International Management Assignment.docx

COMPETETIVE ADVANTAGE OF NATION

A nation’s competitiveness depends on the capacity of its industry to innovate and upgrade. Companies gain advantage against the world’s best competitors because of pressure and challenge. They benefit from having strong domestic rivals, aggressive home-based suppliers, and demanding local customers. In a world of increasingly global competition, nations have become more, not less, important. As the basis of competition has shifted more and more to the creation and assimilation of knowledge, the role of the nation has grown. Competitive advantage is created and sustained through a highly localized process. Differences in national values, culture, economic structures, institutions, and histories all contribute to competitive success. There are striking differences in the patterns of competitiveness in every country; no nation can or will be competitive in every or even most industries. Ultimately, nations succeed in particular industries because their home environment is the most forward-looking, dynamic, and challenging. These conclusions, the product of a four-year study of the patterns of competitive success in ten leading trading nations, contradict the conventional wisdom that guides the thinking of many companies and national governments —and that is pervasive today in the United States. (For more about the study, see the insert “Patterns of National Competitive Success.”) According to prevailing thinking, labor costs, interest rates, exchange rates, and economies of scale are the most potent determinants of competitiveness. In companies, the words of the day are merger, alliance, strategic partnerships, collaboration, and supranational globalization. Managers are pressing for more government support for particular industries. Among governments, there is a growing tendency to experiment with various policies intended to promote national competitiveness—from efforts to manage exchange rates to new measures to manage trade to policies to relax antitrust—which usually end up only under mining it. (See the insert “What Is National Competitiveness?”) These approaches, now much in favor in both companies and governments, are flawed. They fundamentally misperceive the true sources of competitive advantage. Pursuing them, with all their short-term appeal, will virtually guarantee that the United States—or any other advanced nation—never achieves real and sustainable competitive advantage. We need a new perspective and new tools—an approach to competitiveness that grows directly out of an analysis of internationally successful industries, without regard for traditional ideology or current intellectual fashion. We need to know, very simply, what works and why. Then we need to apply it.

EXPORTING Exporting is defined as the sale of products and services in foreign countries that are sourced or made in the home country. Importing is the flipside of exporting. Importing refers to buying goods and services from foreign sources and bringing them back into the home country. Importing is also known as global sourcing. Exporting is an effective entry strategy for companies that are just beginning to enter a new foreign market. It’s a low-cost, low-risk option compared to the other strategies. These same reasons make exporting a good strategy for small and midsize companies that can’t or won’t make significant financial investment in the international market. Companies can sell into a foreign country either through a local distributor or through their own salespeople. Many government export-trade offices can help a company find a local distributor. Increasingly, the Internet has provided a more efficient way for foreign companies to find local distributors and enter into commercial transactions.

LICENSING Licensing is another way to enter a foreign market with a limited degree of risk. Under international Licensing, a firm in one country permits a firm in another country to use its intellectual property( Patents, trade marks etc). Licensing The major drawback of licensing is the problem of controlling the licensee due to the absence of direct commitment from the international firm granting the licence. After few years, once the knowhow is transferred, there is a risk that the foreign firm may begin to act on its own and the international firm may therefore lose that market. Advantages of Licensing A license allows the licensee to use, make and sell an idea, design, name or logo for a fee. They are advantageous for licensors because they allow them to expand their business’ reach without having to invest in new locations and distribution networks.

FRANCHISING Franchising is a business model in which many different owners share a single brand name. A parent company allows entrepreneurs to use the company's strategies and trademarks; in exchange, the franchisee pays an initial fee and royalties based on revenues. The parent company also provides the franchisee with support, including advertising and training, as part of the franchising agreement. Advantages of Franchising Owning a franchise allows an individual to be selfemployed while also investing in a proven system with training and support. It brings a ready-made customer base and often comes with client listings. There is a reduced risk of failure, on-going research and develop, and a semiMonopoly in a certain territory.

SIMILARITY BETWEEN LICENSING AND FRANCHISING

Licensing is similar to franchising except that the franchising organisation tends to be more directly involved in the development and control of the marketing programme. COUNTER TRADING Countertrade is a reciprocal form of international trade in which goods or services are exchanged for other goods or services rather than for hard currency. This type of international trade is more common in lesser-developed countries with limited foreign exchange or credit facilities. Countertrade can be classified into three broad categories: barter, counterpurchase, and offset. In any form, countertrade provides a mechanism for countries with limited access to liquid funds to exchange goods and services with other nations. Countertrade is part of an overall import and export strategy that ensures a country with limited domestic resources has access to needed items and raw materials. Additionally, it provides the exporting nation with an opportunity to offer goods and services in a larger international market, promoting growth within its industries. Barter Bartering is the oldest countertrade arrangement. It is the direct exchange of goods and services with an equivalent value but with no cash settlement.

COUNTER PURCHASING

Under a counterpurchase arrangement, the exporter sells goods or services to an importer and agrees to also purchase other goods from the importer within a specified period. Offset

In an offset arrangement, the seller assists in marketing products manufactured by the buying country or allows part of the exported product's assembly to be carried out by manufacturers in the buying country.

CONVERTIBILITY OF INDIAN RUPEE AND ITS APPLICATIONS

The RBI appointed in 1997 the Committee on Capital Account Convertibility with Mr. S. S. Tarapore as its Chairperson. The Tarapore Committee defined CAC as “the freedom to convert local financial assets into foreign financial assets and vice versa at market-determined rates of exchange.” CAC would permit anyone to move freely from local currency into foreign currency and back. Purpose: The basic purpose of CAC is to woo foreign investors by sharing an easy market to move in and move out and to send a strong message that Indian economy is strong and vibrant enough, and that India has sufficient forex reserves to meet any flight of capital from the country —whatever may be its extent. Applications of CAC: The potential applications from the scheme are: 1. Availability of large funds to supplement domestic resources and thereby promote faster economic growth. 2. Improved access to international financial markets and reduction of the cost of capital. 3. Incentive for Indians to acquire and hold international securities and assets. 4. Improvement (strengthening) of the financial system in the context of global competition.