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worldwide and moving there. However, organizations operate businesses asif they were puzzles. For every puzzle, many pieces are required to completethe puzzle. Therefore, going global would be of the utmost essence for themajority of organizations in order to properly compete and control both

produce and costs in an efficient manner.Nothing is created within global trading but winners since selling productscreates increase in demand for those products because the foreigners net demand will be added onto the domestic demand. So, with a demandincrease, prices will rise. Still, purchasing products will create increaseswithin product supply since net foreign supply will be added onto thedomestic supply. Therefore, with this supply increase, the prices will drop.

Nobody will lose. It is definitely a win-win situation for every country thatparticipates.Because of technological changes, continuous development and research, the

market economy remains to be dynamic. Because of this, people have tokeep up with this overall movement and change, as well, by attendingseminars and going through training on a regular basis. The traditional kindof static markets is long gone.There are worries regarding exploitation of poorer people within developingcountries, however. This even went further as their wages were compared toslave s wages. The truth is: whenever developing countries get thechance to get jobs to earn more than before, improvement happens. A lot of

people from these countries happen to be illiterate and have no idea howimportant education is. Because of this, they send their kids off to work at

production plants. Before sending their kids to school, however, they have tobe educated on how important education is and stop sending their kids theseproduction plants.

Q.2 What is culture and in the context of international business

environment how does it impact international business

decisions?

Culture is defined as the shared patterns of behaviors and interactions,cognitive constructs, and affective understanding that are learned through a

process of socialization. These shared patterns identify the members of aculture group while also distinguishing those of another group.the word "culture" is most commonly used in three basic senses:* Excellence of taste in the fine arts and humanities, also known as highculture

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* An integrated pattern of human knowledge, belief, and behavior thatdepends upon the capacity for symbolic thought and social learning* The set of shared attitudes, values, goals, and practices that characterizesan institution, organization or group

In this new millennium, few executives can afford to turn a blind eye toglobal business opportunities. Japanese auto-executives monitor carefullywhat their European and Korean competitors are up to in getting a biggerslice of the Chinese auto-market. Executives of Hollywood movie studiosneed to weigh the appeal of an expensive movie in Europe and Asia as muchas in the US before a firm commitment. The globalizing wind has broadenedthe mindsets of executives, extended the geographical reach of firms, andnudged international business (IB) research into some new trajectories. Onesuch new trajectory is the concern with national culture. Whereas traditional

IB research has been concerned with economic/ legal issues andorganizational forms and structures, the importance of national culture

broadly defined as values, beliefs, norms, and behavioral patterns of anational group has become increasingly important in the last two decades,largely as a result of the classic work of Hosted (1980). National culture has

been shown to impact on major business activities, from capital structure(Chui et al., 2002) to group performance (Gibson, 1999). For reviews, seeBoyacigiller and Adler (1991) and Earley and Gibson (2002).

The purpose of this Unit is to provide a state-of-the-art review of severalrecent advances in culture and IB research, with an eye toward productiveavenues for future research. It is not our purpose to be comprehensive; ourgoal is to spotlight a few highly promising areas for leapfrogging the field inan increasingly boundary-less business world. We first review the issuessurrounding cultural convergence and divergence, and the processesunderlying cultural changes. We then examine novel constructs forcharacterizing cultures, and how to enhance the precision of cultural models

by pinpointing when the effects of culture are important. Finally, weexamine the usefulness of experimental methods, which are rarely employed

in the field of culture and IB. A schematic summary of our coverage is givenin Table 2.1, which suggests that the topics reviewed are loosely related, andthat their juxtaposition in the present paper represents our attempt tohighlight their importance rather than their coherence as elements of anintegrative framework.

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Q.3 Explain the meaning of the term trade liberalization and

advantages. Also, identify some commonly observed mistakes

in international trade.

Trade Liberalization is the removal or reduction of restrictions or barriers onthe free exchange of goods between nations. This includes the removal orreduction of both tariff (duties and surcharges) and non-tariff obstacles (likelicensing rules, quotas and other requirements). The easing or eradication ofthese restrictions is often referred to as promoting "free trade."The Benefits of Trade LiberalizationPolicies that make an economy open to trade and investment with the rest ofthe world are needed for sustained economic growth. The evidence on this isclear. No country in recent decades has achieved economic success, in termsof substantial increases in living standards for its people, without being open

to the rest of the world. In contrast, trade opening (along with opening toforeign direct investment) has been an important element in the economicsuccess of East Asia, where the average import tariff has fallen from 30

percent to 10 percent over the past 20 years.Opening up their economies to the global economy has been essential inenabling many developing countries to develop competitive advantages inthe manufacture of certain products. In these countries, defined by the WorldBank as the "new globalizes," the number of people in absolute povertydeclined by over 120 million (14 percent) between 1993 and 1998.

