MH 0046: INTERNATIONAL BUISNESS MANAGEMENT

ASSIGNMENT SET 1

Q. NO. 1: IS CRISIS, AS THE RECENT OF 2008 SHOWS, THE ESSENTIAL FEATURE

OF GLOBALIZATION?

The effects of a recession do sprout the causes for globalization. More and more countries of
the world suffer some kind of a recession or the other (low or high) and they tend to balance
their currencies with those of other countries, and of course where gold is the measuring
value of a country's currency value. Not only this but when one country goes into recession it
tries to pave way for trade so as to balance the trade deficit--- and it is at this stage that
countries start trading in an attempt to negate the effects of recession regardless of how low
the profit margin is. One country in recession would look to increase the employment sources
in one way or the other, and these are some of the ways they do so. Many countries that do
well are given assistance by the I.M.F. and the World Bank, and these countries go in times
of crisis with other countries more or less in recession. Nevertheless the effects are give and
take, not always an easy thing to do, but as a last resort, ideally leading to the essential
feature of globalization.

After four years of average annual global real GDP growth of better than 4½ percent, recent
data indicate that the pace of advance is slowing in the major industrial countries, with the
US economy on the verge of, and perhaps already in, outright recession. So far, the evidence
points to less of a slowdown in other industrial countries, while most emerging-market
economies appear likely to maintain quite strong, albeit somewhat slower, growth.
Meanwhile, world consumer price inflation (on a 12-month basis) is up from barely 2 percent
seven years ago to nearly 5 percent as of February 2008. Among both industrial (except for
Japan) and major emerging-market countries, inflation is now running at, or in most cases
somewhat above, rates consistent with policy objectives. Driven by persistently rising global
demand, commodity prices continue to surge upward across the board, especially measured in
US dollars but also in terms of the rapidly appreciating euro.
In this situation, the world economy really needs what is now forecast for 2008/2009: a
significant slowing of economic growth, down to 3.8 percent (year over year) in 2008 from
4.7 percent in 2007. This slowdown will be led by a decline of demand growth in the US
economy, which is both pronounced and extends over a considerable period. Indeed, in view
of the exceptionally aggressive easing of macroeconomic policies already in place in the
United States and the likelihood of monetary policy remaining highly accommodative so
long as US financial markets remain under stress, it is now desirable that real GDP growth
for 2008 fall to a forecasted rate of barely more than 1 percent (year over year)—an outcome
consistent with a very mild and brief recession. Reflecting some risk of a somewhat deeper
and more prolonged recession in the United States, the growth forecast for 2009 (year over
year) is set at 2 percent. For the rest of the world, a mild US recession in 2008 will have a
modest negative effect on real GDP growth, with more significant impacts in Mexico and
Canada. In countries where the slowdown threatens to become excessive and inflation is
under control, some easing of monetary and perhaps fiscal policy is both likely and
appropriate. More generally, however, it is too soon to call for a general and significant
easing of macroeconomic policies. A general slowdown in global economic growth is needed
to cool the clearly apparent upsurge in worldwide inflation.
Some countries, including Australia, China, and Sweden, have recently tightened monetary
policies in efforts to forestall inflation. Other countries, including Canada and the United
Kingdom, have eased monetary policies modestly in response to weakening economic
growth. Quite appropriately, however, no country has so far followed the lead of the Federal
Reserve in aggressive monetary easing.
As the custodian of the world's second most important currency, the policy of the European
Central Bank (ECB) is particularly noteworthy. Inflation in the euro area is running more
than a percentage point above the ECB's announced objective. The euro area economy has
recently been growing significantly more rapidly than its potential rate of about 1½ percent.
The unemployment rate has fallen half a percentage point below the minimum reached in the
last expansion. Key monetary aggregates are surging at rates well above their desired target
ranges. In this situation, one would normally have expected the ECB to have raised its key
policy interest rate a further 100 basis points since last summer.
Instead, with financial turbulence spreading to some extent from the United States to euro
area financial markets and institutions, with evidence that euro area economies are beginning
to slow, and with a sharp appreciation of the euro against the dollar, which is likely to slow
growth and impede inflation, the ECB has wisely held back from further interest rate
increases. With the euro area economy now expected to expand by about 1½ percent this year
(in line with potential), the timing and direction of future adjustments in ECB interest rates
remain—appropriately—dependent upon the evolving balance of risks for inflation and
economic growth.
For Japan, the strengthening of the yen against the dollar in recent months and weakening of
exports to the United States, together with likely weakness in domestic demand growth,
suggest a further write-down in the forecast for real GDP growth for 2008 to 1.2 percent
(from 1¾ percent forecast last October). This reflects the assumption that the surprising
upsurge of GDP growth in the final quarter of 2007 will be partly offset in the first half of
this year.
For the industrial countries as a group, real GDP growth this year is now forecast to be 1.5
percent, and growth for 2009 is projected to be moderately stronger at about 1.9 percent.
In emerging-market economies, circumstances vary and so do appropriate policies, but the
general prospect is for continued quite strong economic growth, despite the slowdown in the
industrial countries.
Is this "decoupling?" Not really. Mexico, Caribbean and Central American countries, and
Asian economies that are particularly dependent on exports to the United States are already
feeling and will continue to feel the effects of the US economic slowdown. More broadly,
however, strong growth of domestic demand in many emerging-market economies will
sustain reasonably strong GDP growth, and rising demand for raw materials by key
emerging-market economies, most importantly China, will help keep commodity prices
strong and aid growth in other emerging-market economies. Overall, I forecast that growth
for developing and emerging-market economies as a group this year will be about 6½
percent, down from almost a 7½ percent advance in 2007. For 2009, I now project slightly
slower growth. The slowdown will be more severe, however, if growth in the industrial
countries, especially the United States, turns out to be meaningfully below the present
forecast. Exports from emerging-market countries would then be hit in volume terms, and
prices of commodity exports could take a serious tumble. Some developing countries,
especially among the primary commodity exporters, could face serious economic challenges
and potential crises.
On this occasion, Arvind Subramanian is available to share his expertise on emerging-market
economies, particularly in Asia and especially India. Accordingly, I will limit my remarks on
these economies to selected observations on some key emerging-market countries. Then, in
view of the departure from the Institute of my colleague Martin Baily and the (at least)
temporary absence of Douglas Holtz-Eakin, I will turn to discuss growth prospects in the
industrial countries, especially the United States. This should provide background for Morris
Goldstein's more in-depth observations on the present financial crisis and proposals for
reform.
Sustained Growth in Emerging Markets
China's economy continues to surge forward, so much so that the authorities are tightening
policies to cool down inflation. Growth will likely slow from 11½ percent last year to about
10 percent this year and next. On the policy front, the key action that should be taken—but
that the Chinese authorities have so far refused —is a significant step appreciation of the
renminbi against the dollar and in real effective terms, combined with policies to stimulate
domestic demand. In the rest of emerging Asia, growth will likely moderate somewhat in
2008 and 2009 but stay above 6 percent, with India continuing to grow at nearly 8 percent. In
Latin America, Mexico will suffer spillover effects from the slowing US economy, and
growth this year is likely to fall to about 2½ percent before recovering modestly in 2009. In
contrast, Brazil should be able to sustain growth of nearly 5 percent, despite the strong
appreciation of the real against the dollar. Growth in Argentina and Venezuela is expected to
slow from the high rates of recent years, bringing down the growth rate for all of Latin
America to about 4½ percent this year and slightly less in 2009.
For Central and Eastern Europe, weak growth in Hungary and Turkey hurt regional
performance in 2007 and partly offset strong results in Bulgaria, the Czech Republic, Poland,
and Slovakia. For 2008 and 2009, regional growth will likely run about 4 percent, reflecting
partly the impact of slower growth in Western Europe. In the Commonwealth of Independent
States, the dominant Russian economy should continue to grow at about 7 percent, and
growth rates will likely remain somewhat higher (on average) in the smaller economies.
For the Middle East, high oil prices will help keep growth strong in the energy exporting
countries. The larger and more diversified economies of Egypt and Israel should also
maintain growth rates in the 5 percent range. High commodity prices will continue to benefit
many African countries, and growth in the region appears likely to continue at least at a 5
percent rate.
Slowing in Other Industrial Countries
Among the industrial countries other than the United States, growth will slow significantly
from the 2¾ percent advance of 2007 to barely more than 1½ percent this year. However,
aside from the United States, I see significant risk of recession this year only in Japan and
possibly Italy. The impact of the yen's recent appreciation and weakening of exports to the
United States, together with deteriorating sentiment among Japanese businesses and
consumers, could push GDP into a couple of quarters of negative growth, even if year-over-
year growth remains slightly positive. And the Japanese policy authorities have little room to
provide offsetting stimulus.
The second quarter may see moderation in the pace of decline of residential investment, but
the other elements of domestic demand are likely to remain weak. Another quarter of
modestly negative real GDP growth now seems to be the most likely outcome. Whether this
will be enough to persuade the National Bureau of Economic Research (NBER) to proclaim
an official recession is not clear, but I would now put the likelihood of such a recession at
over 50 percent.
By June, the tax cuts from the recently passed fiscal package will be flowing into consumers
pockets, bumping up consumer spending mainly in the third quarter. Some, not unreasonable,
forecasts suggest that the stimulus could induce as much as a 5 percent annualized gain of
real consumer spending in the third quarter, implying a considerable temporary boost to GDP
growth. My view is more restrained, partly because I expect that businesses will absorb some
of any surge in consumption spending (particularly for durables) into reductions in
inventories.
On the other hand, businesses have kept inventories quite lean for the past three years, and
there is no indication of a general inventory overhang (aside from the stockpile of unsold
homes, which is not counted in business inventories). Sharp declines of inventory investment
into negative territory have been a feature of all ten postwar recessions. It is a positive sign
that the magnitude of any inventory correction in the present episode appears likely to be
limited.
In sum, the prospect is that with the benefit of the fiscal stimulus, the US economy will
bounce back to moderately positive growth this summer. By then the massive contraction of
residential investment, which began two years ago, should be complete—with new home
building running just below one million units, less than half of its recent peak level. Growth
of consumer spending is likely to be weak after the effects of the stimulus are spent, but
inventory investment should bounce back, and net exports may be expected to continue to
make positive contributions to GDP growth. During the second half of 2008, it is reasonable
to expect growth to rebound to 2 to 3 percent. The suggested pattern of modestly falling GDP
in the first half and moderate rebound in the second half implies that real GDP will show a
very meagre advance of about one-half percent on a fourth-quarter-to-fourth-quarter basis.
Year-over-year real GDP growth would be barely more than 1 percent. In comparison, in the
2001 recession—the mildest of the postwar era—fourthquarter- to-fourth-quarter growth was
0.4 percent and year-over-year growth was 0.8 percent.
The 2001 recession was followed by an initially weak recovery, with real GDP growing at
only a 1.7 percent rate during the six quarters after the official end of recession, and with the
unemployment rate continuing to rise to a peak of 6.3 percent in May 2003. On this occasion,
I expect that the economy will remain quite sluggish through 2009, with growth proceeding
at about a 2 percent annual rate. Weak growth of consumer spending in the face of significant
losses of household net worth associated with lower real home values will be the key reason
for this sluggishness.

