Gratulent Publications

UNIT - I

INTRODUCTION TO INTERNATIONAL BUSINESS

DEFINITION OF INTERNATIONAL BUSINESS

International business includes any type of business activity that crosses national borders.
Though a number of definitions in the business literature can be found but no simple or universally accepted
definition exists for the term international business.
International business is defined as organization that buys and/or sells goods and services across two or more
national boundaries, even if management is located in a single country. International business is equated only with
those big enterprises, which have operating units outside their own country.
In its traditional form of international trade and finance as well as its newest form of multinational business
operations, international business has become massive in scale and has come to exercise a major influence
over political, economic and social from many types of comparative business studies and from a knowledge of
many aspects of foreign business operations. In fact, sometimes the foreign operations and the comparative
business are used as synonymous for international business. Foreign business refers to domestic operations
within a foreign country. Comparative business focuses on similarities and differences among countries and
business systems for focuses on similarities and differences among countries and business operations and
comparative business as fields of enquiry do not have as their major point of interest the special problems that
arise when business activities cross national boundaries. For example, the vital question of potential conflicts
between the nation-state and the multinational firm, which receives major attention is international business, is
not like to be centered or even peripheral in foreign operations and comparative business.
All countries need goods and services to satisfy wants of their people. Production of goods and services
requires resources. Every country has only limited resources. No country can produce all the goods and services
that it requires. It has to buy from other countries what it cannot produce or can produce less than its requirements.
Similarly, it sells to other countries the goods which it has in surplus quantities. India too, buys from and sells to
other countries various types of goods and services.
Generally no country is self-sufficient. It has to depend upon other countries for importing the goods which
are either non-available with it or are available in insufficient quantities. Similarly, it can export goods, which are in
excess quantity with it and are in high demand outside.
International trade means trade between the two or more countries. International trade involves different
currencies of different countries and is regulated by laws, rules and regulations of the concerned countries. Thus,
International trade is more complex.
International or Foreign trade is recognized as the most significant determinants of economic development
of a country, all over the world. The foreign trade of a country consists of inward (import) and outward (export)
movement of goods and services, which results into. outflow and inflow of foreign exchange. Thus it is also called
EXIM Trade.
Reasons takes place on account of International trade
 Human wants and countries’ resources do not totally coincide. Hence, there tends to be interdependence on
a large scale.
 Factor endowments in different countries differ.
 Technological advancement of different countries differs. Thus, some countries are better placed in one kind
of production and some others superior in some other kind of production.
 Labour and entrepreneurial skills differ in different countries.
Importance of international business
1. Earn foreign exchange: International business exports its goods and services all over the world. This helps
to earn valuable foreign exchange. This foreign exchange is used to pay for imports. Foreign exchange helps to
make the business more profitable and to strengthen the economy of its country.

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2. Optimum utilization of resources: International business makes optimum utilization of resources. This is
because it produces goods on a very large scale for the international market. International business utilizes
resources from all over the world. It uses the finance and technology of rich countries and the raw materials and
labour of the poor countries.
3. Achieve its objectives: International business achieves its objectives easily and quickly. The main objective
of an international business is to earn high profits. This objective is achieved easily. This it because it uses the
best technology. It has the best employees and managers. It produces high-quality goods. It sells these goods all
over the world. All this results in high profits for the international business.
4. To spread business risks: International business spreads its business risk. This is because it does business
all over the world. So, a loss in one country can be balanced by a profit in another country. The surplus goods in
one country can be exported to another country. Thesurplus resources can also be transferred to other countries.
All this helps to minimise the business risks.
5. Improve organization’s efficiency: International business has very high organization efficiency. This is because
without efficiency, they will not be able to face the competition in the international market. So, they use all the
modern management techniques to improve their efficiency. They hire the most qualified and experienced
employees and managers. These people are trained regularly. They are highly motivated with very high salaries
and other benefits such as international transfers, promotions, etc. All this results in high organizational efficiency,
i.e. low costs and high returns.
6. Get benefits from Government: International business brings a lot of foreign exchange for the country.
Therefore, it gets many benefits, facilities and concessions from the government. It gets many financial and tax
benefits from the government.
7. Expand and diversify: International business can expand and diversify its activities. This is because it earns
very high profits. It also gets financial help from the government.
8. Increase competitive capacity: International business produces high-quality goods at low cost. It spends a
lot of money on advertising all over the world. It uses superior technology, management techniques, marketing
techniques, etc. All this makes it more competitive. So, it can fight competition from foreign companies.

Nature and characteristics or features of international business are:-

1. Large scale operations: In international business, all the operations are conducted on a very huge scale.
Production and marketing activities are conducted on a large scale. It first sells its goods in the local market.
Then the surplus goods are exported.
2. Integration of economies: International business integrates (combines) the economies of many countries.
This is because it uses finance from one country, labor from another country, and infrastructure from another
country. It designs the product in one country, produces its parts in many different countries and assembles
the product in another country. It sells the product in many countries, i.e. in the international market.
3. Dominated by developed countries and MNCs: International business is dominated by developed countries
and their multinational corporations (MNCs). At present, MNCs from USA, Europe and Japan dominate (fully
control) foreign trade. This is because they have large financial and other resources. They also have the best
technology and research and development (R & D). They have highly skilled employees and managers because
they give very high salaries and other benefits. Therefore, they produce good quality goods and services at
low prices. This helps them to capture and dominate the world market.
4. Benefits to participating countries: International business gives benefits to all participating countries.
However, the developed (rich) countries get the maximum benefits. The developing (poor) countries also get
benefits. They get foreign capital and technology. They get rapid industrial development. They get more
employment opportunities. All this results in economic development of the developing countries. Therefore,
developing countries open up their economies through liberal economic policies.

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5. Keen competition: International business has to face keen (too much) competition in the world market. The
competition is between unequal partners i.e. developed and developing countries. In this keen competition,
developed countries and their MNCs are in a favourable position becausethey produce superior quality goods
and services at very low prices. Developed countries also have many contacts in the world market. So,
developing countries find it very difficult to face competition from developed countries.
6. Special role of science and technology: International business gives a lot of importance to science and
technology. Science and Technology (S & T) help the business to have large-scale production. Developed
countries use high technologies. Therefore, they dominate globalbusiness. International business helps them
to transfer such top high-end technologies to the developing countries.
7. International restrictions: International business faces many restrictions on the inflow and outflow of capital,
technology and goods. Many governments do not allow international businesses to enter their countries. They have
many trade blocks, tariff barriers, foreign exchange restrictions, etc. All this is harmful to international business.
8. Sensitive nature: The international business is very sensitive in nature. Any changes in the economic policies,
technology, political environment, etc. have a huge impact on it. Therefore, international business must conduct
marketing research to find out and study these changes. They must adjust their business activities and adapt
accordingly to survive changes.

REASONS FOR THE EMERGENCE OF INTERNATIONAL BUSINESS:

 To achieve higher rate of profits:The basic objective of the business firm is to earn profit. The domestic
markets do not promise a higher rate of profits. Business firms search for foreign market which hold promise
for higher rate of profits. Thus, the objective of profits affects and motivates the business to expand its operations
to foreign countries.
 Expanding the production capacity:Domestic companies expanded their production capacities more than
the demand for product in domestic countries. In such cases, these companies are forced to sell their excessive
production in foreign developed market.
 Severe competition in home country:The countries oriented towards market economies since 1960’s,
experience severe competition from other business firm in the home country. The weak companies which
could not meet the domestic countries started entering the markets of developing countries.
 Limited home market:When the size of the home market is limited either due to the smaller size of the
population or due to lower purchasing power of the people or both, the companies internationalize their
operations.
 Political Stability v/s Political Instability:Business firms prefer to enter the politically stable countries and
are restrained from locating their business operations in politically instable countries. In fact, business firms
shift the operations from politically instable countries to the politically stable countries.
 Availability of Technology and Managerial Competency:Availability of advanced technology and competent
human resource in some countries acts as pulling factors for business firms from the home country. The
developed countries due to these reasons attract companies from developing world. In fact, American and
European countries depend on Indian Companies for software products and services through their BPO’s.
 High cost of transportation:Initially companies enter foreign countries through their marketing operations.
At this stage, the companies realize the challenge from the domestic companies. Added to this, the home
companies enjoy higher rate of profit margins whereas the foreign firms suffer from lower profit margins. The
major factor for this situation is the cost of transportation,Under such conditions, the foreign companies are
inclined to increase their profit margin by locating their manufacturing unit in foreign countries where there is
enough demand either in one country or in a group of neighbouring countries.

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 Nearness to Raw materials:The source of highly qualitative raw materials and bulk raw materials is a major
factor for attracting the companies from the various foreign countries. Most of the US based companies open
their manufacturing unit in Middle East countries due to the availability of petroleum. These companies, thus,
reduces the cost of transportation.
 Availability of Quality HR at less cost:This is the major factor, in recent times, for software, high technology
and telecommunication companies to locate their operations in India. India is a major source for high quality
and low cost human resources unlike USA and other developed countries.
 Liberalization and Globalization:Most of the countries in the globe liberalized their economies and opened
their countries tothe rest of the globe. These changed policies attracted the multinational companies to extend
their operations to these countries.
 To increase market share:Some of the large-scale business firms would like to enhance their market share
in the global market by expanding and intensifying their operations in various foreign countries.
 To achieve higher rate of economic development:International Business helps the governments to achieve
higher growth rate of the economy, increases the total and per-capita income, GDP, industrial growth,
employment and income levels.
Limitations:
1. Political Factors: Political instability is the major factor that discourages the spread of international business.
2. Huge Foreign Indebtedness: The developing countries with less purchasing power are lured into a debt
trap due to the operations of MNCs in these countries.
3. Exchange Instability: Currencies of countries are depreciated due to imbalances in the balance of payments,
political instability and foreign indebtedness. This, in turn, leads to instability in the exchange rates of domestic
currencies in terms of foreign currencies.
4. Entry Requirements: Domestic governments impose entry requirements to multinational.
5. Tariff Quotas and Trade Barriers: Governments of various countries impose tariffs, import and export
barriers in order to protect the domestic business. Further these barriers are imposed based on the political
and diplomatic relations between or among various governments.
6. Corruption: Corruption has become an international phenomenon. The higher rate bribes and kickbacks
discourage the foreign investors to expand their operations.
7. Bureaucratic Practices of Government: Bureaucratic attitudes and practices of government delay sanctions,
grants permission and licenses to foreign companies.
8. Technological Pirating: Copying the original technology, producing imitative products, imitating other areas of
businessoperations were common in Japan. This practices invariably alarms the foreign companies against expansion.
9. Quality maintenance: International business firms have to meticulously maintain quality of the products
based on quality norms of each country. The firms have to face severe consequences, if they fail to conform
to the country standards.
10. High Cost: Internationalizing the domestic business involves market survey, product improvement, qualityup
gradation, managerial efficiency and the like. These activities need larger investments and involve higher cost
and risk. Hence, most of the business houses refrain themselves from internationalizing their business.

FACTORS AFFECTING INTERNATIONAL BUSINESS

Impact of Inflation:
• Inflation is the rate at which the general level of prices for goods and services is rising and, consequently, the
purchasing power of currency is falling.

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• If a country’s inflation rate increases relative to the countries with which it trades, its current account will be
expected to decrease.
• Consumers and corporations in that country will most likely purchase more goods overseas (due to high local
inflations), while the country’s exports to other countries will decline.
Impact of National Income:
• The total amount of income accruing to a country from economic activities in a year’s time is known as
national income.
• It includes payments made to all resources in the form of wages, interest, rent and profits.
• If a country’s income level (national income) increases by a higher percentage than those of other countries,
its current account is expected to decrease.
Impact of Government Restrictions:
• Government will impose some trade restrictions on certain products for health and safety reasons.
• Government restricts international trade to protect domestic producers from competition by using main tools:
 Tariffs;
 Subsidies;
 Quotas
 Tariffs: A tariff is a tax that is imposed by the importing country when an imported good crosses its international
boundary.
 Subsidy: A subsidy is a payment made by a government to a domestic producer based on the quantity produced.
 Quota: A quota is a limit on the quantity of a good that may be imported.
Impact of Exchange Rates:
• The price of a nation’s currency in terms of another currency.
• An exchange rate thus has 2 components:
 Domestic Currency and
 Foreign Currency, and can be quoted either directly or indirectly.
 In direct quotation, the price of a unit of foreign currency is expressed in terms of the domestic currency.
 In an indirect quotation, the price of a unit of domestic currency is expressed in terms of the foreign currency.
Geographical Location:
• The geographical location of the trading country’s also affect the international trade.
• The ease of transportation, climate, presence of coastal areas etc.
Competitiveness:
• Competitiveness is a measure of the relative ability of different countries to provide different products or
services.
• Competitiveness takes into account the efficiency, costs of employment, level of government regulation and
the ease of doing business.
Globalization:
• It is a general tendency for national economies to become more integrated with each other.
• This happens because of a combination of advanced communication technologies, logistic technologies,
increased capital flows and reduction of trade barriers by national governments.
Tariff and Non-tariff barriers
INTRODUCTION
Trade barriers are restrictions imposed on the movement of goods between countries (import and export).
The major purpose of trade barriers is to promote domestic goods than exported goods, and there by safeguard
the domestic industries. Trade barriers can be broadly divided into tariffbarriers and non-tariff barriers.