There is considerable evidence that more outward-oriented countries tendconsistently to grow faster than ones that are inward-looking. Indeed, onefinding is that the benefits of trade liberalization can exceed the costs bymore than a factor of 10. Countries that have opened their economies inrecent years, including India, Vietnam, and Uganda, have experienced fastergrowth and more poverty reduction. On average, those developing countriesthat lowered tariffs sharply in the 1980s grew more quickly in the 1990s thanthose that did not.Freeing trade frequently benefits the poor especially. Developing countriescan ill-afford the large implicit subsidies, often channeled to narrow

privileged interests that trade protection provides. Moreover, the increasedgrowth that results from free trade itself tends to increase the incomes of the

poor in roughly the same proportion as those of the population as a whole.New jobs are created for unskilled workers, raising them into the middleclass. Overall, inequality among countries has been on the decline since1990, reflecting more rapid economic growth in developing countries, in

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part the result of trade liberalization.The potential gains from eliminating remaining trade barriers areconsiderable. Estimate of the gains from eliminating all barriers tomerchandise trade range from US$250 billion to US$680 billion per year.About two-thirds of these gains would accrue to industrial countries. But theamount accruing to developing countries would still be more than twice thelevel of aid they currently receive. Moreover, developing countries wouldgain more from global trade liberalization as a percentage of their GDP thanindustrial countries, because their economies are more highly protected and

because they face higher barriers.Although there are benefits from improved access to other countriesmarkets, countries benefit most from liberalizing their own markets. Themain benefits for industrial countries would come from the liberalization oftheir agricultural markets. Developing countries would gain about equally

from liberalization of manufacturing and agriculture. The group of low-income countries, however, would gain most from agricultural liberalizationin industrial countries because of the greater relative importance ofagriculture in their economies.Mistakes:

Failure to obtain export counseling and to develop a master internationalmarketing plan before starting an export business: Insufficient commitment to overcome the initial difficulties and financialrequirements of exporting: Failure to have a solid agent and or distributors agreement: Blindly chasing orders from around the world Failure to understand the connection between country risk and the

Probability of getting export financing Failure to understand Intellectual Property Rights (IPR): Insufficient attention to marketing and advertising requirements: Lack of attention to product adaptation and preparation needs Failure to obtain legal advice Failure to understand export licensing requirements.

Q.4 Explain the product life cycle theory.

Product Life Cycle Theory

Life cycle theory has been used since the 1970s to describe the behavior of aproduct or service from design to obsolescence.

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The typical pattern of a product is represented by a curve divided into fourdistinct phases: introduction, growth, maturity, and decline. Recent researchin the area has focused on its use in decision making in areas ranging fromthose as broad as overall strategy to those as narrow as equipmentreplacement.But does the product life cycle, or PLC, really tell the entire story? Considerthe Ford Mustang. Since its 1964 introduction, the automobile hasundergone several changes. Performance was increased with the addition ofthe 428 Cobra Jet in 1968 and Mach I styling in 1969. Another substantialchange took place in 1971 with the introduction of the high-performanceBoss 351. Then a true muscle car, the Mustang was detuned in 1974, whenoil prices forced a more fuel-efficient redesign, called Mustang II. Thefourth generation Mustang, introduced as the 1994 model, has been furtherrefined and is more aerodynamic than its immediate predecessor. Yet it still

shares roots with earlier models. A 302 V-8 is still offered, the wheelbase issimilar, and if one looks closely enough, one can see its genesis in the 1964model. The pattern evidenced by the life of the Mustang, then, is severalcurves of introduction, growth, maturity, and decline.

. Conventional Life Cycle Theory

In the introductory phase, sales are slow. The strategy is to createwidespread awareness. Costs are incurred in building distribution andincreasing awareness through heavy promotion. It is hoped that theinvestments made in new product introduction pay off and the product orservice moves to the growth phase.The firm may either build market share or profitability in the growth phase.Strategies here are to make differential changes that add value to the productand to target new markets. Marketing moves away from promotion through

personal selling toward more mass media advertising. Just as predators reactto attractive targets, competition begins to build as awareness increases andsales momentum builds. Unit manufacturing costs begin to fall as fixed costsare spread over more production units and workers move down the learning

curve. The firm attempts to stay in the growth stage as long as possible.Sales growth slows at maturity and the firm moves to defend market

position. This is where marketing managers must pay the most attention.Promotion costs increase significantly. Cost reduction is crucial ascompetitors begin to lower prices and introduce improved versions of the

product. With the lower prices come lower profits, and competitors begin todrop out. This is typically the longest lasting stage, with some market

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leaders holding their position over several decades.The final stage is decline. Here the firm may continue to market the producthoping that competitors will discontinue their products. Other strategies areto maximize profit by eliminating as many product costs as possible as salesslow, or else to eliminate the product altogether.

Life Cycle Elements

Design engineering, process engineering, product marketing, and productionhave been recurring elements in each stage of the product life cycle. Inaddition, end-of-life (EOL) issues must be addressed when the productapproaches obsolescence. These elements vary in importance as the productor service moves through its life, thus creating waves of activity. The factthat they change in importance and magnitude requires that they be closely

managed. Lets begin our discussion of the individual elements with designengineering.

