International business

International business is a term used to collectively describe all commercial transactions (private and governmental, sales, investments, logistics and transportation) that take place between two or more nations. 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 involves 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 In most countries, it represents a significant share of gross domestic product (GDP). While international business has been present throughout much of history, its economic, social, and political importance has been on the rise in recent centuries. Industrialization, advanced transportation, globalization, multinational, and outsourcing are all having a major impact on the international business system. Increasing international business is crucial to the continuance of globalization. Without international business, nations would be limited to the goods and services produced within their own borders. International trade is a branch of economics, which, together with international finance, forms the larger branch of international economics.

Scope of International Business

Foreign trade refers to the flow of goods across national political borders. Therefore , it refers to exporting and importing by international marketing companies plus the creation of demand, promotion, pricing etc. The aim of international business is to increase production and to raise the standard of living of the people.International business helps citizens of one nation to consume and enjoy the possession of goods produced in some other nation. There is a need of international business due to the following reasons: Uneven Distribution of Natural Resources: Natural resources of the world are not evenly divided amongst the nations of the world. Different countries of the world have different amount of natural resources and they differ with each other in regard to climate, minerals and other factors. Some countries can produce more of sugar like Cuba, some can produce more of cotton like Egypt, while there are some others which can produce more of wheat like Argentina. But all these countries need sugar, cotton and wheat. So they have to depend upon one another for the exchange of their surpluses with the goods are in short in their country and hence the need forinternational business is natural. Division of Labour and Specialization: Due to uneven distribution of natural resources, some countries are more suitable placed to produce some goods more economically than other countries. But they are geographically at a disadvantageous position to produce other goods. They specialize in the production of such goods in which they have

some natural advantage in the form of availability of raw material, labour, technical know-how, climatic conditions, etc., and get other goods in exchange for these goods from other countries. Differences in Economic Growth Rate: There are many differences in the economic growth rates of different countries. Some countries are developed, some are developing, while there are some other countries which are under-developed; these under- developed and developing countries have to depend upon developed ones for financial help, which ultimately encourages internationalbusiness. Theory of Comparative Cost: According to the theory of comparative cost each country should concentrate on the production of those goods for which it is best suited, taking into account its natural resources, climate, labour supply, technical know-how and the level of development. Each country specializes in the production of those goods which it can produce at the lowest cost as compared to other countries which leads to international specialization and division of labour. This reduces the cost of production all over the world and improves the standard of living of the people in various countries. Hence the theory of comparative cost encourages international business.

International business is wider in scope because it involves: International marketing, international investments,
management of foreign exchange, procuring international finance from IMF, IBRD, IFC, IDA etc, management of international human resource, management of cultural diversity, management of international production and logistics, international strategic management, and the like. Thus, international business is wider in scope and covers all the aspects of the system.

Importance of International Business

International business is defined as any commercial transaction taking place across boundary lines of a
sovereign entity. International business is all business transactions-private and governmental-that involve two or more countries. International business comprises a large and growing portion of the world's total business. Today, almost all companies, large or small, are affected by global events and competition because most sell output to and/or secure suppliers from foreign countries and/or compete against products and services that come from abroad.

More companies that engage in some form of international business are involved in exporting and importing
than in any other type of business transaction. : Many of the international business experts argue that exporting is a logical process with a natural structure, which can be viewed primarily as a method of understanding the target country's environment, using the appropriate marketing mix, developing a marketing plan based upon the use of the mix, implementing a plan through a strategy and finally, using a control method to ensure the strategy is adhered to. This exporting process is reviewed and evaluated regularly and modifications are made to the use of the mix, to take account of market changes impacting upon competitiveness. This view seems to suggest that much of the international business

theory related to enterprises, which are internationally based and have global ambitions, does often change depending on the special requirements of each country.

Another core issue is the company's growth and the importance of networking and interaction. : This view looks
at the way in which companies and organizations interact and consequently network with each other to gain commercial advantage in world markets. The network can be using similar subcontractors or components, sharing research and development costs or operating within the same governmental framework. Clearly, when businesses formulate a trading block with no internal barriers they are actually creating their own networks. Collaborations in aerospace, vehicle manufactures and engineering have all sponsored the development of a country's or a group of countries' outlook based on their own internal market network. This network and interaction approach to internationalization shows the ability to influence decisions when knowing how the global network players work or interact. For example, a crucial market network is that of the Middle East. Middle East countries are rich, diverse markets, with a vibrant and varied cultural heritage. This means that although there has been a harmonization process during the past few years, differences still exist. Rather than business being simpler as a result, it should be recognized that because of regulations and the need those countries have to restructure as they enter the global market, performing any kind of business can be highly complex. It should be remembered though that the Middle-Eastern countries have a low-income average and like to have their cultural differences recognized. Those firms that will or have recognized these facts have a good chance of developing a successful marketing strategy to meet their needs. Fortunately some firms have realized these important differences and reacted adequately when strategic decisions had to be made regarding their penetration to this kind of markets.

Studying international business is important because: 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.

Importance of international business Every company is trying to expand its business by entering foreign markets. International business helps in the following ways:-

Helps as growth strategy: - Geographic expansion may be used as a business strategy. Even though companies may
expand their business at home.

Helps in managing product life cycle: - every product has to pass through different stages of product life cycle-when
the product reaches the last stages of life cycle in present market; it may get proper response at other markets.

 Technology advantages: - some companies have outstanding technology advantages through which they enjoy core
competency. This technology helps the company in capturing other markets.

New business opportunities: - business opportunities in overseas markets help in expansion of many companies. They
might have reached a saturation point in domestic market.

Proper use of resources: -Sometimes industrial resources like labor, minerals etc. are available in a country but are not
productively utilized.

Availability of quality products: - when markets are open, better quality goods will be available every where. Foreign
companies will market latest products at reasonable prices. Good product will be available in the markets.

Earning foreign exchange: - international business helps in earning foreign exchange which may be used for strategic
imports .India needs foreign exchange to import crude oil, deface equipment, raw material and machinery.

Helps in mutual growth: - countries depend upon each other for meeting their requirements. India depends on gulf
countries for its crude oil supplies.

Investment in infrastructure: - international business necessitates proper development of infrastructure. A company

entering international business must invest in roads.

REASONS TO ENGAGED INTERNATIONAL BUSINESS

All organizations, irrespective of their size, are keen to enter in to international business. Established companies are expanding their business. Many countries encourage trade, and removal of strangulating trade barriers. It motivates companies to aggressively multiply their targets. The governments of various countries are also determined to make their economy grow through international business that has therefore become a inevitable part of their economic policy. The objective behind international business can be looked at: 1. From an individual companys angle. 2. From the government angle. From an individual companys angle Managing the product life cycle: All companies have products, which pass through different stages of their life cycles. After the product reaches the last stage of the life cycle called the declining stage in one country, it is important for the company to identify other countries where the whole cycle process could be encashed. For example, HP laptops are moving all the developing countries the moment they reached maturity in the U.S. market. Geographic expansion as a growth strategy:

Even if companies expand their business at home, they may still look overseas for new markets and better prospects. For example,Ranbaxys growth is mainly attributed to geographic expansion every year to new territories. The adventurous spirit of the younger generation The younger generation of business families has considerable International exposure. They are willing to take risks and challenges and also create opportunities for their business. Laxmi Mittal has Emerged as the steel king of the world Corporate ambition Every corporate in the country has strategic plans to multiply its sales turnover. In case some of the ventures fail, others will offset the losses because of multi-location operations. For example, Coco Cola is still to day not earning any profit in a number of countries. But this will not affect the company because more than a hundred countries are contributing to offset losses Technology advantage: Some companies have outstanding technology through which they enjoy core competency. There is a need for such technology in all countries. Biocon, Infosys, Gharda chemicals are known for their core competency in biotechnology,. Building a corporate image Prior to profits and revenue generation, many companies first build their corporate image abroad. Once the image is built, generating revenues is a comparatively easy task. Samsung and LG built their image in India for the first three years and generation of revenue and profits has been considerable. Incentives and business impact Companies, which are involved in international business, enjoy fiscal, physical and infrastructural incentives while they setup business in the host country. The Aditya Birla Group enjoyed such incentives in Thailand and Indonesia.. Lobour advantage Many companies have a highly productive lobour force. Their unique skills may not be available throughout the world. Manufacturing units in India have consistently performed well, whether in a diamond industry, handicraft, woodwork or leather New business opportunities

Many companies have entered in to business abroad, seeing unlimited opportunities. National foreign trade policy emphasizes focus markets. Enormous amount of growth potential is untapped in Latin America, Sub-Saharan Africa, CIS countries and China.

From a Government Angle Earning valuable foreign exchange Foreign exchange earning is necessary to balance the payments for imports. India imports crude oil, defense equipments, essential raw materials and medical equipments for which the payments have to be made in foreign exchange. If the exports are high and imports are low it indicates a surplus balance of payment. On the other hand if imports are high and exports are low it indicates an adverse balance of payment, which all economies would want to avoid. A vast majority of the nations in the world are facing adverse balance of payment. Interdependency of nations From time immemorial, nations have depended on each other. Even during the era of Indus valley civilization, Egypt and the Indus Valley depended on each other for various items. Today, India depends on the Gulf regions for crude oil and in turn the Gulf region depends on India for tea, rice etc. No single country is endowed with all the resources to survive on her own. Trade theories and their impact The theories of absolute advantage, comparative advantage and competitive advantage, which have been propounded by classical economists, indicate that a few nations have certain advantages of resources. The resources may be in the form of labour or infrastructure or technology or even a proactive policy of the government. Such theories are remaining foundations till today, for international business practices with few changes and trends. Diplomatic relations Diplomacy and trade always go hand in hand. Many sovereign nations send their diplomatic representatives to other countries with a motive of promoting trade besides maintaining cordial relations. Indian diplomats in Latin America have done a remarkable job of promoting Indias business in the 1990s. Core competency of nations

Many countries are endowed with resources, which are produced at an optimum level. Such countries can compete well anywhere in the world. Rubber products from Malaysia, knitwear from India, rice from Thailand and wool from Australia are a few illustrations.. Investment for infrastructure Over the years all countries have invested huge amounts of money on infrastructure by building airports, seaports, economic zones and inland container terminals. If the trade activities do not increase, the country cannot recover the amounts invested. Hence, the government fixes targets for every infrastructure unit and time frame to achieve it National targets

Modes of entry
The modes of entry used by an exporter will depend on the product or service being sold as well as the country targeted for entry. Each mode of entry has its advantages and disadvantages based on the relative risk of a buyer and target country. These advantages and disadvantages will obviously affect the costs of the venture/transaction and ultimately the profitability of the international business. The experience of a seller as well as the company support in terms of personnel and finances will also help to determine the best mode of entry. Remember that the mode of entry is just that, the entry. Once the relationship has been established and experience and critical mass gained, it can be changed. It may cost to make a change, but long term profitability should be increased.

Joint Venture One of the most popular modes of entry is the establishment of a joint venture, in which two businesses combine resources to sell products or services. Many countries with tightly controlled economies, such as China, often require foreign companies to partner with a local company if they wish to sell products to their residents. Although joint ventures provide foreign companies with a partner experienced in the foreign market, these partnerships can be difficult to manage and require a splitting of profits. Licensing In the licensing mode of entry, companies sign contracts with foreign businesses, called "licenses," that allow the foreign companies to legally manufacture and sell the company's products. The foreign companies will either purchase the license outright, pay a regular licensing fee or pay a percentage of their revenue over time in the form of royalties. Often used by manufacturing firms, licensing allows a company to enter a market quickly and inexpensively, but gives them little control over the products' foreign marketing and sales.

Exporting Rather than attempt to partner with or provide a license to foreign companies, some companies will simply sell their products to distributors overseas, who will sell the products to consumers. This exporting prevents the company from having to invest the money in developing manufacturing facilities in the foreign market, but transportation costs and restrictive tariffs may make this mode uneconomical for certain products. Internet Many companies will attempt to enter foreign markets indirectly, by targeting foreign consumers on the Internet. Similar to exporting, companies retain their physical operations in their native countries, but ship products overseas. However, whereas in exporting, companies contract with local businesses, with the Internet they take orders directly from consumers. The advantages to this mode are that it is relatively cheap, entailing only the cost of a website and marketing. The downside is that it is often less effective than establishing a physical presence in the foreign market. Purchasing Foreign Assets Many companies, rather than launching an entirely new venture in a foreign market, will simply purchase or invest in a foreign company. While often more expensive, direct investment provides allows the investing company to reap the profits of a business that is already well integrated into the local market.