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Tariff Barriers
• Term tariff means ‘Tax’ or ‘duty’.
• Tariff barriers are the ‘tax barriers’ or the ‘monetary barriers’ imposed on internationally traded goods when
they cross the national borders.
Major tariff barriers:
• Specific duty: It is based on the physical characteristics of the good. A fixed amount of money can be levied
on each unit of imported goods regardless of its price.
• Ad Valorem tariffs: The Latin phrase ‘ad valorem’ means “according to the value”. This tax is flexible and
depends upon the value or the price of the commodity.
• Combined or compound duty: It is a combination of specific and ad valorem duty on a single product, for
instance, there can be a combined duty when 10% of value (ad valorem)and 1$ per kilogram(specific tax) are
charged on metal M.
• Sliding scale duty: The duty which varies along with the price of the commodity is known asliding scale duty
or seasonal duties. These duties are confined to agricultural products, as their prices frequently vary because
of natural and other factors.
• Revenue tariff: A tariff which is designed to provide revenue or income to the home government is known as
revenue tariff. Generally this tariff is imposed with a view of earning revenue by imposing duty on consumer
goods, particularly on luxury goods whose demand from the rich is inelastic.
• Anti –dumping duty: At times exporters attempt to capture foreign markets by selling goods at rock-bottom
prices, such practice is called dumping. As a result of dumping, domestic industries find it difficult to compete
with imported goods. To offset anti-dumping effects, duties are levied in addition to normal duties.
• Protective tariff: In order to protect domestic industries from stiff competition of imported goods, protective
tariff is levied on imports. Normally a very high duty is imposed, so as to either discourage imports or to make
the imports more expensive as that of domestic products.
Classification of tariff on the basis of trade relationship:
• Single column tariff: here the tariff rates are fixed for various commodities and the same rates are charged for
imports from all countries. Tariff rates are uniform for all countries and discrimination between importing
countries is not made.
• Double column tariff: here two rates of tariff on all or some commodities are fixed. The lower rate is made
applicable to a friendly country or the country with which bilateral trade agreement is entered into. The higher
rate is made with all other countries.
Triple column: here 3 rates are fixed. They are: general rate, international rate, preferential rate. The first two
are similar to lower and higher rates while the preferential rate is substantially lower than the general rate and is
applicable to friendly countries with trade agreement or with close trade relationship.

Non-Tariff Barriers
Non-tariff barriers to trade (NTBs) are trade barriers that restrict imports, but are unlike the usual form of
a tariff; And Tariff Barriers restricts Exports. Some common examples of NTB’s are anti-dumping measures and
countervailing duties, which, although called non-tariff barriers.
Example of Tariff Barrier is Export Duty.
Non Tariff Barriers
• Any barriers other than tariff.

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• It is meant for constructing barriers for the free flow of the goods.
• It does not affect the price of the imported goods.
• It affects the quality and quantity of the goods.
1. LICENSES: License is granted by the government, and allows the importing of certain goods to the country.
2. VOLUNTARY EXPORT RESTRAINS (VER): these types of barriers are created by the exporting country
rather than the importing one. These restrains are usually levied on the request of the importing company. eg.
Brazil can request Canada to impose VER on export of sugar to Brazil and this helps to increase the price of
sugar in Brazil and protects its domestic sugar producers.
3. Quotas: under this system, a country may fix in advance, the limit of import quantity of commodity that would
be permitted for import from various countries during a given period.
This is divided into the following categories:
a) Tariff quota: certain specified quantity of imports allowed at duty free or at a reduced rate of import duty. A tariff
quota, therefore, combines the features of a tariff and import quota.
b) Unilateral quota: the total import quantity is fixed without prior consultations with the exporting countries.
c) Bilateral quota: here quotas are fixed after negotiations between the quota fixing importing country and the
exporting country.
d) Multilateral quota: a group of countries can come together and fix quotas for each country.
4. Product standards: here the importing country imposes standards for goods. If the standards are not met, the
goods are rejected.
5. Domestic content requirements: governments impose DCR to boost domestic production.
6. Product Labeling: certain countries insist on specific labeling of the products. Eg. EU insists on products
labeling in major languages in EU.
7. Packaging requirements: certain nations insist on particular type of packaging of goods. Eg. EU insists on
packaging with recyclable materials.
8. Foreign exchange regulations: the importer has to ensure that adequate foreign exchange is available for
import of goods by obtaining a clearance from exchange control authorities prior to the concluding of contract with
the supplier.
9. State trading: in some countries like India, certain items are imported or exported only through canalizing
agencies like MMTT(minerals and metals trading cooperation of India)
10. Embargo: partial or complete prohibition of trade with any particular country, mainly because of the political
tensions.
Other NTBs are:
 Health and safety regulations.
 Technical formalities
 Environment regulations

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UNIT - II

TRADING BLOCS

A trade bloc is a type of intergovernmental agreement, often part of a regional intergovernmental

organization,where regional barriers to trade, (tariffs and non-tariff barriers) are reduced or eliminated among the
participatingstates. A regional trading bloc is a group of countries within a geographical region that protect
themselves fromimports from non-members. A trade bloc is basically a free-trade zone, or near-free-trade zone,
formed by oneor more tax, tariff, and trade agreements between two or more countries. Trading blocs are a form
of economicintegration, and increasingly shape the pattern of world trade.Regional trade blocks promote trade
within the block and defend its members against global competition. Defenceagainst global competition is obtained
through established tariffs on goods produced by member states, importquotas, government subsidies, onerous
bureaucratic import processes, and technical and other non-tariff barriers.
Since trade is not an isolated activity, member states within regional blocks also cooperate in economic,
political,security, climatic, and other issues affecting the region. Members of successful trade blocs usually share
fourcommon traits: similar levels of per capita GNP, geographic proximity, similar or compatible trading regimes,
andpolitical commitment to regional organization.
Advocates of worldwide free trade are generally opposed to trading blocs, which, they argue, encourage
regionaltrade as opposed to global free trade.

TYPES OF REGIONAL TRADING BLOCS

Trade blocs can be stand-alone agreements between several states (such as the North American Free
TradeAgreement (NAFTA) or part of a regional organization (such as the European Union). Depending on the
level ofeconomic integration, trade blocs can fall into six different categories, such as preferential trading areas,
freetrade areas, customs unions, common markets, economic union and monetary unions, and political union .
1. Preferential Trade Area : Preferential Trade Areas (PTAs) exist when countries within a geographical
regionagree to reduce or eliminate tariff barriers on selected goods imported from other members of the area.
This isoften the first small step towards the creation of a trading bloc.
2. Free trade area : Free Trade Areas (FTAs) are created when two or more countries in a region agree toreduce
or eliminate barriers to trade on all goods coming from other members. This is the most basic form ofeconomic
cooperation. Member countries remove all barriers to trade between themselves but are free toindependently
determine trade policies with non-member nations. An example is the North American Free TradeAgreement
(NAFTA).
3. Customs union: This type provides for economic cooperation as in a free-trade zone. Barriers to trade
areremoved between member countries. The primary difference from the free trade area is that members agreeto
treat trade with non-member countries in a similar manner. A customs union involves the removal of tariffbarriers
between members, plus the acceptance of a common (unified) external tariff against non-members.This means
that members may negotiate as a single bloc with third parties, such as with other trading blocs,or with the WTO.
The Gulf Cooperation Council (GCC) Cooperation Council for the Arab States of the Gulf isan example.
4. Common market: A ‘common market’ is the first significant step towards full economic integration, andoccurs
when member countries trade freely in all economic resources not just tangible goods. This means thatall barriers
to trade in goods, services, capital, and labor are removed. In addition, as well as removing tariffs,non-tariff
barriers are also reduced and eliminated. For a common market to be successful there must also be asignificant
level of harmonization of micro-economic policies, and common rules regarding monopoly powerand other anti-
competitive practices. There may also be common policies affecting key industries, such as theCommon
Agricultural Policy (CAP) and Common Fisheries Policy (CFP) of the European Single Market (ESM).

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This type allows for the creation of economically integrated markets between member countries. Trade
barriersare removed, as are any restrictions on the movement of labor and capital between member countries.
Likecustoms unions, there is a common trade policy for trade with non-member nations. The primary advantage
toworkers is that they no longer need a visa or work permit to work in another member country of a commonmarket.
An example is the Common Market for Eastern and Southern Africa (COMESA).
5. Economic and Monetary union: This type is created when countries enter into an economic agreement toremove
barriers to trade and adopt common economic policies. An example is the European Union (EU). Monetaryunion is
a type of trade bloc which is composed of an economic union (common market and customs union) witha monetary
union. Monetary union is established through a currency-related trade pact. An intermediate stepbetween pure
monetary union and a complete economic integration is the fiscal union. Economic and MonetaryUnion of the
European Union with the Euro for the Euro-zone members is the example of monetary union.
6. Political union: In order to be successful the more advanced integration steps are typically accompanied
byunification of economic policies (tax, social welfare benefits, etc.), reductions in the rest of the trade
barriers,introduction of supranational bodies, and gradual moves towards the final stage, a “political union”.
Politicalunion is the final stage in economic integration with more formal political links between the countries. A
limitedform of political union may exist when two or more countries share common decision making bodies and
havecommon policies. It is the unification of previously separate nations. The unification of West and East
Germanyin 1990 is an example of total political union.

Effects of Trading Blocs:

The Effects of Trade Blocs
Discriminatory trade policy is the defining characteristic of a trade bloc. The different types of trade blocs
(orPTAs) can be broadly distinguished in three categories:
(1) a free trade agreement (FTA) where trade barriers among member countries are removed, but where each
member remains responsible for the determination of its trade policy vis-à-vis non-member countries;
(2) a customs union (CU), with liberalized intra-block trade, as well as the adoption of a external tariff structureand
trade barriers towards outsiders common to all members of the CU; and
(3) a common market, which entails a CU with deeper integration between its members (such as free
movementsof goods, services and factors of production, common economic policies, etc).
Most of the analyses on the effects of trade blocs focus on FTAs and/or CUs. The effects of a PTA are of
twotypes: the trade effects and the welfare effects. The trade effects comprise the impact of a PTA on the
volumeand quantity of trade, on the terms of trade (i.e. prices) and on the level of protection (generally tariffs) for
PTAmembers and excluded countries. In analyzing the welfare effects of a PTA, it is important to distinguishbetween
the impact of trade bloc (formation and expansion) on the welfare of (1) each of its member, (2) thetrade bloc as
a whole and (3) the countries excluded from the trade bloc.
A standard result of international trade theory is that, in a competitive environment and in the absence of
marketdistortions and externalities, free trade will maximise global welfare. Removing trade barriers between a
subsetof countries could therefore appear to be, a priori, a move in the right direction. Yet, the ‘theory of second
best’points out that removing a distortion while others remain in place may not increase welfare. Trade blocs
areexamples of second best since a distortion is removed, i.e. trade barriers between member countries,
whileanother distortion is created in the form of a discrimination between members and non-members (the
latterfacing trade barriers from the PTA), as well as other market imperfections. Hence, the welfare implications
of atrade bloc are ambiguous as they depend on many factors. The demonstration of the theory of second
bestsituation entailed by a PTA was derived from the seminal work of Jacob Viner (1950), which shows that
whileliberalizing trade between a group of countries can lead to ‘trade creation’ between members (which
shouldincrease welfare), it can also reduce trade between the CU and its trading partners.

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Major Trading Blocs:
EU
The EU is the world’s largest trading bloc, and second largest economy, after the USA. The European
Union(EU) is an economic and political union of 27 member states that are located primarily in Europe. The EU
operates through a system of supranational independent institutions and intergovernmental negotiated decisionsby
the member states. Institutions of the EU include the European Commission, the Council of the EuropeanUnion, the
Court of Justice of the European Union, the European Central Bank, the Court of Auditors, and theEuropean Parliament.
The European Parliament is elected every five years by EU citizens. The EU’s de factocapital is Brussels.
The EU was originally called the Economic Community (Common Market, or The Six) after its formation
followingthe Treaty of Rome in 1957. The original six members were Germany, France, Italy, Belgium, Netherlands,
andLuxembourg. The term ‘European Communities’ is a collective term for the European Coal and Steel
Community(ECSC), founded in 1951, the European Economic Community (EEC) and the European Atomic
EnergyCommunity (EURATOM or EAEC), founded in 1957. The European Union, created by the Maastricht Treaty,
didnot make the European Communities disappear. They form its institutional framework. The Union remain basedon
the Communities, supplemented by the policies and the forms of cooperation - Economic and MonetaryFund,
Common Foreign and Security Policy, cooperation in justice and home affairs brought in by that treaty.
The latest major amendment to the constitutional basis of the EU, the Treaty of Lisbon, came into force in
2009.The EU has developed a single market through a standardised system of laws that apply in all member
states.Within the Schengen Area (which includes 22 EU and 4 non-EU states) passport controls have been
abolished.EU policies aim to ensure the free movement of people, goods, services, and capital, enact legislation
in justiceand home affairs, and maintain common policies on trade, agriculture, fisheries and regional development.
A monetary union, the eurozone, was established in 1999 and is composed of 17 member states. Through
theCommon Foreign and Security Policy the EU has developed a role in external relations and defence.
Permanentdiplomatic missions have been established around the world. The EU is represented at the United
Nations, theWTO, the G8 and the G-20.

The EU has 27 members countries.

The initial aim was to create a single market for goods, services, capital, and labour by eliminating barriers
totrade and promoting free trade between members. Some examples of the role the European Union playsaround
the world are given below: The EU promotes peace and reconciliation through its political, practical and economic
support. It provides development aid which is making a huge difference to millions of people’s livelihoodsaround
the world. The Union is committed to human rights and works to ensure they are respected universally. The Union
works closely with the United Nations on a host of issues. It supports in building security around the world through
its Common Security and Defence Policy(CSDP). The European Union is the world’s largest trading bloc. Trade
is a common policy so the EU speaks witha single voice in trade negotiations with international partners in
promoting a free and fairer internationaltrading system.
The European Union (EU) has four main institutions namely through which it functions, the Council of
Ministers,the European Commission, the European Parliament and the European Court of Justice. Other bodies
such asthe Economic and Social Committee and the Committee of the Regions have particular roles to play in
thedecision making process.

The Council of Minister

The Council is the EU’s main decision-making body. It is the embodiment of the Member States,
whoserepresentatives it brings together regularly at ministerial level. The Council is comprised of ministers from
nationalgovernments of each of the member states. It meets mostly in Brussels or Luxembourg to deliberate
uponlegislation and policy. Diplomats and officials in a committee called Coreper, involving the
permanentrepresentations to the EU of each member state, prepare the Council’s work. The United Kingdom
PermanentRepresentation is known as UKRep.

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The Presidency of the Council is held by each member state, in rotation, for a period of six months. The
countryholding the presidency hosts a meeting of the heads of states and governments every six months, known
as theEuropean Council.

