve its image in the host country because it creates jobs. Generally, a firm develops a deeper relationship with government, customers, local suppliers, and distributors, allowing it to adapt its products to the local market better.

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Finally, the firm keeps full control over the investment and therefore can develop manufacturing and marketing policies that serve its long-term international objectives. The main disadvantage of direct investment is that the firm faces many risks, such as restricted or devalued currencies, falling markets, or government changes. In some cases, a firm has no choice but to accept these risks if it wants to operate in the host country.

Assembly Operations As Miracle and Albaum point out, a manufacturer who wants many of the advantages that are associated with overseas manufacturing facilities and yet does not want to go that far may find it desirable to establish overseas assembly facilities in selected markets. In a sense, the sence, of an assembly operation represents a cross between exporting and overseas manufacturing. Having assembly facilities in foreign markets is very ideal 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. It may be noted that a number of U.S. manufacturers ship the parts and components to the developing countries, get the product assembled there and bring it back home. The U.S. tariff law also encourages this. Thus, even products meant to be marketed domestically are assembled abroad. Assembling the product meant for the foreign market in the foreign market itself has certain other advantages, besides the cost advantage.The import duty is normally low on parts and components than on the finished product. Assembly operations would satisfy the 'local content' demand, at least to some extent. Because of the employment generation, the foreign government's attitude will be more favourable than towards the import of the finished product. Another advantage is that the investment to be made in the foreign country is very small comparison with that required for establishing complete manufacturing facilities. The political risks of foreign investment is, thus, not much.

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Third Country Location Third country location is sometimes used as an entry strategy. When there are no commercial transactions between two nations because of political reasons or when direct transactions between two nations are difficult due to political reasons or the like, a firm in one of these nation which wants to enter the other market will have to operate from a third country base. For example. Taiwanese entrepreneurs found it easy to enter People's Republic of China through bases in Hong Kong. Third country location may also be helpful to take advantage of the friendly trade relation between the third country and the foreign market concerned. Thus, for example, Rank Xerox found . it convenient to enter the erstwhile USSR through its Indian joint venture Modi Xerox There are several cases of countries not having direct commercial transactions. For example it was true of Israel and Arab Countries. In the past, government of India did not permit trade South Africa and Mauritius. Sometimes commercial reasons encourage third country location. For example, several Japanese companies established production facilities in developing countries to circumvent the non tariff barriers' (like quotas, voluntary export restraints and orderly marketing arrangement) tc countries like the United States and also to avail of the preferential treatment according developed countries to the imports from the developing countries. Further, third country location may be resorted to reduce cost of production and there by increase price competitiveness to facilitate market entry or for improving/maintaining the market position. The incentives offered by governments, particularly of the developing countries for-investment and exports encourage such third country location. The export procession- particularly attractive in this respect.

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Strategic Alliance Strategic alliance has been becoming more and more popular in international business. Also known by such names as entente and coalition, 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. "The goals are to leverage critical capabilities, increase the flow of innovation and increase flexibility in responding to market and technological changes. Strategic alliance is also sometimes used as a market entry strategy. For example, a firm may enter a foreign market by forming an alliance with a firm in the foreign market for marketing or distributing the former's products. A U.S. pharmaceutical firm may use the sales promotion and contribution infrastructure of a Japanese pharmaceutical firm to sell its products in Japan. In return, the Japanese firm can use the same strategy for the sale of its products in the U.S. market. Strategic alliance, more than an entry strategy, is a competitive strategy. There are different types of alliances according to purpose- or structure. Based on the description of the generic forms of coalitions by Michael Porter and Mark Fuller, Magsaysay classifies alliances according to purpose as follows." 1. Technology development alliances like research consortia, simultaneous engineering agreements, licensing or joint development agreements. 2

Marketing, sales and service alliances in which a company makes

marketing infrastructure etc., of another company, in the products. This may help easy penetration of the

use of the

foreign market, for its

foreign market and pre-emption of

potential competitors. 3.

Multiple activity alliance which involves the combining of two or more

types of alliances. While marketing alliances are often single country alliances, as international firms take on different allies in each country, technology

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development and operations alliances are usually multi-country since these kinds of activities can be employed over several countries. 4.

