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rd

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ASSIGNMENT BOOKLET
Identity No.

C13MB0480001

Learner Name

P.SANTOSH REDDY

Mobile No.

9490096475

Programme

MBA

Group

GENERAL (OPERATIONS MANAGEMENT)

Paper Name (Subject)

: 301-INTERNATIONAL BUSINESS ENVIRONMENT

Year/ Semester

: 1

Study Centre

Station

: Hyderabad

Date

: 14.05.14

st

2nd

3rd

4th

Jahnavi Degree and PG College, Narayanguda

P.SANTOSH REDDY
Learner Signature

ASSIGNMENT I
1) What is electronic commerce?

Answer:
Electronic commerce involves the activities of selling and buying, but it perform these
operations using any electronic medium like, TV, fax, radio or internet. Today internet
has captured all the e-trade demand with its comparatively greater features, so here
we will consider only internet as an e-commerce source.
There are two basic categories of e-commerce:
1.
2.

Business-to-Business (B2B)
Business-to-Consumer (B2C)

Business-to-Business (B2B):
E-commerce plays an important role in enhancing and transforming
relationships between and among businesses.
Some B2B applications are:

Supplier Management: Electronic applications in this area aid in expediting

business partnerships through the reduction of purchase order (PO) processing costs
and cycle times, and by maximizing the number of POs processed with fewer people.

Inventory Management: Electronic applications make the order-ship bill cycle

shorter. For instance, if most of a business's partners are linked electronically, any
information sent by mail can be transmitted instantly. Businesses can easily keep track
of their documents to make sure that they were received. Such a system improves
auditing capabilities, and helps reduce inventory levels, improve inventory turns, and
eliminate out-of-stock occurrences.

Distribution Management: Electronic-based applications make the transmission

of shipping documents a lot easier and faster. Shipping documents include bills of
lading, purchase orders, advance ship notices, and manifest claims. E-commerce
also enables more efficient resource management by certifying that documents
contain more accurate data.

Channel Management: E-commerce allows for speedier dissemination of

information regarding changes in operational conditions to trading partners.
Technical, product and pricing information can be posted with much ease on
electronic bulletin boards.

Payment Management: An electronic payment system allows for a more

efficient payment management system by minimizing clerical errors, increasing the
speed of computing invoices, and reducing transaction fees and costs.

Business-to-Consumer (B2C)

Business-to-Consumer e-commerce involves customers gathering information,

purchasing, and receiving products over an electronic network.

The consumer uses electronic commerce in the following economic

transactions:

Purchasing products and information: Electronic applications make it possible

for consumers to look up online information about existing and new products/services.

Personal finance management: In this field, electronic applications aid the

consumers in managing investments and personal finances through the use of online
banking tools. Chow.net is a good example of B2C electronic commerce application,
particularly of purchasing products online.
E-commerce benefits
Benefits to Organization

Expends the marketplace to national and international markets.

Decrease the cost of creating, processing, distributing, storing and retrieving paperbased information.
Allows reduced inventories and overhead by facilitating "pull" type supply chain
management.
The pull type processing allows for customization of products and services which
provides competitive advantages to its implementers.
Reduce the time between the outlay of capital and the receipt of products and
services.
Support Business Processes Reengineering (BPR) efforts.
Lowers telecommunication cost the internet is much cheaper than Value Added
Networks (VANs).

Benefits to Society

Enables more individual to work at home, and to do less traveling for shopping,
resulting in less traffic on the roads, and lower air pollution.
Allows some merchandise to be sold at lower prices benefiting the poor ones.
Enables people in Third World countries and rural areas to enjoy products and
services which otherwise are not available to them.
Facilities delivery of public services at reduced cost, increases effectiveness, and/or
improves quality.

Benefits to Consumer

Enables customers to shop or do other transactions 24 hours a day, all year round
from almost any location.
Provides customers with more choices.

Provides customers with less expensive products and services by allowing them to
shop in many places and conduct quick comparisons.
Allows quick delivery of products and services in some cases, especially with
digitized products.
Customers can receive relevant and detailed information in seconds; rather than in
days or weeks.
Makes it possible to participate in virtual auctions.
Allows customers to interact with other customers in electronic communities and
exchange ideas as well as compare experiences.
Electronic commerce facilitates competition, which results in substantial discounts.

Limitations of E-commerce
Technical Limitations

Lack of sufficient system's security, reliability, standards, and communication

protocols.
Insufficient telecommunication bandwidth.
The software development tools are still evolving and changing rapidly.
Difficulties in integrating the Internet and electronic commerce software with some
existing applications and databases.
The need for special Web servers and other infrastructures, in addition to the
network servers (additional cost).
Possible problems of interoperability, meaning that some E-commerce software
does not fit with some hardware, or is incompatible with some operating systems or
other components.
Non-Technical Limitations
Cost and justification (35% of the respondents)
The cost of developing an EC in house can be very high, and mistakes due to lack
of experience, may result in delays. There are many opportunities for outsourcing,
but where and how to do it is not a simple issue. Furthermore, to justify the system
one needs to deal with some intangible benefits which are difficult to quantify.
Security and Privacy (17% of the respondents)
These issues are especially important in the B2C area, and security concerns are not
truly so serious from a technical standpoint. Privacy measures are constantly
improving too. Yet, the customers perceive these issues as very important and
therefore the E-commerce industry has a very long and difficult task of convincing
customers that online transactions and privacy are, in fact, fairly secure.
Lack of trust and user resistance (4%)
Customers do not trust an unknown faceless seller, paperless transactions, and
electronic money. So switching from a physical to a virtual store may be difficult.
Other limiting factors
o Lack of touch and feel online.
o Many unresolved legal issues.

o
o
o
o
o

Rapidly evolving and changing E-commerce.

Lack of support services.
Insufficiently large enough number of sellers and buyers.
Breakdown of human relationships.
Expensive and/or inconvenient accessibility to the Internet.

===========================================================================

2) What do you mean by foreign direct investment?

Answer:
Foreign direct investment theories:
The international product lifecycle states, a company will begin by exporting its
product, and later undertake foreign direct investment as a product used its life cycle.
A product passes through three stages: new-product stage, maturing product stage,
and standardized product stage.
Market imperfections theory states when an imperfection in the market makes a
transaction less efficient than it could be, a company will undertake foreign direct
investment to internalize the transaction and thereby remove the imperfection.
The eclectic theory states firms undertake foreign direct investment. When the features
of a particular location, combined with ownership and internationalization
advantages to make a location appealing for investment. The market power theory
states that a firm tries to establish a dominant market presence in an industry by
undertaking foreign direct investment.
Foreign direct investment management issues:
Companies investing abroad are often concerned with controlling activities in the
local market. The local governments might require a company to hire local managers
were require that all goods produced locally be exported.
A key concern is whether to purchase an existing business or to build an international
subsidiary from the ground up. Acquisition generally provide an investor with of existing
plant and equipment and personnel. Factors reducing the appeal of purchasing of
existing facilities include obsolete equipment, poor relations with workers, and an
unsuitable location. Adequate facilities are sometimes simply unavailable in the
company must go ahead with a Greenfield investment.
Labor regulations can increase the hourly cost of production several times. An
approach companies may use to contain production costs is rationalize production
in which a products components are produced in the lowest-cost location.