Direct Exporting: Direct exporting involves selling directly to your target customer in market. This could be from New Zealand through the internet and regular trade visits, or by setting up a branch, office or company in the target country. Selling directly to customers prevents other businesses taking parts of your margin. However this approach requires a large commitment of financial and human resources. It takes time to make contacts and build relationships, negotiate deals, understand the market and carry out marketing. Indirect Exporting : Selling to or through an intermediary is a relatively cheap and straightforward way to enter a new market. Intermediaries are typically agents or distributors based in your target export market who sell your products or services to end users. A good intermediary will have in-market experience, reputation and contacts. Using them can be a quick way to get your products and services to the end user. They will generally require a level of support in the overseas marketing and selling of your product. Franchising : Franchising is a business model in which many different owners share a single brand name. A parent company allows entrepreneurs to use the company's strategies and trademarks; in exchange, the franchisee pays an initial fee and royalties based on revenues. The parent company also provides the franchisee with support, including advertising and training, as part of the franchising agreement. Franchising is a faster, cheaper form of expansion than adding company-owned stores, because it costs the parent company much less when new stores are owned and operated by a third party. On the flip side, potential for revenue growth is more limited because the parent company will only earn a percentage of the earnings from each new store. 70 different

industries use the franchising business model, and according to the International Franchising Association the sector earns more than $1.5 trillion in revenues each year. Contract Manufacturing: Contract manufacturing is a process that established a workingagreement between two companies. As part of the agreement, onecompany will custom produce parts or other materials on behalf of their client. In most cases, the manufacturer will also handle the ordering and shipment processes for the client. As a result, the client does not have to maintain manufacturing facilities, purchaseraw materials, or hire labor in order to produce the finished goods. Management Contracts: A management contract is an arrangement under which operational control of an enterprise is vested by contract in a separate enterprise which performs the necessary managerial functions in return for a fee. Management contracts involve not just selling a method of doing things (as with franchising or licensing) but involves actually doing them. A management contract can involve a wide range of functions, such as technical operation of a production facility, management of personnel, accounting, marketing services and training. Turnkey Projects: A turnkey or a turnkey project is a project that is sold to the buyer after it is complete. Such projects are ready to use and the buyer can have full control over the functionality of the project the moment it is complete. The term turnkey basically refers to a home that is newly built and ready for use immediately by the customer. The turnkey project is a contract based project under which a company agrees to completely design, construct and fully equip the business or home and sell the project to the buyer fully functional.Such contracts and projects provide their customers with ready to use, fully developed and tested businesses or homes. This is the factor that is highly appreciated by the customer that when he purchases the project it is fully functional and there is no need for any sort of struggle in the part of the customer. Direct investment: Foreign direct investment (FDI) refers to long term participation by country A into country B. It usually involves participation inmanagement, joint-venture, transfer of technology and expertise. There are three types of FDI: inward foreign direct investment and outward foreign direct investment, resulting in a net FDI inflow (positive or negative) and "stock of foreign direct investment", which is the cumulative number for a given period. Direct investment excludes investment through purchase of shares Mergers and acquisition: Mergers and acquisitions, or M&A as they are also known, are both means by which two or more business entities become one larger entity. In the case of a merger, this is often a process that is entered into after a long period of evaluation on the part of the respective officers and owners of the companies involved. When the idea is to merge companies together, there is usually a sensethat all parties involved in the creation of the new and larger entity are equals in the process and will be treated as such as the structure of the new entity is planned and put into operation.With an acquisition, the scenario is a little different. When onecompany decides to acquire another company, the process usually involves a buyout or purchase of that business. There are not necessarily any plans to continue all the operations of the acquired company; often the resources of the acquisition are absorbed into the resources held by the purchasing company while the acquired business simple ceases to exist.

Offshore Banking
An offshore bank is a bank located outside the country of residence of the depositor, typically in a low tax jurisdiction (or tax haven) that provides financial and legal advantages. These advantages typically include: greater privacy (see also bank secrecy, a principle born with the 1934 Swiss Banking Act) low or no taxation (i.e. tax havens) easy access to deposits (at least in terms of regulation) protection against local political or financial instability

Advantages
Offshore banks can sometimes provide access to politically and economically stable jurisdictions. This will be an advantage for residents in areas where there is risk of political turmoil, who fear their assets may be frozen, seized or disappear. However it is often argued that developed countries with regulated banking systems offer the same advantages in terms of stability. Some offshore banks may operate with a lower cost base and can provide higher interest rates than the legal rate in the home country due to lower overheads and a lack of government intervention. Advocates of offshore banking often characterise government regulation as a form of tax on domestic banks, reducing interest rates on deposits. Offshore finance is one of the few industries, along with tourism, in which geographically remote island nations can competitively engage. It can help developing countries source investment and create growth in their economies, and can help redistribute world finance from the developed to the developing world. Interest is generally paid by offshore banks without tax being deducted. This is an advantage to individuals who do not pay tax on worldwide income, or who do not pay tax until the tax return is agreed, or who feel that they can illegally evade tax by hiding the interest income. Some offshore banks offer banking services that may not be available from domestic banks such as anonymous bank accounts, higher or lower rate loans based on risk and investment opportunities not available elsewhere.

 Offshore banking is often linked to other structures, such as offshore companies, trusts or foundations, which may have specific tax advantages for some individuals. Many advocates of offshore banking also assert that the creation of tax and banking competition is an advantage of the industry. Tax competition allows people to choose an appropriate balance of services and taxes.

Disadvantages
Banking offshore is historically riskier than banking onshore.Offshore bank accounts are less financially secure. In a banking crisis which swept the world in 2008 the only savers who lost money were those who had deposited their funds in offshore branches of Icelandic banks such as Kaupthing Singer & Friedlander. Those who had deposited with the same banks onshore received all of their money back. Offshore banking has been associated in the past with the underground economy and organized crime, through money laundering.[3]Following September 11, 2001, offshore banks and tax havens, along with clearing houses, have been accused of helping various organized crime gangs, terrorist groups, and other state or non-state actors. However, offshore banking is a legitimate financial exercise undertaken by many expatriate and international workers. Offshore jurisdictions are often remote, and therefore costly to visit, so physical access and access to information can be difficult. Yet in a world with global telecommunications this is rarely a problem for customers. Accounts can be set up online, by phone or by mail. Offshore private banking is usually more accessible to those on higher incomes, because of the costs of establishing and maintaining offshore accounts. However, simple savings accounts can be opened by anyone and maintained with scale fees equivalent to their onshore counterparts. The tax burden in developed countries thus falls disproportionately on middle-income groups. Offshore bank accounts are sometimes touted as the solution to every legal, financial and asset protection strategy but this is often much more exaggerated than the reality.

Banking Services It is possible to obtain the full spectrum of financial services from offshore banks, including: deposit taking , credit, wire- and electronic funds transfers, foreign exchange, letters of credit and trade finance investment management and investment custody, fund management, trustee services, corporate administration

Not every bank provides each service.

Regulation of Offshore Banking In the 21st century, regulation of offshore banking is allegedly increasing, although critics maintain it remains largely insufficient. The quality of the regulation is monitored by supra-national bodies such as the International Monetary Fund (IMF). Since the late 1990s, especially following September 11, 2001, there have been a number of initiatives to increase the transparency of offshore banking. A few examples of these are: The tightening of anti-money laundering regulations in many countries including most popular offshore banking locations means that bankers are required, by good faith, to report suspicion of money laundering to the local police authority, regardless of banking secrecyrules. There is more international co-operation between police authorities. In the US the Internal Revenue Service (IRS) introduced Qualifying Intermediary requirements, which mean that the names of the recipients of US-source investment income are passed to the IRS. USA PATRIOT Act, which authorises the US authorities to seize the assets of a bank, where it is believed that the bank holds assets for a suspected criminal. Similar measures have been introduced in some other countries. The European Union has introduced sharing of information between certain jurisdictions, and enforced this in respect of certain controlled centres, such as the UK Offshore Islands, so that tax information is able to be shared in respect of interest

Foreign Exchange Market

The foreign exchange market (forex, or currency market) is a worldwide decentralized over-the-counter financial market for the trading of currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends. The foreign exchange market determines the relative values of different currencies. The primary purpose of the foreign exchange market is to assist international trade and investment, by allowing businesses to convert one currency to another currency. For example, it permits a US business to import British goods and pay Pound , even though the business's income is in US dollars. It also supports speculation, and facilitates the carry trade, in which investors borrow low-yielding currencies and invest in high-yielding currencies, and which may lead to loss of competitiveness in some countries. The modern foreign exchange market started forming during the 1970s when countries gradually switched to floating exchange rates from the previous exchange rate regime, which remainedfixed The foreign exchange market is unique because of its

huge trading volume, leading to high liquidity geographical dispersion continuous operation: 24 hours a day except weekends, i.e. trading from 20:15 GMT on Sunday until 22:00 GMT Friday the variety of factors that affect exchange rates the low margins of relative profit compared with other markets of fixed income the use of leverage to enhance profit margins with respect to account size

According to the Bank for International Settlements, average daily turnover in global foreign exchange markets is estimated at $3.98 trillion, as of April 2010 a growth of approximately 20% over the $3.21 trillion daily volume as of April 2007. Market Participants Unlike a stock market, the foreign exchange market is divided into levels of access. At the top is the inter-bank market, which is made up of the largest commercial banks and securities dealers. Banks The interbank market caters for both the majority of commercial turnover and large amounts of speculative trading every day. A large bank may trade billions of dollars daily. Some of this trading is undertaken on behalf of customers, but much is conducted by proprietary desks, trading for the bank's own account. Commercial companies An important part of this market comes from the financial activities of companies seeking foreign exchange to pay for goods or services. Commercial companies often trade fairly small amounts compared to those of banks or speculators, and their trades often have little short term impact on market rates. Central banks National central banks play an important role in the foreign exchange markets. They try to control the money supply, inflation, and/or interest rates and often have official or unofficial target rates for their currencies. They can use their often substantial foreign exchange reserves to stabilize the market. Hedge funds as speculators About 70% to 90% of the foreign exchange transactions are speculative. In other words, the person or institution that bought or sold the currency has no plan to actually take delivery of the currency in the end; rather, they were solely speculating on the movement of that particular currency. Investment management firms Investment management firms (who typically manage large accounts on behalf of customers such as pension funds and endowments) use the foreign exchange market to facilitate transactions in foreign securities. Some investment management firms also have more speculative specialist currency overlay operations, which manage clients' currency exposures with the aim of generating profits as well as limiting risk.

Retail foreign exchange brokers Retail traders (individuals) constitute a growing segment of this market, both in size and importance. Currently, they participate indirectly through brokers or banks. There are two main types of retail FX brokers offering the opportunity for speculative currency trading: brokers and dealers or market makers. Non-bank foreign exchange companies Non-bank foreign exchange companies offer currency exchange and international payments to private individuals and companies. These are also known as foreign exchange brokers but are distinct in that they do not offer speculative trading but currency exchange with payments. I.e., there is usually a physical delivery of currency to a bank account. Money transfer/remittance companies Money transfer companies/remittance companies perform high-volume low-value transfers generally by economic migrants back to their home country.

DETERMINANTS OF FX RATES The following theories explain the fluctuations in FX rates in a floating exchange rate regime (In a fixed exchange rate regime, FX rates are decided by its government): (a) International parity conditions: Relative Purchasing Power Parity, interest rate parity, Domestic Fisher effect, International Fisher effect. Though to some extent the above theories provide logical explanation for the fluctuations in exchange rates, yet these theories falter as they are based on challengeable assumptions [e.g., free flow of goods, services and capital] which seldom hold true in the real world. (b) Balance of payments model: This model, however, focuses largely on tradable goods and services, ignoring the increasing role of global capital flows. It failed to provide any explanation for continuous appreciation of dollar during 1980s and most part of 1990s in face of soaring US current account deficit. (c) Asset market model: views currencies as an important asset class for constructing investment portfolios. The asset market model of exchange rate determination states that the exchange rate between two currencies represents the price that just balances the relative supplies of, and demand for, assets denominated in those currencies. None of the models developed so far succeed to explain FX rates levels and volatility in the longer time frames.