Q. NO. 2: WILL CULTURE BE ERODED IN THE WAKE OF GLOBALIZATION?

Of course it wills Cultures are the result of the conditions of life in any particular place. they
are formed by religions customs the means of production of food, the methods of the
preparation of foods. The moors of sexual behaviour and traditions and so on. These
traditions grow over time, However they are easily overpowered by the marketing and
advertising that comes with what globalisation is spreading around the world. This is because
the same restrictions and seasonal implications just don't apply anymore. Add to this a
relaxation in religious restriction and you will find that many cultures will eventually blend
into oblivion over time.

There are two levels, theoretically, at which the relationship between the processes of
globalization and the responses of the local cultures can be analyzed. Firstly, one has to
recognize the near universal feeling of disenchantment in the social sciences from the
totalizing and generalizing paradigms of positivism----a product of the European renaissance
ideology. Positivism proposed abstract systems and categories of culture and society, which
often proved inadequate in respect of fuller Comprehension of reality. A more meaningful
understanding of culture called for reflexive or empathic sensitivity in the concepts and
methods of social science. Analytically, it has contributed to the growth in the
phenomenological methods to study local cultures, and the use of ethno-methodological
categories. A radical expression of the revolt against positivism is found in the postmodern
rejection of the totalizing concepts of culture and social system. In the new approach, focus is
upon the local, the particularistic and reflexive (Loyotard, 1987; Dilthey, 1988; also Earnst,
G. 1992) dimensions of culture.
The purpose of this Unit is to provide a state-of-the-art review of several recent advances in
culture and IB research, with an eye toward productive avenues for future research. It is not
our purpose to be comprehensive; our goal is to spotlight a few highly promising areas for
leapfrogging the field in an increasingly boundary-less business world. We first review the
issues surrounding cultural convergence and divergence, and the processes underlying
cultural changes. We then examine novel constructs for characterizing cultures, and how to
enhance the precision of cultural models by pinpointing when the effects of culture are
important. Finally, we examine the usefulness of experimental methods, which are rarely
employed in the field of culture and IB. A schematic summary of our coverage is given in
Table 2.1, which suggests that the topics reviewed are loosely related, and that their
juxtaposition in the present paper represents our attempt to highlight their importance rather
than their coherence as elements of an integrative framework.
Cultural change, convergence and divergence in an era of partial globalization
An issue of considerable theoretical significance is concerned with cultural changes and
transformations taking place in different parts of the world. In fact, since the landmark study
of Haire et al. (1966) and the publication of Industrialism and Industrial Man by Kerr et al.
(1960), researchers have continued to search for similarities in culture-specific beliefs and
attitudes in various aspects of work related attitudes and behaviours, consumption patterns,
and the like. If cultures of the various locales of the world are indeed converging (e.g., Heuer
et al., 1999), IB-related practices would indeed become increasingly similar. Standard,
culture-free business practices would eventually emerge, and inefficiencies and complexities
associated with divergent beliefs and practices in the past era would disappear. In the
following section, we review the evidence on the issue and conclude that such an outlook
pertaining to the convergence of various IB practices is overly optimistic.
Evolution of partial globalization
Globalization refers to a ‘growing economic interdependence among countries, as reflected in
the increased cross-border flow of three types of entities: goods and services, capital, and
know-how’ (Govindarajan and Gupta, 2001, 4). Few spoke of ‘world economy’ 25 years ago,
and the prevalent term was ‘international trade’ (Drucker, 1995). However today,
international trade has culminated in the emergence of a global economy, consisting of flows
of information, technology, money, and people, and is conducted via government
international organizations such as the North American Free Trade Agreement (NAFTA) and
the European Community; global organizations such as the International Organization for
Standardization (ISO); multinational companies (MNCs); and cross – border alliances in the
form of joint ventures, international mergers, and acquisitions. These inter – relationships
have enhanced participation in the world economy, and have become a key to domestic
economic growth and prosperity. Yet, globalization is not without its misgivings and
discontents. A vivid image associated with the G8 summits is the fervent protests against
globalization in many parts of the world, as shown in television and reported in the popular
media. Strong opposition to globalization usually originates from developing countries that
have been hurt by the destabilizing effects of globalization, but in recent times we have also
seen heated debates in Western economies triggered by significant loss of professional jobs
as a result of off shoring to low – wage countries. Indeed, workers in manufacturing and
farming in advanced economies are becoming increasingly wary of globalization, as their
income continues to decline significantly. In parallel to the angry protests against
globalization, the flow of goods, services, and investments across national borders has
continued to fall after the rapid gains of the 1990s. Furthermore, the creation of regional trade
blocs, such as NAFTA, the European Union, and the Association of Southeast Asian Nations,
have stimulated discussions about creating other trade zones involving countries in South
Asia, Africa, and other parts of the world. Although it is often assumed that countries
belonging to the World Trade Organization (WTO) have embraced globalization, the fact is
that the world is only partially globalized, at best .Many parts of Central Asia and Eastern
Europe, including the former republics of the Soviet Union, parts of Latin America, Africa,
and parts of South Asia, have been sceptical of globalization (Greider, 1997). In fact, less
than 10% of the world’s population is fully globalized (i.e., being active participants in the
consumption of global products and services) (Schaeffer, 2003). Therefore, it is imperative
that we analyze the issues of cultural convergence and divergence in this partially globalized
world. ‘Universal culture’ often refers to the assumptions, values, and practices of people in
the West and some elites in non-Western cultures. Huntington (1996) suggested that it
originates from the intellectual elites from a selected group of countries who meet annually in
the World Economic Forum in Davos, Switzerland. These individuals are highly educated,
work with symbols and numbers, are fluent in English, are extensively involved with
international commitments, and travel frequently outside their country. They share the
cultural value of individualism, and believe strongly in market economics and political
democracy. Although those belonging to the Davos group control virtually all of the world’s
important international institutions, many of the world’s governments, and a great majority of
the world’s economic and military capabilities, the cultural values of the Davos group are
probably embraced by only a small fraction of the six billion people of the world. Popular
culture, again mostly Western European and American in origin, also contributes to a
convergence of consumption patterns and leisure activities around the world. However, the
convergence may be superficial, and have only a small influence on fundamental issues such
as beliefs, norms, and ideas about how individuals, groups, institutions, and other important
social agencies ought to function. In fact, Huntington (1996, 58) noted that ‘The essence of
Western civilization is the Magna Carta, not the Magna Mac. The fact that non-Westerners
may bite into the latter has no implications for their accepting the former’. This argument is
obvious if we reverse the typical situation and put Western Europeans and Americans in the
shoes of recipients of cultural influence. For instance, while Chinese Kung Fu dominates
fight scenes in Hollywood movies such as Matrix Reloaded, and Chinese restaurants abound
in the West, it seems implausible that Americans and Europeans have espoused more Chinese
values because of their fondness of Chinese Kung Fu and food. A major argument against
cultural convergence is that traditionalism and modernity may be unrelated (Smith and Bond,
1998). Strong traditional values, such as group solidarity, interpersonal harmony,
paternalism, and feminism, can co-exist with modern values of individual achievement and
competition. A case in point is the findings that Chinese in Singapore and China indeed
endorsed both traditional and modern values (Chang et al., 2003; Zhang et al., 2003). It is
also conceivable that, just as we talk about Westernization of cultural values around the
world, we may also talk about Easternization of values in response to forces of modernity and
consumption values imposed by globalization (Marsella and Choi, 1993). Although the
argument that the world is becoming one culture seems untenable, there are some areas that