The Council has following major responsibilities:

1. It is the Union’s legislative body; for a wide range of EU issues, it exercises that legislative power in codecision
with the European Parliament;
2. It coordinates the broad economic policies of the Member States;
3. It concludes, on behalf of the EU, international agreements with one or more States or internationalorganisations;
4. It shares budgetary authority with Parliament;
5. It takes the decisions necessary for framing and implementing the common foreign and security policy,on the
basis of general guidelines established by the European Council;
6. It coordinates the activities of Member States and adopts measures in the field of police and judicialcooperation
in criminal matters.

The European Commission

The EU’s Administrative & Executive body is headed by the Twenty Commissioners who are charged
withfurthering the goals of the Union and implementing EU policy and legislation. The Commission for
considerationand decision by the Council of Ministers and the European Parliament drafts initial proposals for
legislation andpolicy. The Commissioners, who serve for five years, are nominated by national governments and
approved bythe European Parliament. MEPs have the power to sack the Commission. The headquarters of the
Commissionis in Brussels.
The Commission is the driving force in the Union’s institutional system:
1. It has the right to initiate draft legislation and therefore presents legislative proposals to Parliament and the
Council;
2. As the Union’s executive body, it is responsible for implementing the European legislation (directives,regulations,
decisions), budget and programmes adopted by Parliament and the Council;
3. It acts as guardian of the Treaties and, together with the Court of Justice, ensures that Community lawis
properly applied;
4. It represents the Union on the international stage and negotiates international agreements, chiefly in thefield of
trade and cooperation.

The European Parliament

The European Parliament is the democratically elected body whose 626 members (MEPs) are elected
everyfive years. Working in Brussels and Strasbourg, Parliament scrutinises the activities of other EU
institutions,passes the annual EU budget, and shapes and decides new legislation jointly with the Council of
Ministers. TheParliament has a staff of 3,850.Elected every five years by direct universal suffrage, the European
Parliament is the expression of the democraticwill of the Union’s 498 million citizens. Brought together within pan-
European political groups, the major politicalparties operating in the Member States are represented.
The Parliament has three essential functions:
1. It shares with the Council the power to legislate, i.e. to adopt European laws (directives, regulations,decisions).Its
involvement in the legislative process helps to guarantee the democratic legitimacy of the texts adopted;

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2. It shares budgetary authority with the Council, and can therefore influence EU spending. At the end ofthe
procedure, it adopts the budget in its entirety;
3. It exercises democratic supervision over the Commission. It approves the nomination of Commissionersand
has the right to censure the Commission. It also exercises political supervision over all the institutions.

The European Court of Justice

Based in Luxembourg, the Court, which has a judge from each member state, adjudicates on all legal
issuesand disputes involving Community law. The judges, who sit for a period of six years, are assisted by
nineadvocates-general who give a preliminary ruling on each case before a final judgement. The Court deals
withtwo main types of actions: those referred to it by national courts for rulings of interpretation of Community
law;and those started by one of the other institutions (usually the Commission against a member state).
NAFTA:
The North American Free Trade Agreement (NAFTA) is a comprehensive trade agreement that sets the
rules oftrade and investment between Canada, the United States, and Mexico. Since the agreement entered into
forceon January 1, 1994, NAFTA has systematically eliminated most tariff and non-tariff barriers to free trade
andinvestment between the three NAFTA countries. – NAFTA is a formal agreement that establishes clear rules
for commercial activity between Canada, theUnited States, and Mexico. NAFTA is overseen by a number of
institutions that ensure the properinterpretation and smooth implementation of the Agreement’s provisions. Since
NAFTA came into effect, trade and investment levels in North America have increased, bringingstrong economic
growth, job creation, and better prices and selection in consumer goods. North Americanbusinesses, consumers,
families, workers, and farmers have all benefited. For more information about
NAFTA’s many benefits, please see: Results: North Americans Are Better Off After 15 years of NAFTA.
NAFTA provides North American businesses with better access to materials, technologies, investmentcapital,
and talent available across North America. Each NAFTA country forgoes tariffs on imported goods “originating” in
the other NAFTA countries. Rulesof origin enable customs officials to decide which goods qualify for this preferential
tariff treatment underNAFTA. The negotiators of the Agreement sought to make the rules of origin very clear so as
to provide certainty and predictability to producers, exporters, and importers. They also sought to ensure that
NAFTA’s benefits are not extended to goods imported from non-NAFTA countries that have undergoneonly minimal
processing in North America. The procedures for presenting a claim to each NAFTA partner are different. To
certify that goods qualifyfor the preferential tariff treatment under NAFTA, the exporter must complete a certificate
of origin. Aproducer or manufacturer may also complete a certificate of origin to be used as a basis for an
exporter’scertificate of origin. To make a claim for NAFTA preference, the importer must possess a certificate
oforigin at the time the claim is made. Four categories of travelers are eligible for temporary entry from one NAFTA
country into another:business visitors, traders and investors, intra-company transferees, and professionals. On
January 1, 2008, the last remaining tariffs were removed within North America. When implemented,NAFTA
immediately lifted tariffs on the majority of goods produced by the NAFTA partners and called forthe phased
elimination, over 15 years, of most remaining barriers to cross-border investment and to themovement of goods
and services between the three countries.

Objectives of NAFTA :
 eliminate barriers to trade in, and facilitate the cross-border movement of goods and services betweenthe
territories of the Parties;
 promote conditions of fair competition in the free trade area;
 increase substantially investment opportunities in the territories of the Parties;
 provide adequate and effective protection and enforcement of intellectual property rights in each Party’sterritory;
 create effective procedures for the implementation and application of this Agreement, for its jointadministration
and for the resolution of disputes; and
 establish a framework for further trilateral, regional and multilateral cooperation to expand and enhancethe
benefits of this Agreement.

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NAFTA has been a remarkable success story for all three partners. It has contributed to significant increases
intrade and investment flows between Canada, the United States, and Mexico. It has benefited companies in
allthree countries, paving the way for increased sales, new partnerships, and new opportunities.
Structure of NAFTA
A number of NAFTA institutions work to ensure smooth implementation and day-to-day oversight of
theAgreement’s provisions.
(a) Free Trade Commission: Made up of ministerial representatives from the NAFTA partners. Supervises the
implementation and further elaboration of the Agreement and helps resolve disputesarising from its interpretation.
Oversees the work of the NAFTA committees, working groups, and other subsidiary bodies.
(b) NAFTA Coordinators Senior trade department officials designated by each country. Responsible for the day-
to-daymanagement of NAFTA implementation.
(c) NAFTA Working Groups and Committees Over 30 working groups and committees have been established
to facilitate trade and investmentand to ensure the effective implementation and administration of NAFTA. Key
areas of work include trade in goods, rules of origin, customs, agricultural trade and subsidies, standards,
government procurement, investment and services, cross-border movement of business people, and alternative
dispute resolution.
(d) NAFTA Secretariat: The NAFTA Secretariat is an independent agency that is responsible for the
impartialadministration of the dispute settlement provisions of the North American Free Trade Agreement. It
hasa Canadian, a Mexican, and a United States Section, each headed by a national Secretary, and withoffices
in each national capital. The Secretariat is accountable to the NAFTA Free Trade Commission, which comprises
the ministers responsible for international trade in the three NAFTA partner countries.
It is also responsible for administering the dispute settlement provisions of the Agreement and foradministering
dispute resolution processes. It maintains a court-like registry relating to panel, committee,and tribunal proceedings.
It also maintains a tri-national website containing up-to-date information onpast and current disputes.

Commission for Labor Cooperation

Created to promote cooperation on labour matters among NAFTA members and the effectiveenforcement
of domestic labour law. Consists of a Council of Ministers (comprising the labour ministers from each country)
and a Secretariat,which provides administrative, technical, and operational support to the Council and implements
anannual work program. Departments responsible for labour in each of the three countries serve asdomestic
implementation points.
(f) Commission for Environmental Cooperation
Established to further cooperation among NAFTA partners in implementing the environmental sideaccord to NAFTA
and to address environmental issues of continental concern, with particular attentionto the environmental challenges
and opportunities presented by continent-wide free trade. Consists of a Council (comprising the environment
ministers from each country), a Joint PublicAdvisory Committee (a 15-member, independent volunteer body that
provides advice and publicinput to Council on any matter within the scope of the environmental accord), and a
Secretariat(which provides administrative, technical, and operational support).
SAARC:
The South Asian Association for Regional Cooperation (SAARC) is an organisation of South Asian
nations,which was established on 8 December 1985 when the government of Bangladesh, Bhutan, India,
Maldives,Nepal, Pakistan, and Sri Lanka formally adopted its charter providing for the promotion of economic and
socialprogress, cultural development within the South Asia region and also for friendship and cooperation with
otherdeveloping countries. It is dedicated to economic, technological, social, and cultural development
emphasisingcollective self-reliance.

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Its seven founding members are Sri Lanka, Bhutan, India, Maldives, Nepal, Pakistan, and
Bangladesh.Afghanistanjoined the organisation in 2007.Meetings of heads of state are usually scheduled annually;
meetings of foreign secretaries, twice annually. It isheadquartered in Kathmandu, Nepal.
The main goal of the Association is to accelerate the process of economic and social development in
memberstates, through joint action in the agreed areas of cooperation.The idea of regional cooperation in South
Asia was first mooted in November 1980. After consultations, theForeign Secretaries of the seven countries met
for the first time in Colombo, in April 1981. This was followed, afew months later, by the meeting of the Committee
of the Whole, which identified five broad areas for regionalcooperation. The Foreign Ministers, at their first meeting
in New Delhi, in August 1983, formally launched theIntegrated Programme of Action (IPA) through the adoption of
the Declaration on South Asian RegionalCooperation (SARC). At the First Summit held in Dhaka on 7-8 December
1985, the Charter establishing theSouth Asian Association for Regional Cooperation (SAARC) was adopted.
Objectives
The objectives, principles and general provisions, as mentioned in the SAARC Charter, are as follows: –
 To promote the welfare of the peoples of South Asia and to improve their quality of life;
 To accelerate economic growth, social progress and cultural development in the region and to provideall
individuals the opportunity to live in dignity and to realise their full potentials;
 To promote and strengthen collective self-reliance among the countries of South Asia;
 To contribute to mutual trust, understanding and appreciation of one another’s problems;
 To promote active collaboration and mutual assistance in the economic, social, cultural, technical andscientific
fields;
 To strengthen cooperation with other developing countries;
 To strengthen cooperation among themselves in international forums on matters of common interests;and
 To cooperate with international and regional organizations with similar aims and purposes.
Principles
The principles are as follows –
 Respect for sovereignty, territorial integrity, political equality and independence of all members states;
 Non-interference in the internal matters is one of its objectives;
 Cooperation for mutual benefit All decisions to be taken unanimously and need a quorum of all eight members
All bilateral issues to be kept aside and only multilateral(involving many countries) issues to be discussedwithout
being prejudiced by bilateral issues.

SAARC Secretariat
Secretariat of the South Asian Association for Regional Cooperation is in Kathmandu, Nepal. It is headed
by theSecretary General appointed by the Council of Ministers from Member Countries in an alphabetical order for
athree-year term. He is assisted by the Professional and the General Service Staff, and also an appropriatenumber
of functional units called Divisions assigned to Directors on deputation from Member States. TheSecretariat
coordinates and monitors implementation of activities, prepares for and services meetings, and serves as a
channel of communication between the Association and its Member States as well as other regionalorganisations.
The Memorandum of Understanding on the establishment of the Secretariat which was signed by ForeignMinisters
of member countries on 17 November 1986 at Bangalore, India contains various clauses concerningthe role,
structure and administration of the SAARC Secretariat as well as the powers of the Secretary-General.
In several recent meetings the heads of state or government of member states of SAARC have taken
someimportant decisions and bold initiatives to strengthen the organisation and to widen and deepen regional
cooperation.
The SAARC Secretariat and Member States observe 8 December as the SAARC Charter Day1.The
highest authority of the Association rests with the Heads of State or Government.

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Council of Ministers Comprising of the Foreign Ministers of member states it is responsible for the formulation
of policies; reviewingprogress; deciding on new areas of cooperation; establishing additional mechanisms as
deemed necessary;and deciding on other matters of general interest to the Association. The Council meets twice
a year and mayalso meet in extraordinary session by agreement of member states.
Standing Committee Comprising of the Foreign Secretaries of member states it is entrusted with the overall
monitoring and coordinationof programmes and the modalities of financing; determining inter-sectoral priorities;
mobilising regional andexternal resources; and identifying new areas of cooperation based on appropriate studies.
It may meet as oftenas deemed necessary but in practice it meets twice a year and submits its reports to the
Council of Ministers.
Programming Committee Comprising of the senior officials it meets prior to the Standing Committee sessions
to scrutinize SecretariatBudget, finalise the Calendar of Activities and take up any other matter assigned to it by
the Standing Committee.
Technical Committees Comprising of representatives of member states, they formulate programmes and prepare
projects in theirrespective fields. They are responsible for monitoring the implementation of such activities and
report to theStanding Committee. The Chairmanship of each Technical Committee normally rotates among
member countriesin alphabetical order, every two years.
Action Committees According to the SAARC Charter, there is a provision for Action Committees comprising
member states concernedwith implementation of projects involving more than two, but not all member states.
ASEAN ASEAN is the most prominent regional grouping in Asia. The Association of Southeast Asian Nations is a
geopolitical and economic organization of ten countries located in Southeast Asia, which was formed on 8 August,
1967 by Indonesia, Malaysia, the Philippines, Singapore and Thailand. Since then, membership has expandedto
include Brunei, Burma (Myanmar), Cambodia, Laos, and Vietnam. Its aims include accelerating economicgrowth,
social progress, and cultural development among its members, protection of regional peace and stability,and
opportunities for member countries to discuss differences peacefully.
ASEAN has emphasized regional cooperation on the three pillars of security and socio-cultural and
economicintegration. It has made most progress in economic integration and aims to create an ASEAN
EconomicCommunity (AEC) by 2015.
The foundation of the AEC is the ASEAN Free Trade Area (AFTA), a common external preferential tariff
schemeto promote the free flow of goods within ASEAN. Other elements of economic integration, such as the free
flowof investment and services and the elimination of non-tariff barriers, have been added by the ASEAN leaders.
MERCOSUR
 Mercosur, the “Common Market of the South,” is the largest trading bloc in South America.
 Its purpose is to promote free trade and the fluid movement of goods, people and currency.
Objectives of Mercosur:
 The free transit of produced goods, services and factors among the member states. Among other things, this
includes the elimination of customs rights and lifting of non-tariff restrictions on the transit of goods or any
other measures with similar effects.
 Fixing of a common external tariff (CET).
 Move member countries economies away from import substitution models.
 Develop institutional groups.
Levels of regional economic integration:
 Free trade Areas
 Custom Union
 Common Markets
 Economic Union

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MERCOSUR’s current position – Custom Union
Administrative / Institutional Structure of MERCOSUR:
 Common Market Council (CMC) : The Council is the highest level agency of MERCOSUR with authority to
conduct its policy, and responsibility for compliance with the objects and time frames set forth.
 Common Market Group (CMG) : Basic duties are to cause compliance with the Asunicon Treaty and to take
resolutions required for implementation of the decisions made by the Council. Furthermore, it can initiate
practical measures for trade opening, coordination of macroeconomic policies, and negotiation of agreements
with non-member states and international agencies, participating when need be in resolution of controversies
under MERCOSUR.
 Commercial Commission of MERCOSUR (CCM): Assists the Common Market Group in the enforcement
of trade policies.
 Joint Parliamentary Commission (CPS): The Committee will have both an advisory and decision making
nature, with powers to submit proposals as well.
Social Economic Consultative Forum (FCES): It brings together various associations and interest groups
from member countries.