Resource Mobilization through portfolio

Global and regional Partnership programmes

Resources are the inputs that are used in the activities of a program.Broadly speaking, the term encompasses natural, physical, financial,human, and social resources, but the vast majority of the resources that make up the inputs to GRPPs are financial resources. Inkind resources such as the provision of office space, seconded staff, or partner participation at board meetings are a second level of resources. Resource mobilization is the process by which resources are solicited by the program and provided by donors and partners. This is particularly important for GRPPs, since GRPPs are typically externally financed programs with little or no capacity to earn income from their own resources. Most are public sector programs, which typically provide goods and services (including financial resources) to beneficiaries on a grant or in-kind basis. The process of mobilizing resources begins with the formulationof a resource mobilization strategy, which may include separate strategies for mobilizing financial and in-kind resources. Carrying out a financial resource mobilization strategy includes the following steps: identifying potential sources of funds, actively soliciting pledges, following up on pledges to obtain funds, depositing thesefunds, and recording the transactions and any restrictions on their use. The process is generally governed by legal agreements at various stages. Resource mobilization strategies and processes may be constrained by parameters or rules established by the partners at the inception of the program and recorded in the charter or initiating legal documents. For example, these may require donors to contribute a minimum amount per year in order to have a seat on the governing body. They may specify that funds cannot be accepted from private sector sources, or only under certain conditions. Or they may require separate accounts for different expected uses of funds, which would affect the recording of the deposits. Financial management refers to all the processes that govern the recording and use of funds, including allocation processes, crediting and debiting of accounts, controls that restrict use, and accounting and periodic financial reporting systems. Financial management also includes the processes which ensure that funds are used for the purposes intended a fiduciary standard that is expected by the vast majority of donors. In cases where funds received accumulate over time, it would also include the management of the cash and investment portfolio. NEED FOR GRPP EVALUATIONS TO COVER RESOURCE MOBILIZATION AND FINANCIAL MANAGEMENT For GRPPs, it is important to review resource mobilization and financial management from both a static and a dynamic perspective. From a static perspective, the financial resources at any point in time are the major input that determines results, and analyzing their sources and uses is an essential part of tracking progress and attributing results to the program. From a dynamic perspective, the processes of formulating the resource mobilization strategy, managing the peculiarities of responding to diverse donor funding cycles, and committing and allocating funds need to be examined in their own right, because these affect the ability of the program to achieve its objectives on its current scale as well as the potential to achieve its objectives on a larger scale or in new ways. Accountability for the final use of funds in a strict legal sense, however, is normally done through the formal audit process. At a minimum, all GRPP evaluations should describe the sources and uses of public and private funds for the program and assess how the patterns of financing have affected the scope, reach, and results the program achieved. They should also analyze the allocation processes and any effects that donor restrictions (such as tying or earmarking funds to particular activities) have had on the achievement of the programs objectives. Also, the evaluation should include in any assessment of the strategy of the program the degree to which

the programs resource mobilization strategy and execution is adequate to meet the needs of the program and to achieve its desired scale. This assessment may be linked to the assessment of governance, since the involvement of new donors may affect the dynamics of the governing body. Finally, it may also be important to assess the degree to which the financial management system and finanMost legal agreements involving official, multilateral, private, or foundation donors will contain a phrase calling for assurances that the funds are used as intended. Only selected individual donors (particularly anonymous individual donors) typically provide contributions to the program as a whole without a legal agreement that sets expectations on reporting or fiduciary assurances.

ADR
Introduced to the financial markets in 1927, an American Depository Receipt (ADR) is a stock that trades in the United States but represents a specified number of shares in a foreign corporation. ADRs are bought and sold on U.S. stock markets just like regular stocks and are issued/sponsored in the U.S. by a bank or brokerage. ADRs were introduced in response to the difficulty of buying shares from other countries which trade at different prices and currency values. U.S. banks simply purchase a large lot of shares from a foreign company, bundle the shares into groups and reissue them on either the NYSE, AMEX or Nasdaq. The depository bank sets the ratio of U.S. ADRs per home country share. This ratio can be anything less than or greater than 1. For example, a ratio of 4:1 means that one ADR share represents four shares in the foreign company. The majority of ADRs range in price from $10 to $100 per share. If the shares are worth considerably less in the home country, then each ADR will represent several real shares. Foreign entities generally like ADRs because it gives them U.S. exposure, which allows them to tap into the rich North American equity markets. In return, the foreign company must provide detailed financial information to the sponsor bank. Objectives and Risks The main objective of ADRs is to save individual investors money by reducing administration costs and avoiding duty on each transaction. For individuals, ADRs are an excellent way to buy shares in a foreign company and capitalize on growth potential outside North America. ADRs offer a good opportunity for capital appreciation as well as income if the company pays dividends. Analyzing foreign companies involves more than just looking at the fundamentals. There are some different risks to consider such as the following: Political Risk - Is the government in the home country of the ADR stable? Exchange Rate Risk - Is the currency of the home country stable? ADRs track the shares in the home country; therefore, if its currency is devalued, it trickles down to your ADR and can result in a loss. Inflationary Risk - This is an extension of the exchange rate risk. Inflation is a big blow to business, and the currency of a country with high inflation becomes less and less valuable each day. How to Buy or Sell It

ADRs are bought in exactly the same way as common stock. Whether you use a full service or discount brokeragedoesn't matter. There is no minimum investment for most ADRs; however, as with any investment, many brokerages require clients to have at least $500 to open an account.

Strengths

ADRs allow you to invest in companies outside North America with greater ease. By investing in different countries, you have the potential to capitalize on emerging economies.

Weaknesses ADRs come with more risks, involving political factors, exchange rates and so on. Language barriers and a lack of standards regarding financial disclosure can make it difficult to research foreign companies.

Three Main Uses Capital Appreciation Income Diversification

GDR
Depositary receipts (DRs) are certificates that represent an ownership interest in the ordinary shares of stock of a company, but that are marketed outside of the companys home country to increase its visibility in the world market and to access a greater amount of investment capital in other countries. Depositary receipts are structured to resemble typical stocks on the exchanges that they trade so that foreigners can buy an interest in the company without worrying about differences in currency, accounting practices, or language barriers, or be concerned about the other risks in investing in foreign stock directly. American depositary receipts (ADRs) were the 1st depositary receipts issuedJP Morgan issued the 1st ADR in 1927. ADRs allowed companies domiciled outside of the United States to tap the United States capital markets. ADRs were structured to resemble other stocks on the American exchanges with comparable prices per share, shareholder notifications in English, and the use of United States currency for the sale and purchase of ADRs and for dividend payments.

A GDR is similar to an ADR, but is a depositary receipt sold outside of the United States and outside of the home country of the issuing company. Most GDRs are, regardless of the geographic market, denominated in United States dollars, although some trade in Euros or British sterling. There are more than 900 GDRs listed on exchanges worldwide, with more than 2,100 issuers from 80 countries. Although ADRs were the most prevalent form of depositary receipts, the number of GDRs has recently surpassed ADRs because of the lower expense and time savings in issuing GDRs, especially on the London and Luxembourg stock exchanges. The Global Depositary Receipt As A Financial Instrument A GDR is issued and administered by a depositary bank for the corporate issuer. The depositary bank is usually located, or has branches, in the countries in which the GDR will be traded. The largest depositary banks in the United States are JP Morgan, the Bank of New York Mellon, and Citibank. A GDR is based on a Deposit Agreement between the depositary bank and the corporate issuer, and specifies the duties and rights of each party, both to the other party and to the investors. Provisions include setting record dates, voting the issuers underlying shares, depositing the issuers shares in the custodian bank, the sharing of fees, and the execution and delivery or the transfer and the surrender of the GDR shares. A separate custodian bank holds the company shares that underlie the GDR. The depositary bank buys the company shares and deposits the shares in the custodian bank, then issues the GDRs representing an ownership interest in the shares. The DR shares actually bought or sold are calleddepositary shares. The custodian bank is located in the home country of the issuer and holds the underlying corporate shares of the GDR for safekeeping. The custodian bank is generally selected by the depositary bank rather than the issuer, and collects and remits dividends and forwards notices received from the issuer to the depositary bank, which then sends them to the GDR holders. The custodian bank also increases or decreases the number of company shares held per instructions from the depositary bank. The voting provisions in most deposit agreements stipulate that the depositary bank will vote the shares of a GDR holder according to his instructions; otherwise, without instructions, the depositary bank will not vote the shares. GDR Advantages And Disadvantages GDRs, like ADRs, allow investors to invest in foreign companies without worrying about foreign trading practices, different laws, or cross-border transactions. GDRs offer most of the same corporate rights, especially voting rights, to the holders of GDRs that investors of the underlying securities enjoy.

Other benefits include easier trading, the payment of dividends in the GDR currency, which is usually the United States dollar (USD), and corporate notifications, such as shareholders meetings and rights offerings, are in English. Another major benefit to GDRs is that institutional investors can buy them, even when they may be restricted by law or investment objective from buying shares of foreign companies. GDRs also overcome limits on restrictions on foreign ownership or the movement of capital that may be imposed by the country of the corporate issuer, avoids risky settlement procedures, and eliminates local or transfer taxes that would otherwise be due if the companys shares were bought or sold directly. There are also no foreign custody fees, which can range from 10 to 35 basis points per year for foreign stock bought directly. GDRs are liquid because the supply and demand can be regulated by creating or canceling GDR shares. GDRs do, however, have foreign exchange risk if the currency of the issuer is different from the currency of the GDR, which is usually USD. The main benefit to GDR issuance to the company is increased visibility in the target markets, which usually garners increased research coverage in the new markets; a larger and more diverse shareholder base; and the ability to raise more capital in international markets.

MULTINATIONAL CORPORATIONS
A multinational corporation (MNC) trans national co-operation.(TNC), also called multinational enterprise (MNE), is a corporation or an enterprise that manages production or delivers services in more than one country. It can also be referred to as an international corporation. The International Labour Organization (ILO) has defined an MNC as a corporation that has its management headquarters in one country, known as the home country, and operates in several other countries, known as host countries. Some multinational corporations are very big, with budgets that exceed some nations' GDPs. Multinational corporations can have a powerful influence in local economies, and even the world economy, and play an important role in international relations and globalization. A multinational corporation (or transnational corporation) (MNC/TNC) is a corporation or enterprise that manages production establishments or delivers services in at least two countries. Very large multinationals have budgets that exceed those of many countries. Multinational corporations can have a powerful influence in international relations and local economies. Multinational corporations play an important role in globalization; some argue that a new form of MNC is evolving in response to globalization: the 'globally integrated enterprise'.

Multinational corporations are

business

entities

that

operate

in

more

than

one

country.

The

typical

multinational corporation or MNC normally functions with a headquarters that is based in one country, while other facilities are based in locations in other countries. In some circles, a multinational corporation is referred to as a multinational enterprise (MBE) or a transnational corporation (TNC). The exact model for an MNC may vary slightly. One common model is for the multinational corporation is the positioning of the executive headquarters in one nation, while production facilities are located in one or more other countries. This model often allows the company to take advantage of benefits of incorporating in a given locality, while also being able to produce goods and services in areas where the cost of production is lower. Another structural model for a multinational organization or MNO is to base the parent company in one nation and operate subsidiaries in other countries around the world. With this model, just about all the functions of the parent are based in the country of origin. The subsidiaries more or less function independently, outside of a few basic ties to the parent. A third approach to the setup of an MNC involves the establishment of a headquarters in one country that oversees a diverse conglomeration that stretches to many different countries and industries. With this model, the MNC includes affiliates, subsidiaries and possibly even some facilities that report directly to the headquarters. The idea of a multinational corporation has been around for centuries. Some trace the origins of the concept back to the Dutch East India Company of the 17th century, as the corporate structure involved a presence in more than one country. During the 19th and 20th centuries, the idea of a company that functioned in more than one nation became increasingly common. In the 21st century, this business model continues to be highly desirable. There are several ways that an MNC can come into existence. One approach is to intentionally establish a new company with headquarters in one country while producing goods and services in facilities located elsewhere. In other instances, the multinational corporation comes about due to mergers between two or more companies based in different countries. Acquisitions and hostile takeovers also sometimes result in the creation of multinational corporations. In a world that continues to become more interconnected each day, a multinational corporation sometimes has a greater ability to adapt to economic and political shifts that corporations that function in a single nation. Along with decreasing costs associated with producing core products, this business model also opens the door for diversification, which often makes it possible for a company to remain solvent even when one division or subsidiary is posting a temporary loss.

MNC STRUCTURE
Multinational corporations can be divided into three broad groups according to the configuration of their production facilities: Horizontally integrated multinational corporations manage production establishments located in different countries to produce the same or similar products. (example: McDonalds)

Vertically integrated multinational corporations manage production establishment in certain country/countries to produce products that serve as input to its production establishments in other country/countries. (example:Adidas) Diversified multinational corporations manage production establishments located in different countries that are neither horizontally nor vertically nor straight, nor non-straight integrated. (example: Microsoft) Others argue that a key feature of the multinational is the inclusion of back office functions in each of the countries in which they operate. The globally integrated enterprise, which some see as the next development in the evolution of the multinational, does away with this requirement.