do show signs of convergence. We explore in the following the roles of several factors that
simultaneously cause cultures of the world to either converge or diverge, in an attempt to
identify several productive avenues for future research.
Role of multiculturalism and cultural identity
The broad ideological framework of a country, corporation, or situation is the most important
determinant of the cultural identity that people develop in a given locale (Triandis, 1994).
The ‘melting pot’ ideology suggests that each cultural group loses some of its dominant
characteristics in order to become the mainstream: this is assimilation, or what Triandis
(1994) calls subtractive multiculturalism. In contrast, when people from a cultural group add
appropriate skills and characteristics of other groups, it may be called integration, or additive
multiculturalism. Both of these processes are essential for cultural convergence to proceed.
However, if there is a significant history of conflict between the cultural groups, it is hard to
initiate these processes, as in the case of Israelis and Palestinians. In general, although there
has been some research on the typology of animosity against other nations (e.g., Jung et al.,
2002), we do not know much about how emotional antagonism against other cultural groups
affects trade patterns and intercultural cooperation in a business context. The issues of
cultural identity and emotional reactions to other cultural groups in an IB context constitute a
significant gap in our research effort in this area.
Implications of convergence and divergence issues
One message is clear: while convergence in some domains of IB activity is easily noticeable,
especially in consumer values and lifestyles, significant divergence of cultures persists. In
fact, Hofstede (2001) asserts that mental programs of people around the world do not change
rapidly, but remain rather consistent over time. His findings indicate that cultural shifts are
relative as opposed to absolute. Although clusters of some countries in given geographical
locales (e.g., Argentina, Brazil, Chile) might indicate significant culture shifts towards
embracing Anglo values, the changes do not diminish the absolute differences between such
countries and those of the Anglo countries (i.e., US, Canada, UK). Huntington, in his ‘The
Clash of Civilizations’ (1996), presents the view that there is indeed a resurgence of non-
Western cultures around the world, which could result in the redistribution of national power
in the conduct of international affairs. The attempt by the Davos group to bring about uniform
practices in various aspects of IB and work culture, thereby sustaining the forces of
globalization, is certainly worthwhile. However, our analysis suggests that there is no
guarantee that such convergence will come about easily, or without long periods of
resistance. IB scholars need to understand that although some countries might exhibit strong
tendencies toward cultural convergence, as is found in Western countries, there are countries
that will reject globalization, not only because of its adverse economic impacts (Greider,
1997) but also because globalization tends to introduce distortions (in their view) in profound
cultural syndromes that characterize their national character. Furthermore, reactions to
globalization may take other forms. Bhagat et al. (2003) have recently argued that adaptation
is another approach that could characterize the tendencies of some cultures in the face of
mounting pressures to globalize. Other approaches are rejection, creative synthesis, and
innovation (Bhagat et al., 2003). These different approaches highlight once again the
complex dynamics that underlie cultural convergence and divergence in a partially globalized
world. Also, in discussing issues of convergence and divergence, it is necessary to recognize
that the shift in values is not always from Western society to others, but can result in the
change of Western cultural values as well. For example, the emphasis on quality and
teamwork in the West is partly a result of the popularity of Japanese management two
decades ago. Scholars of IB should recognize that the issue of convergence and divergence in
this era of partial globalization will remain as a persistent and complex issue whose direction
might only be assessed on a region-by-region basis. It is also wise to adopt an
interdisciplinary perspective in understanding the forces that create both convergence and
divergence of cultures in different parts of the world. For instance, in Understanding
Globalization, Schaeffer (2003) has provided an insightful discussion of the social
consequences of political, economic and other changes, which have significant implications
for IB. The cause-effect relationships of globalization and its various outcomes, especially the
cultural outcomes, are not only characterized by bi-directional arrows, but are embedded in a
complex web of relationships. How these complex relationships and processes play out on the
stage of IB remains to be uncovered by IB researchers.
Processes of cultural changes
In the previous section, we make the point that, through the process of globalization, cultures
influence each other and change, but whether or not these changes will bring about cultural
convergence is yet to be seen. In this section, we delineate a general model that describes and
explains the complex processes underlying cultural changes. As explained before, IB is both
an agent and a recipient of cultural change, and for international business to flourish it is
important to understand its complex, reciprocal relationships with cultural change. In line
with the view of Hofstede (2001) that culture changes very slowly, culture has been treated as
a relatively stable characteristic, reflecting a shared knowledge structure that attenuates
variability in values, behavioral norms, and patterns of behaviors (Erez and Earley, 1993).
Cultural stability helps to reduce ambiguity, and leads to more control over expected
behavioural outcomes (Weick and Quinn, 1999; Leana and Barry, 2000). For instance, most
existing models of culture and work behaviour assume cultural stability and emphasize the fit
between a given culture and certain managerial and motivational practices (Erez and Earley,
1993). High fit means high adaptation of managerial practicesto a given culture and,
therefore, high effectiveness. The assumption of cultural stability is valid as long as there are
no environmental changes that precipitate adaptation and cultural change. Yet, the end of the
20th century and the beginning of the new millennium have been characterized by turbulent
political and economical changes, which instigate cultural changes. In line with this
argument, Lewin and Kim (2004), in their comprehensive chapter on adaptation and selection
in strategy and change, distinguished between theories driven by the underlying assumption
that adaptation is the mechanism to cope with change, and theories driven by the underlying
assumption of selection and the survival of the fittest, suggesting that ineffective forms of
organization disappear, and new forms emerge. However, although organizational changes as
a reaction to environmental changes have been subjected to considerable conceptual analyses,
the issue of cultural change at the national level has rarely been addressed.
There are relatively few theories of culture that pertain to the dynamic aspect of culture. One
exception is the eco-cultural model by Berry et al. (2002), which views culture as evolving
adaptations to ecological and socio-political influences, and views individual psychological
characteristics in a population as adaptive to their cultural context, as well as to the broader
ecological and socio-political influences. Similarly, Kitayama (2002) proposes a system view
to understanding the dynamic nature of culture, as opposed to the entity view that sees culture
as a static entity. This system view suggests that each person’s psychological processes are
organized through the active effort to coordinate one’s behaviours with the pertinent cultural
systems of practices and public meanings. Yet, concurrently, many aspects of the
psychological systems develop rather flexibly as they are attuned to the surrounding socio-
cultural environment, and are likely to be configured in different ways across different socio-
cultural groups. These adaptive views of culture are supported by empirical evidence. For
example, Van de Vliert et al. (1999) identified curvilinear relationships between temperature,
masculinity and domestic political violence across 53 countries. Their findings showed that
masculinity and domestic violence are higher in moderately warm countries than in countries
with extreme temperatures. Inglehart and Baker (2000) examined cultural change as reflected
by changes in basic values in three waves of the World Values Surveys, which included
65societies and 75% of the world’s population. Their analysis showed that economic
development was associated with shifts away from traditional norms and values toward
values that are increasingly rational, tolerant, trusting, and participatory. However, the data
also showed that the broad cultural heritage of a society, whether it is Protestant, Roman
Catholic, Orthodox, Confucian, or Communist, leaves an enduring imprint on traditional
values despite the forces of modernization. The process of globalization described before has
introduced the most significant change in IB, with its effects filtering down to the national,
organizational, group and individual levels. Reciprocally, changes at micro-levels of culture,
when shared by the members of the society, culminate into macro level phenomena and
change the macro-levels of culture.