Multiple activity alliance involves the combining of two or more types of

alliances. While marketing alliances are often single country alliances, as international firms take on different marketingallies in each country, technology development and operations alliances are usually multi-country since these kinds of activities can be employed over several countries. Strategic alliances also differ according to how they are structured. They can be equity based joint ventures) or non-equity based. Non-equity based alliances such as technology transfer licensing agreements, marketing agreements etc., are proving to be more dynamic, more constructive and more strategic, according to Magsaysay. As indicated above, several areas of business - from R and D to distribution provide scope for alliance. Whether it is in R and D, manufacturing or marketing, an important objective of the collaboration is to maximize marginal contribution to fixed cost.

Counter trade Although the major reason for the substantial growth of counter trade is its use as a strategy to increase exports, particularly by the developing countries, countertrade has been successfully used by a number of companies as an entry strategy. For example, Pepsi Co gained entry to the USSR by employing this strategy. Countertrade is a form of international trade in which certain export and import transation are directly linked with each other and in which import of goods are paid for by export of instead of money payments. In the modern economies, most transactions involve monetary payments and receipt either immediate or deferred. As against this, "countertrade refers to a variety of unconventional international trade practices which link exchange of goods directly or indirectly - in an attempt to dispense with currency transactions 26

Forms of Counter trade Barter: Barter refers to direct exchange of goods of equal value, with no money and no third party involved in it. For example, a counter trade deal between the Minerals and Metals Trading Corporation of India (MMTC) and a Yugoslavian company involved import of 50000 tonnes of, rails of the value of about $ 38 million by the MMTC and the purchase by the Yugoslavian of iron ore concentrates and pellets of the same value. Buy Back: Under the buy back agreement, the supplier of plant, equipment or technology agrees to purchase goods manufactured with that equipment, or technology. Under the buy back scheme, the full payment may be made in kind or a part may be made in kind and the balance in cash. Thus, a Rs. 20 crore buy back agreement with the Soviet Union provided for the import of 200 sophisticated looms by the National Textiles Corporation. The buy back ratio was 75 percent Compensation Deal: Under this arrangement, the seller receives a part of the payment in cash and the rest in products. Counter purchase: Under the counter purchase agreement the seller receives the full payment in cash but agrees to spend an equivalent amount of money in that country within a specified period. A classic example of this kind of an agreement was Pepsi Cola's trade with the USSR.Pepsi Cola got paid in Rubles for the sale of its concentrates in the USSR but spent this amount for purchase of Russian products like Vodka and wine

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CHAPTER 4: BARRIERS IN GLOBAL BUSINESS A trade barrier is a general term that describes any government policy or regulation that restricts international trade. The barriers can take many forms, including the following terms that include many restrictions in international trade within multiple countries that import and export any items of trade. Most trade barriers work on the same principle: the imposition of some sort of cost on trade that raises the price of the traded products. If two or more nations repeatedly use trade barriers against each other, then a trade war results. Economists generally agree that trade barriers are detrimental and decrease overall economic efficiency, this can be explained by the theory of comparative advantage. In theory, free trade involves the removal of all such barriers, except perhaps those considered necessary for health or national security. In practice, however, even those countries promoting free trade heavily subsidize certain industries, such as agriculture and steel. types of trade barriers are given below..

1. Import quota- An import quota is a type of protectionist trade restriction that sets a physical limit on the quantity of a good that can be imported into a country in a given period of time. It is a limit on the amount of the good that can be imported.

[1]

For

example, a country might limit sugar imports to 50 tons per year. Quotas, like other trade restrictions, are used to benefit the producers of a good in a domestic economy at the expense of all consumers of the good in that economy. Critics say quotas often lead to corruption (bribes to get a quota allocation), smuggling (circumventing a quota), and higher prices for consumers. In economics, quotas are thought to be less economically efficient than tariffs which in turn are less economically efficient than free trade.

2. Subsides- In economics, a subsidy (also known as a subvention) is a form of financial assistance paid to a business or economic sector. A subsidy can be used to

28

support businesses that might otherwise fail, or to encourage activities that would otherwise not take place. Subsidies can be regarded as a form of protectionism or trade barrier by making domestic goods and services artificially competitive against imports. Subsidies may distort markets, and can impose large economic costs. Financial assistance in the form of a subsidy may come from one's government, but the term subsidy may also refer to assistance granted by others, such as individuals or non-governmental institutions, although these would be more commonly described as charity.