International POWER Large multinational corporations can have a powerful influence in international relations, given their large economic influence in politicians' representative districts, as well as their extensive financial resources available for public relations and political lobbying. Tax Competition Multinationals have played an important role in globalization. Countries and sometimes subnational regions must compete against one another for the establishment of MNC facilities, and the subsequent tax revenue, employment, and economic activity. To compete, countries and regional political districts offer incentives to MNCs such as tax breaks, pledges of governmental assistance or improved infrastructure, or lax environmental and labor standards. This process of becoming more attractive to foreign investment can be characterized as a race to the bottom, a push towards greater freedom for corporate bodies, or both. Market Withdrawal Because of their size, multinationals can have a significant impact on government policy, primarily through the threat of market withdrawal. For example, in an effort to reduce health care costs, some countries have tried to force pharmaceutical companies to license their patented drugs to local competitors for a very low fee, thereby artificially lowering the price. When faced with that threat, multinational pharmaceutical firms have simply withdrawn from the market, which often leads to limited availability of advanced drugs. In these cases, governments have been forced to back down from their efforts. Lobbying Multinational corporate lobbying is directed at a range of business concerns, from tariff structures to environmental regulations. There is no unified multinational perspective on any of these issues. Companies that have invested heavily in pollution control mechanisms may lobby for very tough environmental standards in an effort to force non-compliant competitors into a weaker position Patents

Many multinational corporations hold patents to prevent competitors from arising. For example, Adidas holds patents on shoe designs,Siemens A.G. holds many patents on equipment and infrastructure and Microsoft benefits from software patents.[12] The pharmaceutical companies lobby international agreements to enforce patent laws on others. Government Power In addition to efforts by multinational corporations to affect governments, there is much government action intended to affect corporate behavior. The threat of nationalization (forcing a company to sell its local assets to the government or to other local nationals) or changes in local business laws and regulations can limit a multinational's power

The advantages of MNCs

Economic Growth and Employment The essence of a MNC is that they bring inward investment to countries that are not their home base. If they choose to expand by building production facilities they will be bringing in inward investment into the country. This investment is likely to provide a boost, not only to the local economy but also the national economy. Building a new plant requires resources - land, labour and capital. Labour has to be found to help construct the plant and all the equipment that goes into it and some firm somewhere will be hired to build the machinery and equipment, provide the bricks, steel, cement, glass etc. that go into the building It can also be expected that the additional income will find its way through the local economy. If additional people are hired, they will receive an income which they spend. For existing workers, increased orders might equate to job security and they too might feel more confident in spending on new items - furniture, house extension, new white goods, holidays and so on. Inward investment therefore can act as a trigger to generating wealth in the local economy. Skills, production techniques and improvements in the quality of human capital It can be argued that MNCs bring with them new ideas and new techniques that can help to improve the quality of production and help boost the quality of human capital in the host country. Many will not only look to employ local labour but also provide them with training and new skills to help them improve productivity and efficiency. Availability of quality goods and services in the host country: In some cases, production in a host country may be primarily aimed at the export market. However, in other cases, the inward investment might have been made to gain access to the host country market to circumvent trade barriers

Tax Revenues For the host country, there is a likelihood that the MNC will have to be subject to the tax regime in that country. As a result, many MNCs pay large sums in taxes to the host government. In less developed countries the problem might be that there is a large amount of corruption and bad governance and as a result MNCs might not contribute the tax revenue they could and even if they do it might not find its way through to the government itself. Improvements in Infrastructure In addition to the investment in a country in production or distribution facilities, a company might also invest in additional infrastructure facilities like road, rail, port and communications facilities. This can provide benefits for the whole country. The advantages of a multinational business are: Gaining a strong foothold into the international market Low-cost locations Cheaper labor costs Cheaper raw materials and distribution costs Taking advantage of the many tax breaks offered by foreign countries Access to new technologies and methods Availability of government grants

Disadvantages include: Trade restrictions imposed at the government-level Taxes or tariffs imposed on imports from other countries Limited quantities (quotas) of imports Effective management of a globally dispersed organization

The adverse effects of MNCs

A.

On the home country:

1. Loss of jobs. 2. Loss of tax revenue. 3. Flexibility of operation is reduced in a foreign political system and thus causes instability. 4. Competitive advantage of multinationals over domestic firms.

B.

On the host country:

1. Remittance of dividends and profits that can result in a net outflow of capital 2. MNCs engage in anticompetitive activities such as formation of cartels and dumping.. 3. MNCs offer higher wages to its employees in the host countries,which is much more than any other domestic firm. 4. Obsolete technology may be used in the host country.

Emergence of Indian MNCs

Indias emergence in the global business arena has been driven mainly by acquisitions and mergers. In January 2006, Lakshmi Mittal CEO of Mittal Steel launched a hostile takeover bid for Arcelor - which was completed by July 2006. On similar lines, Tata Steel went abroad with acquisition of NatSteel in Singapore and Corus Steel in the UK. Notable cross-border acquisitions Some of the Notable cross-border acquisitions in the year 2006 are: 1. Videocon Industries buying Daewoo Electronics - $731 Million 2. Dr Reddy Labs acquires Betapharm Arzneimittel - $572 Million 3. Ballarpur Industries buys Sabah Forest Industries - $261 Million 4. Ranbaxy Labs acquisition of Terapia - $324 Million 5. Suzlon Energy buys Hansen Transmission - $565 Million In total, Indian firms spent $15.72 billion in 192 overseas acquisitions. While this number may not be significant when compared on a global scale, this number is significant in the global context. The real significance of this should be seen from the fact that next year this number could double or even triple, making India as Asias largest acquirer abroad. India Plays with Global Expansion Indian companies are using all the tricks of the trade to go global: Mergers & Acquisitions, Organic expansions, Green field investments, and Joint Ventures. The scale and the business share may not be significant today, but Indian businesses are slowly but surely establishing themselves abroad.

Tata Motors successful acquisition of Daewoos truck unit in 2002 in S. Korea has become a classic business case study. Tata acquired a loss making unit - and without any layoffs, turned the loss making unit around. This built enormous goodwill and reputation for Indian companies in S. Korea. This helped Videocon acquire Daewoo Electronics and is aiming to acquire LG-Philips LCD Co. In S. Korea. Success of one acquisition in a particular country/market has prompted other Indian

companies to look for acquisition in the same country. Given this mentality, one should not be surprised if Indian companies make a major acquisitions in S. Korea in 2007. Similarly, Tatas successful acquisition of Tetly Tea in UK prompted several Indian companies to look for acquisitions in the UK and European markets. Tata-Corus deal (if it succeeds) will mark a new beginning for mega deals involving Indian companies. Why opt for Acquisitions Indian companies have long practiced conservative business practices, have maintained almost zero debt and are in very good financial health. This when coupled with access to significant pools of capital - either foreign debt or stock markets creates an ideal situation for acquisition abroad. Another potent power which Indian companies can leverage is its vast pool of highly talented human resources. All this when combined together creates an ideal conditions for Indian companies to expand abroad. The reasons for cross border acquisitions by Indian companies stems from their traditional thinking: Reduce risk and build global competencies. Cross-border acquisitions make natural sense for Indian firms. The five main reasons (pretty much in the same order) why Indian companies opt for acquisitions are: The lure of access to global markets. Leveraging the synergy with the existing businesses Strengthening the acquired company - via better management Reduce competitive threats and vulnerability to other global giants Create a Global Company.

To understand, consider the example of Dr Reddy Labs acquisition of Betapharm Arzneimittel. This acquisition gives Reddy Labs access to German and high grown Central & Eastern European markets. Betapharm Arzneimittels business has a good synergy with Dr. Reddys existing business, and give the company a significant presence in Germany. In 2006, the largest number of acquisitions were in the pharmaceuticals sector, followed by IT and manufacturing sector. Indian companies are buoyed by strong local demand, red hot stock market, strong management capability and a desire to move up the value chain. Indian managers have the vision to go global - this vision is further encouraged by brain gain, when experienced expiates are returning back to India and using their rich experience and capability to help local firms expand abroad.

Minimize risks with Partial Acquisitions Since acquisitions carry a great risk - companies can try to take another route to avoid the risks of an outright acquisition - use partial acquisition. Partial acquisition is when a company acquires a substantial stake in another company - and with a right to buy the remainder as per a predetermined plan or without an option to buy the remainder.

Companies like to use this option of partial acquisitions so that they can learn the local operations from the partner - without exposing themselves to these operational risks. This is a preferred way to enter new market segments and new geographies where the company has very little experience. For example, Tata Tea has acquired 30% stake in Energy Brands Inc., the maker of flavored tea drinks. Since Tata Tea does not have expertise in selling soft drinks - this will be an ideal way to venture into new areas. Similarly, ONGC has invested 15% in a Brazilian oil exploration venture.

Joint Ventures is also an attractive option Ranbaxy completed five acquisitions in the year 2006. This is surely a mark of success and confidence, for Ranbaxy - this was just another year in their long march towards becoming a global pharma giant. Ranbaxy started venturing abroad via joint ventures. In 1977, Ranbaxy expanded into Nigeria via a joint venture. Today Ranbaxy has several JV all across the world. Joint ventures offers a low risk option for going abroad. Often times, a joint venture is used as an entry vehicle into foreign markets. Aditya Birla group used joint venture as a preferred means to enter into Thailand, Egypt, China, Canada, and Indonesia.

Another company which used JV to successfully expand abroad is Essel Propack. Essel Propack is the worlds largest manufacturer of lamitubes - used to package toothpaste, gels, and creams. Essel operates in 14 countries and has 24 manufacturing facilities. Many of these outposts were created via JV, acquisitions and green field ventures. Essels march into the global scene has been partially driven by the fact that its main product - "empty tubes" are not cheap to transport, thus forcing the company to setup manufacturing facilities close to its customer locations. Essel has a global vision and an advantage of lowest cost operations. This helped Essel acquire Propack - which propelled Essel to the top.

Main reasons to opt for Joint Ventures: Lower risk Option Joint Venture with the local partner will lower the risk as the local partner knows the local market, the local partner has greater capability to attract talent, has the necessary contacts/links with the local government, and provides an entry into new markets.

Unfortunately, JV also has the highest failure rates - if the venture becomes successful, one partner will try to muscle out the

other, or if the venture fails, the partner tries to blame the other. Having a well defined exit strategy is vital to prevent a painful breakups.

Green field Ventures Establishing green field ventures is a core competence for several Indian companies. Tata group for example has setup several green field operations in South Africa, Kenya, Nigeria, Sri Lanka, Vietnam, etc. Mahindra & Mahindra has setup new operations in China to make tractors. Indian companies have been very prudent when expanding into newer territories. Indian management lays a great emphasis on integrating the overseas operations first. Only when the management gets a feeling of comfort that the overseas operations is fully integrated, Indian managers will look for further acquisitions. A classic example of this prudent expansion is Asian Paints - 2nd largest manufacturer of decorative paints. Asian paints started global expansion in 1999. Initially this was done via small acquisitions in Egypt, Sri Lanka etc. This was followed by well managed integration and then a green field expansion. By 2003, the company had enough expertise and experience to play a bigger role in acquisitions - it acquired Berger International. This acquisition gave Asian paints a global reach to market its products over 70 countries. According to Ashwin Dani, MD of Asian Paints: "We have rolled out a mega operational efficiency initiative which focus on productivity, safety, environment, reducing losses, planning & Control systems. So the message is clear - you should constantly adding value to your acquired operations"

Closing Thoughts These risks have not decreased Indian companies appetite for acquisitions. Understanding these risks have prompted Indian companies to approach cautiously towards acquisitions - starting with small, less than $30 Million, all cash acquisitions in late 1990s - Indian companies have progressed steadily to multi-billion dollar acquisitions. Several Indian business houses have built a dedicated capability for acquisitions: Tatas, Ranbaxy Laboratories, Dr. Reddy Labs, Wipro, Ruias, Videocon, Kalyani etc. Past successful acquisitions have also added to the confidence levels of Indian firms.

While Indian firms are expanding abroad - more global giants are entering India. Global Retail giants, Banks, Insurance companies, manufacturing firms - cars, tyres, consumer goods, heavy engineering, chemicals etc. - all are eager to enter India. Some are forced to enter into joint ventures with Indian companies due to legal legislation while others are pondering on how to enter Indian markets.

International business fraternity has finally recognized that Indian firms are credit worthy and has the expertise to successfully manage global assets. This confidence can be seen how willing the banks are willing to help Tata Steel to acquire Corus.

Indian companies have just started venturing abroad. In the next decade, lot of Indian multinationals will be listed in the Fortune-500 list of companies. As a vanguard of things to come, Infosys is now listed in NASDAQ-100 index - the first Indian company to achieve this fame.

Globalization
Globalization is a difficult term to define because it has come to mean so many things. In general, globalization refers to the trend toward countries joining together economically, through education, society and politics, and viewing themselves not only through their national identity but also as part of the world as a whole. Globalization is said to bring people of all nations closer together, especially through a common medium like the economy or the Internet. In our world, there are few places a person cant get to within a day of travel, and few people a person cant reach via telephone or Internet. Because of modern modes of travel and communication,citizens of a nation are more conscious of the world at large and may be influenced by other cultures in a variety of ways. Time and space matter less, and even language barriers are being overcome as people all over the world communicate through trade, social Internet forums, various media sources, and a variety of other ways. Arguments for globalization include the following: It is reducing poverty worldwide. It is allowing access to technology in developing countries. It promotes world peace. It has benefited women and childrens rights. It raises life expectancy. Arguments against globalization are likely to come from people or nations who wish to resist trends in the global society. For instance, a Fundamentalist Islamic country may resist globalization because they see it as equivalent to westernization weakening the religious strength of a country and exposing its people to corrupting ideas. Similarly, globalization may be feared or a matter of a concern to any country with strong isolationist policies. In the US, much of the arguments for resisting globalization come from conservative groups. Some people worry about how certain trends, such as outsourcing, might affect the nation. Concern exists that while outsourcing might benefit a nation which gets jobs, this takes jobs from the country or company that outsources. In this way, though theeconomy of the world is more globalized, the economy of an individual nation might suffer

Even though globalization may be a subject of argument, its highly unlikely to end any time soon. It would take mass destruction of all modern methods of communication and transport, in addition to all countries taking strong isolationist policies in order to reverse the globalization trends in the world. This doesnt mean that some nations or people wont resist what they view as globalization, but you could compare this trend to a runaway train. At this point, there is little to do to stop the communication of minds all over the world through vehicles like the Internet. Even teens and kids are communicating with children from the four corners of the globe. Its therefore unlikely that globalization will experience a downward trend, and will likely continue to influence our world in myriad ways.