Q. NO. 3: A WORLD WIDE STANDARDIZATION IS A MAJOR ISSUE IN THE WAKE

OF GLOBALIZATION – DISCUSS?

With start-ups going global earlier than ever before, companies are rethinking management of
their international operations. In particular, they are giving special consideration to
localization, the process of translating text and reengineering software components of a
particular product to operate in other languages. As demand for localized products increases,
everyone from established multinational technology vendors, to consumer electronics
companies, and small start-ups are reviewing their internal product globalization processes.
They are finding that localization projects are fragmented and dispersed throughout the
organization and that activities are inconsistent, unresponsive and unwieldy. As a result,
international roll-outs are delayed, and revenues are unpredictable. Overall globalization
strategy should include a repeatable globalization methodology, independent of target
language that becomes part of the product release cycle.
In fact, one software company estimates that today about 20 percent of all computer
documentation is now translated into 30 languages, but by 2005, the figure will be 60 percent
in 80 languages. As demand for localized products increases, everyone from established
multinational technology vendors, to consumer electronics companies, and small start-ups are
reviewing their internal product globalization processes. They are finding that localization
projects are fragmented and dispersed throughout the organization and that activities are
inconsistent, unresponsive and unwieldy. As a result, international rollouts are delayed, and
revenues are unpredictable.
In the software industry, "simultaneous worldwide release" has become a mantra to keep
increasingly Internet-enabled consumers buying. In the recreational products industry,
companies want a "global brand" and position, regardless of local eccentricities. Instituting a
consistent, dependable localization methodology is a sure-fire way to maintain high global
standards for product introductions and continued high levels of product service. Whether
outsourcing, vending, or managing the process internally, leading companies are
consolidating their previously disparate localization activities into one coordinated process
with a senior management sponsor. They are reaping paybacks in lower costs, higher
velocity, and sustainable quality. Successful global companies have recognized the need for
localized product user interfaces. They know that the days are gone when Americans heavy
manufactured exports only needed their "on-off" switch translated into different languages.
With software and semiconductors permeating everything from PCs to refrigerators to
automobiles, companies must adopt more pervasive product localization programs than ever
before. For instance, a 1998 sports utility vehicle has more computing power than the original
PC. As a result, dashboard displays, controls, brochures and the traditional glove box material
all constitute part of the "user interface." The challenge for automotive manufacturers is to
break the localization activities for each of these parts away from their production or
functional operating groups, and centralize localization in order to achieve consistent
terminology and an even "look and feel" for the product. By internationalizing products at the
design phase, companies can communicate the need for consistent standardization to their
R& D organization, development partners, and subcontractors. Engineers can design
everything from product screens, to help files, and systems diagnostics to be double byte
enabled in order to accommodate the extra space needs of Asian characters. This will ensure
speedy product deployment for that "big Asian order" without expensive and episodic
internationalization campaigns.
Product globalization also includes every step in the sales channel. This means that both hard
copy and on-line versions of sales, dealer and service/support materials will contribute to the
"feel" of your corporation and reinforce the "ethic" of your product. This attention also
ensures consistent terminology, which reinforces the verbal "identity" of the company,
throughout the book-to-deliver process. Since the purchase and delivery process constitutes
an increasingly large percentage of a product’s perceived value, a consistent channel
experience will directly affect product pricing leverage and after-sale customer satisfaction.
When a company decides to open a direct office or establish new market segments, the worst
case scenario is the discovery that its individual distributors now "own" the localized version.
Equally disconcerting is a localized product that is undocumented, inconsistent and
imprecise.
Distributors’ efforts are nearly always under-managed, which results in variations from
release to release, a tarnished image and uncoordinated release dates from country to country.
Altogether, these drawbacks will undermine a corporate globalization focus. By centralizing
localization activities, a company can avoid the confusion that results when individual
distributors try to localize a product on a site-by-site basis.