A local market presence might help companies gained valuable knowledge about
the behavior of buyers that it could not obtain from the home market. Firms commonly
engage in foreign direct investment. When doing so puts them close to both client
firms and rival firms.
Government intervention in the free flow of foreign direct investment:
Both host and home countries interfere with the free flow of FDI for a variety of reasons.
One reason that governments of host countries intervene in foreign direct investment
flows is to protect their balance of payments. Allowing FDI to come in is a nation a
balance of payments boost. Countries also improve their balance of payments
position from the exports of local production operations created by FDI. But when
direct investors sent profits made locally back to the parent company and the home
country, the balance of payments decreases. Local investment in technology also
tends to increase the productivity and competitiveness of the nation. Encouraging FDI
also brings in people with management skills who cant train locals and improve the
competitiveness of local firms. Furthermore, many local jobs are also created as a
result of incoming FDI.
Home countries also intervene in FDI flows. For one thing, investing and other nations,
sends resources out of the home country lowering the balance of payments. Yet
profits on assets abroad that are returned home increases a home countrys balance
of payments. Also, outgoing FBI may ultimately damage a nations balance of
payments by taking the place of its exports. And jobs that result from outgoing
investments may replace jobs at home that were based on exports to the country.
Policy instruments that governments used to promote and restrict foreign direct
investments:
Host country governments can impose ownership restrictions that prohibit not
domestic companies from investing in businesses and cultural industries and that is vital
to national security. They can also create performance demand that influence how
international companies operate in the host nation.
They can also grant companies tax incentives such as lower tax rates or offer to waive
taxes on local profits for a period of time. A country may also offer low interest loans to
investors. Some governments prefer to lower investment by making local infrastructure
improvements that are seaport suitable for containerized shipping, improve roads,
and increased telecommunications systems.
To limit the effects of outbound FDI on the national economy, home governments may
impose differential tax rates that charge income from earnings abroad at a higher
rate than domestic on a. Or they cant impose outright sanctions that prohibit
domestic firms for making investments in certain nations. But to encourage outbound
FDI home country, governments can offer insurance to cover investment risks abroad.

They can also grant lends to firms that wish to increase their investments abroad. A
home country government may guarantee loans that a company takes from financial
institutions. They might also offer tax breaks on profits earned abroad or negotiate
special tax treaties. Finally, it may apply political pressure on other nations to get them
to relax restrictions on inbound investments.
===========================================================================

3) What are the instruments of trade policies? Explain

Answer:
Trade policy is set of rules and regulations applied to trade. Trade policy instruments
are as given below:
Tariffs
Subsidies
Import quotas
Voluntary export restraints
Others.
Tariffs and subsidies are the two most common instruments of trade policy. Tariffs are
broadly divided into specific and ad valorem tariffs, while subsidies could be provided
for imports of exports. In the context of the multilateral trade negotiations notions such
as applied tariffs, bound tariffs, tariff waters, tariff peaks, tariff escalations and so on
are important concepts. These concepts will be discussed during the face-to-face
phase of the course.
Tariff a levy on imports and exports.
Specific tariff: Fixed charge for each unit of goods imported (often based on
weight, number, length, volume or other unit of measurement). They are
often levied on foodstuffs and raw materials.E.g. $1 per kill of apple etc
Ad valorem tariff : It is a bit more complex due to the need to determine the
value of the import. Levy as percentage of value (instead of quantity, weight
etc.)
Tariffs are the oldest and easiest forms of trade policy. They have traditionally been
used as a source of government income. However, tariffs have often been imposed to
protect certain domestic industries from external competition. Nowadays, the
popularity of tariffs for trade protection has declined as governments revert to nontariff
barriers such as import quotas (restriction on quantity of imports), export restrains
(restriction on quantity of exports at the importing country's request) other restrictions
on the basis of technical and sanitary requirements. Recently, tariffs aimed at
protecting the environment and human and animal health becoming popular.

Effects:
Case 1: Effects in the tariff imposing country:
The main impact of a tariff is to raise the cost of importation. As such, a tariff has the
same effect as an increase in shipping cost. Its implication is to raise the price of
imported goods thereby reducing the demand for them.
Case 2: For the country whose exported goods face the tariff and that the tariff
imposing country accounts for a negligible share of total demand for the good:
In the case where the tariff imposing country (the home country) is too small to affect
the global demand for the good, the effect of tariffs is limited within the domestic
market. In this case, the tariff creates differences between the international price of
the good and the domestic price of the good. However, the tariff in this case will have
a negligible effect on the international prices of, and the global demand for, the
good hence the production, supply and global trade remains unaffected in any
significant way.
Case 3: For the country whose exported goods face the tariff and that the tariff
imposing country accounts for a significant share of total demand for the good:
Here, the tariff causes the domestic price of the good to increase. Since the tariff
imposing country is a significant player in the market for the good (accounting for a
significant share), hence the lower demand for the good in the importing country will
cause excess supply of the good at global level. This will lead to a decline in the export
price (the international price). The lower international prices discourage production by
the exporters in turn leading to a decline in global production of the good and the
volume traded.
Protection does a tariff offer : As said, one of the most important objectives of a tariff is
to protect domestic producers from external competition. But, how much protection
does a tariff provide to domestic producers? In analysing trade policy in practice
and/or even for imposing how high a tariff is needed to provide just enough
protection for domestic producers, it is important to know how much protection a tariff
actually provides. The amount of protection that a tariff provides is often measured by
a concept called effective rate of protection.
E.g., The effective rate of protection of the 20% tariff levied is 100%. In other words, the
effective impact of the tariff is to double the margin between the cost of the parts and
the final price of the auto. Prior to the levy of the tariff, domestic assemblers can
assemble cars profitably if and only if the cost of assembly does not exceed 2000.
Because, the parts of the car to be assembled will cost them 8,000 and the final price
of the cars is 10,000. If the cost of assembly exceeds 2,000 the assemblers will lose.
What the tariff achieved is to make it possible for assemblers to profitably operate
even at a cost of assembly as high as 4,000. Because, with the 20% tariff, the price of
cars is now increased to 12,000.

Costs and benefits of tariffs: The loss of efficiency for the economy refers to that part of
consumer welfare that does not get transferred to producers and/or governments. This
is a net loss for the economy. It is caused by distortion of incentives of both producers
(production distortion) and consumers (consumption distortion) that a tariff induces by
making them to act as if imports were more expensive than they actually are.
Subsidies
Import subsidies
Export subsidies
For exporters, export subsidies increase revenue because for each unit exported,
exporters receive total revenue comprised of the international price of the good and
the subsidy.

