IBMSIBMS

IBMS definitionIBMS definition Decisions /needsDecisions /needs Decisions to which forms of IBMSDecisions to which forms of IBMS response of country to globalization/response of country to globalization/ environmental changes.environmental changes. FOREX management n Global finance.FOREX management n Global finance. Conflict resolution.Conflict resolution.

IBMSIBMS

Why : Reasons/ Needs Why : Reasons/ Needs Facilitators/ Facilitators/

drivers/attractions/compulsions drivers/attractions/compulsions Inference study Inference study Analysis on functionsAnalysis on functions

FactorsFactors

Economic reformsEconomic reforms WTO/GATTWTO/GATT CommunicationCommunication TransportationTransportation TechnologyTechnology

DRIVERSDRIVERS

ProtectionProtection MNC impetusMNC impetus Cultural changeCultural change Urge to expand / Global imageUrge to expand / Global image Change in empire /country pattern.Change in empire /country pattern.

AttractionsAttractions

ProfitProfit Availability of 4 psAvailability of 4 ps FeasibilityFeasibility Lesser cost high priceLesser cost high price ROI ROI

CompulsionsCompulsions

Domestic limitationsDomestic limitations Minimized RiskMinimized Risk Conglomerate/ parallel possbilities/Diverse.Conglomerate/ parallel possbilities/Diverse.

PatternsPatterns

Based on factors/ interest / response/ Based on factors/ interest / response/ strategy--- configurationstrategy--- configuration

Local/ INC / TNC / MNC / GNCLocal/ INC / TNC / MNC / GNC

ConceptsConcepts

IBMS concepts IBMS concepts

FlowFlow ShareShare Capitalise Capitalise

Concepts IBMSConcepts IBMS

EXIM flow / trade flow EXIM flow / trade flow Finance flow / investment flowFinance flow / investment flow

Trade flowTrade flow Resources flowResources flow Benefit of costBenefit of cost Expertise countries participation in flowExpertise countries participation in flow Techno sharing Techno sharing

Trade flowTrade flow

Increased trade flow Profit / exchange profitIncreased trade flow Profit / exchange profit Possibility of BE/ PE thro source exploitationPossibility of BE/ PE thro source exploitation Common currencies benefit.Common currencies benefit. World over development of DVGC/ UDCWorld over development of DVGC/ UDC Cultural migration and Reverse cultural Cultural migration and Reverse cultural

shock. shock.

Investment n Trade trendsInvestment n Trade trends

High by USA /EU more than 10 % 2006High by USA /EU more than 10 % 2006 Low by India /SA less than 1 %Low by India /SA less than 1 %

INV: World : 12113 bn $INV: World : 12113 bn $ High by USA/ EU : 15.8 / 43.1High by USA/ EU : 15.8 / 43.1 Low by 1.4 india/AZ/NZ. Low by 1.4 india/AZ/NZ.

Motives of FDIMotives of FDI

Country inflowsCountry inflows Country outflowsCountry outflows FDI capitalizationFDI capitalization Exploitation thro FDIExploitation thro FDI GDP/ GGDP GDP/ GGDP Income thro FDI Income thro FDI

Reasons for FDIReasons for FDI

Mergers n AcquisitionsMergers n Acquisitions Weakening currencies of developed countryWeakening currencies of developed country ex: Dollarex: Dollar Secular govntsSecular govnts High P/S n ROI increase.High P/S n ROI increase.

MercantilismMercantilism

Mercantilism meaningMercantilism meaning TheoriesTheories Mercantilism theory( gold and silver)Mercantilism theory( gold and silver) Based BOT /BOP- Monarch wealthBased BOT /BOP- Monarch wealth Neo mercantilism (Higher. production – Neo mercantilism (Higher. production –

higher exports)higher exports) Cost advantage n comparative cost adv.Cost advantage n comparative cost adv.

Other theories IB Other theories IB

Heckscher ohlin theoryHeckscher ohlin theory Relative resource endowment (Labour adv vs Relative resource endowment (Labour adv vs

resouce adv) R a /L a >> R b/L bresouce adv) R a /L a >> R b/L b Country similarity theory( steffan linder) Country similarity theory( steffan linder) Based on DC to Dc / Dvg to DVg / etc.,Based on DC to Dc / Dvg to DVg / etc., IPLC theory -Louis wellsIPLC theory -Louis wells Release- export-prodn increase- foreign prodn- Release- export-prodn increase- foreign prodn-

foreign prodn.- foreign protection-import foreign prodn.- foreign protection-import competiton.competiton.