Role of Global Managers

THE ABILITY to accept and deal with diversity and differences is not that someone is born with. And yet, it is the defining attribute of successful managers. Apart from the real need for people with a healthy attitude and skills when it comes to dealing with a diverse cross-section of people from varied backgrounds, those with attributes defining them as global leaders will, as a rule, be more tolerant and less exacting in their demands. Success will come to them naturally, as will loyalty and trust. A few years back, global leaders were defined as an extraordinary class of people functioning at higher niches of organisations. Today, the middle manager level leaders are fast taking up the role and spreading the trend. Then, who is a global manager? What does he do? How does he do it differently? Let's find out. Penchant for discovery and learning: The global manager is someone who is ready to learn. A person who clings to preconceived notions and stereotypes will run into communication troubles sooner or later. The prospect of meeting new people and learning their ways is something that thrills the global manger. Has a global perspective: The global manager can broaden his or her focus from local conditions to a global business perspective. He is capable of comparing and evaluating the required parameters when it comes to dealing with certain business issues in an alien cultural environment. Cultural adaptability: The global manager is someone who recognises the potential of cultural synergies. This is what brings adaptability. This also brings in an understanding and respect for cultural sensitivities. He realises that differences are perceived on both the sides. Further, he also knows that overlooking petty differences is something that both the sides need to do.

Cross- cultural collaboration: The global manager can function as effectively in a multicultural environment. The reason being that he or she can focus on the positive results or implications of cross- cultural collaboration. Collaboration involves treating all the team members equally to get the maximal contribution from all. And the global manager knows how to do that amply. Realistic expectations: The global manager knows that one could mess up in setting up expectations from employees belonging to a different cultural background. He understands that handling in-group differences is more important to increase the performance levels. In this backdrop, the global manager is wary of setting up his initial level of expectations. Culture shock: The global manager welcomes an opportunity to go to a different country and get first hand experience of functioning in a culturally different environment. Culture shock need not be a negative experience for the global manager. The global manager with an inclination for perennial learning will inevitably develop a novel set of skills. He will learn the lessons that can be generalised across cultures. Where on the one hand a global manager will not shun an overseas assignment, there, one need not necessarily leave one's country to get the skill set. With fruits of globalisation now spreading to services, there are enough opportunities around to develop the skills. The global manager exhibits traits that are positive in themselves and have a healthy undertone. He is open-minded and welcomes newness. He is someone who understands that `an obstinate man does not hold opinions; they hold him'. The global manager has to play multidimension role by combining his technical skill, people skill and soft skill. the manager must have combination of hard as well as soft skills. He must be able to organize, analyse and motivate people at international level. GLOBAL MANAGER HAS FOLLOWING ROLES : 1. IN THE CAPACITY OF COUNTRY MANAGER. The global manager has to deal with clients, legal bodies, immigration authorities on behalf of his office. 2. IN THE CAPACITY OF FUNCTIONAL MANAGER. The global manager has to select right technique, right resources, software projects to compete at international level. 3. IN THE CAPACITY OF BUSINESS LEADER. The global manager has to make changes in the organization keeping in mind the trend of World and requirement of outsourcing

International Organization

An international organization (or organisation) is an organization with an international membership, scope, or presence. International organizations provide a common platform wherein representatives from different parts of the world can discuss and evolve solutions for contemporary issues. In common parlance, it is well known as intergovernmental organizations. The World trade Organization, European Union and Council of Europe are international Organizations to name a few. There are two main types: International nongovernmental organizations (INGOs): non-governmental organizations (NGOs) that operate internationally. These may be either: International non-profit organizations. Examples include the International Olympic Committee, World

Organization of the Scout Movement, International Committee of the Red Cross and Mdecins Sans Frontires. International corporations, referred to as multinational corporations. Examples include The Coca-Cola

Company, Sony, Nintendo,McDonalds, and Toyota. Intergovernmental organizations, also known as international governmental organizations (IGOs): the type of organization most closely associated with the term 'international organization', these are organizations that are made up primarily of sovereign states(referred to as member states). Notable examples include the United Nations (UN), Organization for Security and Co-operation in Europe(OSCE), Council of Europe (CoE), European Union (EU; which is a prime example of a supranational organization), and World Trade Organization (WTO). The UN has used the term "intergovernmental organization" instead of "international organization" for clarity.[2] In addition, Global Public Policy Networks (GPPNs) may be considered a third category. These take various forms and may be made up of states and non-state actors. Non-state actors involved in GPPNs may include: intergovernmental organizations, states, state agencies, regional or municipal governments, in partnerships with non-governmental organizations, private companies, etc. Role Of International Organizations The participating countries define the function of the International Organizations. The objective of international organization is to study, collect and propagate information, setting up of laws that are internationally accepted. The international organizations also help in cooperation between different countries by setting up negotiation deals between them. The international Organizations also help in technical assistance. The International Organizations play an important role in collecting statistical information, analyzing the trends in the variables, making a comparative study and disseminate the information to all other countries. There are some intergovernmental organizations that have set international Minimum standards. Such norms are difficult to be set at the state level.

There are some international organizations that perform certain supervisory functions. The supervisory system of the UN is very weak. In contrast, the supervisory mechanism of the ILO is quite strong. The European Union, together with the Commission and the Court of Justice, has a relatively strong supervisory mechanism. The third function of the international organizations is setting up multilateral or bilateral agreements between countries. Another function, that has assumed importance in the recent times, is lending out technical cooperation to the member countries. By technical cooperation we mean the provision of intellectual or financial material to the countries, which require them. Amongst all the roles and activities of the international organizations, the most important is negotiating and setting up multilateral agreements. Minimizing the transaction costs can strengthen the cooperation between different countries. Beside they also provide lucidity and information. For negotiations, forums for bargaining are set up and focal point structures are constructed during negotiations. The multilateral agreements that are settled by the international organizations occur in sections like environment protection, development trade, crime human rights, etc.

STAGES OF GLOBAL DEVELOPMENT The four stages of global development are described below and on the accompanying chart, which shows how the 55 companies in the Asian survey were analyzed with respect to each of the factors. Stage I companies are opportunistic exporters. The domestically designed and manufactured products of these companies find their way to overseas markets through standard export channels. They have little or no presence or investment outside their home market. They make no efforts to differentiate their product or service geographically. These companies typically have a foreign agent orlicensee that handles their products once they leave the boat. Stage I companies typically see an opportunity to leverage an underutilized asset and to test foreign markets on a variable-cost basis using existing technology. Stage II companies, or international enterprises, want to be in foreign markets. They recognize the advantages of tailoring a product to foreign markets. They are slow to fully adapt local designs, to manufacture in other countries, or to make other major investments. They approach major investments--such as significant product modification, local manufacturing sites, and human resource commitments--slowly and with extreme caution. These organizations tend to be "plodders" in their approach to localization. Top executives of such companies generally speak the language of international business, but not fluently.

Stage III companies are usually large multinationals with extensive experience in a number of markets (although
they tend to become involved in cultures similar to that of their home country). They can fulfill local service needs and have established bases for marketing, manufacturing, and/or R&D in several foreign countries. However, they still generate and maintain critical strengths in their home markets and roll them out to foreign subsidiaries. Stage IV companies are global. They are local players in a diverse mix of foreign markets and have extensive foreign experience in tailoring products to overseas markets, manufacturing and/or conducting some technical development activities in foreign countries, and locally fulfilling all service needs. They are country neutral, but they are at home and competitively advantaged in their key markets. They have developed an interdependent and geographically dispersed organization that creates, maintains, and shares strengths in the company. Resources are fluid and exchanged efficiently. We found a significant correlation between companies ranked as more advanced in their global development and those reaping greater returns from their investments in Southeast Asia. However, most companies were inconsistent in their approach to creating a global business, which kept them from fulfilling all the Stage IV characteristics, as the table indicates. MATCHING GOALS TO REALITY Before diagnosing where a company is and where it should be, it is well to remember that every firm does not need to be a Stage IV company. Businesses can succeed and gain competitive advantage at any stage, depending on variables, such as the nature of their product or service, distribution, cost structure, and competitive environment. Not every company is cut out to compete at Stage IV. And not every industry is optimized by truly global companies. Different industries and businesses need different strategies and time frames in terms of global development. In construction equipment, for instance, two major worldwide competitors control 70 percent of the world market. These companies do not need to be Stage IV companies across all descriptors to keep their competitive positions. They are probably Stage IV for service, but Stage II or III for other factors. Global scale is not an issue because bulldozers are not produced in huge runs. For most companies, it is important to link goals at each stage of global development with the company's objectives--global scale, global effectiveness (scope and scale of value-added activities that the company localizes in specific markets), and in-country performance versus competitors.

Companies just entering Stage I--those that are considering actions outside the domestic economy--will do well to look at the possible benefits of export strategies. After all, the international market is more than four times larger than the U.S. market, and growth rates in some overseas markets far exceed those in the U.S. Lumber firm Louisiana-Pacific, headquartered in Portland, OR, took advantage of its export potential and is selling wood to Japan by the boatload. But first, the company talked to its customers to find out what they needed. Louisiana-Pacific now makes 3-by-6 paneling favored by Japanese customers in addition to the standard 4-by-8 paneling favored in the U.S. There are many other examples of companies that are pursuing carefully planned Stage I export strategies. Dean Foods, a $2 billion dairy and vegetable processing company based in Illinois, exports non-dairy powdered creamer, and canned and frozen vegetables to Europe and Asia. In addition, the company recently started selling liquid milk in Mexico. But its strategy does not provide for operating production facilities overseas. Dean Foods executives have decided they don't want to take on the problems of setting up complicated distribution systems in underdeveloped countries. Companies such as Dean Foods, which deals with highly perishable products, may find they can succeed at Stage I for many years --and they may move gradually into Stage II. They have analyzed their distinctive strengths and their international markets, and gained a good understanding of their global position. AST Research, a computer company in Irvine, CA, is a good example of a company moving from pre-Stage I into Stage II. In 1984, AST had 150 employees and no overseas sales. Today it has 2,200 employees, only half of them in the U.S. Exports make up 35 percent of sales. AST began by marketing its IBM-compatible personal computer enhancement board in Europe, and sales took off. Eventually the company added two overseas plants and marketing units in 11 countries. Domestic employment has continued to grow as the company expands overseas. These examples of companies that begin as opportunistic exporters exemplify Stage I companies. LouisianaPacific, a Stage I exporter, is taking its first tentative steps toward localization by determining the needs of its Japanese customers. And Dean Foods is a successful Stage I exporter--and may remain at that stage. Whether companies are at Stage I or IV--or somewhere in between--tangible results are the most important measures of global success. But there are also intangible benefits to an effective global strategy. For instance, as companies become global operators, they learn to choose markets and suppliers without regard to national

boundaries and to become more alert to competitive threats wherever they operate. Their executives generally become more sophisticated managers and more relaxed citizens of the global village. Over time, these global executives move through their own stages of global development.

The World Trade Organization (WTO)

The World Trade Organization (WTO) is an organization that intends to supervise andliberalize international trade. The organization officially commenced on January 1, 1995 replacing the General Agreement on Tariffs and Trade (GATT). The organization deals with regulation of trade between participating countries; it provides a framework for negotiating and formalizing trade agreements, and a dispute resolution process aimed at enforcing participants' adherence to WTO agreements which are signed by representatives of member governments and ratified by their parliaments. The WTO has 153 members, representing more than 97% of total world trade and 30 observers, most seeking membership. The WTO is governed by a ministerial conference, meeting every two years; a general council, which implements the conference's policy decisions and is responsible for day-to-day administration; and a director-general, who is appointed by the ministerial conference. The WTO's headquarters is at the Centre William Rappard, Geneva, Switzerland.