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UNIT - III

INTERNATIONAL BUSINESS ENVIRONMENT

• Environment refers to the surrounding things, objects, factors, influences and circumstances under which
someone or something exists.
• Business environment refers to those aspects and factors of the surroundings of business enterprises that
affect its operations and determine its effectiveness.
• It’s a mixture of complex and dynamic external and internal factors within which a business is to be operated.
• Every business enterprise is influenced by both internal and external factors.
• Therefore, business environment factors can be divided into two categories:
 Internal environment
 External environment
 Internal environment:
• It reflects the internal organization of a business firm which it operates.
• Yet, changes in the internal environment affect the working system of a business though these are generally
regarded as controllable factors.
• The company can alter or modify these factors according to its objectives.
• The main factors of internal environment are as follows:
• Mission and objectives of the firm;
• Business and managerial policies of the firm;
• Production capacity, technology and efficiency of the productive apparatus;
• Organisation and management structure;
• Availability of resources;
• Prospects of business development.
 External environment
• It includes those external factors that create opportunities and threats for a company.
• These factors are dynamic within which the business is to be operated.
• The external environment consists of:
 External Micro Environment
 External Macro Environment
 External Micro Environment
 It consists of all those factors that have a direct bearing on the operations of the firm.
 These factors are linked more intimately with the company than the macro factors.
 The micro factors need not necessarily affect all companies in a particular industry in the same manner.
 This environment includes the following factors:

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 Suppliers;
 Customers;
 Competitors;
 Marketing intermediaries;
 Bankers and financial institutions;
 Shareholders;
 Creditors
 External Macro Environment
 It consists of all those factors that affect the operations of a business firm indirectly.
 These are beyond the control of the firm.
 This environment includes the following factors known as PLECTIN:
 Political; Legal; Economic; Cultural; Technological; International and Natural factors.
 The internal environmental factors indicate the various strengths and weaknesses of the firm.
 The external environmental factors provide various opportunities and threats posed by the surrounding factors
to the firm.
 By a combination of internal and external factors, a company’s strategy can be formulated.

Political Environment
The political environment refers to the type of government, the government relationship with business,
and the political risk in a country. Doing business internationally thus implies dealing with different types of
governments, relationships, and levels of risk. The political environment in a country influences the legislations
and government rules and regulations under which a foreign firm operates. Every country in the world follows its
own system of law. A foreign company operating in that particular country has to abide with its system of law as
long as it is operating in that country. Countries can be classified as free-market, centrally planned, or mixed.
Free-market economies are those where government intervenes minimally in business activities, and market
forces of supply and demand are allowed to determine production and prices. Centrally planned economies are
those where the government determines production and prices based on forecasts of demand and desired levels
of supply. Mixed economies are those where some activities are left to market forces and some, for national and
individual welfare reasons, are government controlled. In the late twentieth century there has been a substantial
move to free-market economies, but the People’s Republic of China, the world’s most populous country, along
with a few others, remained largely centrally planned economies, and most countries maintain some government
control of business activities. There are many different types of political systems, for example, multi-party
democracies, one-party states, constitutional monarchies, dictatorships (military and non-military). Also,
governments change in different ways, for example, by regular elections, occasional elections, death, coups,
war. Government-business relationships also differ from country to country. Business may be viewed positively
as the engine of growth, it may be viewed negatively as the exploiter of the workers, or somewhere in between as
providing both benefits and drawbacks. Specific government-business relationships can also vary from positive
to negative depending on the type of business operations involved and the relationship between the people of the
host country and the people of the home country. To be effective in a foreign location an international firm relies on
the goodwill of the foreign government and needs to have a good understanding of all of these aspects of the
political environment. A particular concern of international firms is the degree of political risk in a foreign location.
Political risk refers to the likelihood of government activity that has unwanted consequences for the firm. These
consequences can be dramatic as in forced divestment, where a government requires the firm to give up its

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assets, or more moderate, as in unwelcome regulations or interference in operations. In any case the risk occurs
because of uncertainty about the likelihood of government activity occurring. Generally, risk is associated with
instability and a country is thus seen as more risky if the government is likely to change unexpectedly, if there is
social unrest, if there are riots, revolutions, war, terrorism, and so on. Firms naturally prefer countries that are
stable and that present little political risk, but the returns need to be weighed against the risks, and firms often do
business in countries where the risk is relatively high. In these situations, firms seek to manage the perceived risk
through insurance, ownership and management choices, supply and market control, financing arrangements,
and so on. In addition, the degree of political risk is not solely a function of the country, but depends on the
company and its activities as well a risky country for one company may be relatively safe for another. Thus, in
analyzing political-legal environment, an organisation may broadly consider the following aspects:  Political
system of the business;  Approaches of the Government towards business i.e., restrictive or facilitating; 
Facilities and incentives offered by the Government;  Legal restrictions such as licensing requirement, reservation
to a specific sector like public sector, private or small-scale sector;  Restrictions in importing technical know-
how, capital goods and raw materials;  Restrictions in exporting products and services;  Restrictions on pricing
and distribution of goods;  Procedural formalities required in setting the business.

Economic Environment:
The economic environment relates to all the factors that contribute to a country’s attractiveness for foreign
businesses. The economic environment can be very different from one nation to another. Countries are often
divided into three main categories: the more developed or industrialized, the less developed or third world, and the
newly industrializing or emerging economies. Within each category there are major variations, but overall the
more developed countries are the rich countries, the less developed the poor ones, and the newly industrializing
(those moving from poorer to richer). These distinctions are usually made on the basis of gross domestic product
per capita (GDP/capita). Better education, infrastructure, technology, health care, and so on are also often
associated with higher levels of economic development. Clearly the level of economic activity combined with
education, infrastructure, and so on, as well as the degree of government control of the economy, affect virtually
all facets of doing business, and a firm needs to understand this environment if it is to operate successfully
internationally. While analyzing the economic environment, the organisation intending to enter a particular business
sector may consider the following aspects:
 Economic system to enter the business sector.
 Stage of economic growth and the pace of growth.
 Level of national and per capita income.
 Incidents of taxes, both direct and indirect.
 Infrastructure facilities available and the difficulties thereof.
 Availability of raw materials and components and the cost thereof.
 Sources of financial resources and their costs.
 Availability of manpower-managerial, technical and workers available and their salary and wage structures.

Socio-Cultural Environment: Introduction

The social and cultural influences on international nurketing are imense. Differences in religion and material
culture all affect consumers' perceptions and patterns of buying behavinar it ither that determines the extent to
which consumers across the globe are either similar or different and on the potential for global branding and
standardisation This category encompasses a wide range of considerations, many of which can i misunderstood
or unanticipated significantly undermine a business marketing efforts. These include:
1) Literacy rates, 2) General education levels, 3) Language
4) Religion, 5) Ethics, 6) Social values, and 7) Social organisation.
A failure to understand the social/cultural dimensions of a market are complex to manage, as McDonald's
found in India. It has to deal with a market that is 40 per cent vegetarian, had an aversion to either bent of pork

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among meat-caters and hostility to frozen meat and fish, but with the general Indian fondness for spice with
everything. To satisfy such tastes, McDonald's discovered it needed to do more than provide the right burgers.
Customers buying vegetarian burgers wanted to be sure that these were cooked in a separate area in the kitchen
using separate utensils and sauces like McMasala and Mcimli were developed to satisfy the Indian taste for spice,
Interestingly, however, these are now innovations they have introduced into other markets.
When a firm operates in an international business environment, as an individual is bound by the society in
which people live, it needs to understand the importance of society. Social class is an important part of the society.
In most Western societies, these classes are classified as upper, middle, and lower. The level of perception of
each class and their frequency of buying goods differ from one country to another
In countries like India perception and trends of the consumers have been changing owing to the liberalisation
and the changes in lifestyles. Another important aspect of society is the group. The performance of groups differs
in individualistic and collectivist societies. The family is an important part of the social environment. The social and
cultural environment is one of the critical components of the international business environment and one of the
most difficult to understand.
This is because the social and cultural environment is essentially unseen, it has been described as a
shared, commonly held body of general beliefs and values that determine what is right for one group National
culture is described as the body of general beliefs and values that are shared by a nation. Beliefs and values are
generally seen as formed by factors such as history, language, religion, geographic location, government, and
education; thus firms begin a cultural analysis by seeking to understand these factors.
Before entering a foreign market, marketers should study all aspects of that nation's culture, including
language, education, religious attitudes, and social values. The French love to debate and are comfortable with
frequent eye-contact. In China, humility is a prized virtue, colours have special significance, and it is insulting to be
late. Swedes value consensus and do not use humour in negotiations. The "etiquette tips for marketing professionals"
feature offers some examples that will help you deal with cultural differences that arise in business dealings with
foreign guests.

Factors Constituting Cultural Differences

The basic premise of cross-cultural differences lies in values and priorities. Factors that constitute cross-
cultural differences are as follows:
1) Time: Different countries assign different values to time dimension. For example, the Americans, the Germans,
and the Japanese, assign very high priority to time. They value time in terms of money, hence, they are very
efficient in time management. But in many other countries, such time value is absent. Because of their strong
sense on time value, the Americans, most Europeans like U.K., France, the Russian as well as the Japanese, and
the South Koreans are fast decision-makers, which at times put them in difficulties. Thus, pervapeive difference
in time value show cross-cultural differences in relationship event in business. Understanding each other's time
value is therefore very important to reduce the cultural gap.

Factors Constituting Cultural Differences

Time Patterns of Thought

Personal Space Familyt Roles & Relationships

Language Religion

Personal Achievement Competiotiveness & Individuality

Social Behaviour Ethnocentric Attitudes

Flexibility and Sincerity Intercultural Socialisation

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2) Patters of Thought: Paterne of theught could be another strong for cross-cula Typically, fadians believe that
their pure ser the reflection of their past Americano other hand, believe that is deal of them, which they can forever
it is for do Americans always take advantage of impending opportunities with an attacking strategy.
3) Personal Space: Coss-cultural influences vermine the nature, and type of ictio imeracting with others, wome
may believece, while others prefer face-to-face interaction. Personal spacing styles are overexion meetings.
Those who believe in maintaining distance may feel unhappy when their personal space is invaded Leto take the
campie of business interactions between de American and he Arabs. Americans may feel uncaty with the chover
interaction style of Arabe, while the Arabs may feel disturbed when Americans may keep distance from them
during interaction.
4) Family Roles and Relationships: Family roles and relationships influence the pattern of culture in my societies,
family roles and relationships are very traditional, personal, and predictable. The husband is the provider, the wife
supervises the household, and males in the household are more valued than lamales. Each member of the family
has a designated rode and the respemaibility for muntaining status quo for such a coûr. Peer persuure peevserves
the mirs, and work stations and business interactions are less influential than familial responsibilities.
5) Language: Verbal and non-vestul tystems of communication systems or languages of every culture primarily
reflect values and composation of languages. In Hindu mythology, Lord Krishna is an icon, for his multiple roles
such as a warmor, as a good family person, as strategist, etu. He is invoked with many names and each name
indicates a different meating Similarly, for a Hindu, cow is a sacred animal, hence Hindus use several words for
cows. Eskimos describe snow uning maty words and experssons. Similarly, Arabs use numerous wonds to
describe a camel. Some of these words may not carry any meaning, but people attach meaning to them. It is for
the managers to understand and observe the composition of languag infer certain cultural cues.
6) Religion: Religion is the most dominant force that influences one's culture except perhaps in communist
countries like China and Cuba. Not only the cultural pattern, religion also influences the business, socio-economic,
and political situation, the lifestyle of peopir, certain beliefs endorsed by specific religion, etc. Understanding religion-
hiased cross-cultural issues, therefore, becomes most important for international business.
7) Personal Achievement: Achievement is another valne espoused by the traditional American business person.
The success and reputation of Indian business leaders are measured by the size of their organisation, the amount
of their compensation, and their position in the hierarchy. The larger the organisation and the compensation, and
higher the stature, the greater the respect they earn. In other cultures, especially where family time is meaningful,
the quality of relationships and the time sp with family are the symbols of success and prestige. When American
(perhaps subconsciously) communicates this acquisitive attitude to a culture that does not share their achievement
motivation, communication channels can be damaged or severed.
8) Competitiveness and Individuality: Competitiveness and individuality are the most crucial cross-cultural
issues, since, from these emanate the individual ambition, aggressive behaviour, etc. In countries like USA,
competitiveness is encouraged, while in Japan it is discouraged as the Japanese believe in team spurn and
consensual decision-making. In India and China also, collectivity, team spirit and patience are valued more than
individuality and competitiveness. Individuality and competitiveness also influence the status symbols, body language,
aggressiveness, and self-advertisement. These are in conflict with other cultures that value modesty, team spirit,
collectivity, and patience.
9) Social Behaviour: Social behavioural pattern varies among different cultures. The Chinese people helieve in
taking a bite of every food item served, as this demonstrates their sense of politeness. Now, imagine a money-
conscious American business hospitality meet for a Chinese delegation. The food budget would far exceed than
envisaged. Similarly, the sense of punctuality is another cross-cultural cue. Punctuality is revered in American culture.
It is said that such value is attached to punctuality by the Americans because of their obvious nature of impatience.
There are many other aspects of social behaviours that exert influence in cross-cultural relations. For
Indians, touching the feet of the boss (especially by the lower staff) is showing respect to elders as well as

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gratitude. For Americans it is something unimaginable even a low-level employee will not touch the feet of the US.
President or a company President/Chairman.
10) Ethnocentric Attitudes: Ethnocentric attitudes indicate nurturing of feelings by a culture group that their
cultural values, habits, and religion are superior to others. This superiority complex is harmful for cross- cultural
relations, as it often culminates in disrespect and inflexibility, and ensuing conflict. Ethnocentricity also develops
the syndrome of stereotyping, i.e., a typical assumption that behaviour of people from another culture group will
match with their perceived superior culture. Stereotyping at times negatively affects cross-cultural relations, and
can even impair a business deal.
11) Flexibility and Sincerity: The degree of flexibility in cross-cultural relationships has to be cautiously dealt
with. With a flexible approach, the superior need to analyse the responses and reactions of culturally different
subordinates to interpret their reactions to the communications. It requires sincerity, and patience, empathetic
listening, etc.
12) Intercultural Socialisation: Intercultural socialisation helps in awareness of each other's cultural constructs,
and thereby develops informed understanding of cross-cultural behaviour, habits, actions, and the reasons. Such
intercultural socialisation is important, particularly for the reasons that actions and behaviour of one culture group
or the other are so different; at times it may create confusion. For example, while bowing is a form of welcome
greeting for most of South-East Asian countries like Japan, for Westemers shaking of hands is the normal custom
of welcoming. Similarly, leaving some portion of food after dining is considered as customary in some culture
groups, but a sign of impoliteness for others.