3. Export restriction-A "voluntary" export restraint (VER) or "voluntary" export restriction is a government imposed limit on the quantity of goods that can be exported out of a country during a specified period of time. Usually the importing country coerces the exporter into a "voluntary" restraint agreement, and the word voluntary is in quotes to indicate it's not truly voluntary. Typically VERs arise when the import-competing industries seek protection from a surge of imports from particular exporting countries. VERs are then offered by the exporter to appease the importing country and to deter the other party from imposing even more explicit (and less flexible) trade barriers. VERs are rarely completely voluntary. They represent a Beggar thy neighbour policy that seeks to shift economic activity (or preserve it) for the importing country, and has the effect of increasing costs for consumers there. Also, VERs are typically implemented on a bilateral basis, that is, on exports from one exporter to one importing country. VERs have been used since the 1930s at least, and have been applied to products ranging from textiles and footwear to steel, machine tools and automobiles. They became a popular form of protection during the 1980s, perhaps in part because they did not violate countries' agreements under the GATT. As a result of the Uruguay round of the General Agreement on Tariffs and Trade (GATT), completed in 1994, World Trade Organization (WTO) members agreed not to implement any new VERs and to phase out any existing VERs over a four year period. Exceptions can be granted for one sector in each importing country.

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4. Embargo- In international commerce and politics, an embargo is the prohibition of commerce (division of trade) and trade with a certain country, in order to isolate it and to put its government into a difficult internal situation, given that the effects of the embargo are often able to make its economy suffer from the initiative. The embargo is usually used as a political punishment for some previous disagreed policies or acts, but its economic nature frequently raises doubts about the real interests that the prohibition serves. For example Israeli and philistine war.

5. Import license- An import license is a document issued by a national government authorizing the importation of certain goods into its territory. Import licenses are considered to be non-tariff barriers to trade when used as a way to discriminate against another country's goods in order to protect a domestic industry from foreign competition

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Major international institution who are promoting the international trade by removing the trade barriers and to providing the financial help. These are given below

International level Institutions

WTO

IMF

World Bank

UNCETED

Regional blocks

1. WTO- the world trade organization is an international organization designed to supervise and liberalize international trade. The WTO came into being on 1 January 1995, and is the successor to the General Agreement on Tariffs and Trade (GATT), which was created in 1947, and continued to operate for almost five decades as a de facto international organization. The World Trade Organization deals with the rules of trade between nations at a nearglobal level; it is responsible for negotiating and implementing new trade agreements, and is in charge of policing member countries' adherence to all the WTO agreements, signed by the majority of the world's trading nations and ratified in their parliaments.[4][5] 31

Most of the issues that the WTO focuses on derive from previous trade negotiations, especially from the Uruguay Round. The organization is currently working with its members on a new trade negotiation called the Doha Development Agenda (Doha round), launched in 2001.[4][3] The WTO has 153 members, which represents more than 95% of total world trade. [6] The WTO is governed by a Ministerial Conference, which meets every two years; a General Council, which implements the conference's policy decisions and is responsible for dayto-day administration; and a director-general, who is appointed by the Ministerial Conference. The WTO's headquarters is in Geneva, Switzerland.

2. IMF- The International Monetary Fund (IMF) is an international organization that oversees the global financial system by following the macroeconomic policies of its member countries, in particular those with an impact on exchange rates and the balance of payments. It is an organization formed to stabilize international exchange rates and facilitate development.[2] It also offers financial and technical assistance to its members, making it an international lender of last resort. Its headquarters are located in Washington, D.C., USA.

3. World bank- The World Bank Group (WBG) is a family of five international organizations responsible for providing finance and advice to countries for the purposes of economic development and eliminating poverty. The Bank came into formal existence on 27 December 1945 following international ratification of the Bretton Woods agreements, which emerged from the United Nations Monetary and Financial Conference (1 July – 22 July 1944). It also provided the foundation of the Osiander-Committee in 1951, responsible for the preparation and evaluation of the World Development Report. Commencing operations on 25 June 1946, it approved its first loan on 9 May 1947 ($250M to France for postwar reconstruction, in real terms the largest loan issued by the Bank to date). Its five agencies are: •

International Bank for Reconstruction and Development (IBRD)

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•

International Development Association (IDA)

•

International Finance Corporation (IFC)

•

Multilateral Investment Guarantee Agency (MIGA)

•

International Centre for Settlement of Investment Disputes (ICSID)

4. Regional blocks- A trade bloc is a large free trade zone or near-free trade zone formed by one or more tax, tariff and trade agreements. Typically trade pacts that define such a bloc specify formal adjudication bodies, e.g. NAFTA trade panels. This may include even a parliament, as in the EU. George Orwell predicted that trade blocs would evolve into continent-spanning empires with ever-changing alliances. The eastward expansion of the EU and use of the Euro, southern expansion of NAFTA into the FTAA, and increasing co-operation in Asia would seem to validate this prediction. Particularly since the demise of most of the world's empires, a number of international— generally regionally based—economic blocs have been developed to promote trade between member states. Several blocs also have stated or implicit political goals—notably the EU. Varieties of economic blocs include free trade areas, customs unions, single markets, and economic and monetary unions.