FUNCTIONS Among the various functions of the WTO, these are regarded by analysts as the most important: It oversees the implementation, administration and operation of the covered agreements. It provides a forum for negotiations and for settling disputes.[30][31]

Additionally, it is the WTO's duty to review and propagate the national trade policies, and to ensure the coherence and transparency of trade policies through surveillance in global economic policy-making. Another priority of the WTO is the assistance of developing, least-developed and low-income countries in transition to adjust to WTO rules and disciplines through technical cooperation and training.[32] The WTO is also a center of economic research and analysis: regular assessments of the global trade picture in its annual publications and research reports on specific topics are produced by the organization.Finally, the WTO cooperates closely with the two other components of the Bretton Woods system, the IMF and the World Bank.

PRINCIPLES OF WTO TRADE SYSTEMS

The WTO establishes a framework for trade policies; it does not define or specify outcomes. That is, it is concerned with setting the rules of the trade policy games.[34] Five principles are of particular importance in understanding both the pre-1994 GATT and the WTO:

1. Non-Discrimination. It has two major components: the most favoured nation (MFN) rule, and the national
treatment policy. Both are embedded in the main WTO rules on goods, services, and intellectual property, but their precise scope and nature differ across these areas. The MFN rule requires that a WTO member must apply the same conditions on all trade with other WTO members, i.e. a WTO member has to grant the most favorable conditions under which it allows trade in a certain product type to all other WTO members.[34]"Grant someone a special favour and you have to do the same for all other WTO members."[35] National treatment means that imported goods should be treated no less favorably than domestically produced goods (at least after the foreign goods have entered the market) and was introduced to tackle nontariff barriers to trade (e.g. technical standards, security standards et al. discriminating against imported goods).

2. Reciprocity. It reflects both a desire to limit the scope of free-riding that may arise because of the MFN rule, and a
desire to obtain better access to foreign markets. A related point is that for a nation to negotiate, it is necessary that the gain from doing so be greater than the gain available from unilateral liberalization; reciprocal concessions intend to ensure that such gains will materialise.[36]

3. Binding and enforceable commitments. The tariff commitments made by WTO members in a multilateral trade
negotiation and on accession are enumerated in a schedule (list) of concessions. These schedules establish "ceiling bindings": a country can change its bindings, but only after negotiating with its trading partners, which could mean compensating them for loss of trade. If satisfaction is not obtained, the complaining country may invoke the WTO dispute settlement procedures.[35][36]

4. Transparency. The WTO members are required to publish their trade regulations, to maintain institutions allowing for
the review of administrative decisions affecting trade, to respond to requests for information by other members, and to notify changes in trade policies to the WTO. These internal transparency requirements are supplemented and facilitated by periodic country-specific reports (trade policy reviews) through the Trade Policy Review Mechanism (TPRM).[37] The WTO system tries also to improve predictability and stability, discouraging the use of quotas and other measures used to set limits on quantities of imports.[35]

5. Safety valves. In specific circumstances, governments are able to restrict trade. There are three types of provisions in
this direction: articles allowing for the use of trade measures to attain noneconomic objectives; articles aimed at ensuring "fair competition"; and provisions permitting intervention in trade for economic reasons.[37] Exceptions to the MFN principle also allow for preferential treatment of developing countries, regional free trade areas and customs unions.

Advantages of WTO

World Trade Organization helps member states in various ways and this enables them to reap benefits such as: Helps promote peace within nations: Peace is partly an outcome of two of the most fundamental principle of the trading system; helping trade flow smoothly and providing countries with a constructive and fair outlet for dealing with disputes over trade issues. Peace creates international confidence and cooperation that the WTO creates and reinforces. Disputes are handled constructively: As trade expands in volume, in the numbers of products traded and in the number of countries and company trading, there is a greater chance that disputes will arise. WTO helps resolve these disputes peacefully and constructively. If this could be left to the member states, the dispute may lead to serious conflict, but lot of trade tension is reduced by organizations such as WTO. Rules make life easier for all: WTO system is based on rules rather than power and this makes life easier for all trading nations. WTO reduces 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 the member states. Free trade cuts the cost of living: Protectionism is expensive, it raises prices, WTO 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 provides more choice of products and qualities: It gives consumer more choice and a broader range of qualities to choose from. Trade raises income: Through WTO trade barriers are lowered and this increases imports and exports thus earning the country foreign exchange thus raising the country's income. Trade stimulates economic growth: With upward trend economic growth, jobs can be created and this can be enhanced by WTO through careful policy making and powers of freer trade. Basic principles make life more efficient: The basic principles make the system economically more efficient and they cut costs. Many benefits of the trading system are as a result of essential principle at the heart of the WTO system and they make life simpler for the enterprises directly involved in international trade and for the producers of goods/services. Such principles include; non-discrimination, transparency, increased certainty about trading conditions etc. together they make trading simpler, cutting company costs and increasing confidence in the future and this in turn means more job opportunities and better goods and services for consumers. Governments are shielded from lobbying: WTO system shields the government from narrow interest. Government is 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.

The system encourages good governance: The WTO system encourages good government. The WTO rules discourage a range of unwise policies and the commitment made to liberalize a sector of trade becomes difficult to reverse. These rules reduce opportunities for corruption.

DISADVANTAGES
It is destroying the environment. It is Increasing inequality It encourages trades which are not ejoyed by poor countries, increases unemployment and increases dependency on others.

World Bank
World Bank is a term used to describe an international financial institution that providesleveraged loans to developing countries for capital programs. The World Bank has a stated goal of reducing poverty. By law, all of its decisions must be guided by a commitment to promote foreign investment, international trade and facilitate capitalinvestment.[3] The World Bank differs from the World Bank Group, in that the World Bank comprises only two institutions: the International Bank for Reconstruction and Development (IBRD) and theInternational Development Association (IDA), whereas the latter incorporates these two in addition to three more:[4] International Finance Corporation (IFC), Multilateral Investment Guarantee Agency (MIGA), and International Centre for Settlement of Investment Disputes(ICSID). The World Bank provides over $24 billion in assistance to developing and transition countries every year. The Bank's projects and policies affect the lives and livelihoods of billions of people worldwide - sometimes for the better, but very often in controversial and problematic ways. The World Bank was originally established to support reconstruction in Europe after World War II, but has since reframed its mission and expanded its operations both geographically and substantively. Today, the Bank's mission is to reduce poverty. It has over 184 member countries and provides over $24 billion annually for activities ranging from agriculture to trade policy, from health and education to energy and mining. The World Bank provides funding for bricks-and-mortar projects, as well to promote economic and policy prescriptions it believes will promote economic growth. The World Bank is not a bank in the common sense of the word. A single person cannot open an account or ask for a loan. Rather, the Bank provides loans, grants and technical assistance to countries and the private sector to reduce poverty in developing and transition countries. The World Bank Group is actually comprised of five separate arms. Two of those arms - the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA) work primarily with governments and together are commonly known as "the World Bank". Two other branches - the International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA) - directly support private businesses investing in

developing countries. The fifth arm is the International Center for Settlement of Investment Disputes (ICSID), which arbitrates disagreements between foreign investors and governments. The goals of the World Bank are very diverse, although the name suggests only financial interest. The organization takes a more holistic approach to financial assistance by aiding education and health development, developing a countrys agriculture and rural areas, protecting the environment, helping establish infrastructure and helping establish government agencies that protect citizens. The World Bank is one of the biggest funders of education. Since 1963, the World Bank has issued 36.5 billion USD for educational loans and grants. It has contributed a huge amount of money in the fight against HIV/AIDS and has established the Multi-countryHIV/AIDS Program (MAP). The World Bank has made strides in fighting corruption in governments worldwide, sponsored

numerous biodiversity projects and helped supply clean water, electricity and transportation. The World Bank also supports debt relief to those countries that are the most heavily indebted and supports the involvement of civil society organizations. Countries in conflict or war are of particular interest to the World Bank as well. Member countries have the benefit of low rates, while the poorest countries often receive grant money. The World Bank often approves loans and grants dependent upon how the project will benefit or improve a specific aspect of a countrys infrastructure, health or education system or environment. Although the World Bank is respected throughout the world and its programs have been largely beneficial and successful, detractors believe that it is too influenced by western powers, specifically the United States. Others believe that its policies dont always fit or work within local traditions, economies or forms of governance. Critics say that the loans make some countries too dependent on foreign aid, making them heavily indebted and causing them to fall into a cycle of indebtedness. Rather than devising programs on their own or finding internal sources of funding, such countries come to depend on the World Bank

Membership There are 184 member countries that are shareholders in the IBRD, which is the primary arm of the WBG. To become a member, however, a country must first join the International Monetary Fund (IMF). The size of the Bank's shareholders, like that of the IMF's shareholders, depends on the size of a country's economy. Thus, the cost of a subscription to the Bank is a factor of the quota paid to the IMF. The president of the Bank comes from the largest shareholder, which is the United States, and members are represented by a Board of Governors. Throughout the year, however, powers are delegated to a board of 24 Executive Directors (ED). The five largest shareholders - the U.S., U.K., France, Germany and Japan - each have an individual ED, and the additional 19 EDs represent the rest of the member states as groups of constituencies. The World Bank gets its funding from rich countries as well as from the issuance of bonds on the world's capital markets.

Asian Development Bank

ADB or the Asian Development Bank is an international financial institute operating since 1966. ADB provides financial assistance to its member nations for poverty reduction and improvement in the quality of life. To finance its projects, ADB issues bonds and also leverages the contributions made by participant countries. The Asian Development Bank (ADB) is a regional development bank established on 22 August 1966 to facilitate economic development of countries in Asia.[2] The bank admits the members of the UN Economic Commission for Asia and the Far East (now UNESCAP) and nonregional developed nations.[2] From 31 members at its establishment, ADB now has 67 members - of which 48 are from within Asia and the Pacific and 19 outside. ADB was modeled closely on theWorld Bank, and has a similar weighted voting system where votes are distributed in proportion with member's capital subscriptions. At present, both USA and Japan hold 552,210 shares - the largest proportion of shares at 12.756 percent each The organization was started with the following objectives: The social and economic development of the Asian and Pacific countries. To boost cooperative and simultaneous regional growth among member countries.

As of early 2007, ADB had 67 members, with 48 regional and 19 non-Asian members. Since Japan has been the largest shareholder, the bank has always been governed by a Japanese President. ADB is headquartered at Metro Manila, Philippines. How ADB Works The main functions of ADB are: Technical assistance provided to members, so that they can plan and execute development strategies and projects. Assistance to DMCs (Developing Member Countries) to coordinate policies designed for development. Equity investments and loans to member nations. Encouragement to member nations to invest private and public capital for development.

Achievements of the Asian Development Bank Asian and Pacific countries have shown considerable transformation in terms of modernization. Till the end of 2007, 1,106 projects funded by ADB were evaluated. Out of these, 65% were rated as successful and 27% partly successful. Some of the highlights of the Asian Development Bank are:

Funding projects led by the Utah State University to bring labor skills to Thailand. ROC Ping Hu Offshore Oil and Gas Development. Technical assistance grant of US$2 million to Bangladesh to overcome the challenges linked to climate change. Trans-Afghanistan Gas Pipeline Feasibility Assessment. Greater Mekong Subregional Program. Loan of $1.2 billion to bail Pakistan out of an impending economic crisis. Contributions towards the development of solar energy in India. Strategic Private Sector Partnerships for Urban Poverty Reduction in the Philippines. Earthquake and Tsunami Emergency Support Project in Indonesia.

Asian Development Bank: Challenges Poverty is still one of the main challenges faced by ADB. The 2009 global recession has severely impacted ADBs poverty alleviation goals. The following situations pose major challenges for ADB: Safe water is still not available to 60% of the people in the member countries. Improved sanitation facilities have still not reached 70% of the people. Out of every 100 children, 40 die before they reach the age of 15. Infant mortality rate is very high. Half of the undernourished population of the world lives in Asia. Rising inflation has adversely impacted growth rates in Asia

International Monetary Fund (IMF) The International Monetary Fund (IMF) is the intergovernmental organization that oversees theglobal financial system by following the macroeconomic policies of its member countries, in particular those with an impact on exchange rate and the balance of payments. It is an organization formed with a stated objective of stabilizing international exchange rates and facilitating development through the enforcement of liberalising economic policies on other countries as a condition for loans, restructuring or aid. It also offers highly leveraged loans, mainly to poorer countries. Its headquarters are in Washington, D.C., United States. The IMF's relatively high influence in world affairs and development has drawn heavy criticism from some sources. Organization & Purposes The International Monetary Fund was created in July 1945, originally with 45 members, with a goal to stabilize exchange rates and assist the reconstruction of the world's international payment system. Countries contributed to a pool which could be borrowed from, on a temporary basis, by countries with payment imbalances (Condon, 2007). The IMF was important when it was first created because it helped the world stabilize the economic system. The IMF works to improve the

economies of its member countries.[ The IMF describes itself as "an organization of 187 countries working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty The IMF's resources come mainly from the quotas that countries deposit when they join the IMF. Quotas broadly reflect the size of each member's economy: the larger a country's economy in terms of output, and the larger and more variable its trade, the larger its quota tends to be. For example, the United States, the world's largest economy, has the largest quota in the IMF. Quotas are reviewed periodically and can be increased when deemed necessary by the Board of Governors.

