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1AMITY INTERNATIONAL BUSINESS SCHOOL

Dr. Namrata PancholiName of InstitutionAmity Business School1Barriers and Complexities of entering into Global Business

2Name of InstitutionBarriers and Complexities of entering into Global BusinessGeographicEconomicPolitical and LegalCultural- Stages of Internationalization3Name of Institution The World Economy - Overview

World Economy has changed profoundly during the last 50 years

Integration of world economy(EU , NAFTA)

Emergence of global markets

Name of InstitutionSuccess of business depends upon our understanding of the following:

-Capital movements not trade are driving force of world economy -Production is uncoupled from employment -World Economy dominates the scene. Macroeconomics of individual countries no longer control economic outcomes. -Internet diminishes the importance of national barriers.

5Name of Institution Economic Systems

Three types of economic systems Capitalist Socialist Mixed Classification based on dominant method of resource allocation Market allocation Command or central plan allocation Mixed allocation

Name of InstitutionEconomic Systems Market Allocation

Relies upon consumers to allocate resources: Economic Democracy

Role of state Promote competition Ensure customer protection

Shift in role of Indian Government from manufacturer to making rules, regulations, encouraging PPP.

Examples of predominately market economies Western European Countries, United States, Japan

Name of Institution Economic Systems Command Allocation

State has broad powers to serve public interest Decides which products to make Decides how to make them

Examples of countries that relied upon command allocation systems for decades China, former USSR

Name of Institution Economic Systems Mixed Systems

There are in reality no pure market or command allocation systems among the worlds economies

Command allocation sector is the proportion of GDP that is taxed. Ex Sweden- 64%of all expenditures are controlled by the government, eco system is more command than market.

Name of InstitutionLuxembourg ranks 1st in both GNP /Capita and PPP. US Ranks 8th in GNP per capita income Ranks 2nd in PPP.

10Name of Institution Regionalization of Markets (1)

Many different forms of economic co-operation between countries Free trade areas Customs unions Common market- (labor and capital)Economic Union-(creation of central bank, single currency, common policies)World Trade Organisation (WTO) Acts as mediator in global trade disputes Ensures that trade flows are as smooth, predictable and as free as possible

Name of Institution FTAAll barriers to trade of goods and services are removed; each country can determine its own trade policies relative to nonmembers European Economic Area NAFTA12Name of InstitutionCustoms Union

Same as FTA, except with common external trade policy..The Central American Common Market, Mercosur Andean Pact(Bolivia, Colombia, Ecuador, Peru)

13Name of InstitutionCommon Market Similar to Customs Union, but factors of production (labor and capital) can move freely across borders.

14Name of InstitutionEconomic UnionFull evolution of economic union:-Creation of one currency, centralised bank and common monetary and fiscal policyEU- Approaching its target.

15Name of Institution Significant Developments in the last 50 yearsEmerging economies are increasingly becoming important players of global economyOther sig. developments:UR of GATT negotiations concludingWTO (2001)Another series of negotiations concluding- Doha Round(Min. trade barriers)16Name of InstitutionAfter 1992, - European Union for Economic and Monetary Union.-1999, Common Currency1994-NAFTA passed into a law.-APEC Future of Asia Pacific free trading area.-Economic & Political Reforms- East Europe and Asia(Communist )17Name of Institutionwww emerged as a backbone for global networking and e-commerce

Post 9/11 and 26/11- Threat to Economic development and Global Economic Integration.

18Name of Institution - EU in 1999, wanted to create a single market for financial services by Jan.2005

- Dismantle barriers to cross border activities in financial services creating a continent wide market for banking, financial services, insurance and investment products.

19Name of InstitutionNation-States and Sovereignty

Sovereignty = supreme and independent political authority Implies that the nation-state Is decision making authority of last resort in its territory Is independent from other nation-states Nation-state activities governed by Economic development Political and economic system Global market integration erodes economic sovereignty

20Name of InstitutionPolitical RiskThe risk that changes in governmental policy adversely affect a companys activities A lower level of political risk tends to attract higher investments Level of political risk is inversely proportional to a countrys state of economic developmentTo reduce the risk of investors to and from India- agreement- Bilateral Investment Promotion and Protection Agreement-min predictable investment climate

21Name of InstitutionTaxesMany companies make efforts to minimize tax liability.

No universal international laws governing the levy of taxes.

A variety of international and bilateral treaties apply

India- DTAA, Double Tax Avoidance Agreement treaty with 80+ nations.

22Name of Institution Dilution of Equity Control In lower-income countries there is often political pressure for national control of foreign-owned companies Goal of national governance: protect the right of national sovereignty Political pressure often causes companies to take local partners (strategic alliances, joint-ventures)

23Name of InstitutionLegislations in Gulf Countries force to have local partners.

-Past Indian govt introduced FERA (now replaced by FEMA).

FERA allowed 40% of foreign equity participation.24Name of InstitutionAmity Business School24 Expropriation Expropriation = governmental action to dispossess or control a companys ownership Nationalization = ownership of property and assets is transferred to the host government Confiscation = nationalization without compensation Creeping expropriation = severe limitations on economic activities. E.g., limitations on repatriation of profits, quotas for hiring locals, price controls

25Name of InstitutionInternational Law International law = the rules and principles nation-states consider binding upon themselves Two categories Public law, or law of nations International commercial law To reduce legal uncertainty, international organizations attempt to provide guidelines The United Nations International Court of Justice

26Name of Institution 1995 WTO members agreed to comply by TRIPS. Trade-Related Aspects of Intellectual Property RightsIndia had to change its process patent to product patent.(March, 2005, patent amendment bill was passed in Parliament)US it is registered under patent office, patent holder retains all rights for the life of the patent.Indian Pharma companies product patent for 20 years.27Name of Institution