IB theories IB theories

Country size theoryCountry size theory

Country size – resources together.Country size – resources together.

Country size – High transport cost- Country size – High transport cost- reducing global trade.reducing global trade.

Vastness of economy and IT trade go Vastness of economy and IT trade go together.together.

Michels porters theory.Michels porters theory.

Forms of IBMSForms of IBMS

Non ownership --- Product EXIM , Service Non ownership --- Product EXIM , Service EXIM, Licensing or franchise , contract mfgEXIM, Licensing or franchise , contract mfg

Turnkey operations, and management Turnkey operations, and management controlcontrol

Ownership : Foreign operations , Assembly Ownership : Foreign operations , Assembly subsidiaries, JVs, Strategic alliances, M & subsidiaries, JVs, Strategic alliances, M & AsAs

Export strategyExport strategy

Decision to export than TNC /GNCDecision to export than TNC /GNC a. Foreign business not large enough a. Foreign business not large enough b. High cost of foreign productionb. High cost of foreign production c. High Investment risk or political riskc. High Investment risk or political risk d. No long term forecasting /guarantee d. No long term forecasting /guarantee e. Country or operation not favoring. e. Country or operation not favoring. f . Hence licensing or franchise or direct f . Hence licensing or franchise or direct

not. not.

Import strategyImport strategy

No feasibility for local productionNo feasibility for local production High cost of productionHigh cost of production Local mkt is with infra/ raw materials/labor Local mkt is with infra/ raw materials/labor

issuesissues Orgn. interest in foreign productionOrgn. interest in foreign production More subsidiaries/sops/ tax discounts in More subsidiaries/sops/ tax discounts in

foreign soil.foreign soil.

J V typesJ V types

JV adoptionJV adoption JV restart or rejuvenationJV restart or rejuvenation JV creationJV creation JV internal ties bkwd integration or fwd JV internal ties bkwd integration or fwd

integrationintegration

Trade policiesTrade policies

guidelines drafted by concerned govts.guidelines drafted by concerned govts. To protect domestic environment.To protect domestic environment.

Priorities, assistance , concessions, Priorities, assistance , concessions, preferences , norms , rules , regulations , preferences , norms , rules , regulations , taxes, quotas , etc., taxes, quotas , etc.,

Trade policyTrade policy

Ex: governing bodiesEx: governing bodies

CII/ COC/ FICCI/ ASSOCHAMCII/ COC/ FICCI/ ASSOCHAM

State owned/ autonomous bodies:State owned/ autonomous bodies: STCL ( state trading corporation ltd)STCL ( state trading corporation ltd) ECGC ( Export credit guarantee corporation)ECGC ( Export credit guarantee corporation)

Trade policy objectivesTrade policy objectives

Economic growthEconomic growth Share – global merchandiseShare – global merchandise EmploymentEmployment Simplification- proceduresSimplification- procedures Inter alia ( further liberalization)Inter alia ( further liberalization) Neutralizing levies n dutiesNeutralizing levies n duties SEZ/ FTZ/ Tech parks etc.,SEZ/ FTZ/ Tech parks etc.,

Trade agreementsTrade agreements

WTOWTO GATTGATT NAMA ( non agri mkt accessNAMA ( non agri mkt access

Regional trade agreementsRegional trade agreements SAFTA,LAFTA, SAFTA,LAFTA,

NAFTA SAARC , BIMST-EC ( bay of bengalNAFTA SAARC , BIMST-EC ( bay of bengal Multi sectoral technical economic co opMulti sectoral technical economic co op

Examples: CEPA with srilanka Examples: CEPA with srilanka CECA with singaporeCECA with singapore

Agreements Misc:Agreements Misc: GSTP Global system of trade preferences.GSTP Global system of trade preferences. GSP Generalized system of preferences. GSP Generalized system of preferences.

Governing bodies :Governing bodies :

DIPP under dept of commerce.DIPP under dept of commerce. FIPB ministry of finance.FIPB ministry of finance. FIIA foreign investment implementation FIIA foreign investment implementation

authority authority FDI direct under RBIFDI direct under RBI SEBI etc.,SEBI etc.,

EXPORT PROMOTIONEXPORT PROMOTION

Export promotion measures: to protect n Export promotion measures: to protect n promote domestic exporters r TNC r INC promote domestic exporters r TNC r INC

Financial , Financial , FiscalFiscal FacilitativeFacilitative Favors n facilitatingFavors n facilitating

Services to exportersServices to exporters

Cr finance thro EXIM bankCr finance thro EXIM bank Cr guaranteeCr guarantee Cr by ECGC n Commercial banksCr by ECGC n Commercial banks Pre shipment cr facility – access of cr from Pre shipment cr facility – access of cr from

mfg stage n to buy raw materialsmfg stage n to buy raw materials Suppliers crfacility.Suppliers crfacility.