Export subsidy:
A payment for a firm or individual that exports goods abroad.
It can be fixed (fixed payment per unit) or ad valorem (proportional to
value of export).
Exports subsidies encourage exporters to export more. From the individual
exporters point of view, subsidies increase his/her export revenue.
o Well known examples: U.S. subsidy on cotton
o The European Common Agriculture Policy (CAP)
Benefits and costs of subsidy:
The effect of export subsidies on prices is exactly the reverse of that of tariffs. If the
exporting country is an influential player in the market of the good then export subsidy
will lead to a fall in the international price of the good. Because, the subsidy
encourages the influential country to export more hence pushing down the
international prices of the export good. So, for the exporter, the benefit of the subsidy
is positive as long as the decline in the international prices of the good is less than the
subsidy he/she receives.
Just like a tariff, subsidies distort production and consumption incentives. Because of
subsidies, exporters who might otherwise have not been able to compete in foreign
markets could become major exporters and in fact could even drive out of market
more efficient foreign producers. Hence, subsidies may allow less efficient producers
to thrive at the expense of more efficient producers (i.e. production distortion). There
is, thus, an efficiency loss. Subsidies also artificially lower the international price of a
good making the subsidized good less cheaper for consumers thereby inducing them
to buy more of the subsidized good than that supplied by more efficient foreign
producers (i.e. consumption distortion).In addition to the efficiency cost, an export
subsidy also leads to a terms of trade loss (i.e. a decline in export prices vis--vis
import prices).

Other instruments of trade policy:

Import Quotas
Restriction on quantity of imports
Often enforced through import license
Have the same effect as tariffs on domestic prices (hence production and
consumption distortions)
The implementation/enforcement of import quotas requires issuing import licenses to
some individuals or firms. Often, each individual or firm licensed to import the restricted
good will have a quota, i.e. a maximum unit (such as number, weight, etc) of the
good that can be imported per year. In some cases only government enterprises are
licensed to import the good.
Just like tariffs, import quotas limit quantity of imports hence push domestic prices
higher than would otherwise be the case. As a result, consumers pay higher price for
imports and demand less than would otherwise be the case (consumption distortion);
and local producers also benefit from the higher prices and produces more than
would be the case (production distortion). However, unlike in the case of imports,
government earns no revenue from import quotas. Instead, the money that would
have gone to governments in the form tariff revenue had tariffs instead of import
quotas were levied now goes to the firms and individuals who held the right to import
goods (i.e. the license holders). This profit is called quota rents.Both in the EU and the
US import quotas have been the main trade instruments for sugar aimed at keeping
domestic prices of sugar higher than international prices. The objective is to provide
protection to domestic sugar producers from cheaper imported sugars. Both in the US
and the EU, the right to sell sugars (the quotas) are allocated to foreign suppliers.
Hence, the quota rents accrue to foreign suppliers.
Case study: One of the oldest and most famous examples of trade protection was the
United Kingdoms Corn Law of 1815. The Corn Law, which was a total ban of
importation of grains to England, aimed at maintaining the French War era lucrative
monopoly that farmers and landlords in Britain enjoyed. Voluntary export restraints
(VER) are agreed between the importing and exporting countries. The importing
countries request (actually put pressure) for VER so as to reduce competition from
imports. The exporting countries often agree to restrict their own exports than risk
sustaining worse terms from tariffs and/or quotas. In terms of its effect, VER has the
same effect as that import quota with the import licenses assigned to foreign
governments. Under VER, the quota rents go to the foreign suppliers.
Examples include: Japans VER on its auto exports into the U.S. as a result of American
pressure in the 1980s. Another well-known VER was the Multi Fiber Arrangement (MFA)
which restricted exports of textile and clothing to developed countries from 22
developing countries. The arrangement expired in 2005. The specific fraction could be
stated in terms of physical units such as volumes etc. In other cases, it could be stated
in terms of value-added in that some minimum share of the final price of a good need
to represent domestic value-added. This policy was widely used in developing
countries in order to promote industrial manufacturing. The policy provides protection

to domestic parts producers by requiring suppliers to buy domestically certain amount

per unit of each product they sell.
The objective of export credit schemes in their many forms is to assist domestic
exporters by providing financing to foreign buyers. The risk on these credits, as well as
on guarantees and insurance, is borne by the sponsoring government. To minimize the
risk, governments put some form of restrictions on the amount of loans or subsidies
allowed; and by excluding loans to some countries where risk of default is perceived
to be high. Export credit schemes may give unfair trade advantages to domestic
exporters against suppliers of competitive goods from other countries. Because the
schemes capture buyers who would otherwise have preferred to buy the good from
other suppliers.
To understand the effect, imagine this scenario: You have a shoe shop where you
produce and sell a pair of shoe for $50. There is another shoe shop next to you which
produces and sell an identical pair of shoes for 60$. Both you and your neighbours
provide no loan and ask cash upfront for the sale of shoes. It is clear that you have a
competitive advantage over your neighbour and it is sensible to believe that buyers
prefer your shoes to your neighbours.
According to the World Trade Organization (WTO), government procurement is an
important aspect of international trade accounting for considerable size of the
procurement market (often 10-15 percent of GDP). By directing or restricting purchase
of goods towards domestically produced goods, governments in their procurement
decision can discriminate against imported goods.
National procurement
May also be called government procurement, public tendering, public
procurement etc
Purchases by government or regulated firms directed towards domestically
produced goods and services.
Bureaucratic barriers
Creating bureaucratic delays in customs clearance and other forms of
administration barrier in order to discourage imports;
Twisting laws, regulations and requirements in order to affect the internal
sale, purchase, transportation and distribution of foreign goods.
===========================================================================

4) What are the strategies of globalization? Discuss

Answer:
Globalization means integrating the Indian economy with the world economy. In the
process India becomes economically interdependent with other countries at the
global or international level. It seeks removal of trade barriers. There are various
features of globalization they are:
Many producers from other countries can sell their goods and services in India.

India can also sell its goods and services in other countries.
Businessmen of other countries can establish their enterprises in India, produce
goods for sale within the country or to other countries as export.
In the same way entrepreneurs from India can also invest in other countries.
Globalization includes not only movement of capital and goods but also allows
exchange of technology experience and labourers from one country to other
and
In pursuance of this policy government of India has removed restrictions on
imports of goods, reduced taxes.

Globalization has helped in:

o Raising living standards,
o Alleviating poverty,
o Assuring food security,
o Generating buoyant market for expansion of industry and services, and
o Making substantial contribution to the national economic growth.
Impact of Globalization on Industrial Sector: Globalization of the Indian Industry
took place in its various sectors such as steel, pharmaceutical, petroleum,
chemical, textile, cement, retail, and BPO
Impact on Financial Sector: Because of Globalization, the financial services
industry is in a period of transition. Market shifts, competition, and technological
developments are ushering in unprecedented changes in the global financial
services industry.
The Indian globalization: Doing or planning to expand, business globally Interlinking
production across countries: Almost all MNCs set up production where it is close to the
markets; where there is skilled and unskilled labour available at low costs; and where
the availability of other factors of production is assured. At times, MNCs set up
production jointly with some of the local companies of these countries. MNCs provide
money for additional investments like buying new machines for faster production and
they might bring with them the latest technology for production. As a result,
production in these widely dispersed locations is getting interlinked. GLOBALISATION
PICTURE IN INDIA? Mushrooming of industries like cell phones, automobiles electronics,
soft drinks, fast food or services, via MNCs have created new avenues. globalization
has enabled some large Indian companies to emerge as multinationals themselves,
Tata-Motors (automobiles), Infosys (IT), Ranbaxy(Medicines), Asian Paints (Paints).?
Globalization and the pressure have also posed a threat to the workers jobs, as they
are not secure any more. Workers are low and workers are forced to work overtime to
make both ends meet. The workers are sometimes denied their fair share of benefits
which is brought about by globalization.
Impact on Export and Import:
Cereals (mostly basmati rice and non-basmati rice), oil seeds, tea and coffee are the
other prominent products each of which accounts from nearly 5 to 10% of the
countrys total agricultural exports.