Importance of Socio-Cultural Environment in International Business

Major social factors considered under international marketing are as follows:
1) National Taste: In Thailand, people prefer black shampoo; Nestle brews different varieties of instant coffee
because people in those countries have different tastes, uncommon in other countries. Green is the favourite
colour of all the Arab countries; red is still widely used in Russia, in banners, posters, and hoardings although
communism is in no way relevant to modern Russia.
2) Language: Cross culture and cross border operations call for necessary language skills, e.g., South Koreans
have learnt Indian languages to operate in India. One can see this in Hyundai or LG factories in India. Companies
also have to change their brand names and slogans in different countries. In Japan, General Motor's slogan "body
by fisher" means "corpse by fisher", and Pepsi Cola slogan "come alive" means "come out of the grave". Prior to
promoting the brand, one has to take into account the socio-cultural background of a specific nation and different
interpretations of a name in the local language.
3) Values and Beliefs: It is also important for companies to understand the significance of different designs and
colours in different countries. For example, blue is perceived as feminine in Holland and masculine in Sweden.
Green is favourite colour in the Muslim world, but is associated with illness in Malaysia although it is a Muslim
country. White indicated death in china and Korea but it is the colour of bridal dresses in Europe. Red is associated
with danger in many countries but it is a favourite in Russia. Another example is 'swastika", which is considered
sacred in India, but has completely different connotations in the west.
4) Demography: A number of demographic factors such as age, sex ratio, family size and occupation influence
the business of many companies. Different companies concentrate on different segments. For example, Barbie
generates huge revenues through the children's segment of affluent countries.
5) Literacy Rate: Countries with a high literacy rate experience a better standard of living. Here the need is for
standardises goods, supported by technical services. For a country with an educated population, the amount of
training required for the staff will be far less than in the case of the country which has a low literacy rate. This is an
important factor, as it influences the cost incurred, products manufactured.

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6) Female Workforce: The most spectacular change that has taken place in the current era is the empowerment
of women throughout the world. In China, Indonesia, Russia and Thailand, women are major contributors to the
GDP. With economic independency, women no longer have to depend on men to make decisions about what to
buy, they can make their own decisions about whether to purchase any consumer product or durable. For example,
Indian women in IT-enabled services and handicrafts, Chinese women in the soft toys and ceramics and Indonesian
women in garments and paperwork, who have brought great success to their countries.
7) Double Income Families: As the household income increases, the demand for the number of products increases
proportionately. This is especially true for packaged food items, electronic gadgets, household appliances, health
equipment, Japanese entertainment electronics and French perfumes dominate in the whole of Europe and North
America. Pizza Express, McDonald and Kentucky Fried Chicken invariably rule the households of double income
families throughout the world.
8) Impulse Buying: Benefit-oriented buying is taking place everywhere. Pre- planned shopping and scheduled
purchases are gradually going away. Throughout the world, people need instant items. They see, ask and buy. It is
a major challenge to international businessmen to provide benefits to lure impulse buying.

Influence of Social Environment on International Business

The influence of social environment on individuals and business organisation is as follows:
1) The behaviour, personality, attitude and thinking of individuals are influenced by the social environment.
2) It affects the consumption behaviour and demands of products in the market.
3) The culture of an individual influences their attitude towards work and business affairs.
4) Culture also influences the degree of individualism and collectivism in the people. It also determines their
degree of independence while taking a purchase decision.
5) The culture has a strong impact on the outlook and attitude of individuals towards pollution, consumerism and
the role of mass media and business.
6) Work ethics in business, corporate governance and social responsibility is also determined by the culture of the
society.
7) Knowledge about rights and duties and work ethics is also influenced by the culture of the society.
8) Various structures of social division, such as the caste system also influence the consumer behaviour. non-veg
products.
For example, people of Brahmin caste refrain from buying
9) In spite of the fact that every country has a unique culture, some cultural elements are getting common due to
frequent cross-cultural mobility of the people and extensive usage of modern communications.
The purpose behind buying is also determined by the social environment. For this reason, organisations
need to tailor their marketing strategies according to the needs of different customers. The aspirations and beliefs
also differ from country to country; therefore, the marketing mix should be planned keeping in mind such diverse
social customs and standards

Influence of Cultural Environment on International Business

The various global marketing decisions or actions are influenced by different cultural factors. Following are
the influences of the cultural environment on global marketing:
1) Culture Determines Goods and Services: The decision regarding what kind of goods and services should
be produced by a business is determined by the culture of the host country. It also influences the food habits, way
of dressing, colour options, etc., of the people. For example, there may be a great demand of seafood in some

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markets whose culture supports it. However, in some countries, there may not be any demand of seafood as they
find it against their cultural norms. Henceforth, it is vital for a global business to contemplate upon the culture of the
host country before taking any manufacturing decision.
2) Culture Determines Attitude to Work: In some societies, culture determines people's attitude towards their
work. People belonging to a particular culture are hard working as they are more committed towards their work.
For example, it is believed that Arabians are comparatively less dedicated towards their work in comparison to the
Japanese.
3) Culture and Global Business: Global companies operate in more than one country and hence deal with
various cultures. They need to recognise the cultural and social factors of various countries and regulate their
manufacturing, advertising and sales techniques as per the needs. For this purpose, they sometimes need to alter
the characteristics of their products, such as design, colour, packaging and so on.
4) Culture and Competitive Advantage: The cultural ethics and customs of the society have a great impact on
the costs involved in doing a business. These costs further affect the capability of a company to build a competitive
advantage under international market. In case of conducting global business, the relationship between competitive
advantage and culture is vital due to the following reasons:
i) It helps in identifying possible competitors and
ii) It suggests countries the best alternatives for conducting manufacturing and marketing operations.
5) Culture and Strategy: The success of global business depends upon maintaining harmony between the
culture and business strategy. However, it is not simple to practically attain this harmony as MNCs operate in
different nations having varying cultural environment. However by successfully identifying some similarities, MNCs
can control the needs to customise their business practices. It will also fulfil the demands of regional cultures.
Technological Environment: The technological environment comprises factors related to the materials and
machines used in manufacturinggoods and services. Receptivity of organisations to new technology and adoption
of new technology by consumers influence decisions made in an organisation. As firms have no control over the
external environment, their success depends upon how well they adapt to the external environment. An important
aspect of the international business environment is the level, and acceptance, of technological innovation in
different countries. The last decades of the twentieth century saw major advances in technology, and this is
continuing in the twenty-first century. Technology often is seen as giving firms a competitive advantage; hence,
firms compete for access to the newest in technology, and international firms transfer technology to
be globally competitive. It is easier than ever for even small businesses to have a global presence thanks to the
internet, which greatly expands their exposure, their market, and their potential customer base. For economic,
political, and cultural reasons, some countries are more accepting of technological innovations, others less
accepting. In analyzing the technological environment, the organisation may consider the following aspects:
 Level of technological development in the country as a whole and specific business sectors.
 Pace of technological changes and technological obsolescence.
 Sources of technology.
 Restrictions and facilities for technology transfer and time taken for absorption of technology

Environmental Factors:
Introduction
The constituents of physical covinment forests, lakes, climate conditions, natural resources, geographical
location and termorials of a corry. The political and economic decisions, religion, language, creampart business
actores, determination of land usage, etc. are influenced by the physical ment. It is important for them to herve the
growth and development in raw materials and natural resources in target nations in order to formulate and sustain
a feasible global marketing plan.
Country's natural caviomement is important for the prosperity of its people. These natural resources are
used for the benefits of people or enterprise irrespective of their state of depletion. In the past few years. people

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have become concerned nationwide and even internationally, regarding the way humans interact with one another,
the setup of their economic systems and the natural environment of the planet. One of the main components of the
economic serap is "business" as it affects nature by utilising its resources and altering the earth's ecological systems.

Factors of Natural Environment in International Business

Following are the factors associated with natural environment of international business :
1) Climate: Climate is an important factor since it restricts the physical and economical capability of people.
Climate encompasses temperature, wind and precipitation. Climate determines the degree of human settlements.
Human settlements are found less in regions with harsh climatic conditions.
However, they are found more in number where climatic conditions are permissive. Climate does not
cause developments but allows them to take place. On the other hand, the non-climatic factors are considered
more significant for the development of manufacturing and trade. These factors include technological growth,
capital availability, cultural tradition, political and economic organisations, convenience to reach an area, deposits
of minerals, etc. As per the Diamond model given by Porter, the impact of climate, even if it is a factor condition,
can be modified by the use of technology.
Similar continental positions and latitudes experience similar type of climates. Also, a region will have
moderate climate if a major portion of its area is covered with water. This is why the northwest Europe and the
northwest United States have similar and moderate climates (moist and mild climate) because they are at the
similar latitude. Similar is the case with New Zealand, Southeast Australia and some portion of South Africa.
Conversely, Central Asia and Kansas are dry and are hot during summers and cold during winters. This is because
they are far from sea and at the same latitude.
2) Natural Resources: The resources that nature offers are called natural resources. People depend on these
natural resources. However, the non-fuel minerals and the energy are the two natural resources which are beneficial
for a business. If an economy has sufficient resources, then a manager would like to optimally
tilise those resources for expanding the firm internationally. This can also attract the attention of the foreign
governments. In fact, tempting investment incentives can be offered by them to the industries that operate in a
particular sector. Also, a nation's overall economic situation will be affected by that sector's performance. This will
be further helpful in predicting the trends in the economy.
The two natural resources are as follows
i) Energy: There are two categories of energy resources:
a) Non-Renewable Energy Sources: Coal, petroleum, fossil fuels, natural gas and nuclear power are the main
non-renewable sources of energy.
b) Renewable Energy Sources: It is believed that the fossil fuels (non-renewable energy sources) will get replaced
by the renewable sources of energy in the future. This might be due to the fact that either the non-renewable sources
of energy will get exhausted or their prices will become higher. The various renewable sources of energy are solar
energy, hydroelectric energy, geothermal energy. wind energy, waves, ocean thermal energy, tidal energy and energy
from biomass fuels like ethanol, etc. Not all these resources are available at all places, but all can be utilised if proper
conditions are available. Moreover, hydroelectric energy is used extensively out of all the sources mentioned above.
It makes up 7% of the world's total consumption of energy. There are also certain programmes which are run by
more than 48 nations for the development and effective utilisation of renewable sources of energy.
ii) Non-Fuel Minerals: Finding out the new sources of energy is the prime focus of the world regarding the natural
resources. However, there are several mineral resources available which require strategic thinking of both industries
and governments. Nowadays, every aspect of modern living utilises non-fuel resources, be it automobile manufacturing
or the construction of houses. In fact, the former Soviet Union (FSU) and South Africa produce almost all of the
vanadium, platinum, manganese and chrome that are present in the world. The use of vanadium is in making
sulphuric acid and aerospace titanium alloys; platinum is utilised in oil refining as a catalytic agent; and hardening of
steel requires manganese and chrome. Moreover, tungsten, barite and tin are produced mostly by China.