Q4. HOW HAS WTO BENEFITED ECONOMIES? DISCUSS BRIEFLY

 The system helps to keep the peace
This sounds like an exaggerated claim, and it would be wrong to make too much of it.
Nevertheless, the system does contribute to international peace, and if we understand why,
we have a clearer picture of what the system actually does. Peace is partly an outcome of two
of the most fundamental principles of the trading system: helping trade to flow smoothly and
providing countries with a constructive and fair outlet for dealing with disputes over trade
issues. It is also an outcome of the international confidence and cooperation that the system
creates and reinforces.
History is littered with examples of trade disputes turning into war. One of the most vivid is
the trade war of the 1930s when countries competed to raise trade barriers in order to protect
domestic producers and retaliate against each others’ barriers. This worsened the Great
Depression and eventually played a part in the outbreak of World War 2. Two developments
immediately after the Second World War helped to avoid a repeat of the pre-war trade
tensions. In Europe, international cooperation developed in coal, and in iron and steel.
Globally, the General Agreement on Tariffs and Trade (GATT) was created. Both have
proved successful, so much so that they are now considerably expanded – one has become the
European Union, the other the World Trade Organization (WTO). The WTO trading system
plays a vital role in creating and reinforcing that confidence. Particularly important are
negotiations that lead to agreement by consensus and a focus on abiding by the rules.
 The system allows disputes to be handled constructively
As trade expands in volume, in the number of products traded, and in the numbers of
countries and companies trading, there is a greater chance that disputes will arise. The WTO
system helps resolve these disputes peacefully and constructively. There could be a down
side to trade liberalization and expansion. More trade means more possibilities for disputes to
arise. Left to themselves, those disputes could lead to serious conflict. But in reality, a lot of
international trade tension is reduced because countries can turn to organizations, in
particular the WTO, to settle their trade disputes. Before World War 2 that option was not
available. After the war, the world’s community of trading nations negotiated trade rules
which are now entrusted to the WTO. Those rules include an obligation for members to bring
their disputes to the WTO and not to act unilaterally.
When they bring disputes to the WTO, the WTO’s procedure focuses their attention on the
rules. Once a ruling has been made, countries concentrate on trying to comply with the rules,
and perhaps later renegotiating the rules – not on declaring war on each other. Around 300
disputes have been brought to the WTO since it was set up in 1995. Without a means of
tackling these constructively and harmoniously, some could have led to more serious political
conflict. The fact that the disputes are based on WTO agreements means that there is a clear
basis for judging who is right or wrong. Once the judgment has been made, the agreements
provide the focus for any further actions that need to be taken.
The increasing number of disputes brought to GATT and its successor, the WTO, does not
reflect increasing tension in the world. Rather, it reflects the closer economic ties throughout
the world, the GATT/WTO’s expanding membership and the fact that countries have faith in
the system to solve their differences. Sometimes the exchanges between the countries in
conflict can be acrimonious, but they always aim to conform to the agreements and
commitments that they themselves negotiated.
 A system based on rules rather than power makes life easier for all
The WTO cannot claim to make all countries equal. But it does reduce some inequalities,
giving smaller countries more voice, and at the same time freeing the major powers from the
complexity of having to negotiate trade agreements with each of their numerous trading
partners Decisions in the WTO are made by consensus. The WTO agreements were
negotiated by all members, were approved by consensus and were ratified in all members’
parliaments. The agreements apply to everyone. Rich and poor countries alike have an equal
right to challenge each other in the WTO’s dispute settlement procedures. This makes life
easier for all, in several different ways. Smaller countries can enjoy some increased
bargaining power. Without a multilateral regime such as the WTO’s system, the more
powerful countries would be freer to impose their will unilaterally on their smaller trading
partners. Smaller countries would have to deal with each of the major economic powers
individually, and would be much less able to resist unwanted pressure. In addition, smaller
countries can perform more effectively if they make use of the opportunities to form alliances
and to pool resources. Several are already doing this. There are matching benefits for larger
countries. The major economic powers can use the single forum of the WTO to negotiate
with all or most of their trading partners at the same time. This makes life much simpler for
the bigger trading countries. The alternative would be continuous and complicated bilateral
negotiations with dozens of countries simultaneously. And each country could end up with
different conditions for trading with each of its trading partners, making life extremely
complicated for its importers and exporters. The principle of non-discrimination built into the
WTO agreements avoids that complexity. The fact that there is a single set of rules applying
to all members greatly simplifies the entire trade regime. And these agreed rules give
governments a clearer view of which trade policies are acceptable.
 Freer trade cuts the cost of living
We are all consumers. The prices we pay for our food and clothing, our necessities and
luxuries, and everything else in between, are affected by trade policies. Protectionism is
expensive: it raises prices. The WTO’s global system lowers trade barriers through
negotiation and applies the principle of non-discrimination. The result is reduced costs of
production (because imports used in production are cheaper) and reduced prices of finished
goods and services, and ultimately a lower cost of living.
 It gives consumers more choice and a broader range of qualities to choose from
Think of all the things we can now have because we can import them: fruits and vegetables
out of season, foods, clothing and other products that used to be considered exotic, cut
flowers from any part of the world, all sorts of household goods, books, music, movies, and
so on. Think also of the things people in other countries can have because they buy exports
from us and elsewhere. Look around and consider all the things that would disappear if all
our imports were taken away from us. Imports allow us more choice – both more goods and
services to choose from, and a wider range of qualities. Even the quality of locally –
produced goods can improve because of the competition from imports. The wider choice isn’t
simply a question of consumers buying foreign finished products. Imports are used as
materials, components and equipment for local production. This expands the range of final
products and services that are made by domestic producers, and it increases the range of
technologies they can use. When mobile telephone equipment became available, services
sprang up even in the countries that did not make the equipment, for example. Sometimes, the
success of an imported product or service on the domestic market can also encourage new
local producers to compete, increasing the choice of brands available to consumers as well as
increasing the range of goods and services produced locally. If trade allows us to import
more, it also allows others to buy more of our exports. It increases our incomes, providing us
with the means of enjoying the increased choice.
 Trade raises incomes
Lowering trade barriers allows trade to increase, which adds to incomes – national incomes
and personal incomes. But some adjustment is necessary. The WTO’s own estimates for the
impact of the 1994 Uruguay Round trade deal were between $109 billion and $510 billion
added to world income (depending on the assumptions of the calculations and allowing for
margins of error). More recent research has produced similar figures. Economists estimate
that cutting trade barriers in agriculture, manufacturing and services by one third would boost
the world economy by $613 billion – equivalent to adding an economy the size of Canada to
the world economy. In Europe, the EU Commission calculates that over 1989 – 93 EU
incomes increased by 1.1–1.5% more than they would have done without the Single Market.
So trade clearly boosts incomes. Trade also poses challenges as domestic producers face
competition from imports. But the fact that there is additional income means that resources
are available for governments to redistribute the benefits from those who gain the most – for
example to help companies and workers adapt by becoming more productive and competitive
in what they were already doing, or by switching to new activities.
 Trade stimulates economic growth and that can be good news for employment
Trade clearly has the potential to create jobs. In practice there is often factual evidence that
lower trade barriers have been good for employment. But the picture is complicated by a
number of factors. Nevertheless, the alternative – protectionism – is not the way to tackle
employment problems. This is a difficult subject to tackle in simple terms. There is strong
evidence that trade boosts economic growth, and that economic growth means more jobs. It is
also true that some jobs are lost even when trade is expanding. But a reliable analysis of this
poses at least two problems.
 The basic principles make the system economically more efficient, and they cut costs
Many of the benefits of the trading system are more difficult to summarize in numbers, but
they are still important. They are the result of essential principles at the heart of the system,
and they make life simpler for the enterprises directly involved in trade and for the producers
of goods and services. Trade allows a division of labour between countries. It allows
resources to be used more appropriately and effectively for production. But the WTO’s
trading system offers more than that. It helps to increase efficiency and to cut costs even
more because of important principles enshrined in the system. Imagine a situation where each
country sets different rules and different customs duty rates for imports coming from
different trading partners. Imagine that a company in one country wants to import raw
materials or components – copper for wiring or printed circuit boards for electrical goods, for
example – for its own production.
It would not be enough for this company to look at the prices offered by suppliers around the
world. The company would also have to make separate calculations about the different duty
rates it would be charged on the imports (which would depend on where the imports came
from), and it would have to study each of the regulations that apply to products from each
country. Buying some copper or circuit boards would become very complicated.
 The system shields governments from narrow interests
The GATT – WTO system which evolved in the second half of the 20th Century helps
governments take a more balanced view of trade policy. Governments are better–placed to
defend themselves against lobbying from narrow interest groups by focusing on trade–offs
that are made in the interests of everyone in the economy One of the lessons of the
protectionism that dominated the early decades of the 20th Century was the damage that can
be caused if narrow sectoral interests gain an unbalanced share of political influence. The
result was increasingly restrictive policy which turned into a trade war that no one won and
everyone lost. Superficially, restricting imports looks like an effective way of supporting an
economic sector. But it biases the economy against other sectors which shouldn’t be
penalized–if you protect your clothing industry, everyone else has to pay for more expensive
clothes, which puts pressure on wages in all sectors, for example. Protectionism can also
escalate as other countries retaliate by raising their own trade barriers. That’s exactly what
happened in the 1920s and 30s with disastrous effects. Even the sectors demanding protection
ended up losing. Governments need to be armed against pressure from narrow interest
groups, and the WTO system can help. The GATT – WTO system covers a wide range of
sectors. So, if during a GATT –WTO trade negotiation one pressure group lobbies its
government to be considered as a special case in need of protection, the government can
reject the protectionist pressure by arguing that it needs a broad-ranging agreement that will
benefit all sectors of the economy. Governments do just that, regularly.
 The system encourages good government
Under WTO rules, once a commitment has been made to liberalize a sector of trade, it is
difficult to reverse. The rules also discourage a range of unwise policies. For businesses, that
means greater certainty and clarity about trading conditions. For governments it can often
mean good discipline. The rules include commitments not to backslide into unwise policies.
Protectionism in general is unwise because of the damage it causes domestically and
internationally, as we have already seen.