There is an International market for companies and for consumers there is awider
range of products to choose from.
Increase in flow of investments from developed countries to developingcountries,
which can be used for economic reconstruction.
Greater and faster flow of information between countries and greater
culturalinteraction has helped to overcome cultural barriers.
Technological development has resulted in reverse brain drain in developing
Countries.
Demerits of Globalization (Challenges):
The outsourcing of jobs to developing countries has resulted in loss of jobs
indeveloped countries.
There is a greater threat of spread of communicable diseases.
There is an underlying threat of multinational corporations with immense
powerruling the globe.
For smaller developing nations at the receiving end, it could indirectly lead to
asubtle form of colonization.
o The number of rural landless families increased from 35 %in 1987 to 45 % in
1999,further to 55% in 2005. The farmers are destined to die of starvation or
suicide.
Conditions for globalization
Business freedom: unnecessary restrictions like import, foreigninvestments
Facilities: infrastructure facilities,
Government support: financial market reforms, R&D support
Resources: technology, finance, man power, skilled managers, HR
Competitiveness: orientation
FOREIGN MARKET ENTRY STRATEGIES:
EXPORTING: A function of international trade whereby goods produced in one
country areshipped to another country for future sale or trade. The sale of such
goods addsto the producing nations gross output. If used for trade, exports are
exchangedfor other products or services. Exports are one of the oldest forms of
economictransfer, and occur on a large scale between nations that have less
restrictionson trade, such as tariffs or subsidies.
LICENSING/FRANCHISING Definition of Franchising: Franchising may be defined
as a businessarrangement which allows for the reputation, (goodwill) innovation,
technical know-how and expertise of the innovator (franchisor) to be combined
with theenergy, industry and investment of another party (franchisee) to
conduct thebusiness of providing and selling of goods and services. Franchising
is a system of business that has grown steadily in the last 50 yearsand is
estimated to account for more than one-third of the worlds retail sales?
Successful franchises are the result of innovation, initiative, investment
andindustry.
The license allows the licensee to use make and sell, the product or name for
afee without censure.

In a Trade Mark license, for example, the licensee will be granted full privilege
touse the Trade Mark on goods or services provided that the use is in
accordancewith agreed signage protocols and quality guidelines

Typical Franchise System:

A license to use the system

A shared development and improvement obligation
The franchisors right to determine how the business operatesLICENSING:
A license arrangement is a business arrangement where a licensor via
amonopoly right such as a Patent, a Trade Mark, a design or a copyright has
toexclusive right which prevents others from exploiting the idea, design, name
orlogo commercially.
The license allows the licensee to use make and sell, the product or name for
afee without censure.
In a Trade Mark license, for example, the licensee will be granted full privilege
touse the Trade Mark on goods or services provided that the use is in
accordancewith agreed signage protocols and quality guidelines.
There is usually no training component, product development strategy
andlimited marketing support.
The following is a list of some of the things that should be considered:
Is the license exclusive, i.e. granted to only one person, or non-exclusive
Can the licensee sub-license
Are there any limitations to the license e.g., geographic or territorial
, Minimumsales, minimum production requirement etc.
What is the amount, frequency, and form of payment, e.g. either lump sum or
byway of royalty, or both, or other payment schedule
Who pays for prosecution and maintenance of any IP (patents, trademarks,
designs)
How are any developments, modifications or improvements to be protected
and who owns them?
Does the license contain a clause which allows for the license to be cancelled
ifthe IP is not being used?
What is the term of license?
Is there a right to renew?
What are the conditions of termination?
When are royalty or other payments due?
If sub-licensing is permitted what payment does the licensor receive?
What information is the licensee committed to providing to the licensor?
What happens if the IP under which the license is granted is refused, infringed,
opposed, revoked or other? Is copyright a consideration?
Does the licensee agree not to challenge the validity of the patent?
Does the licensor agree to provide essential know-how?
What provisions for any hardware, should the license be terminated?
How will any disputes be resolved?

What happens in the event of death of one of the parties? In whose name will
the applications be made in?

MANAGEMENT CONTRACT: The management contract is a business format

whichseparates ownership from operation. The operator assumes full responsibility for
themanagement of the business, while the ultimate legal and financial
responsibilitiesand rights of ownership of the property, its furniture and equipment, its
workingcapital and the benefits of its profits (or burden of its losses) remain those of
theowner. The owner may be a private individual, a financial institution, a real
estatecompany or a government. The operator is most likely to be an established hotel
chainoffering marketing strength, brand names, bargaining power, systems and
procedures, project design and management, technical services, training and
management development.
CONTRACT MANUFACTURING: Contract manufacturing is a process that establishes
aworking agreement between two companies. As part of the agreement,
onecompany custom produces parts or other materials on behalf of their client. In
mostcases, the manufacturer also handles the ordering and shipment processes for
theclient. As a result, the client does not have to maintain manufacturing facilities,
purchase raw materials, or hire labour in order to produce the finished goods.
Industries like personal care andhygiene products, automotive parts, and medical
supplies are often created under theterms of a contract manufacture agreement.
TURNKEY CONTRACTS: A turnkey contract is a business arrangement in which aproject
is delivered in a completed state. The builder or developer is separate fromthe final
owner or operator, and the project is turned over only once it is fullyoperational. In
effect, the developer is finishing the project and turning the key over to the new
owner. Thistype of arrangement is commonly used for construction projects ranging
from singlebuildings to large-scale developments, residential home building industry.
Under atraditional lump-sum contract
ASSEMBLY OPERATIONS: A market entry strategy in which an organization sends
partsfor products to a foreign plant for final assembly. The products are then sold in the
foreignmarket or exported to other countries. Assembly plants may allow a company
to takeadvantage of low cost labour in the most labour intensive portion of
production. Theremay also be lower duties and other taxes because unfinished
products are importedinstead of finished products. Assembly plants also allow a
foreign manufacturer to meethost country requests for more domestic production
while at the same time allowing themanufacturer to continue control over production
by using its own sub-products assupplies and materials for the foreign assembly plant.
STARTEGIC ALLIANCES: An arrangement between two companies that have decided
toshare resources to undertake a specific, mutually beneficial project. A strategic
alliance isless involved and less permanent than a joint venture, in which two
companies typicallypool resources to create a separate business entity. In a strategic