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CHAPTER 5: Impact of Global Recession on Indian Market The recession in the US market and the global meltdown termed as Global recession have engulfed complete world economy with a varying degree of recessional impact. World over the impact has diversified and its impact can be observed from the very fact of falling Stock market, recession in jobs availability and companies following downsizing in the existing available staff and cutting down of the perks and salary corrections. Globally the financial sector sacking the existing base of employees in high numbers in US the major example being CITI Group same still followed by others in hospitality industry Jet and Kingfisher Airlines too. The cut in salary for the pilots being 90 % can any one imagine such a huge cut in salary. In the globalized market scenario, the impact of recession at one place/ industry/ sector percolate down to all the linked indusrty and this can be truly interpreted from the current market situation which is faced by the world since approx 2 month and still the situation is not in control in spite of various measures taken to fight back the recession in the market. The badly hit sector at present being the financial sector, and major issue being the "LIQUIDITY Crises" in the market. In-spite of the various measures to subsidize the impact of the recession and cut down the inflation present nothing really sound have been done. Various steps taken by RBI to curb the present recession in the economy and counter act the

prevailing

situation.

The sudden drying-up of capital inflows from the FDI which were invested in Indian stock markets for greater returns visualizing the Potential Higher Returns flying back is continuing to challenge liquidity management. At the heart of the current liquidity tightening is the balance of payments deficit, and this NRI deposit move should help in some small way.

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To curb the liquidity crises the RBI will continue to initiate liquidity measures as long as the current unusually tight domestic liquidity environment prevails. The current step to curb these being lowering of interest rates and reduction of PLR.However, the big-picture story remains unchanged – all countries in the world with current account deficits and strong credit cycles are finding it difficult to bring cost of capital down in the current environment. India is no different. New measures do not change our view on the growth outlook. Indeed, we remain concerned about the banking sector and financial sector. The BOP- Balance of Payment deficit – at a time when domestic credit demand is very high – is resulting in a vicious loop of reduced access to liquidity, slowing growth, and increased risk-aversion in the financial system. In total the recession have turned down the growth process and have set the minds of economists and others for finding out the real solution to sustain the economic growth and stability of the market which is desired for the smooth running of the economy. Complete business/ industry is in dolledrum situation and this situation persist for a longer duration will create the small business to vanish as they have lower stability and to run smoothly require continous flow of liquidity which is drived from the market. In present situation down fall in one sector one day leads to a negative impact on the other sector thus alltogether everyone feel the impact of the Financial crises with the result of the current recession which started in US and slowly and gradually due to linked global world have impacted everyone. Solution for the problem still remain at the top of the mind of every one, still everyone facing the impact of recession but how long is the major question which is of great importance .

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CHAPTER 6: CASE STUDY INFOSYS

ON

THE

CHANGING

"GLOBAL

BUSINESS

ENVIRONMENT" The company has no limit to growth opportunities it can pursue both in India and in the developing world, and even here in the U.S. But it also means the challenges for the company become more diverse and complex, from increasing headcount thousands of miles from home, to dealing with higher attrition rates in China, to calculating just how much growth can be achieved internally versus through buying businesses, to cultivating the next group of executives Here's his list of the most important transformational trends out there today: -The sensor Internet. He believes that sensors of all types will gradually become vital pieces of the Internet. "We'll move from an Internet of people to an Internet of appliances and people." -Social networking. "Thanks to social networking, power is shifting from organizations to individuals." The first major example of this phenomenon at work is the open source software movement. -The explosion of data. The data is there, but it's not being taken advantage of yet. "We leave a digital trail everywhere we go." -Mobile computing. "We got used to desktop computing, but the user interfaces of today don't really some natural to us. With mobile computing, we'll create more natural interfaces."