Q.NO.5: SHOW YOUR UNDERSTANDING OF REGIONAL ECONOMIC

INTEGRATION
Regional integration can take many forms and nowhere is this more evident than in the vastly
different integration processes taking place in the regions of Europe and East Asia. The
subject of this paper is regional integration as it has developed in East Asia with a focus on
the drivers of that integration. While the paper is not intended as a direct comparison of
integration in East Asia and Europe, it will include some comparisons between the two
regions. Integration in East Asia has progressed very slowly and is still in an early stage
despite that the process has continued for decades. In fact, it could be said that the process
began centuries ago – even as far back as the 15th century. By comparison, European
integration has progressed steadily and has gradually deepened over the last 50 years to reach
an advanced stage today with a common currency and well-developed regional institutions.
Thus, the speed of progression and the level of integration attained in the two regions are
quite dissimilar. In addition to these differences, the drivers behind the integration process in
each region are different. In Europe, the origins of integration have been institutional in
nature, and the development of institutions has been prominent throughout the process. Thus,
regional institutions have been the driving force behind integration in Europe. In East Asia,
the development of regional institutions has also occurred; however, progress in this area has
been slow and the few existing institutions are fairly weak and ineffective. Nevertheless,
regional integration is taking place in East Asia, but the driving force is the market rather
than policy or institutions. Corporations and the production networks they have established
are driving integration in East Asia. Until 1917 the Grand Duchy of Finland enjoyed a
privileged position as a relatively advanced part of the Russian Empire, supplying metal
products and ships in exchange for agricultural goods. These ties collapsed, however, when
political tensions between the Bolshevik regime and the Finnish Republic precluded
commercial agreements. The interwar pattern was reversed in the years following World War
II, as reparations payments and barter trade grew into a close trading relationship in which
Finland exported industrial goods, especially capital goods, in exchange for raw materials and
fuels – an arrangement roughly parallel to that which had existed before 1917. Starting in the
late 1950s, however, Finland broke away from its dependence on the Soviet market,
successfully opening its economy to the two West European trading blocks, the European
Economic Community and the European Free Trade Association. Expanded trade with the
West did not imply renunciation of profitable exchanges with the East, however, because
Finnish commercial ties with the Soviet Union and with the other members of the Council for
Mutual Economic Assistance (CMEA, CEMA, or Comecon – see Glossary) deepened after
1960. By the late 1980s, Finland provided a unique example of a neutral country with a free-
market economy that had developed increasing economic interdependence with both the
market economies of Western Europe and the planned economies of Eastern Europe.
Although many Western observers saw in Finnish foreign economic policy the dominance of
security concerns over economic interests, close inspection revealed a mixture of motives.
The guiding principles of postwar foreign policy – Finland’s need to assure the Soviet Union
that it did not have to fear threats from (or through) Finnish territory as well as Finland’s
practice of active neutrality – influenced trade policies toward the East, especially in the
immediate postwar years. Such concerns blocked Finnish participation in the Marshall Plan
and in the Organization for European Economic Co-operation (OEEC), which was
established to coordinate the use of Marshall Plan aid Trade with the East also served
important economic interests, however, driving the rapid development of the metalworking
industries during the 1950s and helping to absorb labor released from the modernizing farm
sector. In the years after the 1973 oil crisis, Finnish exports to the Soviet Union also provided
an essential market at a time of recession in Western markets. Commentators suggested that
by the 1980s, the Finns, less concerned with security than they had been in the early postwar
years, based policy decisions almost exclusively on market considerations.

Q6. DESCRIBE THE CURRENT ISSUES IN GLOBALIZATION.