alliance, each companymaintains its autonomy while gaining a new opportunity. A

strategic alliance could help acompany develop a more effective process, expand
into a new market or develop anadvantage over a competitor, among other
possibilities.an oil and Natural Gas Company might form a strategic alliance with a
researchlaboratory to develop more commercially viable recovery processes. A
clothing retailer mightform a strategic alliance with a single clothing manufacturer to
ensure consistent quality andsizing. A major website could form a strategic alliance
with an analytics company to improveits marketing efforts.
WHOLLY OWNED MANUFACTURING FACILTIES: A company whose commonstock is
100% owned by another company, called the parent company. A companycan
become a wholly owned subsidiary through acquisition by the parentcompany or spin
off from the parent company. In contrast, a regular subsidiary is 51 to 99% owned by
the parent company. One situation in which a parentcompany might find it helpful to
establish a subsidiary company is if it wants tooperate in a foreign market. This
arrangement is common among high-techcompanies who want to retain complete
control and ownership of theirtechnology.
JOINT VENTURING: Joint ventures are set up for a number of reasons, includingcarrying
out a specific project or simply assisting with the growth andcontinuation of a business.
The parties to a joint venture can be individuals, partnerships, companies, or other
organizations or associations. In certain cases, the joint venture can be created
through the incorporation of a company thatbecomes a party to the joint venture
agreement. The joint venture will take effect on the day the parties sign the
agreement. The parties should be as specific as possible in outlining the partys
relationship and commitments to the joint venture. Tata Global Beverages and
Starbucks Form Joint Venture to Open StarbucksCafs across India, TATA Starbucks
Limited, will own and operate Starbucks cafswhich will be branded as Starbucks
Coffee A Tata Alliance. The services of a management contractor might include:
Advising on the development of the brief (if appointed at this stage),on appointments
(such as site inspectors), feasibility, interfaces, build ability, cost andprogramming of
the design, packaging of production information
Defining key performance indicators for works contractors
Cost planning and cost control.
Preparing a construction programme and defining methods of working on site.
Consenting to sub-contracting of work by works contractors
Arranging for site accommodation, welfare facilities, fences, hoardings, roads
andwalkways, drainage, power and water supply
Arranging labour for certain site activities (such as cleaning)
Managing site inspectors
Co-ordinating the release of information.
Managing and co-ordinating works contracts, including acting as contracted
ministration, carrying out inspections, issuing instructions and certificates etc.
Collating as-built information, building owners manual, building usershandbook,
project handbook, health and safety file, pre-constructioninformation, site waste

management plan and construction phase plan Chairing site progress meetings and
preparing progress reports for the client
COUNTERTRADE: International trade in which goods are exchanged for othergoods,
rather than for hard currency. Countertrade can be classified into threebroad
categories
Barter: Barter is the direct exchange of goods between two parties in a transaction
Counter purchase: Sale of goods and services to one company in other country bya
company that promises to make a future purchase of a specific product fromthe
same company in that country.
Buy back: occurs when a firm builds a plant in a country - or supplies technology,
equipment, training, or other services to the country and agrees to take a certain
percentage of the plants output as partial payment for the contract.
Compensation deal: Compensation trade is a form of barter in which one of the flows
is partly in goods and partly in hard currency.
MERGERS AND ACQUISITIONS: A merger is a combination of two companies to form a
new company, while an acquisition is the purchase of one company byanother in
which no new company is formed.
==========================================================================

5) What is legal environment?

Answer:
The economic environment includes the structure of the economy; the industrial,
agricultural, tariff, pricing, and other trade policies of the Government of the country;
the growth and pattern of national income and its distribution; the conditions
prevailing in the agricultural, industrial and service sectors; the position of the balance
of trade and the balance of payments; and a host of other conditions of the
economy. The legal environment refers to a large number of laws anbu-laws, rules and
regulations passed by the Government from time to time to regulate and control the
business in the country.
The success of the business enterprise will greatly depend upon the condition of
economy's growth. The Indian economy comprises three major sectors, viz., public,
private and joint sector. The business in general and the private sector business in
p[articular is functioning under increasing control and regulation by the Government.
The modern business has to operate in an economy which is highly controlled and
regulated by the Government. Gone are the days of laissez-faire economy when the
economic activity was allowed freely without any interference of the State. After the
outbreak of the First World War, various political scientists and economists have

attacked the concept of laissez-faire because of its anti-social an exploitative nature

and consequences. The Government does play a significant role in shaping the
character of the economy-even in a capitalist economy.
In totalitarian countries, however, the State has gone to the extreme extent of taking
over complete control of economic interests. The communist nations of the world led
by Soviet Russia have adopted the communist pattern of economy under which the
ownership and control of productive resources has been socialized and placed in the
hands of the State. Economic activity has been completely regimented there in the
sense that neither production nor consumption goes according to individual decisions
by producers and consumers, but is determined by the State. Private enterprise has
been totally abolished and the whole economy constitutes the public sector.
In a mixed economy where the private enterprise co-exists with State enterprise, the
State plays a dual role in relation to private business. On the one hand, it acts as an
instrument to aid and benefit industry with the object of inducing the accelerating the
growth of the economy. In this role, the State provides finance and facilities to
industrial entrepreneurs and tires to look after and further their interests through policies
like protection and export promotion. Some aspects of this have already been
examined in the section on Company Finance. In the second role, the State acts as a
restraining force on business curbing the anti-social aspects of business, laying down
the side-rails within which private business must function and pulling up private
enterprise (in fact, sometimes even superseding and taking over control of an
individual enterprise or a whole industry).
The object of the Government regulation and control of business especially the private
enterprise is to steer the wheel of the economy in the direction of maximum social
good, without replacing the present economic set-up. This can be achieved through
regulatory action at all important points in the economic system.

ASSIGNMENT II
6) Discuss the factors affecting the international business environment

Answer:
International business comprises all commercial transactions (private and
governmental, sales, investments, logistics, and transportation) that take place
between two or more regions, countries and nations beyond their political boundaries.
Usually, private companies undertake such transactions for profit; governments
undertake them for profit and for political reasons It refers to all those business activities
which involve cross border transactions of goods, services, resources between two or
more nations. Transaction of economic resources include capital, skills, people etc. for
international production of physical goods and services such as finance, banking,
insurance, construction etc.[2]
A multinational enterprise (MNE) is a company that has a worldwide approach to
markets and production or one with operations in more than a country. An MNE is
often called multinational corporation (MNC) or transnational company (TNC). Well
known MNCs include fast food companies such as McDonald's and Yum Brands,
vehicle manufacturers such as General Motors, Ford Motor Company and Toyota,
consumer electronics companies like Samsung, LG and Sony, and energy companies
such as ExxonMobil, Shell and BP. Most of the largest corporations operate in multiple
national markets.
Areas of study within this topic include differences in legal systems, political systems,
economic policy, language, accounting standards, labor standards, living standards,
environmental standards, local culture, corporate culture, foreign exchange market,
tariffs, import and export regulations, trade agreements, climate, education and many
more topics. Each of these factors requires significant changes in how individual
business units operate from one country to the next.
Physical and societal factors of competitive Business social environment:
The conduct of international operations depends on companies' objectives and the
means with which they carry them out. The operations affect and are affected by the
physical and societal factors and the competitive environment.
Operations of business
Objectives: sales expansion, resource acquisition, risk minimization, Diversify their
revenue stream
Means of businesses
Modes: importing and exporting, tourism and transportation, licensing and
franchising, turnkey operations, management contracts, direct investment and
portfolio investments.