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Nandan Nilkeni , 5 Themes that dominate the new world: Future Customers - Rise of the Emerging market , China / India, Significant growth rates, implications on the global GDP and its reallocation over the next 30-40 years Global Age Arbitrage - Demographics driving the world , Next 20 years the young people are going to be in places like India, Countries that are aging need to tap countries with the younger workforce - Global Arbitrage of age, Outsourcing phenomenon will continue to raise, trend is expected to continue for many years to come. Moores law still goes strong - Nobody predicting the end of the compounding improvements of computing power of computers , faster forms of computing - silicon, molecular & atomic. Along with improvement in communication networks (Satellite to T1,T2, Broadband moving towards wireless and mobility). Leading to increase collaboration, virtual work rooms and a virtual work force. Increased Granularity of information - Realtime nature of information that clients are having is on the increase, the future competitive advantages for all customers are going to be coming from those who take advantage of this information and make money from the same.Looking at information systems as a source of profit.

Manage Global Regulations - Pressure on companies as they globalize in this environment is that they have to deal with the complexities of increasing global regulations. Sarbox, BaselI, BaselII , Anti Money laundering act etc etc.

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To Survive - Every company no matter what the value proposition , will have to become the most efficient low cost provider for products and services. To factor all these companies will have to undergo a lot of fundamental transformation. Winning in the turn - Companies that can take advantage of these shifts in the market place , companies which have information management to respond quickly to market changes, those that can respond to demand supply or strategic change in direction.

CONCLUSION This collection of international business blunders was not gathered with the intention of using it to poke fun at multinational companies or to make them appear inept. Rather, it was assembled to provide valuable, vicarious examples of business practices that should be avoided. The blunders others have experienced provide us with interesting lessons—ones surely preferable to learning through experience. In reality, companies are generally quite competent. Considering the many ways a firm can blunder, it must be doing most things correctly just to survive. This thought was best expressed by a senior executive from General Motors when he was asked to verify one of the problems reported in this book. He replied that although GM may have made a few errors overseas, when that very small number is compared with the many decisions made by GM, it is “a good batting average.” This is true. Most firms make few serious mistakes and even fewer avoidable blunders. If they did make many blunders, they simply would not be in business long. Although numerous errors have been committed, one must realize that the mistakes have been made by many different companies over a number of years. The fact that firms make these mistakes should not be all that surprising anyway. After all, it is not really a company that blunders, but its employees. Employees are only human, and we all make mistakes. Sometimes our errors are personal, but sometimes they are made on behalf of corporations. It should also be noted that the blunders reported may not be totally accurate. Although most of the anecdotes have been reported in the media and efforts were made to 38

verify them, verification has not been easy. Many corporations have been reluctant to respond to inquiries. Several firms have replied with a version of “we are sorry but we cannot provide you with the information about that possible event. The person who had been responsible for that area is no longer with the company.” These statements possibly bear an added message: if one wants to remain with a firm, avoid making blunders. Since firms do not appreciate appearing foolish, they sometimes deny a witnessed event. But as the public becomes more and more aware that all firms have made some mistakes, these denials become less necessary. There are cases, however, where reports of company blunders have proven to be false. The wrong companies have been identified or the entire story has been fictionalized. This author discovered an excellent example of a false report when trying to verify a story regarding Exxon’s ventures in Thailand. The report stated that Exxon’s ad “Put a tiger in your tank” failed in Thailand because the tiger does not represent power and strength there. However, a series of letters and investigations in both Asia and the United States revealed what had really happened. Overzealous competitors had deliberately planted the false story, hoping the U.S. media would pick it up. In fact, not only is the tiger a symbol of strength in Thailand, Exxon continued to use the ad effectively and was able to capture a large share of the local market .

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BIBLOGRAPHY

INTERNET SITEShttp://getinternationalclients.com/3-types-of-international-communication-forinternational-business-success-online/ http://www.cbronline.com/article_cbr.asp?guid=DE52BC45-02E2-42EA-9071757AE9C19557 http://en.wikipedia.org/wiki/International_Business http://scholar.google.co.in/scholar? q=ECONOMIC+ENVIRONMENT+OF+INTERNATIONAL+BUSINESS&hl=en&um= 1&ie=UTF-8&oi=scholart http://scholar.google.co.in/scholar? q=IMPACT+OF+RECESSION+ON+INTERNATIONAL+BUSINESS&hl=en&um=1&i e=UTF-8&oi=scholart

BOOKS 1. INTERNATIONAL BUSINESS, AUTHER “FARRCIS CHERRUNILUM

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