Nonfarm payrolls increased by 169,000 in March led by temporary and health services, as
well as federal employment related to the 2010 Census. The Household Survey still was
showing unemployment unchanged at 15 million, with 44% having been jobless for 27 weeks
or more. The official rate of unemployment remains at 9.7%. The Bureau of Economic
Analysis (BEA) early estimate that the GDP grew in Q4 of 2009 by 5.7% was, on February
26th, revised up to 5.9% and, as we expected, revised down to 5.6% on March 26th. We
expected it to be a much lower figure. BEA admits that most of the increase was due to
additional building of inventories and deceleration of imports. My interview on Jan 31, 2010,
with John Williams, pre-eminent expert on deconstructing US official statistics at confirmed
my distrust of this revised Q4 2009 GDP-growth of 5.9%. Williams agrees with us that "GDP
is the worst quality information from the US government." The inventory build up accounts
for over 3.6% of that 5.9% GDP-growth estimate; 1.5% as an over-statement of the Personal
Consumption Expenditure which GDP states as up by 2% and another 0.5% as related to the
actual widening of the overall trade deficit – even though BEA emphasized that the
deceleration of imports is accounted for as part of its rise of 5.9% in GDP. The non-farm
payroll jobs lost in February were 36,000, leaving the number of unemployed persons at 14.9
million and the official unemployment rate at 9.7%. Since the start of the recession in
December 2007, payroll jobs have fallen by 8.4 million. Discouraged workers bring the total
unemployment rate to approximately 16.8%. Many economic reports indicate that the US
recovery was illusory .I have long explored the entire range of distortions that make GDP a
perverse measure of US progress, and TIME's article agrees, pointing to our Calvert-
Henderson Quality of Life Indicators and others including the United Nations Human
Development Index (HDI). At last, better measures of human progress are gaining
mainstream media attention: the excellent Canadian Index of Wellbeing (CIW) at
www.ciw.ca and the new report by British researchers Richard Wilkinson and Kate Pickett
linking equality with quality of life within and across countries. They find that countries with
the most equal income distribution (by GINI) have the largest socially and politically
prosperous middle class while unequal countries do worse on most quality of life indicators
(www.equalitytrust.org.uk). The USA scores poorly and confirms John Williams' and our
view that a massive overhaul of GDP, unemployment, inflation, money supply and other US
statistics is now urgent if we are to address the need for more jobs. Why has the weak US
recovery produced so few jobs? Companies, big and small are not hiring, as January 2010's
revised job losses of another 26,000 were reported by the BLS, after December's revised
losses of another 104,000. This BLS "Establishment Survey" differed from the broader
"Household Survey" which recorded the civilian labor force dropped in January by 661,000,
due to small companies failing or unable to obtain financing, which the Establishment Survey
cannot detect. For 20 years, I have pointed to reasons the USA has experienced "jobless
growth" - rooted in the abstractions of macroeconomics theories and methods. The faith in
"free trade" has prevented government agencies from making use of futurists' broader
forecasting and planning methods used by most global corporations. Their economic
advisors' market fundamentalism warned against "industrial policy" except for that covertly
practiced by the Department of Defense and activities in the name of "national security."
Thus, the "hollowing out" of US manufacturing has continued for two decades at the behest
of global corporations and their investment bankers. President Bush I famously held that it
did not matter whether the US manufactured computer chips or potato chips, while President
Bush II's chair of the Council of Economic Advisors, Gregory Mankin, maintained that
outsourcing was good for American workers who could take their severance pay and 401Ks
and become day traders on the stock markets. Add to these idiocies the stout denials by
economists that increasing capital intensive technological change, automating manufacturing
and services would create the structural unemployment we see today. Conventional measures
of output per capita masked this technological unemployment as beneficial "increases in
productivity" for decades, as we have pointed out. Unfortunately, Obama administration
economic advisors are mostly steeped in conventional theories and models which continue to
serve Wall Street and corporate interests at the expense of workers and individuals much of
the US GDP increase in 2009 was due to "cash for clunkers" and the $8,000 offered to first-
time homebuyers. February 2010's job losses of another 36,000 kept the official
unemployment rate 9.7%, still the highest since April 1983. Adding "discouraged" and "part-
timers" still makes the total 16.8%. Although the recession is deemed officially ended, any
recovery will be fragile until job creation picks up. This may not get big banks to step up
lending to domestic companies since they make more money with proprietary trading,
hoarding their bailout funds or sending them offshore. The good news of the 4th quarter’s
GDP uptick must be seen in the context of four successive quarters of negative growth. These
numbers underline what most Americans have experienced for the past years, along with the
loss of over 8.4 million jobs since December 2007. States facing their new fiscal year are
wrestling with budget shortfalls with California's at $24 billion, while Illinois and Arizona
have much smaller deficits. North Dakota still stars with continuing budget surpluses, as we
discuss later. Trickledown economics of bailing out Wall Street is colliding with the bottom-
up demands of middle class voters for fairness, accountability and transparency. It's about
time for this debate and the deeper debate about whether money is more important than the
other forms of wealth that GDP counts and why Wall Street doesn't count: human "capital,"
knowledge, ecological assets and productivity. President Obama campaigned for recognition
of these uncounted forms of wealth and of the higher values of Americans: trust in each other
and our institutions and fairness in rewarding hard work in an economy designed to include
opportunities for a better future for all. Many new investors see these opportunities, as I
describe in "The New Financiers." Now for the good news. The confluence of the financial
meltdown and increasing threats to climate stability are leading to much creativity by these
new financiers in devising new ways of investing in the needed global transition to a low
carbon "re-industrialization." The weakness of the Waxman-Markey energy bill passed in the
US Congress by 7 votes focused the critiques of its reliance on Wall Street centric cap and
trade markets which have so far failed to reduce carbon emissions. This rapid deployment of
solar, wind, geothermal, ocean power sources as well as retro fitting for maximum energy
efficiency over 10 years is projected to cost $10 trillion. This can be covered by issuance of
several classes of new assets: long-bonds, zero coupon bonds, with hedging against the main
risk: Governments back-sliding on their greenhouse gas emissions targets under the Kyoto
Protocol. While this seems like a large sum, it is less than 10% of the $120 trillion in pension
funds and other institutional portfolios. Since pension funds and other government bonds
focus on long maturities, they are ideally suited to finance climate prosperity bonds out of the
savings they will produce: from energy efficiency and in reducing the cost of renewable
energy (with free fuel sources from the Earth) over the costs of fossil fuels (projected to keep
slowly rising). More good news is the collapse of gas prices due to the availability of gas
deposits in shale in the USA and other countries. This allows coal-fired power plants to
replace coal with cheaper natural gas for base loads as well as peak power. Thus, many coal-
fired plants may be retired and few will now be built. Business leaders met in Copenhagen in
May 2009 to address climate risks in their companies' fossil-fuelled processes and agreed that
the opportunities in shifting to a green, solar, wind, geothermal, ocean and energy-efficient
global economy were enormous. The 700 business leaders participating in the meeting
declared that immediate action would be cheaper than any further delays. While 193
governments failed to agree at the UN Conference in Climate in Copenhagen in December
2009, investments in low-carbon technology sectors continue to grow. The key will be to
keep pressure on governments to stop back-sliding and pandering to the fossil-fueled industry
sectors with toothless cap and trading which will only make Wall Street players richer.
Downsizing bloated financial sectors will be imperative. Those on Wall Street and in London
grew to 25% of U.S. and U.K. GDP. An efficient financial sector should be less than 10% of
a country's GDP. Yet Washington has still to follow through with vital reforms, while
Britain's head of their Financial Services Authority agrees that financial sectors must be
downsized and recommended a tax on financial transactions. Debate is growing that such a
tax is the best way to assess Wall Street for its cleanup costs – rather than taxpayers. So
today's GDP figures still force us to re-examine our rearview-mirror focus on the costly past
and reformulate statistics themselves which only measure money transactions. They overlook
the savings in shifting to the new green economy and the vast riches in our society from
energy-efficiency while ignoring the almost 50% of all productive work that is unpaid and
therefore omitted from GDP. From caring for our homes, children, the elderly and sick and
volunteering in our communities to exchanging and bartering goods and services, this vast
unpaid "love economy" is thriving and increasingly electronically traded on e-Bay, Craigslist,
Freecycle, time-banking and hundreds of other websites, flea markets and on radio programs
and via cell phones. My monograph with physicist Fritjof Capra, "Qualitative Growth,"
published by Britain's Society of Chartered Accountants and Tomorrow's Company, was
launched in the House of Lords in Britain's Parliament in November, 2009, co-sponsored by
WWF, the World Wildlife Fund. President Obama's team includes Google CEO Eric Schmidt
who understands the transition to the green economy and sees all the new possibilities in this
explosion of internet and community trading such as Making Change Without Money, the
title of a new series of papers by Gwendolyn Hallsmith and Edgar Cahn, both pioneer
community organizers. I have been pointing to all these alternatives to government-printed
money as well as all the local currencies helping to clear local markets: e.g., the Schumacher
Society's Berkshares in Massachusetts and time-based currencies based on Paul Glover's
Ithaca Hours China devised its own changes to GDP accounting to subtract pollution and
resource depletion (The Economist, "Greening of China," Oct 22, 2005, p. 43). This "Green
GDP" deducted 3% of environmental costs of the current GNP growth economic model
according to a Task Force Interim Report (2007). However, local officials still judged by
GDP-growth managed to suspend the Green GDP. As China's pollution is now visible on TV
worldwide, after the Olympic Games, we believe the Green GDP will be reinstated. The
British government report by Sir Nicholas Stern, the former chief economist of the World
Bank, states that stabilizing CO2 emissions at 550 parts per million could cost one percent of
global GDP growth and would prevent a likely global depression and economic losses of
from 5-20% of global GDP (Financial Times, Oct 20, 2006). China is moving rapidly to
create its own green economy and is already the world's largest producer of solar panels, a
leader in wind power and has the first plug-in hybrid car on sale now which will reach the US
market in 2010 costing $22,000.
INTERNATIONAL BUSINESS MANAGEMENT
Assignment Set- 2
Q1. DESCRIBE BRIEFLY THE EXCHANGE RATE ARRANGEMENTS OF
DEVELOPING AND TRANSITION COUNTRIES.
There is considerable diversity in exchange rate regimens of developing & transition
countries from very hard currency pegs to relatively free floats & with many variations in
between. However as these countries have adapted to expanding opportunities arising from
deeper involvement in an increasing integrated global economy & to change in their own
economic situation. The following conditions are likely to favour the adoption by a country
of some form of pegged exchange rate regime:
Its degree of involvement with international capital markets is low its share of trade with the
country to whose currency a peg is being considered is high. The economic shocks its faces
are similar to those facing the country to whose currency a peg is being considered. It
economy & financial system already extensively rely on its partners currency Fiscal policy is
flexible & sustainable It has high international reserves When these criteria are applied one
group of countries for which pegged exchange rates would seem to remain sensible are small
economic with a dominant trading partners that pursues a reasonably stable monetary policy
including small carribean & pacific Island economic for such countries. There is generally
little point in incurring the cost of attempting to run an independent monetary policy. Under
all exchange rate regimen other than absolutely free floating, ancillary policy to affect the
foreign exchange market through official intervention & controls merit attention. The key
point is that benign neglect of the exchange rate is unlikely to be desirable. When the foreign
exchange market is then dominated by a relatively small number of agents, it is likely that the
exchange rate will be volatile if the authorities do not provide some guidance & support.

Q2. WRITE A NOTE ON BILL OF LADING.

A bill of lading is a type of document that is used to acknowledge the receipts of a shipment
of goods & is an essential document in transporting goods overland to the exporter
international carriers. A bill of Lading involve the use of at least two different modes of
transport from road, rail, air & sea. The term drives from the noun Bill a schedule of cost for
services supplied or to be supplied & from the verb to lade which means to load a cargo onto
a ship or other form of transport. A bill of lading indicates the particular vessel on which the
goods have been placed, their intended destination & the terms for transporting the shipment
to its final destination. Inland, ocean through airway bill are the name given to bill of lading.
Q3. DISCUSS IN BRIEF THE FIVE MAJOR PRODUCT STRATEGIES IN
INTERNATIONAL MARKETING
a. Product communications extension-This strategy is very low cost and merely takes the
same product and communication strategy into other markets. However, it can be risky if
misjudgments are made. For example, CPC International believed the US consumer would
take to dry soups, which dominate the European market. It did not work.
b. Extended product – communications adaptation-If the product basically fits the
different needs or segments of a market it may need an adjustment in marketing
communications only. Again this is a low cost strategy, but different product functions have
to be identified and a suitable communications mix developed.
c. Product adaptation – communications extension: The product is adapted to fit usage
conditions but the communication stays the same. The assumption is that the product will
serve the same function in foreign markets under different usage conditions.
d. Product adaptation–communications adaptation-: Both product and communication
strategies need attention to fit the peculiar need of the market.
e. Product invention-This needs a totally new idea to fit the exclusive conditions of the
market. This is very much a strategy which could be ideal in a Third World situation. The
development costs may be high, but the advantages are also very high. The choice of strategy
will depend on the most appropriate product/market analysis and is a function of the product
itself defined in terms of the function or need it serves, the market defined in terms of the
conditions under which the product is used, the preferences of the potential customers and the
ability to buy the product in question,

Q4. HOW WAS ‘PROTECTIONISM’ PRACTICED?