Project cr facility.Project cr facility. SME s schemesSME s schemes Rural grass root promotion (RGR)Rural grass root promotion (RGR) Funding for overseas exporting Funding for overseas exporting Funding for overseas acquisition.Funding for overseas acquisition. Fiscal concession for exports.Fiscal concession for exports.

Target plus support – duty free credit – pro Target plus support – duty free credit – pro rata based.rata based.

Web chat : Facilitator for queries or clouts Web chat : Facilitator for queries or clouts for exporters.for exporters.

Documents for ShippingDocuments for Shipping

Shippers export declarationShippers export declaration Shipping bill - Cess /duty if any Shipping bill - Cess /duty if any Commercial invoiceCommercial invoice Origin certificateOrigin certificate Insurance certificateInsurance certificate Packing list Packing list ATA CARNETATA CARNET Dock receipt n ware house receipt. Dock receipt n ware house receipt.

Shipping bill needsShipping bill needs

GR forms duplicate.GR forms duplicate. Contents copy qua triplicate ( size , content , Contents copy qua triplicate ( size , content ,

qty weight , etc., )qty weight , etc., )

Four copies of invoiceFour copies of invoice Copy of Contract , L/C , purchase order of Copy of Contract , L/C , purchase order of

importer.importer. Inspection certificate Inspection certificate

IEC /RCMC IEC /RCMC

Import export code no: first legal step in Import export code no: first legal step in EXIM – DGFT director genl of foreign tradeEXIM – DGFT director genl of foreign trade

Registration cum membership certificate Registration cum membership certificate number : thro Federation of indian exporters number : thro Federation of indian exporters organization FIEO. organization FIEO.

FOREXFOREX

Macro aspects:Macro aspects: a. Forex meaninga. Forex meaning b. Uniform currency codificationb. Uniform currency codification c. Exchange rate determinationc. Exchange rate determination d. Dynamics of FX ratesd. Dynamics of FX rates e. Fluctuation in Fx rate ( brickbats n e. Fluctuation in Fx rate ( brickbats n

bouquets )bouquets )

FX rate typesFX rate types

Inter bank mkts - parties banksInter bank mkts - parties banks Merchant deal mkts – parties dealers Merchant deal mkts – parties dealers Wholesale mkt - size large corporations r Wholesale mkt - size large corporations r

inter banks.inter banks. Retail mkt – size deals less than $1000Retail mkt – size deals less than $1000 OTC mkt : ORGN - direct parties no IMAsOTC mkt : ORGN - direct parties no IMAs Exchange mkt : ORGN -thro exchanges of Exchange mkt : ORGN -thro exchanges of

clearing house.clearing house.

Transactional mkt : Type of deal : Trade or Transactional mkt : Type of deal : Trade or finance exchangefinance exchange

Hedging mkt : Risk cover dealHedging mkt : Risk cover deal

Speculation : Wait n pegg deal to gain Speculation : Wait n pegg deal to gain profit.profit.

Spot mkt : based on shedules: in two daysSpot mkt : based on shedules: in two days FWD mkt : scheduled for future delivery .FWD mkt : scheduled for future delivery . Arbitrage mkt : simultaneous exchangeArbitrage mkt : simultaneous exchange Options mkt : Open schedule in call / putOptions mkt : Open schedule in call / put Futures mkt : scheduled with stdzd agents Futures mkt : scheduled with stdzd agents

LIFFE / TIFFE( london intnl fncl futures LIFFE / TIFFE( london intnl fncl futures exchange )exchange )

SWAPS mkt : Temporary schedules SWAPS mkt : Temporary schedules

Types of Forex rate :Types of Forex rate :

Telegraphic transferTelegraphic transfer Direct n indirect ratesDirect n indirect rates Bid and ask ratesBid and ask rates Spot n fwd ratesSpot n fwd rates Cross rates pound vs dollar thro rupeeCross rates pound vs dollar thro rupee

Determinants – Ex ratesDeterminants – Ex rates

GDPGDP Inflation rates Inflation rates Interest ratesInterest rates Demand n supply mappingDemand n supply mapping Exim trendsExim trends Forex reservesForex reserves Natural resource Vs policiesNatural resource Vs policies

Political systemPolitical system Market trends.Market trends.