Purposes The purposes of the International Monetary Fund are: To promote international monetary cooperation through a permanent institution which provides the machinery for To facilitate the expansion and balanced growth of international trade, and to contribute thereby to the promotion

consultation and collaboration on international monetary problems. and maintenance of high levels of employment and real income and to the development of the productive resources of all members as primary objectives of economic policy. To promote exchange stability, to maintain orderly exchange arrangements among members, and to avoid To assist in the establishment of a multilateral system of payments in respect of current transactions between To give confidence to members by making the general resources of the Fund temporarily available to them under competitive exchange depreciation. members and in the elimination of foreign exchange restrictions which hamper the growth of world trade. adequate safeguards, thus providing them with opportunity to correct maladjustments in their balance of payments without resorting to measures destructive of national or international prosperity. In accordance with the above, to shorten the duration and lessen the degree of disequilibrium in the international balances of payments of members.

The IMF performs three main activities: monitoring national, global, and regional economic and financial developments and advising member countries on their lending members hard currencies to support policy programs designed to correct balance of payments problems; and economic policies ("surveillance");

offering technical assistance in its areas of expertise, as well as training for government and central bank officials.

The IMF's main business: macroeconomic and financial sector policies In its oversight of member countries, the IMF focuses on the following: macroeconomic policies relating to the government's budget, the management of money and credit, and the exchange

rate;

macroeconomic performancegovernment and consumer spending, business investment, exports and imports, output balance of paymentsthat is, the balance of a country's transactions with the rest of the world; financial sector policies, including the regulation and supervision of banks and other financial institutions; and structural policies that affect macroeconomic performance, such as those governing labor markets, the energy sector,

(GDP), employment, and inflation;

and trade. The IMF advises members on how they might improve their policies in these areas so as to achieve higher rates of employment, lower inflation, and sustainable economic growth.

Membership Members of the IMF are 186 of the UN members and Kosovo. Former members are: Cuba (left in 1964),[10] and Taiwan (expelled in 1980), Non-members are: North Korea, Andorra, Monaco, Liechtenstein, Nauru, Cook Islands, Niue, Vatican City and the rest of the states with limited recognition. All member states participate directly in the IMF. Member states are represented on a 24-member Executive Board (five Executive Directors are appointed by the five members with the largest quotas, nineteen Executive Directors are elected by the remaining members), and all members appoint a Governor to the IMF's Board of Governors.

Assistance & reforms The primary mission of the IMF is to provide financial assistance to countries that experience serious financial and economic difficulties using funds deposited with the IMF from the institution's 187 member countries. Member states with balance of payments problems, which often arise from these difficulties, may request loans to help fill gaps between what countries earn and/or are able to borrow from other official lenders and what countries must spend to operate, including to cover the cost of importing basic goods and services. In return, countries are usually required to launch certain reforms, which have often been dubbed the "Washington Consensus". These reforms are thought to be beneficial to countries with fixed exchange rate policies that may engage in fiscal, monetary, and political practices which may lead to the crisis itself. For example, nations with severe budget deficits, rampant inflation, strict price controls, or significantly over-valued or undervalued currencies run the risk of facing balance of payment crises. Thus, the structural adjustment programs are at least ostensibly intended to ensure that the IMF is actually helping to prevent financial crises rather than merely funding financial recklessness.

The North American Free Trade Agreement

The North American Free Trade Agreement (NAFTA) is one of the most powerful and wide-reaching treaties in the world. It governs the entire spectrum of North American trade and has at its rootshemispheric cooperation on a scale never before seen. NAFTA is a treaty between Canada, Mexico, and the United States that was designed to foster greater trade between the three countries. NAFTA has been in effect since 1 January 1994. It has since been updated with two major additions, the North American Agreement for Economic Cooperation (NAAEC) and the North American Agreement for Labor Cooperation (NAALC). A very recent addition was the Security and Prosperity Partnership ofNorth America, designed to foster cooperation on issues ofnational security. One prime benefit of NAFTA is that goods shipped between the three countries have labels printed in three languages: French, Spanish, and English. The English is for Canada and the US, the Spanish is for Mexico, and the French is for Quebec and other French-speaking parts of Canada. Another prime benefit, at least for Mexico, is that the NAFTA agreement ostensibly also encourages greater immigration between the three countries. In recent years, the increased immigration from Mexico to the US has become even more of a flashpoint than it had been previously. The same sort of relationship does not exist between Canada and the US or between Canada and Mexico. Objectives of NAFTA Eliminate customs barriers and facilitate cross-border trade in goods and services Guarantee conditions of equitable competition in the free trade zone Substantially increase investment opportunities in the three member countries Provide for the protection and adequate application of intellectual property rights in each country Adopt efficient implementation, joint administration and dispute settlement procedures Improve trilateral cooperation to extend the benefits of the agreement

The major functions of NAFTA are: Eliminate trade barriers in various service sectors belonging to its member nations. Reduce high Mexican tariffs and help to promote agricultural exports. Assist firms spanning the three nations to bid on government contracts. Assure fair market value to investors by reducing risk and offering the same legal rights that are enjoyed by local investors. . Help investors to claim against a government by offering legal help

Benefits of the NAFTA for U.S. consumers more free trade resulting in greater choices in goods and services lower prices and improved quality products stronger health and safety standards improved economic stability in the U.S. marketplace a marketplace that is increasingly driven more by supply and demand than by barriers to commerce

Benefits of the NAFTA for U.S. business: larger North American market access new export and investment opportunities elimination of tariffs; Canadian and U.S. tariffs were eliminated on January 1, 1998; Mexico will be duty free by the year 2008 for North American made products creation of strong "rules of origin" for North American made products effective procedures to resolve trade disputes establishment of compatible standards of goods between the three countries facilitation of cross-border movement of goods and services

Industries that are experiencing significant benefits as a result of the NAFTA

Agriculture sector:

Non tariff obstacles pertaining to trade in agriculture between Mexico and United States of America were dissolved. In

addition to this, there were other tariffs, which faced removal soon after its implementation. It has also been anticipated that majority of the agricultural provisions are likely to be brought into force by the year

2008. Agricultural provisions of United States-Canada Free Trade Agreement, which was in force since the year 1989, was

included in NAFTA.

Effect of NAFTA on investment:Implementation of NAFTA, influenced investments in a positive manner The other two member partners also registered a healthy growth in investment. NAFTA has helped in the increase the FDI in Canada as well as in other NAFTA member nations. Automotive Industry: Prior to the NAFTA, U.S. motor vehicle exports to Mexico faced restrictive trade balancing and local content requirements, as well as tariffs of 20 %. With the reduction/elimination of these trade barriers, liberalized investment rules and preferential rules of origin, U.S. parts and vehicle manufacturers have become more efficient and competitive in the North American market. Textiles and Apparel: The NAFTA has increased economic activity and enhanced export prospects for textile and apparel producers in the United States. To be internationally competitive in the global marketplace, U.S. producers of textiles and apparel have improved their productivity and concentrated on specialized products. The NAFTA has enabled U.S. producers to optimize production and manufacturing investment in North America, resulting in a shift of production from the Far East to North America, strengthening the industry's worldwide position. NAFTA and the environment North American consumers will benefit from various initiatives being undertaken by the NAFTA partners to strengthen and protect the North American environment. The NAFTA Commission for Environmental Cooperation (CEC) has deepened trilateral cooperation on a broad range of environmental issues, including illegal trade in hazardous wastes, endangered wildlife, and the elimination of certain toxic chemicals and pesticides. Through the CEC, Mexico has agreed to join the United States and Canada in banning the pesticides DDT and chlordane, ensuring that these long-lived toxic substances no longer cross our border. The United States and Mexico have also launched a Border XXI program establishing five-year objectives for achieving a clean border environment and a blueprint for meeting these objectives.

The European Commission

The European Commission is the executive body of the European Union. The body is responsible for proposing legislation, implementing decisions, upholding the Union's treaties and the general day-to-day running of the Union. The Commission operates as a cabinet government, with 27 Commissioners. There is one Commissioner per member state, though Commissioners are bound to represent the interests of the EU as a whole rather than their home state. One of the 27 is the Commission President(currently Jos Manuel Duro Barroso) appointed by the European Council. The Council then appoints the other 26 Commissioners in agreement with the nominated President, and then the 27 Commissioners as a single body are subject to a vote of approval by the European Parliament. The first Barroso Commission took office in late 2004[2] and its successor, under the same President, took office in 2010.

The term "Commission" can mean either the 27 Commissioners themselves (known as theCollege of Commissioners), or the larger institution that also includes the administrative body of about 25,000 European civil servants who are split into departments called Directorates-General and Services.[5] The internal working languages are English, French and German.
[2]

The Commissioners and their immediate teams are based in the Berlaymont building of Brussels.

Objectives European Union works toward and oversees the economic and political integration of these states. The European Union consists of the European Community and a framework for unified action by member countries in security and foreign policy and for cooperation in police and justice matters. Within the Union, goods, services, capital and people move freely. The monetary union has advanced to its third stage, and in 1999, a single currency, euro, is going to be introduced. The European Commission has four main roles: 1. to propose legislation to Parliament and the Council; 2. to manage and implement EU policies and the budget; 3. to enforce European law (jointly with the Court of Justice); 4. to represent the European Union on the international stage, for example by negotiating agreements between the EU and other countries.

Powers and functions The Commission was set up from the start to act as an independent supranational authority separate from governments; it has been described as "the only body paid to think European". The members are proposed by their member state governments, one from each, however they are bound to act independently neutral from other influences such as those governments which appointed them. The European Commission operates at the very heart of the European Union. Its role as the source of policy initiatives is unique; yet this role is not always clearly understood. The Commission has used its right of initiative to transform the framework provided by the treaties establishing the European Communities into today's integrated structures. The benefits for citizens and companies throughout the Union have been considerable: freedom of movement, greater prosperity, much less red tape. But the Commission has not done this alone. It works in close partnership with the other European institutions and with the governments of the Member States. Although the Commission makes the proposals, all the major decisions on important legislation are taken by the ministers of the Member States in the Council of the European Union, in co-decision (or, in some cases, consultation) with the democratically elected European Parliament.

The Commission consults widely with interested parties from all sectors and all walks of life when preparing draft legislation. In addition to its power of proposal, the Commission acts as the EU executive body and guardian of the Treaties. It represents the common interest and embodies, to a large degree, the personality of the Union. Its main concern is to defend the interests of Europe's citizens. The Commission's job is to ensure that the European Union can attain its goal of an ever-closer union of its members. One of the principal tasks here is to secure the free movement of goods, services, capital and persons throughout the territory of the Union. The Commission must also ensure that the benefits of integration are balanced between countries and regions, between business and consumers and between different categories of citizens.

ASEAN
ASEAN or Association of Southeast Asian Nations was formed with Malaysia, Philippines, Indonesia, Thailand and Singapore. These five countries were the original members. Several other countries followed suit and became members of ASEAN. They were Brunei Darussalam, Cambodia, Myanmar , Lao PDR and Vietnam . The ASEAN was set up to advance mutual interests in the region. These interests include the acceleration of economic growth, social and cultural progress, and regional peace and stability. In line with those goals, ASEAN leaders set up three "pillars" of governance in 2003: ASEAN Security, ASEAN Economic Community, and ASEAN Socio-cultural Community. The ASEAN members believe in the following:

Prosperity and stability in economy Peaceful living Being far sighted and looking ahead of ones times. Maintaining a healthy partnership and creating stronger bonds among the member nations. This would eventually lead to a healthy society and all sided development.

AIMS AND PURPOSES As set out in the ASEAN Declaration, the aims and purposes of ASEAN are: 1. To accelerate the economic growth, social progress and cultural development in the region through joint endeavours in the spirit of equality and partnership in order to strengthen the foundation for a prosperous and peaceful community of Southeast Asian Nations;

2. To promote regional peace and stability through abiding respect for justice and the rule of law in the relationship among countries of the region and adherence to the principles of the United Nations Charter; 3. To promote active collaboration and mutual assistance on matters of common interest in the economic, social, cultural, technical, scientific and administrative fields; 4. To provide assistance to each other in the form of training and research facilities in the educational, professional, technical and administrative spheres; 5. To collaborate more effectively for the greater utilisation of their agriculture and industries, the expansion of their trade, including the study of the problems of international commodity trade, the improvement of their transportation and communications facilities and the raising of the living standards of their peoples; 6. To promote Southeast Asian studies; and 7. To maintain close and beneficial cooperation with existing international and regional organisations with similar aims and purposes, and explore all avenues for even closer cooperation among themselves. Principles of ASEAN or Association of Southeast Asian Nations : The different member nations of ASEAN abide by the following principles with respect to one another. These principles are recorded in the TAC or the Treaty Of Amity And Cooperation In Southeast Asia.