Ans. Protectionism is levying of additional tariffs or other protectionist measures by other
countries in retaliation, reduced competition (which results in inflation and less choice for
consumers), a weakening of the trade balance (due in part to diminished export abilities
resulting from foreign retaliations and in part because of the domestic currency loses power
as there is less demand for it). This may lead to a vicious cycle of trade wars as each country
responds to the other with a "tit for tat." Although trade generally benefits a country as a
whole, powerful interests within countries frequently put obstacles – i.e., they seek to inhibit
free trade.
There are several ‘protectionism’ can be done:
a. Tariff barriers: A duty, or tax or fee, is put on products imported. This is usually a
percentage of the cost of the good.
b. Quotas: A country can export only a certain number of goods to the importing country.
For example, Mexico can export only a certain quantity of tomatoes to the United States, and
Asian countries can send only a certain quota of textiles here.
c. "Voluntary" export restraints: These are not official quotas, but involve agreements
made by countries to limit the amount of goods they export to an importing country. Such
restraints are typically motivated by the desire to avoid more stringent restrictions if the
exporters do not agree to limit themselves. For example, Japanese car manufacturers have
agreed to limit the number of automobiles they export to the United States.
d. Subsidies to domestic products: If the government supports domestic producers of a
product, these may end up with a cost advantage relative to foreign producers who do not get
this subsidy. U.S. honey manufacturers receive such subsidies.
e. Non-tariff barriers, such as differential standards in testing foreign and domestic products
for safety, disclosure of less information to foreign manufacturers needed to get products
approved, slow processing of imports at ports of entry, or arbitrary laws which favour
domestic manufacturers.
Justifications for protectionism: Several justifications have been made for the practice of
protectionism. Some appear to hold more merit than others:
a. Protection of an "infant" industry: Costs are often higher, and quality lower, when an
industry first gets started in a country, and it thus be very difficult for that country to
compete. However, as the industry in the country matures, it may be better able to compute.
Thus, for example, some countries have attempted to protect their domestic computer markets
while they gained strength. The U.S. attempted to protect its market for small autos.
American manufacturers were caught unprepared for the switch in demand away from the
larger cars. This is generally an accepted reason in trade agreements, but the duration of this
protection must be limited (e.g., a maximum of five to ten years).
b. Resistance to unfair foreign competition: The U.S. sugar industry contends that most
foreign manufacturers subsidize their sugar production, so the U.S. must follow to remain
competitive. This argument will hold little merit with the dispute resolution mechanism
available through the World Trade Organization.
c. Preservation of a vital domestic industry: The U.S. wants to be able to produce its own
defence products, even if foreign imports would be cheaper, since the U.S. does not want to
be dependent on foreign manufacturers with whose countries conflicts may arise. Similarly,
Japan would prefer to be able to produce its own food supply despite its exorbitant costs. For
an industry essential to national security, this may be a compelling argument, but it is often
used for less compelling ones (e.g., manufactures of funeral caskets or honey).
d. Intervention into a temporary trade balance: A country may want to try to reverse a
temporary decline in trade balances by limiting imports. In practice, this does not work since
such moves are typically met by retaliation.
e. Maintenance of domestic living standards and preservation of jobs. Import restrictions can
temporarily protect domestic jobs, and can in the long run protect specific jobs (e.g., those of
auto makers, farmers, or steel workers). This is less of an accepted argument – these workers
should instead by retrain to work in jobs where their country has a relative advantage.
f. Retaliation: The proper way to address trade disputes is now through the World Trade
Organization. In the past, where enforcement was less available, this might have been a
reasonable argument.
Note that while protectionism generally hurts a country overall, it may be beneficial to
specific industries or other interest groups. Thus, while sugar price supports are bad for
consumers in general, producers are an organized group that can exert a great deal of
influence. In contrast, the individual consumer does not have much of an incentive to take
action to save

Q5. DESCRIBE SOME STRATEGIES ADOPTED BY MCDONALD TO SPREAD

THEIR CHAIN WORLDWIDE.
McDonald may pursue business strategies that are home country – oriented or host country
– oriented or world – oriented. Perlmutter uses such terms as ethnocentric, polycentric and
geocentric. However, "ethnocentric" is misleading because it focuses on race or ethnicity,
especially when the home country itself is populated by many different races, whereas
"polycentric" loses its meaning when the MNCs operate only in one or two foreign countries.
According to Franklin Root (1994), an MNC is a parent company that a. engages in foreign
production through its affiliates located in several countries,
b. exercises direct control over the policies of its affiliates,
c. implements business strategies in production, marketing, finance and staffing that
transcend national boundaries.

Business strategy of a MNC can be analyzed with the help of Three Stages of Evolution
1. Export stage
· initial inquiries - firms rely on export agents
· expansion of export sales
· further expansion - foreign sales branch or assembly operations (to save transport cost)
2. Foreign Production Stage
There is a limit to foreign sales (tariffs, NTBs).Once the firm chooses foreign production as a
method of delivering goods to foreign markets, it must decide whether to establish a foreign
production subsidiary or license the technology to a foreign firm.
Licensing is usually first experience (because it is easy)
· it does not require any capital expenditure
· it is not risky
· payment = a fixed % of sales
e.g.: Kentucky Fried Chicken in the U.K.
Problem that may arise while following a particular business strategy: The mother firm
may find it difficult in exercise of any managerial control over the licensee (as it is
independent). Secondly, the licensee may transfer industrial secrets to another independent
firm, thereby creating a rival.
The next stage for supplementing any particular business strategy is Investments
involved.
It requires the decision of top management because it is a critical step.
 it is risky (lack of information) (for example-US firms tend to establish
subsidiaries in
 Canada first. Singer Manufacturing Company established its foreign plants
in Scotland
 and Australia in the 1850s)
 plants are established in several countries
 licensing is switched from independent producers to its subsidiaries.
 export continues
3. Multinational Stage: The company becomes a multinational enterprise when it begins to
plan, organize and coordinate production, marketing, R&D, financing, and staffing. For each
of these operations, the firm must find the best location. McDonald has offered its customer
what they want at the best available prices. Since the need of customer change with time
Mcdonald has introduced new products by terminating the old one.
Q6. IN THE WAKE OF GLOBALIZATION WHAT IS ROLE OF SUPPLY CHAIN
MANAGEMENT?
A supply chain is a network of supplier, manufacturing, assembly, distribution & logistic
facilities that perform the function of procurement of material, transformation of these
materials into intermediate & finished goods, the distribution of these products to customer.
Supply chain arises in both manufacturing & service organization. Supply chain management
is a system approach to manage the entire flow of information, material & service from raw
material supplier through factories & warehouse to hand customers. SCM has emerged as the
new key to productivity & competitiveness of manufacturing & service enterprises the
importance of this area is shown by a significant spurt in research the last 5 years & also
proliferation of supply chain solutions & supply chain companies. It is a major application
area for Internet Technologies & Electronic Commerce (ITEC). In facts advances in ITEC
hace contributed to growing importance of SCM.
It is having 2 major Phases
1. Phase-1: It can be called loosely as the back end comprises the physical building blocks
such as the supply facilitates, production facilitates, warehouse, distributors, retailers &
logistic facility. Major decision here includes
Procurement: Supplier selection, Optimal procurement
Manufacturing: Plant location, product line selection, capacity planning, production
Logistics: Selection of Port, direct delivery, etc Global Decision
2. Phase-2: is where IT & ITEC play a key role. This phase involves processing & use of
information to facilitate & optimize the back end operation.
Key technologies here include EDI Exchange for important information across different
players in supply chain, Electronic payment protocols, Internet auctions etc.