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3) Topography: The business is influenced by topographical features. Also differences occur in the social structures,
politics, cultures and economies of nations due to various topographical features like water bodies, deserts, plains
and mountains. Some of these features facilitate and some obstruct the process of physical distribution. Modifications
in products may be required because of topographical differences. For example, the production of cakes is influenced
by altitude, therefore cake manufacturers have to modify their baking manuals accordingly. Similarly, altitude affects
the power of internal combustion engines. Therefore, larger engines have to be used at heights 5,000 feet or above.
The different components of the topography are as follows:
1) Mountains and Plains: Interactions and exchanges are hindered by the mountains, whereas they are““facilitated
by plain areas like plateaus, unless it is a desert area which makes it almost impossible for exchanges and interactions
to occur. The length, breadth, height, presence of valleys and terrain ruggedness determine the degree to which the
mountains can act as barriers. For example, the mountain ranges of Himalayas are such barriers that make it nearly
impossible to travel through them. This is the reason that water or air transportation is preferred between China and
India. The effectiveness of the Himalayas in acting as barriers is also evident by the huge cultural differences that can
be seen between the people living to the north of the mountains and those living to the south.
ii) Deserts and Tropical Forests: The tropical forests and deserts also influence businesses. They tend to
increase the transportation cost, create separations in markets and force people to concentrate““themselves in
certain regions.
Approximately, 1/3 of the Earth's surface is covered by deserts. They are semi-dry or dry regions situated
along the coastal areas (winds blowing away from the land) or in the interiors (moisture-less winds). Deserts can be
found in all the continents. Every west coast is dry either it is 20-30 degree north of the equator or 20-30 degree south
of the equator. The desert areas can also be inhabitable if there is a main water source present. For example, the
major portion of Egypt is covered with deserts, but people live there since there is a major water source.
Another major barrier to settlement of humans and development of the economy are the tropica forests.
Their effectiveness in acting as barriers increases when they are accompanied by poor quality of soil and severe
climatic conditions. The tropical rainforests of the Congo, Southeast Asia and the Amazon Basin are home to such
situations. However, the major rainforests are less economically developed and less populated except for the
ones present in Java and West Africa. For example, the Brazilian Amazon basin is considered as the greatest
rainforest, but because of its low population, it has turned into a desert. This is why only 4% of the population of the
nation live there
iii) Bodies of Water: Unlike the tropical forests, deserts and mountains, the water bodies aid the process of
transportation and also serve in attracting people. It is clearly evident from a map of world population that water
bodies attract greater number of people than regions which are not close to water. Normally. the regions that are
thickly populated without any lakes or rivers flowing through them are not far from the sea. For example, the Great
Lakes, the St. Lawrence, the Mississippi, the Congo and the Amarom. One can easily recognise in the population
map that Po river plains in the Rhine and Italy, while moving towards the North Sea, enter into Germany and the
Netherlands and originate from the glaciers in Switzerland beyond France, Austria and Liechtenstein. Similarly,
rivers like the Nile, the Amu Darya in Central Asia, the Tigris-Euphrates in Iraq and the Indus in Pakistan cross the
deserts and can be easily recognised in the map. However, these rivers are utilised less for transportation purposes
and more for irrigation purposes since they bring in rich, fertile soil with them.

Influence of Natural Environment on International Business

While making international marketing plans, the following influences of physical environment must be
considered:
1) Demand Pattern: Patterns of demand are influenced by the climate and topographical factors. For example,
where there are uneven roads, especially in hill areas, jeeps are preferred over cars. Likewise, woollen clothes are
in demand in areas with low temperature and ACs and coolers are required in warm or hot areas. Natural environment
of country may often require changes in the product storage, packaging and product mix.

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2) Population Distribution: The distribution of population depends upon the topographical and climate conditions.
People prefer to live in the areas with moderate weather and sufficient water availability. Topographical factors
affect the path as well as the mode of transport. All these factors influence the product cost, and therefore, the final
price offered to the end customer.
3) Product Adaptation: Climate factors influence modifications in the product. For example, certain oils and
glues do not work in areas where the temperature is low. The climatic conditions also impact the packaging (from
the marketing point of view) and safety packing when it is being transported from one place to another or when it
is stored. The products that cannot survive the uncertain climates get negatively impacted in extreme temperatures
or humid weather (for example, fruits and dairy products transported in extreme weather conditions).
4) Disrupt the Transportation: Uncertain climatic conditions may disturb the transport of the goods to be exported.
Unexpected climate change also adversely affects the firms producing seasonal items.
5) Location of Industry: With a rise in sea level, the firms are compelled to shift their business location. The sea
level rises when polar ice melts and adversely affects the agricultural activities all over the world. This in turn,
affects the business and society. The location of heavy industries needs to be closer to the place of availability of
raw material. For example, iron and steel industries in India are located in the areas where there is abundance of
required raw material (coal and iron ore). Stone quarrying, mining, oil drilling and other extractive industries are
dependent upon the mineral deposits available in the region.
6) Natural Disasters: These are the natural calamities like floods, earthquakes, heavy storms, etc., which lead to
loss of property, lives and other associated issues. For example, any business suffering heavy damages in floods,
etc., may have to bear huge losses. Repair work will hamper the business activities and involve heavy expenses
in accordance with the loss occurred. Insurance companies can lower the burden of the firms up to an extent, but
are not helpful in speeding up the reconstruction work. During this phase of rebuilding or repair works of the
businesses, other businesses such as construction, roofing, etc., flourish.
Legal Environment
• Different countries have different forms of laws and varying degrees of independence of jurisdiction in the
legal framework.
• International players should know all the legal aspects thoroughly before getting engaged in business activities
in any nation for smooth operations.
• For example, advertising laws in Germany are considered so strict that legal counselling is advised for the
international players before framing their advertising strategy in the country.
Legal System:
• A legal system is a procedure or process for interpreting and enforcing the law.
• The set of laws of a country and the ways in which they are interpreted and enforced.
• A legal system is an operating set of legal institutions, procedures and rules.
Kinds of Legal System:
Common Law:
• Common law owes its origin to the United Kingdom.
• The common law is based upon traditions, customs, values, culture and usage.
• Courts play an important role in interpreting the law according to each situation and incident.
• It is the body of law derived from judicial decisions of courts and similar tribunals.
• It deals with past legal precedents or judicial rulings are used to decide cases at hand.
• Examples of common law nations include Australia, Britain, New Zealand, Canada and United States.
Civil Law:
• It is also known as Roman Law and comprises a detailed set of laws that include rules, regulations and codes
for business activities.

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• It is the part of a country’s set of laws which is concerned with the private affairs of citizens.
• It is based on codified statutes and ordinances which rules the land.
• Examples of such countries are France, Germany and Japan.
Theocratic Law:
• It is based upon religious teachings and the ultimate legal authority is conferred upon religious leaders who
govern the society.
• The best example is Islamic law which is based on the Holy Koran.
Mixed Legal System:
• A mixed legal system comes into existence when two or more legal systems exist within a country.
• For example, the legal system of some African and Asian countries and the United States combines both
common and civil law.
Legal Issues in International Business
• Legal environment may affect day-to-day business operations and long-term competitive strategy of the firm
both within and beyond a country’s borders.
• The main legal concerns in various aspects of business are as follows:

Operational Concerns:
• All operations of a business firm are affected by national laws and regulations of host countries.
• These include setting up a business, drawing and enforcing contracts, hiring and firing employee, conducting
other business activities and winding up a business.
• The legal systems of developed economies tend to regulate operational features of business activity more
consistently in comparison to the less developed countries.
Strategic Concerns:
 Legal Jurisdiction:
• When any business entity operates in two or more countries, it must be specified which law will be applicable
in case of disputes and from where litigation will be handled.
• The legal jurisdiction must be specified clearly.
Intellectual Property Rights:
• Ownership rights for intangible assets constitute intellectual property rights (IPRs).
• It consists of the right to control and derive benefits from copyrights, inventions, patents, or trademarks.
• In global business operations, IPR is of great concern because the intellectual property, which is in the form of
literature, innovation, design, software, copyright, scientific patents or brand names is difficult to create but
easy to copy.

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UNIT - IV

FOREIGN TRADE IN INDIA

Foreign Direct Investment (FDI)

Foreign direct investment (FDI) is a direct investment into production or business in a country by a company
in 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. Foreign direct investment has many forms.
Broadly, foreign direct investment includes “mergers and acquisitions, building new facilities, reinvesting profits
earned from overseas operations and intra company loans”. In a narrow sense, foreign direct investment refers
just to building new facilities.
International trade play a key role in the process of integration of the world economy. Many firm consider
FDI as an important strategy to enter in to the international business are as the mobility of factors of production
across countries have enhanced. As far as developing countries are concerned, FDI is a powerful source of
external finance. At present, inward stock of FDI amounts to one third of the developing country’s GDP, compared
to merely 10 percent in 1980. FDI often promotes the development of the host economies.
FDI also helps the host countries to enhance the competitiveness of the domestic economy through transferring
technology,strengthening infrastructure, raising productivity and generating new employment opportunities.
The United Nations Conference on Trade and Development (UNCTAD) said that, India was among the top 10
recipients of Foreign Direct Investment (FDI) in 2019, attracting $49 billion in inflows, a 16% increase from the previous
year, driving the FDI growth in South Asia. The majority went into services industries, including information technology.

Benefits of FDI :
1. Access to superior technology Foreign firms bring superior technology to the host countries while investing
The benefits depends upon the technology spill over to other firms based in the host country
2. Increased competition The investing foreign firm increasing industry output resulting in overall domestic
prices, improved product or service quality, and more availability of intensifies competition in host economies
resulting in the improvement in consumer welfare.
3. Increase in domestic investment. It is found that capital flows in the form of FDI increase domestic investment
so as to survive and effectively respond to the increasing competition.
4. Bridging host country’s foreign exchange gap In most developing countries, the levels of domestic savings
are offen insufficient to capital accumulation and to achieve growth targets. Besides, the level of support be
insufficient to purchase imported inputs. Under such situations, the FDl help may ‘s in making foreign exchange
for imports.

Negative impacts of FDI

In most countries, public opinion towards FDI is not favourable and FDI is feared due to its impact on
domestic firms, the economy and culture. The major concerns about the negative aspects of FDI are as follows;
1.Market monopoly MNCs are far more advanced than domestic enterprises, owing to their large size and
financial power. In some sectors, this is leading to MNE monopolies, thus impeding the entry of domestic enterprises
in marketing, and advertising and R&D activities differentiate their products and makes the entry of new firms far
more difficult as they are unable to make similar investments in R&D and marketing strategies.
2. Crowding out and unemployment effects FDI tends to discourage entry and stimulates exit of domestic
enterprises often termed as the crowding out effect. As FDI enterprises are less labour intensive, their entry
results in higher unemployment and increased social instability.

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3. Technology dependence MNBs often function in a way that doesn’t result in technology transfer or technology
sharing, thereby making local firms technologically dependent or technologically less self-reliant.
4. Profit outflow Foreign investors import their inputs and use the host country as a processing base, with little
value added earnings in the host country. A large proportion of their profits may be repatriated.
5. Corruption Many foreign investors often bribe government officials, to get their desires satisfied.
6. National security With MNCs holding a dominant position in sensitive industries like telecommunications,
and the supply of core equipment and software for the IT industry, there is a danger that the strategic interests of
the host country may be compromised.

The Determinants of FDI Location

 Market demand: The flows of FDI are positively influenced by the size of a country’s market demand as
measured by GDP per capita.
 Growth rate: FDI flows to where fast economic growth has been recorded. A vicious circle is observed here-
at the same time that FDI contributes significantly to economic growth, faster economic growth attracts more
FDI because it increases foreign investors’ confidence in the economy, which in turn pushes the growth rate
even higher. In the least developed countries, studies have shown that FDI in fact follows, notproceeds, some
initial growth or at least the promise of growth.
 Political stability: Political riots or armed conflicts may exert a negative influence on foreign companies
investment decisions. Indeed, frequent changes of governments and the resultant policy changes can reduce
an investor’s assets to zero overnight.
 Macroeconomic stability: A Country’s overall macroeconomic performance, such as low inflation rate and
balanced fiscal account is a consistently significant factor in shaping the decision making of foreign investors
when assessing investment locations.
 Infrastructure: FDP encompasses both physical (e.g. roads and power) and social health and education)
concepts. It has been repeatedly shown around the world that a well developed infrastructure network and a
well-trained labor force are major elements of attractiveness to foreign investors.

FDI:
The role of FDI in Economic DevelopmentFDI increases capital stock, boosts human capital accumulation
(though usually unmeasured in labor stock), and speeds up technological advances in host countries. Nevertheless,
the most direct impacts of FDI on host economies are through its role in the accumulation of investment capital
and the growth of Total Factor Product (TFP) of the recipients.
1. FDI and Productivity Growth
2. The technology transfer arising from FDI may assist productivity growth. In fact, the most important benefit of
FDI is, along with providing financial resources it gives access to the whole range of technological, organizational
and skill assets, as well as the markets of the parent company.FDI as a mechanism for social advancement.
3. FDI serves as a catalyst for rapid economic growth and also helps in improving social norms. Here, FDI
plays, a major role in the development schedule of the host countries. Here two of main social aspects of
development viz. employment and environment .
a) FDI s effect on host country Employment and Labor Standard .One of the main objectives of developing
countries is to achieve a employment condition. It is a most important way to get an equitable distribution of
income and higher standard of living for its population.
There are three ways for FDI to generate employment in the host countries
First, foreign affiliates employ people in their domestic operations.

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Second, through backward and forward linkages, employment is created in enterprise that are suppliers,.
Subcontractors, or service providers to them.
Third, as FDI-related industries expand and the local economy grows created in sectors and activities that are
not even indirectly linked to the original FDP
b) FDI’s effect on host country’s Environmental Standards . Evidences are unavailable to prove that FDI is
imposing pressure on developing countries to lower their environmental standards. It can be narrated as
follows:
 Environmental resources are an essential input in the production process.
 Production efficiency of firms is closely related to the environmental sustainability of a particular country.
 Environmental damage will be more in low productivity operations that employ obsolete technology, outdated
work methods, poorhuman resource management techniques, and inefficient energy use.
On this base, with stronger technological and management base, it can be said that FDI is actually upholding
the environmental standards in a host country than their domestic affiliates.

FDI in India
FDI is an important monetary source for India’s economic development. Economic liberalisation started in
India in the wake of the 1991 crisis and since then, FDI has steadily increased in the country. India, today is a part
of top 100-club on Ease of Doing Business (EoDB) and globally ranks number 1 in the greenfield FDI ranking.