Functions: marketing, global manufacturing and supply chain management,

accounting, finance, human resources

Overlaying alternatives:
mechanisms

choice

of

countries,

organization

and

control

Physical and societal factors of business :

Political policies and legal practices
Policy is a statement of intent, and is implemented as a procedure or protocol. Policies
are generally adopted by the Board of or senior governance body within an
organization whereas procedures or protocols would be developed and adopted by
senior executive officers. Policies can assist in both subjective and objective decision
making. Policies to assist in subjective decision making would usually assist senior
management with decisions that must consider the relative merits of a number of
factors before making decisions and as a result are often hard to objectively test e.g.
work-life balance policy. In contrast policies to assist in objective decision making are
usually operational in nature and can be objectively tested e.g. password policy.
The term may apply to government, private sector organizations and groups, and
individuals. Presidential executive orders, corporate privacy policies, and
parliamentary rules of order are all examples of policy. Policy differs from rules or law.
While law can compel or prohibit behaviors (e.g. a law requiring the payment of taxes
on income), policy merely guides actions toward those that are most likely to achieve
a desired outcome.
Policy or policy study may also refer to the process of making important organizational
decisions, including the identification of different alternatives such as programs or
spending priorities, and choosing among them on the basis of the impact they will
have. Policies can be understood as political, management, financial, and
administrative mechanisms arranged to reach explicit goals. In public corporate
finance, a critical accounting policy is a policy for a firm/company or an industry
which is considered to have a notably high subjective element, and that has a
material impact on the financial statements
Cultural factors
In the 20th century, "culture" emerged as a central concept in anthropology,
encompassing the range of human phenomena that cannot be directly attributed to
genetic inheritance. Specifically, the term "culture" in American anthropology had two
meanings:
1. The evolved human capacity to classify and represent experiences with symbols,
and to act imaginatively and creatively; and
2. The distinct ways that people, who live differently, classified and represented their
experiences, and acted creatively.Hoebel describes culture as an integrated system
of learned behavior patterns which are characteristic of the members of a society and

which are not a result of biological inheritance.Distinctions are currently made

between the physical artifacts created by a society, its so-called material culture, and
everything else, the intangibles such as language, customs, etc. that are the main
referent of the term "culture".
Economic forces:
These factors determine an enterprises volume of demand for its product and affect
its marketing strategies and activities. The economic system is made up of three main
steps. The first one being production and then there is distribution of the produced
goods and then the last step is consumption of the same. Now all this is possible
because of two factors- Human resource and Natural resource. Natural resources
include the raw material which is generally used in the production process, and
human resources help to convert the raw materials to finished products which are
then ready for distribution.
Competitive factors of business :

Major advantage in price, marketing, innovation or other factors.

Number and comparative capabilities of competitors
Competitive differences by country
Local taxes

Risk of business
Strategic risk
Operational risk
Political risk
Technological Risk
Environmental Risk
Economic Risk
Financial risk
Terrorism Risk
Planning risk
Factors that influenced the growth in globalization of international business
There has been growth in globalization in recent decades due to (at least) the
following eight factors:

Technology is expanding, especially in transportation and communications.

Governments are removing international business restrictions.
Institutions provide services to ease the conduct of international business.
Consumers know about and want foreign goods and services.
Competition has become more global.
Political relationships have improved among some major economic powers.
Countries cooperate more on transnational issues.
Cross-national cooperation and agreements.

Importance of International Business Education

Most companies are either international or compete with international
companies.
Modes of operation may differ from those used domestically.
The best way of conducting business may differ by country.
An understanding helps you make better career decisions.
An understanding helps you decide what governmental policies to support.
Managers in international business must understand social science disciplines
and how they affect all functional business fields.
Importance of studying International Business
The International Business standards focus on the following:

Raising awareness of the interrelatedness of one country's political policies and

economic practices on another;
Learning to improve international business relations through appropriate
communication strategies;
Understanding the global business environmentthat is, the interconnectedness of cultural, political, legal, economic, and ethical systems;
Exploring basic concepts underlying international finance, management,
marketing, and trade relations; and identifying forms of business ownership and
international business opportunities.
These are tools that would help future business people bridge the economic
and political gap between countries.

===========================================================================

7) How does FII force affect capital market of a nation? Illustrate with an
example

Answer:
FOREIGN INSTITUTIONAL INVESTOR: The term Foreign Institutional Investor is defined by
SEBI as under:"Means an institution established or incorporated outside India which
proposes to make investment in India in securities. Provided that a domestic asset
management company or domestic portfolio manager who manages funds raised or
collected or brought from outside India for investment in India on behalf of a subaccount, shall be deemed to be a Foreign Institutional Investor." Foreign Investment
refers to investments made by residents of a country in financial assets and production
process of another country.
Entities covered by the term FII include Overseas pension funds, mutual funds,
investment trust, asset management company, nominee company, bank, institutional
portfolio manager, university funds, endowments, foundations, charitable trusts,

charitable societies etc.(fund having more than 20 investors with no single investor
holding more than 10 per cent of the shares or units of the fund) (GOI (2005)).
FIIs can invest their own funds as well as invest on behalf of their overseas clients
registered as such with SEBI. These client accounts that the FII manages are known as
sub-accounts. The term is used most commonly in India to refer to outside companies
investing in the financial markets of India. International institutional investors must
register with Securities & Exchange Board of India (SEBI) to participate in the market.
One of the major market regulations pertaining to FII involves placing limits on FII
ownership in Indian companies. They actually evaluate the shares and deposits in a
portfolio.
FII is required for following reasons:
FIIs contribute to the foreign exchange inflow as the funds from multilateral finance
institutions and FDI (Foreign direct investment) are insufficient. Following are the some
advantages of FIIs.
It lowers cost of capital, access to cheap global credit.
It supplements domestic savings and investments.
It leads to higher asset prices in the Indian market.
And has also led to considerable amount of reforms in capital market and
financial sector.
INFLUENCE OF FII ON INDIAN MARKET
Positive fundamentals combined with fast growing markets have made India an
attractive destination for foreign institutional investors (FIIs). Portfolio investments
brought in by FIIs have been the most dynamic source of capital to emerging markets
in 1990s. At the same time there is unease over the volatility in foreign institutional
investment flows and its impact on the stock market and the Indian economy.
Apart from the impact they create on the market, their holdings will influence firm
performance. For instance, when foreign institutional investors reduced their holdings
in Dr.Reddys Lab by 7% to less than 18%, the company dropped from a high of
around US$30 to the current level of below US$15. This 50% drop is apparently because
of concerns about shrinking profit margins and financial performance. These instances
made analysts to generally claim that foreign portfolio investment has a short term
investment horizon. Growth is the only inclination for their investment.
Some major impact of FII on stock market:
They increased depth and breadth of the market.
They played major role in expanding securities business.
Their policy on focusing on fundamentals of share had caused efficient pricing of
share.
These impacts made the Indian stock market more attractive to FII & also domestic
investors. The impact of FII is so high that whenever FII tend to withdraw the money
from market, the domestic investors fearful and they also withdraw from market.