The sovereignty, independence, equality, national identity, territorial integrity of all the member nations to be respected mutually. Cooperation among all members Should any conflicts arise, these conflicts or disputes are required to be settled in a peaceful way. Intervention in the internal matters of the other nation to be avoided. A member nation is entitled to the right of functioning in its own manner without intervention from any external source. Ignoring any forceful action

India & ASEAN Since its start about a decade ago, the partnership between India and the Association of South East Asian Nations (ASEAN) comprising Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam has been developing at quite a fast pace. India became a sectoral dialogue partner of ASEAN in 1992. Mutual interest led ASEAN to invite India to become its full dialogue partner during the fifth ASEAN Summit in Bangkok in 1995. India also became a member of the ASEAN Regional Forum (ARF) in 1996. India and ASEAN have been holding summit-level meetings on an annual basis since 2002.

In August 2009, India signed a Free Trade Agreement (FTA) with the ASEAN members in Thailand. Under the ASEAN-India FTA, ASEAN member countries and India will lift import tariffs on more than 80 per cent of traded products between 2013 and 2016, according to a release by the Ministry of Commerce and Industry. In January 2010, Singapore, Malaysia and Thailand accepted the FTA on goods. The other seven ASEAN countries are expected to operationalise the FTA by August 2010. India and ASEAN are currently negotiating agreements on trade in services and investment. The services negotiations are taking place on a request-offer basis, wherein both sides make requests for the openings they seek and offers are made by the receiving country based on the requests. India has made requests in a number of areas including teaching, nursing, architecture, chartered accountancy and medicine as it has a large number of English speaking professionals in these areas who can gain from job opportunities in the ASEAN region. India is also keen on expanding its telecom, IT, tourism and banking network in ASEAN countries.

COMESA
The Common Market for Eastern and Southern Africa, is a preferential trading area with nineteen member states stretching from Libya to Zimbabwe. COMESA formed in December 1994, replacing a Preferential Trade Area which had existed since 1981. Member states that formed a free trade area - Djibouti, Egypt, Kenya, Madagascar, Malawi, Mauritius, Sudan, Zambia and Zimbabwe, with Rwanda ,Burundi ,Comoros and Libya joining later. COMESA aims at promoting trade, increasing production, improving physical infrastructure and, and in general, achieving market integration COMESA is one of the pillars of the African Economic Community. COMESA agreed to an expanded free-trade zone including members of two other African trade blocs, the East African Community (EAC) and the Southern Africa Development Community (SADC). The aims and objectives of COMESA are defined in the Treaty and its Protocols. In summary, the main objective is to facilitate the removal of all structural and institutional weaknesses of member States, and the promotion of peace; security and stability so as to enable them attain sustained development individually and collectively as a regional bloc. Among other things, COMESA member States have agreed on the need to create and maintain: a full free trade area guaranteeing the free movement of goods and services produced within COMESA and the removal of all tariffs and non-tariff barriers; a Customs Union under which goods and services imported from non-COMESA countries will attract an agreed single tariff in all COMESA states;

free movement of capita and investment supported by the adoption of common investment practices and policies so as to create a more favourable investment climate for the COMESA region; a gradual establishment of a payments union based on the COMESA Clearing House and the eventual establishment of a common monetary union with a common currency; and the adoption of common visa arrangements, including the right of establishment leading eventually to the free movement of bona fide persons.

The member States of COMESA have agreed to adhere to the following principles: (a) equality and inter-independence of the member States; (b) solidarity and collective self-reliance among the member States; (c) inter-State co-operation, harmonisation of policies and integration of programmes among the member States; (d) non-aggression between the member States; (e) recognition, promotion and protection of human and people's rights in accordance with the provisions of the Charter on Human and People's Rights; accountability, economic justice and popular participation in development; the recognition and observance of the rule of law; the promotion and sustenance of a democratic system of governance in each member State; the maintenance of regional peace and stability through the promotion and strengthening of good neighbourliness; and the peaceful settlement of disputes among the member States, the active co-operation between neighbouring countries and the promotion of a peaceful environment as a pre-requisite for their economic development. African

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Its aim is to promote regional economic integration through trade and investment and attain a fully integrated, competitive regional economic community for its 21 member countries. The chosen path towards an economic community is through development integration involving a combination of trade development, investment promotion, infrastructure development, science and technology development and coordination.

Its trade development priorities include the formation of a Free Trade Area, a Customs Union with a Common External
Tariff and a Monetary Union. COMESA has harmonized customs and trade statistics under a programme supported by the EC. COMESA will be involved in additional areas like national accounts, price statistics, monitoring of MDGs and statistical capacity building initiatives. The basic function of the Secretariat is to provide technical support and advisory services to the member states in the implementation of the Treaty. The Secretariat includes a section for technical co-operation.

(Potential) Benefits of regional integration under the COMESA Results in a more efficient allocation of regional resources; The large market promotes competition leading to better quality, fair-priced goods; Competition also accelerates the process of technological change; The larger market encourages longer production runs and better, cost-effective utilisation of production capacity, The single market with harmonised policies improves market access and reduces, for instance transport and communication costs; Regional consumers benefit from greater product diversity; Integration under COMESA with a common external tariff can act as a learning and adjustment period for 'infant' firms as they prepare to complete globally; The large market acts as a stimulus for investment; Acts as a device for binding and committing member States to certain economic reforms thus increasing their credibility; Acts as a signal to partners that member countries are willing to play by collective rules; Increases Member States' bargaining power with third parties; Acts as a co-ordination mechanism for taking up collective positions; and Provides a forum for co-operation in matters of peace and security.

Global Supply Chain

Definition An integrated process where several business entities such as suppliers, manufacturers, distributors, and retailers work together to plan, coordinate and control materials, parts, and finished goods from suppliers to customers. One or more of these business entities operate in different countries. Practicality and Usefulness Help companies compete all over the world Expand business operations Offer new services and applications to meet global customers needs Give company a competitive advantage Falling International Trade Barriers Mean Rising Profits

Goal of the Global Supply Chain Prompt and reliable delivery of high-quality products and services at the least cost To effectively meet rising customer expectations Recent changes effecting the global supply chain Internet and technological change Proliferation of trade agreements Falling Trade Barriers Increase in international trade groups New Markets Advantages of Global Supply Chains Reduced total costs Inventory reduction Improved fulfillment cycle time Reduce cycle time Increased forecast accuracy Productivity increase Improved capacity Expand international connections Increase intellectual assets Delivery improvement Diversified business and trading Competitive advantage Untapped markets Enhance speed and efficiency Global Supply Chains Obstacles

SECURITY: When your supply extends beyond domestic borders, a whole new level of security comes into play. PORT ISSUES: If you are shipping by ocean, you absolutely need to consider capacity issues and route your goods accordingly. TAX AND TARIFF ISSUES: Make sure that manufacturing or sourcing overseas is as low cost as you think it is. Tax and tariff regulations differ according to country. Something as basic as the way a product is packaged can change its entire tariff structure. Be sure to do your homework.

PARTNERSHIPS WITH LOCAL EXPERTS: Extending your supply chain into another country requires in-depth knowledge of how that country operates. Partners, either through 3PLs or directly, are often critical to success.

CULTURAL DIFFERENCES: To Americans this may seem like a small thing, but misunderstanding the culture can wreak havoc on your planning. TECHNOLOGY ABILITIES AND CAPABILITIES: A global supply chain often requires an even greater investment in technology to improve visibility. RISK MANAGEMENT: With a global supply chain, the possibility of things going wrong is greater and often more costly to fix. Knowing what the risks are and planning for them in advance is critical. Global Operations Management Supply Base Design / Vendor Consolidation How do I simultaneously perform supplier selection for all the parts in the same commodity group? How many suppliers is best and which suppliers should send which parts to which plants? Am I missing opportunities by sourcing one part at a time? Supplier Relations :How much should be the degree of involvement with your suppliers? Characteristics of global sourcing excellence

Executive commitment to global sourcing Rigorous and well-defined processes Availability of needed resources Integration through information technology Supportive organization design Structured approaches to communication Methodologies for measuring saving Global Manufacturing Strategies

Plant Location Strategies Transportation costs, duties, proximity to customers and suppliers, foreign exchange rate risk, economies of scale in the production process, government incentives, climate, technological requirements of the manufacturing process.

Plant Layout Planning Strategies physical arrangement of economic activity centers within a manufacturing facility Every manufacturing facility cannot have the same type layoutlocal conditions such as cost of labor, cost of land, local culture must be considered in deciding about the plant layout

Multi-agent systems (MAS) enhance overall system performance, in particular along such dimensions as computational efficiency, reliability, extensibility, responsiveness, reuse, maintainability, and flexibility. International Logistics Definition designing and managing a system to control the flow of materials into, through, and out of a company

Two phases of the movement of materials:

Materials management the timely movement of materials, parts, and supplies Physical distribution movement of the companys physical product to customers-- transport, warehousing and order processing. Cost-saving programs that can be part of international logistics Just-in-time (JIT) purchasing and manufacturing Electronic data interchange (EDI) Early supplier involvement (ESI) - Before or early in the design phase of a project

Classical Logistic Issues Facility Locations Sourcing Distribution Facility location Physical Distribution The act and functions of physically distributing goods and services including the elements of transport, warehousing and order processing Physical distribution is 10-25% of the total cost of an international order Distribution is a key to winning and keeping international customers Distribution Strategy Should we ship direct from the plants or use warehouses? How many warehouses and where located? What service areas for each distribution center? What modes of transportation to use? How best to use in-transit merge to fulfill orders? Should I outsource logistics? Which functions? What spare parts and returns network design? Distribution Complexity Request for Quote , P. O. Confirmation, Purchase Order, Quotation, Ship Order / Instr, Export Documents, Payment Order, Remittance, Import Documents, Air Freight, Ship Investment, Proof of Delivery. International Transportation Usually greater distances than with domestic transportation Longer lead times (more planning needed) More chances for things to go wrong Potential for delays at port or border Selecting a Mode of Transportation Transit time Important for highly perishable products Important when product is needed ASAP

Predictability of delivery by a specific date Important when buyer needs product by specified date Cost of shipping per dollar of product value Important to economize on costs with bulky commodities International Inventory Issues

Inventories tie up a major portion of corporate funds, therefore proper inventory policies should be a major concern to the international logistician Just-in-time inventory policies minimize the volume of inventory by making it available only when needed The goals of inventory systems are to Maintain product movement in the delivery pipeline Have a cushion to absorb demand fluctuations Storage Facilities

A stationary period is involved when merchandise becomes inventory stored in warehouses The location decision addresses how many distribution centers to have and where to locate them Storage facilities abroad can differ in availability and quality - Refrigerated facilities The logistician should analyze international product sales and then rank order products according to warehousing needs International Packaging Issues

Packaging is instrumental in getting merchandise to the destination in a safe, presentable condition Food safety regulations Because of the added stress of international shipping, packaging that is OK for domestic purposes may be not be adequate for international shipping One solution to the packaging problem has been the development of inter-modal containers Global Business Issues

In the global economy, the classical logistics issues of facility locations, sourcing and distribution are greatly influenced by such political and economic factors as taxes on corporate income, customs duty, local content and offset trade.

International Factors : Costs - Local labor rates, Local space costs, International freight tariffs , Currency exchange rates Customs Duty - Duty rates differ by commodity and level of assembly, Duty drawback, Impact of GATT: Changes over Taxes on Corporate Income - Different markups by country,Tax havens and not havens,Make vs. buy effect Offset Trade and Local Content - Local content requirement for government purchases, Content for preferential duty rates, Offset trade requirements Export Regulations - Export licenses, Denied parties list Time - Lead time Cycle time,Transit time, Export license approval cycle ,Customs clearance

time Transfer pricing Duty suspension

The Payment Contract Freight Forwarders - Act as an agent for exporter in arranging transportation and related services, handling paperwork. Expertise with entire exporting process documentation, regulations, transportation, export financing, etc. Access to discounted shipping rates

Export Documentation Both exporting country and importing country have paperwork requirements.Shippers, distributors, and others in Typically outsourced to a third party supply chain also have documentation requirements. Average international shipment requires 46 separate documents

Logistics and Security After the terrorist attacks of 2001, companies have to deal with the fact that the pace of international transactions has slowed down and that formerly routine steps now take longer. Logistics systems and modern transportation systems are often the targets of attacks. New safeguards for international shipments affect the ability of firms to efficiently plan their international shipments Conclusions The supply chain is complex, globally integrated and extends beyond the enterprise to third parties. Changes to the supply chain are being driven by company efforts to deliver better customer value, reduce costs, increase responsiveness and resiliency. IT duties and customs barriers are factors in internal business optimization and location decisions. New challenges are on the horizon as governments develop strategies to address security concerns. Security and efficiency are mutually reinforcing. Supply Chain complexities make government-industry partnership essential. Traditional trade facilitation issues and platforms provide an opportunity to expand global IT trade and also address new security concerns.