global environment

2.  Meaning of global environment
 Why firms go global
 Route of globalization
 Active players in global business
 FDI, India’s experience
 WTO-benefits and problems for India
 Trading blocks
 Analysis of global environment
 Scanning, monitoring, forecasting, assessing,
global environment

3. The process of integration of the world
into huge market even political and geographical
barrier becomes irrelevant. In other words the
company commits itself heavily with several
manufacturing locations around the world and
offers products in several diversified industries.
Ex: Toyota, General Electrical, MC Donald,
Suzuki, Uniliver, Shell, Sony, Ford ,IBM, Microsoft,
City group, Intel, Ranbaxy, Philips etc

4.  Spread of; manufacturing, services, market,
culture, life style, capital, technology and
ideas across national boundaries around the
world.
 Also the integration of these geographically
dispersed economic and social activities.
 Huge impacts on people and nation. The
whole world is affected by globalization.

5. Globalization refers to the process of
integration of the world into one huge market
through cross border flow of products, factors and
information.

7.  The globalization of Production
 The globalization of markets
 The globalization of investments
 The globalization of technology

13.  Geographical market segmentation
 Large size business operation ex: shell, IBM
 Wider scope
 Inter-country comparative study
 Achieve high rate of profit
 Expanding the production capacity
 Available technology and managerial competence

14. a) Achieve high rate of profit
b) Expanding of production capacity
c) Severe competition
d) Limited home market
e) Political stability v/s political instability
f) Availability of technology and managerial
competency

15. g) High cost of transformation
h) Nearness to raw materials
i) Availability of human resources
j) Liberalization
k) Increase market share
l) Avoid tariffs and import quotas

16.  International Trade
Export
Import
 Foreign Direct Investment(FDI)
International company
MNC
Global company
Transnational company
 Other Routes
Licensing
Franchising
Joint venture
Wholly owned subsidiaries
Mergers and acquisitions

17.  Transnational company
 Multinational company
 Global companies
EX:General motor
Ford motor
Toyota
Shell group
Hitachi
General electric

20.  Foreign direct investment (FDI) is a direct
investment into production or business in a
country by an individual or company of
another country, either by buying a company
in the target country or by expanding
operations of an existing business in that
country.
 Foreign direct investment is in contrast
to portfolio investment which is a passive
investment in the securities of another
country such as stocks and bonds.

21.  The Foreign Direct Investment means “cross border
investment made by a resident in one economy in an
enterprise in another economy, with the objective of
establishing a lasting interest in the investee
economy”.
 FDI is also described as “investment into the
business of a country by a company in another
country”.
 Mostly the investment is into production by
either buying a company in the target country or by
expanding operations of an existing business in that
country”. Such investments can take place for
many reasons, including to take advantage of
cheaper wages, special investment privileges (e.g.
tax exemptions) offered by the country.

22. (a) Domestic capital is inadequate for
purpose of economic growth;
(b) Foreign capital is usually essential, at least
as a temporary measure, during the period
when the capital market is in the process of
development;
(c) Foreign capital usually brings it with other
scarce productive factors like technical know
how, business expertise and knowledge

23. (a) Improves forex position of the country;
(b) Employment generation and increase in
production ;
(c) Help in capital formation by bringing fresh
capital;
(d) Helps in transfer of new technologies,
management skills, intellectual property
(e) Increases competition within the local market
and this brings higher efficiencies
(f) Helps in increasing exports;
(g) Increases tax revenues

24. (a) Domestic companies fear that they may lose their
ownership to overseas company
(b) Small enterprises fear that they may not be able to
compete with world class large companies and may
ultimately be edged out of business;
(c) Large giants of the world try to monopolise and
take over the highly profitable sectors;
(d) Such foreign companies invest more in machinery
and intellectual property than in wages of the local
people;
(e) Government has less control over the functioning
of such companies as they usually work as wholly
owned subsidiary of an overseas company;

25. An Indian company may receive Foreign Direct
Investment under the two routes as given under:
i. Automatic Route
FDI is allowed under the automatic route without
prior approval either of the Government or the
Reserve Bank of India in all activities/sectors as
specified in the consolidated FDI Policy, issued by the
Government of India from time to time.
ii. Government Route
FDI in activities not covered under the automatic
route requires prior approval of the Government
which are considered by the Foreign Investment
Promotion Board (FIPB), Department of Economic
Affairs, Ministry of Finance.

26.  India is the 3rd largest economy of the world in terms of purchasing power
parity and thus looks attractive to the world for FDI. Even Government of
India, has been trying hard to do away with the FDI caps for majority of the
sectors, but there are still critical areas like retailing and insurance where
there is lot of opposition from local Indians / Indian companies.
 Some of the major economic sectors where India can attract investment are as
follows:-
◦ Telecommunications
◦ Apparels
◦ Information Technology
◦ Pharma
◦ Auto parts
◦ Jewelry
◦ Chemicals
 In last few years, certainly foreign investments have shown upward trends but
the strict FDI policies have put hurdles in the growth in this sector. India is
however set to become one of the major recipients of FDI in the Asia-Pacific
region because of the economic reforms for increasing foreign investment
and the deregulation of this important sector. India has technical expertise
and skilled managers and a growing middle class market of more than 300
million and this represents an attractive market.