Effects on Indian Economy:

POSITIVE IMPACT: It has been emphasized upon the fact that the stock market reforms
like improved market transparency, automation, dematerialization and regulations on
reporting and disclosure standards were initiated because of the presence of the FIIs.
But FII flows can be considered both as the cause and the effect of the stock market
reforms. The market reforms were initiated because of the presence of them and this in
turn has led to increased flows.
ENHANCED FLLOWS OF EEQUITY CAAPITAL: FFIIs are well known for aa greater appetite
for equity than debt in their asset structure. For example, pension funds in the United
Kingdom and United States had 68 per cent and 64 per cent, respectively, off their
portfolios in equity in 1998. Not only it can help in supplementing the domestic savings
for the purpose of development projects like building economic and social
infrastructure but can also help in growth of rate of investment, it boosts the
production, employment and income of the host country.
MANAGING UNCERTAINNTY AND CONTROLLLING RISKS: FIIs promote financial
innovation and development of hedging instruments. These because of their interest in
hedging risks, are known to have contributed to the development of zero-coupon
bonds and index futures.
FIIs not only enhance competition in financial markets, but also improve the alignment
of asset prices to fundamentals. FIIs in particular are known to have good information
and low transaction costs. By aligning asset prices closer to fundamentals, they
stabilize markets. In addition, a variety of FIIs with a variety of risk-return preferences
also help in dampening volatility.
IMPROVING CAPITAL MARKETS: FIIs as professional bodies of asset managers and
financial analysts enhance competition and efficiency of financial markets. By
increasing the availability of riskier long term capital for projects, and increasing firms
incentives to supply more information about them, the FIIs can help in the process of
economic development.
IMPROVED CORPORATE GOVERNANCE: Good corporate governance is essential to
overcome the principal-agent problem between share-holders and management.
Information asymmetries and incomplete contracts between share-holders and
management are at the root of the agency costs. Bad corporate governance makes
equity finance a costly option. With boards often captured by managers or passive,
ensuring the rights of shareholders is a problem that needs to be addressed efficiently
in any economy. Incentives for shareholders to monitor firms and enforce their legal
rights are limited and individuals with small share-holdings often do not address the
issue since others can free-ride on their endeavor. FIIs constitute professional bodies of
asset managers and financial analysts, who, by contributing to better understanding
of firms operations, improve corporate governance. Among the four models of
corporate control - takeover or market control via equity, leveraged control or market

control via debt, direct control via equity, and direct control via debt or relationship
banking-the third model, which is known as corporate governance movement, has
institutional investors at its core. In this third model, board representation is
supplemented by direct contacts by institutional investors.
NEGATIVE IMPACT: If we see the market trends of past few recent years it is quite
evident that Indian equity markets have become slaves of FIIs inflow and are dancing
to their tune. And this dependence has to a great extent caused a lot of trouble for
the Indian economy. Some of the factors are:
POTENTIAL CAPITAL OUTFLOWS: Hot money refers to funds that are controlled by
investors who actively seek short-term returns. These investors scan the market for shortterm, high interest rate investment opportunities. Hot money can have economic
and financial repercussions on countries and banks. When money is injected into a
country, the exchange rate for the country gaining the money strengthens, while the
exchange rate for the country losing the money weakens. If money is withdrawn on
short notice, the banking institution will experience a shortage of funds.
INFLATION: Huge amounts of FII fund inflow into the country creates a lot of demand
for rupee, and the RBI pumps the amount of Rupee in the market as a result of
demand created. This situation leads to excess liquidity thereby leading to inflation
where too much money chases too few goods.
PROBLEM TO SMALL INVESTORS: The FIIs profit from investing in emerging financial stock
markets. If the cap on FII is high then they can bring in huge amounts of funds in the
countrys stock markets and thus have great influence on the way the stock markets
behaves, going up or down. The FII buying pushes the stocks up and their selling shows
the stock market the downward path. This creates problems for the small retail
investor, whose fortunes get driven by the actions of the large FIIs.
ADVERSE IMPACT ON EXPORTS: FII flows leading to appreciation of the currency may
lead to the exports industry becoming uncompetitive due to the appreciation of the
rupee.
===========================================================================

8: Write note on the mechanism for settlements of international trade

disputes.

Answer:
The Dispute Settlement Understanding (DSU), formally known as the Understanding on
Rules and Procedures Governing the Settlement of Disputes, establishes rules and
procedures that manage various disputes arising under the Covered Agreements of

the Final Act of the Uruguay Round. All WTO member nation-states are subject to it
and are the only legal entities that may bring and file cases to the WTO.
The DSU created the Dispute Settlement Body (DSB), consisting of all WTO members,
which administers dispute settlement procedures.It provides strict time frames for the
dispute settlement process and establishes an appeals system to standardize the
interpretation of specific clauses of the agreements.It also provides for the automatic
establishment of a panel and automatic adoption of a panel report to prevent
nations from stopping action by simply ignoring complaints. Strengthened rules and
procedures with strict time limits for the dispute settlement process aim at providing
"security and predictability to the multilateral trading system" and achieving " solution
mutually acceptable to the parties to a dispute and consistent with the covered
agreements."
The basic stages of dispute resolution covered in the understanding include
consultation, good offices, conciliation and mediation, a panel phase, Appellate
Body review, and remedies.
Consultation:
A member-country may request consultations when it considers another membercountry to have "infringed upon the obligations assumed under a Covered
Agreement. If the respondent fails to respond within ten days or enter into
consultations within thirty days, the complaint "may proceed directly to request the
establishment of a panel."
Good Offices, Conciliation and Mediation:
Unlike consultation in which "a complainant has the power to force a respondent to
reply and consult or face a panel," good offices, conciliation and mediation "are
undertaken voluntarily if the parties to the dispute so agree." No requirements on form,
time, or procedure for them exist. Any party may initiate or terminate them at any
time. The complaining party may request the formation of panel, "if the parties to the
dispute jointly consider that the good offices, conciliation or mediation process has
failed to settle the dispute. Thus the DSU recognized that what was important was that
the nations involved in a dispute come to a workable understanding on how to
proceed, and that sometimes the formal WTO dispute resolution process would not be
the best way to find such an accord. Still, no nation could simply ignore its obligations
under international trade agreements without taking the risk that a WTO panel would
take note of its behavior.
Panel Phase
If consultation, good offices, conciliation or mediation fails to settle the dispute, the
complaining party may request the formation of panel. The DSB shall form a panel,
unless at that meeting the DSB decides by consensus not to establish a panel. Panels
shall be composed of well-qualified governmental and/or non-governmental