Routes through which India gets FDI

 Automatic route: The non-resident or Indian company does not require prior nod of the RBI or government of
India for FDI.
 Govt route: The government’s approval is mandatory. The company will have to file an application through
Foreign Investment Facilitation Portal, which facilitates single-window clearance. The application is then
forwarded to the respective ministry, which will approve/reject the application in consultation with the Department
for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce. DPIIT will issue the Standard
Operating Procedure (SOP) for processing of applications under the existing FDI policy.
Sectors which come under up to 100% Automatic Route’ category
 Infrastructure Company in the Securities Market: 49%
 Insurance: up to 49%
 Medical Devices: up to 100%
 Pension: 49%
 Petroleum Refining (By PSUs): 49%
 Power Exchanges: 49%
Government route
Sectors which come under the ‘up to 100% Government Route’ category
 Banking & Public sector: 20%
 Broadcasting Content Services: 49%
 Core Investment Company: 100%
 Food Products Retail Trading: 100%
 Mining & Minerals separations of titanium bearing minerals and ores: 100%
 Multi-Brand Retail Trading: 51%
 Print Media (publications/ printing of scientific and technical magazines/ specialty journals/ periodicals and
facsimile edition of foreign newspapers): 100%
 Print Media (publishing of newspaper, periodicals and Indian editions of foreign magazines dealing with news
& current affairs): 26%
 Satellite (Establishment and operations): 100%

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FDI prohibition
There are a few industries where FDI is strictly prohibited under any route. These industries are
 Atomic Energy Generation
 Any Gambling or Betting businesses
 Lotteries (online, private, government, etc.)
 Investment in Chit Funds
 Nidhi Company
 Agricultural or Plantation Activities (although there are many exceptions like horticulture, fisheries, tea plantations,
Pisciculture, animal
husbandry, etc.)
 Housing and Real Estate (except townships, commercial projects, etc.)
 Trading in TDR’s
 Cigars, Cigarettes, or any related tobacco industry

Government Institutes supporting Foreign Trade:

Foreign trade is all about trade among different countries. It is exchange of capital, goods and services
acrossthe borders of the countries. Concerning the regulation and promotion of foreign trade, Foreign Trade
Policiesare announced from time to time in various countries. The countries rich in natural resources export raw
materialsto other countries whereas some countries that have skilled and qualified manpower export finished
materials toother countries. Thus, maintaining a systematic flow of export and import to meet the needs of the
developed aswell as the underdeveloped nations.
All the countries benefit from the foreign trade as it helps them get their hands on particular materials that
are nototherwise available plus put their particular in the global marketplace, consequently resulting in
specializationas well as labour division at an international level. Moreover, it brings the nations closer and assists
the progressof advanced technology and strengthened economy. Therefore, the policy regarding foreign trade is
made withutmost concern.
The international trade policies are aimed at continuity and stability in the market. The policies address
upgradesin technology, reduction in transaction costs, market expansion and diversification. Foreign trade helps
in stabilizingthe prices of goods all the while maintaining the stability of their demand and supply, making the
market highlycompetitive. The FTPs aim to elevate the standard of the goods to be exported so that the exporting
countriesare acknowledged for the distinctive quality of their products. Employment opportunities are increased
becauseof the mobility of resources and labour required for international trade. There are plentiful jobs in the
foreigntrade sector including export and import along with other sectors such as banking, insurance,
communicationand transportation. Thereby, FTPs aim to improve the labour-intensive sectors while coming up
with schemesthat allow exporters to seek financial support so as to promote their brands, venture out into new
markets andhold trade fairs as well as buyer-seller meets.
Regulating the inflow and outflow of good to and from a country, the FTP focuses on earning valuable foreignexchange
in the global market. It plays very important role in directing, regulating and promoting the foreign trade.

DGFT:
Directorate General of Foreign Trade (DGFT)
This Directorate, with headquarters at New Delhi, is headed by the Director General. Keeping in line
withliberalization and globalization and the overall objective of increasing of exports, DGFT is assigned the role of
a”facilitator”. It is responsible for implementing the Foreign Trade Policy with the main objective of promotingIndia’s
exports. The DGFT also issues licenses to exporters and monitors their corresponding obligations througha
network of 35 Regional Offices. All DGFT offices provide facilitation to exporters in regard to developments inthe
area of international trade, i.e. WTO agreements, Rules of Origin and Sanitary and Phytosanitary Measures(SPS)
requirements, Anti-Dumping issues, etc. to help the exporters to strategize their import and export decisionsin an
internationally dynamic environment.

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EXIM POLICY: EXPORT-IMPORT POLICY
Introduction
The sale of goods and services across national boundaries in known as esport, whereas, purchasing of
poosh and services from other stations is called import. Due to globalisations of the world are commected to each
other. The exchange of goods and services between nations has accesserable role in enhancing the ecoserO
development of developed or developing countmes. The shof globalistic like UNCTAD, WTO. ASEAN, etc, has
resulted in rapid growth of world trade EXIM (Export Import) Policy or trade policy outlines the set of laws and
regulations for experts and imports of acountry. It also helps in cxport promotion and controlling tiports of a country
by following specific policies and guidelines formulated by the government To a laging in, EXIM Policy has removed
various quantitative restrictions, licensing and other regulatory and discretionary controls. This has liberalised the
exports and imports since 1992 According to the varying environmental conditions of domestic and foreign countries,
necessary change made in the policy at regular intervals. The EXIM Policy helps in communicating the strategy of
the government to exporters and importers.
India's EXIM Policy was established for studying the degree of protectionism and free trade in the country
and for highlighting the measures for export promotion, it was formed on the recommendations of Foreign Trade
(Development and Regulation Act), 1992. The policy is formulated by the Union Commerce Ministry of Indian
Government, for the time period of five years, on March 31" of every year. On priority basis, every year certain
amendments and schemes are introduced in the policy. Currently, an integrated five years policy is enacted as
Foreign Trade Policy of India from 2009 to 2014. This policy was declared on 27 August, 2009.

Objectives of Export-Import Policy

Major objectives of export-import policy are as follows:
1) To achieve larger percentage shares in the worldwide merchandise trade by aiding sustainable growth in exports.
2) To provide essential raw materials, components, intermediates, consumables and capital goods for accelerating
production services so as to encourage sustainable economic growth.
3) To attain international quality standards by boosting the technological ability and level of Indian primary sectors
(agriculture, services and industry), thus improving India's competitiveness and job opportunities
4) To offer high quality products and services to domestic consumers at prices which are internationally competitive
in nature and also positioning the domestic goods and services simultaneously in international market.
Determinants of Indian EXIM Policy Following are the factors based on which India's Foreign Trade policy is
determined:
1) Geographical Location: Rightly remarked by Napoleon Bonaparte, "Any country's foreign policy is determined
by its geography. India's location between middle-east, south-east Asia and far-east obliged her to engage in the
events of the region. A natural frontier in the form of Himalayas in the north and Indian Ocean and Bay of Bengal on
the three sides has considerably influenced its foreign policy. Historical Traditions India's commitment to peace
from time immemorial has significantly influenced the foreign policy. Her experience of colonialism in the modern
period promoted India to take a firm stand on any form of imperialism. There has been constant emphasis on the
aspect of world peace and spirit of brotherhood among nations because of the fact that Indians still pin faith in the
dictum "Vasudhaiva Kutumbakam".
2) Impact of Ideology: Gandhi's idea of peace and non-violence is cracially important. Nehru concretised the
ideas of Gandhi into pragmatic form and channelled them into foreign policy. It was only because of rich intellectual
heritage of Indian leadership that India chose to have an independent stance on her relations with other nations.
Non-alignment, mixed economy, etc., are outcome of ideological base provided by Indian leaders.
3) History and Culture: India's rich and varied historical and cultural experience has been conduioning determinant
of her foreign policy. The historical links with the British was responsible for India remaining in the Common
Wealth of Nations. India's commitment to peace from time immemorial has significantly influenced the foreign
policy. India's cultural values such as peaceful co existence, golden mean, mutual respect, means justifying ends,

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tolerance, neutrality, righteous indignation are reflected in India's foreign policy
4) Economic Condition: The stagnant economy at the time of independence profoundly affected todia's foreign
policy. The problems of poverty, health, scarcity that was outcome of British imperialism convinced the country of
futility of alignments. Instead it chose to welcome assistance from all the countries.
5) Security and Defence: After independence, India inherited a weak defence system. Her military was organised
on British pattern, geared to serve the interest of an alien country. It was plagued by maladministration, lack of
equipment and up to date technical knowhow. Lack of capital to modernise the army led India to pursue her
economic interests at the cost of security issues. However, with the passage of time, India took cognizance of
these lacunae in her security. Today Indian army is one of the ablest anul strongest armies in the world.
6) Cold War: The politics of cold war and the polarisation of the world into two camps remained a dominant feature
of international politics, when India became independent. Under such circumstances, India opted to remain outside
the blocs and pursue a policy of non-alignment. In fact, this stand was soon emulated by a large number of newly
emerging independent countries from Asia and Africa. Though India remained outside bloc politics, it welcomed
aid and assistance from both the blocs and helped in slackening tension between them.
7) International Economic System: No country can he absolutely self-sufficient in her economic needs and
requirements. Foreign trade and foreign exchange are the barometers to test the country's economy. Critical
inputs of development flow through exports and imports. A developing country like India had to depend on international
monetary institutions like World Bank, IMF and other developed nations to meet her developmental inputs.

Importance of EXIM Policy

Foreign trade policy holds importance due to the following reasons:
1) International business operations at firm level are considerably influenced by various policy measures employed
to regulate trade, both by home and host countries.
2) Exportability and importability of a firm's goods are often determined by trade policies of the countries involved.
) Price-competitiveness of traded goods is affected
3. by import and export tariffs. to increase their profitability through foreign sales.
4) Policy incentives help exporters
5) The host country's trade and FDI policies often influence entry decisions in international markets.
6) It also helps in deriving maximum benefits from expanding global market opportunities.
Export in India is witnessing an upward trend. EXIM policy helps in sustaining this growth and accelerating
country's transition to vibrant economy and leading global player.

EXIM Policy (2015-2020)

The EXIM Policy or Foreign Trade Policy (2015-2020) is notified by Central Government, in exercise of
powers conferred under Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 (No. 22 of 1992)
[FT (D&R) Act), as amended. The Foreign Trade Policy (FTP), 2015-2020, incorporating provisions relating to
export and import of goods and services shall come into force with effect from the date of notification and shall
remain in force upto 31 March, 2020, unless otherwise specified.
All exports and imports made upto the date of notification shall, accordingly, be governed by the relevant
FTP, unless otherwise specified.
Objectives of the EXIM Policy of India (2015-2020)
A vision is best achieved through measurable target Government aims to increase India's exports of
merchandise and services from USD 465.9 billion in 2013-2014 to approximately USD 900 billion by 2019, 2020 and
to raise India's share in world chillion in 2010 a 15 per cent. The FTP for 2015-2020 achieve the following objectives.
1) To provide a stable and sustainable policy environment for foreign trade in merchandise and services
2) To link rules, procedures and incentives for exports and imports with other initiatives such as Make in India,
Digital India and Skills India to create an "Export Promotion Mission" for India

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3) To promote the diversification of India's export basket by helping various sectors of the Indian economy to gain
global competitiveness with a view to promoting exports
4) To create architecture for India's global trade engagement with a view to expanding its markets and better
integrating with major regions, thereby increasing the demand for India's products and contributing to the
government's flagship "Make in India" initiative.
5) To provide a mechanism for regular appraisal in order to rationalise imports and reduce the trade imbalance.
Salient Features of EXIM Policy (2015-2020)
This time policy is divided into three parts:
1) Simplification and Merger of Reward Schemes
i) Merchandise Exports from India Scheme (MEIS): Earlier there were five different schemes for rewarding
merchandise exports with different kinds of duty scripts with varying conditions attached to their use. Now all
these schemes have been merged into a single scheme, namely Merchandise Export from India Scheme
(MEIS) and there would be ne conditionality attached to the scrips issued under the scheme. The main features
of MEIS, including details of various groups of products supported under MEIS. Rewards for export of notified
goods to notified markets under 'Merchandise Exports 2 from India Scheme (MEIS) shall be payable as
percentage of realised FOB value.
ii) Service Exports from India Scheme (SEIS): Served From India Scheme (SFIS) has been replaced with
Service Exports from India Scheme (SEIS) SEIS shall apply to 'Service Providers Located in India instead of
'Indian Service Providers. Thus SEIS provides for rewards to all service providers of notified services, who are
providing services from India, regardless of the constitution or profile of the service provider. The rate of reward
under SEIS would be based on net foreign exchange earned.
iii) Duty Credit Scrips to be Freely Transferable and Usable for Payment of Custom Duty, Excise Duty and
Service Tax: Scrips issued under Exports from India Schemes can be used for the following:
a) Payment of customs duty for import of inputs/goods including capital goods is done.
b) Payment of excise duty on domestic procurement of inputs or goods, including capital goods as per DOR
notification.
c) Payment of service tax on procurement of services as per DOR notification.
iv) Status Holders : a) Business leaders who have excelled in international trade and have successfully contributed
to country's foreign trade are proposed to be recognised es Status Holders and given special treatment and
privileges to facilitate their trade transactions in order to reduce their transaction costs and time.
b) The nomenclature of Export House, Star Export House, Trading House, Star Trading House, Premier Trading
House certificate has been changed to One, Two, Three, Four, Five Star Export House
c) The criteria for export performance for recognition of status holder have been changed from Rupees to U.S.
dollar earnings.
v) Approved Exporter Scheme-Self Certification by Status Holders: Manufacts where sho Status Holders
will he enabled to self-certify their mumufactured goods as originating from view to qualify for preferential
treatment under differem Preferential Trading Agreements (PTA) Fese Trade Agreements (FTA), Comprehensive
Economic Cooperation Agreements (CECA Comprehensive Economic Partnerships Agreements (CEPAs)
which are in operation.
2) Boost to "Make in India"
i) Specific Export Obligation under EPCG scheme, in case capital goods are procured frown indigenous
manufacturers, which is currently 90% of the normal export obligation to times at the duty saved amount has been
reduced to 75%, in order to promote domestic capital goods manufacturing industry.
ii) Higher level of rewards under MEIS for export items with high domestic content and value addition. It is proposed
to give higher level of rewards to products with high domestic content and value addition, as compared to products
with high import content and less value addition.