27. FDI is prohibited under the Government Route as well as the Automatic Route in the
following sectors:
i) Atomic Energy
ii) Lottery Business
iii) Gambling and Betting
iv) Business of Chit Fund
v) Nidhi Company
vi) Agricultural (excluding Floriculture, Horticulture, Development of seeds, Animal
Husbandry, Pisciculture and cultivation of vegetables, mushrooms, etc. under
controlled conditions and services related to agro and allied sectors) and
Plantations activities (other than Tea Plantations)
vii) Housing and Real Estate business (except development of townships,
construction of residen-tial/commercial premises, roads or bridges to the extent
specified in notification
viii) Trading in Transferable Development Rights (TDRs).
ix) Manufacture of cigars , cheroots, cigarillos and cigarettes , of tobacco or of
tobacco substitutes.

28. (a) Foreign Investment Promotion Board (popularly known as FIPB)
: The Board is responsible for expeditious clearance of FDI
proposals and review of the implementation of cleared
proposals. It also undertake investment promotion activities and
issue and review general and sectoral policy guidelines;
(b) Secretariat for Industrial Assistance (SIA) : It acts as a gateway
to industrial investment in India and assists the entrepreneurs
and investors in setting up projects. SIA also liaison with other
government bodies to ensure necessary clearances;
(c) Foreign Investment Implementation Authority (FIIA) : The
authority works for quick implementation of FDI approvals and
resolution of operational difficulties faced by foreign investors;
(d) Investment Commission
(e) Project Approval Board
(f) Reserve Bank of India

29.  India has made a decade of rapid economic
gains and still has a large, young, and fast-
growing population. In 2012, the country saw
$25.5 billion in FDI inflows, with investors
still anticipating enormous potential.

31. 1. By incorporating a wholly owned subsidiary
2. By acquiring shares in an associates
3. Mergers or acquisitions
4. Participating in an equity joint venture with
another

32. o Political stability
o Government policy
o Industrial policy
o Economic policy
o Rate of interest
o Speculation
o Cost of production

33.  Expansion of employment opportunities
 Capital formation
 Domestic labour and wages increases
 Increases GDI
 Benefits to consumers and Industry
 Benefits to government
 BOP will change
 More export
 External economics

34. Foreign Direct Investment
 Wholly owned subsidiary
 Joint venture
 Acquisitions
 Port Folio Investment
 Investment by FI investors
 Global Depository Receipts(GDR)
 American Depository Receipts(ADR)
 Foreign Currency Convertibility

35.  FDI in India allowed 100% in single brand and 51% in
multi brand retail sectors
 Global Investors Meeting (GIM)
 Liberalize provisions relating to FDI or New Economic
Policy 1991
 India creates fast track route to FDI
 Government changes the policy environment across the
economies which influence the FDI
 India introduce ADR’s and GDR’s
 India providing many infrastructural facilities to FDI
 In the Indian context overseas investment in joint venture
and wholly owned subsidiary have been recognized
important channels for promoting global business

36.  Profits in domestic industrial fall
 Puts pressure on foreign exchange reserves
 Foreign firms reinforce dualistic socio-economic
structure and increases income equalities
 Stimulate inappropriate consumption patterns
through excessive advertising and monopolistic
market power
 Contribution of foreign firms to public revenues
through corporate taxes is comparatively less

37. Regional Trading Blocks are inter
governmental associations that manage and
promote trade activities for specific regions of the
world

41. 1. NAFTA - North American Free Trade Agreement
2. EU - European Union
3. EFTA - European Free Trade Agreement
4. EC - European community
5. CEFTA - Central European Free Trade Area
6. FTAA - Free Trade Area of America
7. LAFTA - Latin America Free Trade Agreement
8. CC - Caribbean Community
9. OECS - Organization of East Caribbean
10. TRIPS - Trade Related Intellectual Property
Rights

42. 11. TRIMS - Trade Related Investment Measures
12. SAARC - South Asian Association of Regional
Co-operation
13. ASEAN - Association of South East Asian
Nation
14. APEC - Asian Pacific Economic Co-
operation
15. BA - Bangkok Agreement
16. GCC - Gulf Co-operation Council
17. OPEC - Organization of petroleum
Exporting Countries
18. IMF - International Monetary Fund
19. IBRD - International Bank for Restructure

43.  WTO was established on 1-1-1995
 The WTO is the embodiment of Uruguay round
results and successor to the GATT (General
Agreement on Trade and Tariffs)
 No of Member Countries Stands at 151
 INDIA is a founder member of WTO

44.  To reduce the restrictions on trade and service
business
 To raising the standards of diving
 To promote full employment
 To expand production and trade
 To optimum utilization of world resources
 To promote multilateral trade agreements
 To ensure sustainable development
 To secure better share of growth and developing
countries in world trade

45. o Resolve the trade disputes
o Administered and implementing multilateral and
plurilateral trade agreements
o Act as a watch dog of international trade
o Act as a management consultant for world trade
o (Like technical co-operation, training to member
countries)
o Acting as a forum for multilateral trade
negotiations
o Co-operation with other institutions like
IMF,IBRD,ILO
o Overseeing national trade policies
o Maintains trade related data base

46. 1. Ministerial conferences
2. General council
◦ Dispute settlement body council
 Council for trade in goods
 Council for trade in services
 Council for trade related aspects of intellectual property
◦ Trade policy review body committee
 Committee on trade and development
 Committee on BOP structure
 Committee on budget finance and development
◦ Director general
 Secretarial of WTO

47.  (TRIPs) Trade Related Intellectual Property Rights
[patent, copyrights, trademarks] as made stringent
 Services sector is back in India EX: Insurance,
banking, telecommunication, transportation is
backward in India compare to other developed
countries
 Extension of intellectual property right to
agriculture has negative affect to India
 TRIMs agreement undernives any local or strategy
of self reliant growth based local technology
 Product patents in India will lead to hike in drug
prices by MNC