individuals with a view to ensuring the independence of the members, and whose
governments are not the parties to the dispute, unless the parties to the dispute agree
otherwise. Three panelists compose a panel unless the parties agree to have five
panelists. The Secretariat proposes nominations for panels that the parties shall not
oppose except for compelling reasons. If the parties disagree on the panelists, upon
the request of either party, the director-general in consultation with the chairman of
the DSB and the chairman of the relevant council or committees shall appoint the
panelists. When multiple parties request the establishment of a panel with regard to
the same matter, the DSU suggests a strong preference for a single panel to be
established to examine these complaints taking into account the rights of all members
concerned. The DSU gives any member that has a substantial interest in a matter
before a panel (and notifies its interest to the DSB) an opportunity to be heard by the
panel and to make written submissions to the panel. The panel shall submit its findings
in the form of written report to the DSB. As a general rule, it shall not exceed six months
from the formation of the panel to submission of the report to the DSB. In interim review
stage, the panel submits an interim report to the parties. The panel shall hold a further
meeting with the parties if the parties present written comments. If no comments are
provided by the parties within the comment period, the report shall be the final report
and circulated promptly to the members. Within sixty days after the report is circulated
to the members, the report shall be adopted at a DSB meeting unless a party to the
dispute formally notifies the DSB of its decision to appeal or the DSB decides by
consensus not to adapt the report.
Appellate Body Review
The DSB establishes a standing Appellate Body that will hear the appeals from panel
cases. The Appellate Body shall be composed of seven persons, three of whom shall
serve on any one case. Those persons serving on the Appellate Body are to be persons
of recognized authority, with demonstrated expertise in law, international trade and
the subject matter of the Covered Agreements generally. The Body shall consider only
issues of law covered in the panel report and legal interpretations developed by the
panel. Its proceedings shall be confidential, and its reports anonymous. This provision is
important because, unlike judges in the United States, the members of the appellate
panel do not serve for life. This means that if their decisions were public, they would be
subject to personal retaliation by governments unhappy with decisions, thus corrupting
the fairness of the process. Decisions made by the Appellate Body "may uphold,
modify, or reverse the legal findings and conclusions of the panel. The DSB and the
parties shall accept the report by the Appellate Body without amendments unless the
DSB decides by consensus not to adopt the Appellate Body report within thirty days
following its circulation to the members.
Remedies
There are consequences for the member whose measure or trade practice is found to
violate the Covered Agreements by a panel or Appellate Body. The dispute panel
issues recommendations with suggestions of how a nation is to come into compliance
with the trade agreements. If the member fails to do so within the determined

reasonable period of time, the complainant may request negotiations for

compensation. Within twenty days after the expiration of the reasonable period of
time, if satisfactory compensation is not agreed, the complaining party may request
authorization from the DSB to suspend the application to the member concerned of
concessions or other obligations under the Covered Agreements.
Retaliation shall be first limited to the same sector(s). If the complaining party considers
the retaliation insufficient, it may seek retaliation across sectors. The DSB shall grant
authorization to suspend concessions or other obligations within thirty days of the
expiry of the reasonable time unless the DSB decides by consensus to reject the
request. The defendant may object to the level of suspension proposed. The original
panel, if members are available, or an arbitrator appointed by the director-general
may conduct arbitration.
Arbitration
Members may seek arbitration within the WTO as an alternative means of dispute
settlement "to facilitate the solution of certain disputes that concern issues that are
clearly defined by both parties. Those parties must reach mutual agreement to
arbitration and the procedures to be followed. Agreed arbitration must be notified to
all members prior to the beginning of the arbitration process. Third parties may
become party to the arbitration only upon the agreement of the parties that have
agreed to have recourse to arbitration. The parties to the proceeding must agree to
abide by the arbitration award. Arbitration awards shall be notified to the DSB and the
Council or Committee of any relevant agreement where any member may raise any
point relating thereto.
===========================================================================

9) What is business ethics? Examine the subsidy component practiced in

some countries from the point of ethics

Answer:
Ethics are moral guidelines which govern good behavior. So behaving ethically
is doing what is morally right. Behaving ethically in business is widely regarded as good
business practice.
Ethical principles and standards in business:
o Define acceptable conduct in business
o Should underpin how management make decisions
An important distinction to remember is that behaving ethically is not quite the
same thing as behaving lawfully:
Ethics are about what is right and what is wrong
Law is about what is lawful and what is unlawful

An ethical decision is one that is both legal and meets the shared ethical standards of
the community Businesses face ethical issues and decisions almost every day in some
industries the issues are very significant.
For example:
Should businesses profit from problem gambling?
Should supermarkets sell lager cheaper than bottled water?
Is ethical shopping a luxury we cant afford?
Business ethics and corporate social responsibility (CSR)are closely linked:
A socially responsible firm should be an ethical firm
An ethical firm should be socially responsible
However there is also a distinction between the two:
CSR is about responsibility to all stakeholders and not just shareholders
Ethics is about morally correct behaviour
Ethical codes are increasingly popular particularly with larger businesses and cover
areas such as:
Corporate social responsibility
Dealings with customers and supply chain
Environmental policy & actions
Rules for personal and corporate integrity
===========================================================================

10) What do you mean by Lex Causae? Explain its dimensions

Answer:
The lex causae is the system of law which is applied to determine substantive issues of
law in international litigation, i.e. the substantive law of the legal system that
determines dispute.
Where both of the litigants are local to the jurisdiction of English Courts, and there is no
foreign element involved, the lex causae will be English law (and the same as
the lexfori). In international disputes, the lex causae will likely be different to English law.
The applicable law is depends upon the resolution in accordance with rules of
conflicts of laws. For Member States (ie countries and territories) of the European
Economic Area, questions of jurisdiction are most often determined by reference to
the Rome Convention, which is annexure to the Contracts (Applicable Law) Act 1990.
The Rome Convention is interpreted by principles of European law, as interpreted by
the European Court of Justice.
Where an international contractual dispute relating to a contract governed by the
laws of a State of the United States of America is heard in the courts of England, the
lex causae will be the laws of the relevant State of the United States and the lexfori will
be the laws of England.

The Rome Convention fixes a series of rules to determine the lex contractus:
1. Parties are entitled to select the law which is to apply to the contract by
incorporating a choice of law clause, which designates the laws of a country to
govern the contract.
2. Where a contract does not specify the law to govern the agreement, the Courts are
able to draw from the law from the terms of the contract and the circumstances of
the case.
3. Where the terms of the contract do not lend assistance, the Court to which the
contract is governed by the laws of the country to which the contract is most closely
connected.
4. Where a contract is severable into parts, it may be that the contract is governed by
the laws of more than one country.
5. Where the law of the contract has not been selected:
a. rebuttable presumption arises that the law to which the contract is most closely
connected is the law of the place where the party who is to effect "characteristic
performance" (a principle adopted from Swiss law) has its habitual residence, or in
event that the characteristic performer is a company, the location of the central
administration of the company.
b. Where the subject matter of the contract is land or some other form of
immoveable property, the law governing the contract will be the place of the
immoveable property.
The Rome Convention also applies mandatory rules with the effect that certain
consumer contracts and employment contracts.