Design Engineering

Design engineering is involved in the five phases of the new productintroduction (NPI) process. Idea validation is first. Engineers take informalideas and study the market for needs that are not being met by productscurrently being offered or planned. Technology, manufacturing capabilities,competition, and potential revenues are analyzed in the review.

Process Engineering

The process engineering function is responsible for the production system.To that end, process engineers specify the type of system, equipment,tooling, layout, and flow used in manufacturing or service operations. Theirtask is to ensure the efficient production of each part or component.Traditionally, the first step is a review of the end item bill of materials,which identifies all the separate parts that make up the product or service to

be produced in, or to flow through, the operation area. Once the bill ofmaterials analysis is completed, the problem of which type of productionsystem to employ may be tackled.

Production

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Production activity follows demand for the product or service; both arelinked by manufacturing planning and control systems. Activity begins inearnest during production ramp-up. Equipment processes, and trained

production personnel must be in place. Targets for product cost,conformance to specification, and overall quality must be met. As customersales begin to speed up production, overhead per-unit costs decrease anddirect costs increase.

Relationships

Design engineering, process engineering, and production are all related. Thepurpose of presenting the traditional relationship here is to facilitate latercomparisons with the five-element wave. The model is illustrated in Figure3, which shows that traditional product engineering follows a linear path.The first step is design engineering, in which the good or service is taken

from concept and detail design to prototyping. The product moves to processengineering, where technologies and production methods are evaluated as asystem is set into motion. Finally, the product flows to production, wheredown-stream manufacturing activities, such as production planning andscheduling, take place. This is known as the over-the-wall method of productdesign and development, with each stage separate from the next.

Product Marketing

New products are usually supported with high advertising budgets to buildawareness and encourage an initial purchase. If the target is the entiremarket, a typical first strategy is to attack it with one theme. When resourcesare relatively limited, the business may choose to identify smaller, morehomogenous concentrations within the market and tailor the advertising tothose groups. Once the product becomes established, fewer advertisingdollars per sales unit are required to encourage demand.

End of Life

This element considers what happens when sales decline to the point atwhich revenues drop to a level that supposedly precludes continued

production of a good by the firm. One strategy is to cease production andallow inventory levels to drop to zero. An alternative tactic is to attempt togive new life to the product and risk succumbing to what is known as "TheThomas Lawson Syndrome."

Q.5 Discuss the implications of Heckscher-Ohlin theory model.

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Q.6 Do you think WTO is helpful for promoting international

business? Give reasons for your answer.

WTO is helpful for promoting international business in the following ways:

1. The system helps to keep the peaceThis sounds like an exaggerated claim, and it would be wrong to make toomuch of it. Nevertheless, the system does contribute to international peace,and if we understand why, we have a clearer picture of what the systemactually does.

2. The system allows disputes to be handled constructivelyAs trade expands in volume, in the number of products traded, and in thenumbers of countries and companies trading, there is a greater chance that

disputes will arise. The WTO system helps resolve these disputes peacefullyand constructively.

3. A system based on rules rather than power makes life easier for allThe WTO cannot claim to make all countries equal. But it does reduce someinequalities, giving smaller countries more voice, and at the same timefreeing the major powers from the complexity of having to negotiate tradeagreements with each of their numerous trading partners

4. Freer trade cuts the cost of livingWe are all consumers. The prices we pay for our food and clothing, ournecessities and luxuries, and everything else in between, are affected bytrade policies.

5. It gives consumers more choice and a broader range of qualities to choosefromThink of all the things we can now have because we can import them: fruitsand vegetables out of season, foods, clothing and other products that used to

be considered exotic, cut flowers from any part of the world, all sorts of

household goods, books, music, movies, and so on.

6. Trade raises incomesLowering trade barriers allows trade to increase, which adds to incomes national incomes and personal incomes. But some adjustment is necessary.

7. Trade stimulates economic growth and that can be good news for

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employmentTrade clearly has the potential to create jobs. In practice there is oftenfactual evidence that lower trade barriers have been good for employment.But the picture is complicated by a number of factors. Nevertheless, thealternative protectionism is not the way to tackle employment problems.

8. The basic principles make the system economically more efficient, andthey cut costsMany of the benefits of the trading system are more difficult to summarizein numbers, but they are still important. They are the result of essential

principles at the heart of the system, and they make life simpler for theenterprises directly involved in trade and for the producers of goods andservices.

9. The system shields governments from narrow interestsThe GATT WTO system which evolved in the second half of the 20thCentury helps governments take a more balanced view of trade policy.Governments are better placed to defend themselves against lobbying fromnarrow interest groups by focusing on trade offs that are made in theinterests of everyone in the economy

10. The system encourages good governmentUnder WTO rules, once a commitment has been made to liberalize a sectorof trade, it is difficult to reverse. The rules also discourage a range of unwise

policies. For businesses, that means greater certainty and clarity abouttrading conditions. For governments it can often mean good discipline.