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3) Trade Facilitation and Ease of Doing Business
i) Online Filing of Documents/Applications and Paperless Trade in 24x7 Environment: DGPT already provides
facility of online filing of various applications under FTP by the exporter/imporums However, certain documents
like Certificates Issued by Chartered Accountants/Company Secretary/Cost Accountant, etc., have to be filed in
physical forms only. In order to move further towards paperless processing of reward schemes, it has been
decided to develop an online procedure to upload digitally-signed documents by Chartered Accountant/Company
Secretary/Cost Accountant
ii) Online Inter-Ministerial Consultations: It is proposed to have online inter-ministerial conmaltations for approval
of export of SCOMET items, Norm's fixation, Import Authorisations, Export Authorisation, in a phased manner, with
the objective to reduce time for approval. As a result, there would not be any need to submit hard copies of
documents for these purposes by the exporters.
iii) Simplification of Procedures/Processes, Digitisation and E-Governance
a) Under EPCG scheme, obtaining and submitting a certificate from an independent Chartered Engineer, confirming
the use of spares, tools, refractory and catalysts imported for final redemption of EPCG authorisations has been
dispensed with.
b) At present, the EPCG Authorisation holders are required to maintain records for three years after redemption of
Authorisations.
c) Exporter-Importer Profile: Facility has been created to upload documents in Exporter/Importer Profile. There will
be no need to submit copies of permanent records/ documents repeatedly with each application, once uploaded.
d) Communication with Exporters/Importers: Certain information, like mobile number, e-mail address, etc.,
has been added as mandatory fields, in IEC database.
e) Online Message Exchange with CBDT and MCA: It has been decided to have online message exchange
with CBDT for PAN data and with Ministry of Corporate Affairs for CIN and DIN data
f) Communication with Committees of DGFT: For faster and paperless communication with
1. various committees of DGFT, dedicated e-mail addresses have been provided to each norms committee,
import committee and pre-shipment inspection agency for faster communication.
g) Online Applications for Refunds: Online filing of application for refund of TED is being introduced for which a
new ANF has been created.
iv) Forthcoming E-Governance Initiatives: DGFT is currently working on the following EDI initiatives:
a) Message exchange for transmission of export reward scrips from DGFT to Customs.
b) Message exchange for transmission of hills of entry (import details) from Customs to DGFT.
c) Online issuance of Export Obligation Discharge Certificate (EODC).
d) Message exchange with Ministry of Corporate Affairs for CIN and DIN.
e) Message exchange with CBDT for PAN.
f) Facility to pay application fee using debit card/credit card.
g) Open API for submission of IEC application,
h) Mobile applications for FTP.
Facilitating and Encouraging Export of Defence Exports
a) Normal export obligation period under advance authorisation is 18 months. Export obligation period for export
items falling in the category of defence, military store, aerospace and nuclear energy shall be 24 months from the
date of issue of authorisation or co-terminus with contracted duration of the export order, whichever is later.
b) A list of military stores requiring NOC of Department of Defence Production has been notified by DGFT recently
iv) E-Commerce Exports
a) Goods falling in the category of handloom products, books/ periodicals, leather footwear, toys and customised

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fashion garments, having FOR value upto 25,000 per consignment (finalised using e-commerce platform) shall
be eligible for benefits under FTP
b) Department of Revenue shall fast track the implementation of EDI mode at courier terminals.
v) Duty Exemption a) Imports against Advance Authorisation shall also be eligible for exemption from Transitional
Product Specific Safeguard Duty.
b) In order to encourage manufacturing of capital goods in India, import under EPCG Authorisation Scheme shall
not be eligible for exemption from payment of anti-dumping duty, safeguard duty and transitional product specific
safeguard duty.
vi) Additional Ports Allowed for Export and Import: Calicut Airport, Kerala and Arakonam ICD, Tamil Nadu have
been notified as registered ports for import and export.
vii) Duty Free Tariff Preference (DFTP): Scheme India has already extended duty free tariff preference to 33
Least Developed Countries (LDCs) across the globe. This is being notified under FTP.
viii) Quality Complaints and Trade Disputes at in an endeavour to resolve quality complaints and trade disputes,
between exporters and importers. a new chapter, namely, Chapter on Quality Coniplaints and Trade Disputes has
been incorporated in the Foreign Trade Policy.
b) For resolving such disputes at a faster pace, a Committee on Quality Complaints and 18 Trade Disputes
(COCTD) is being constituted in 22 offices and would have members from
ix) Vishakhapatnam and Bhimavaram Added as Towns of Export Excellence: Government has already recognised
33 towns as export excellence towns. It has been decided to add Vishakhapatnam and Bhimavaram in Andhra
Pradesh as towns of export excellence (Product category Seafood). (Source: hige/Algft.gov.in/exim/2000/highlight
2015.pdf)

Recent Changes in EXIM Policy

The various recent changes in the foreign trade policy are as follows:
1) In the Mid-Term Review of the Foreign Trade Policy (FTP) 2015-20 the Ministry of Commerce and Industry has
enhanced the scope of Merchandise Exports from India Scheme (MEIS) and Service Exports from India Scheme
(SEIS), increased MEIS incentive raised for ready-made garments and made ups by 2 per cent, raised SEIS
incentive by 2 per cent and increased the validity of Duty Credit Scrips from 18 months to 24 months.
2) In August 2019, Ministry of Commerce plans to introduce new foreign trade policy aimed at providing incentives
and guidelines for increasing export in next five financial years 2020-25.
3) As of December 2018, Government of India is planning to set up trade promotion bodies in 15 countries to
boost exports from Small and Medium Enterprises (SME) in India.
4) In September 2018, Government of India increased the duty incentives for 28 milk items under the Merchandise
Export from India Scheme (MEIS).
5) All export and import-related activities are governed by the Foreign Trade Policy (FTP), which is aimed at
enhancing the country's exports and use trade expansion as an effective instrument of economic growth and
employment generation.
6) The Department of Commerce has announced increased support for export of various products and included
some additional items under the Merchandise Exports from India Scheme (MEIS) in order to help exporters to
overcome the challenges faced by them.
7) The Central Board of Excise and Customs (CBEC) has developed an integrated declaration' process leading
to the creation of a single window which will provide the importers and exporters a single point interface for
customs clearance of import and export goods.
8) As part of the FTP strategy of market expansion, India has signed a Comprehensive Economic Partnership

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Agreement with South Korea which will provide enhanced market access to Indian exports. These trade
agreements are in line with India's Look East Policy. To upgrade export sector infrastructure, Towns of Export
Excellence and units located therein will be granted additional focused support and incentives.
9) RBI has simplified the rules for credit to exporters, through which they can now get long-term advance from
banks for up to 10 years to service their contracts. This measure will help exporters get into long-term contracts
while aiding the overall export performance.
10) The Government of India is expected to announce an interest subsidy scheme for exporters in order to boost
exports and explore new markets.

EXIM Bank
Export-Import Bank of India is the premier export finance institution of the country, set up in 1982 under the
Export-Import Bank of India Act 1981 with the objective for providing financial assistance to exporters
and importers, and for functioning as the principal financial institution for coordinating the working of
institutionsengaged in financing export and import of goods and services with a view to promoting the country’s
international trade. Government of India launched the institution with a mandate, not just to enhance exports from
India, but to integrate the country’s foreign trade and investment with the overall economic growth. Since its inception,
Exim Bank of India has been both a catalyst and a key player in the promotion of cross border trade and investment.
Commencing operations as a purveyor of export credit, like other Export Credit Agencies in the world, Exim Bank of
India has, over the period, evolved into an institution that plays a major role in partnering Indian industries, particularly
the Small and Medium Enterprises, in their globalisation efforts, through a widerange of products and services
offered at all stages of the business cycle, starting from import of technology and export product development to
export production, export marketing, pre-shipment and post-shipment and over seas investment.
The bank provides a variety of products and services at all stages of export.
Some of the initiatives taken by the bank are as follows –
 Exim Bank of India has been the prime mover in encouraging project exports from India. The Bank providesIndian
project exporters with a comprehensive range of services to enhance the prospect of their securingexport
contracts, particularly those funded by Multilateral Funding Agencies like the World Bank, AsianDevelopment
Bank, African Development Bank and European Bank for Reconstruction and Development.
 The Bank extends lines of credit to overseas financial institutions, foreign governments and their
agencies,enabling them to finance imports of goods and services from India on deferred credit terms. Exim
Bank’slines of Credit obviate credit risks for Indian exporters and are of particular relevance to SME exporters.
 The Bank’s Overseas Investment Finance programme offers a variety of facilities for Indian investmentsand
acquisitions overseas. The facilities include loan to Indian companies for equity participation inoverseas
ventures, direct equity participation by Exim Bank in the overseas venture and non-fundedfacilities such as
letters of credit and guarantees to facilitate local borrowings by the overseas venture.
 The Bank provides financial assistance by way of term loans in Indian rupees/foreign currencies forsetting up
new production facility, expansion/modernization/upgradation of existing facilities and foracquisition of production
equipment/technology. Such facilities particularly help export oriented Smalland Medium Enterprises for creation
of export capabilities and enhancement of internationalcompetitiveness. Under its Export Marketing Finance
programme, Exim Bank supports Small and Medium Enterprises intheir export marketing efforts including
financing the soft expenditure relating to implementation of strategicand systematic export market development
plans.
 The Bank has launched the Rural Initiatives Programme with the objective of linking Indian rural industryto the
global market. The programme is intended to benefit rural poor through creation of export capabilityin rural
enterprises. In order to assist the Small and Medium Enterprises, the Bank has put in place the Export
MarketingServices (EMS) Programme. Through EMS, the Bank seeks to establish, on best efforts basis,

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SMEsector products in overseas markets, starting from identification of prospective business partners
tofacilitating placement of final orders. The service is provided on success fee basis.
 Exim Bank supplements its financing programmes with a wide range of value-added information, advisoryand
support services, which enable exporters to evaluate international risks, exploit export opportunitiesand improve
competitiveness, thereby helping them in their globalisation efforts.

ECGC
Export Credit Guarantee Corporation of India Limited (ECGC)
The Corporation was established in 1957 as the Export Risk Insurance Corporation of India Ltd. Keeping
inview the wider role played by the Corporation, the name was changed to Export Credit Guarantee Corporationof
India Ltd. (ECGC). The ECGC is the premier organization in the country, which offers credit risk insurancecover
to exporters, banks, etc. The primary objective of the Corporation is to promote the country’s exportsby covering
the risk of export on credit. It provides (a) a range of insurance covers to Indian exporters againstthe risk of non-
realization of export proceeds due to commercial or political causes and (b) different types ofguarantees to banks
and other financial institutions to enable them to extend credit facilities to exporters onliberal basis.
Export Credit Guarantee Corporation of India Limited, was established to strengthen the export promotion
driveby covering the risk of exporting on credit. Being essentially an export promotion organization, it functions
underthe administrative control of the Ministry of Commerce & Industry, Department of Commerce, and
Governmentof India. It is managed by a Board of Directors comprising representatives of the Government, Reserve
Bank ofIndia, banking, insurance and exporting community. ECGC is the fifth largest credit insurer of the world in
termsof coverage of national exports. The present paid-up capital of the company is Rs.800 crores and
authorizedcapital Rs.1000 crores.
Functions of Export Credit Guarantee Corporation of India Limited:
 Provides a range of credit risk insurance covers to exporters against loss in export of goods and services
 Offers guarantees to banks and financial institutions to enable exporters to obtain better facilities fromthem
 Provides Overseas Investment Insurance to Indian companies investing in joint ventures abroad in theform of
equity or loan
It provides support to exporters in following ways: –
 Offers insurance protection to exporters against payment risks
 Provides guidance in export-related activities
 Makes available information on different countries with its own credit ratings
 Makes it easy to obtain export finance from banks/financial institutions
 Assists exporters in recovering bad debts
 Provides information on credit-worthiness of overseas buyer.

EXPORT PROMOTION COUNCIL

The Export Promotion Councils are Non-profit, Autonomous and Professional Bodies registered under
the IndianCompanies Act or the Societies Registration Act, as the case may be.
Features
– The EPCs are autonomous and regulate their own affairs. However, if the Central Government framesuniform
bylaws for the constitution and/or for the transaction of business for EPCs, they shall adopt thesame.
– The EPCs shall be required to obtain the approval of the Central Government for participation in tradefairs,
exhibitions etc and for sending sales teams/ delegations abroad.
– The Department of Commerce/ Ministry of Textiles of the Government of India, as the case may be,would
interact with the Managing Committee of the Council concerned, twice a year, once for approvingtheir annual
plans and budget and again for a mid-year appraisal and review of their performance.

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The EPCs should function as professional bodies. For this purpose, executives with a professionalbackground
in commerce, management and international marketing and having experience in governmentand industry should
be brought into the EPCs.
– The EPCs may be provided financial assistance by the Central Government.
– The Export Promotion Councils are also the registering authorities under the Export Import Policy,1997-2002.
An exporter may, on application, register and become a member of Export Promotion Council.
On being admitted to membership, the applicant shall be granted forthwith Registration-cum-
MembershipCertificate (RCMC) of the EPC concerned.
Basic Objective
The basic objective of Export Promotion Councils is to promote and develop the exports of the country.
EachCouncil is responsible for the promotion of a particular group of products, projects and services.
Role
– The main role of the EPCs is to project India’s image abroad as a reliable supplier of high quality goods and
services.
– The EPCs shall encourage and monitor the observance of international standards and specifications
byexporters.
– The EPCs shall keep abreast of the trends and opportunities in international markets for goods andservices
and assist their members in taking advantage of such opportunities in order to expand anddiversify exports.
Functions
The Export Promotion Councils perform both advisory and executive functions. The major functions of the EPCsare:
– To provide commercially useful information and assistance to their members in developing andincreasingtheir
exports.
– To offer professional advice to their members in areas such as technology up gradation, quality anddesign
improvement, standards and specifications, product development, innovation, etc.
– To organize visits of delegations of its members abroad to explore overseas market opportunities.
– To organize participation in trade fairs, exhibitions and buyer-seller meets in India and abroad.
– To promote interaction between the exporting community and the Government both at the Central andState
levels.
– To build a statistical base and provide data on the exports and imports of the country, exports andimports of
their members, as well as other relevant international trade data.
EPZ
EPZ stands for Export Processing Zone. Most EPZs are located in developing countries. The basic objective
of EPZs is to enhance foreign exchange earnings and to generate employment opportunities. EPZs are also
known as Special Economic Zones in some countries.
An Export Processing Zone (EPZ) is a specific type of Free Trade Zone (FTZ), set up generally in developing
countries by their governments to promote industrial and commercial exports.
Objectives of EPZ:
 Provide special areas where potential investors would find a congenial investment climate and free from
cumbersome procedures.
 Promotion of Foreign Direct Investment (FDI) and local investment.
 Diversification of export.
 Generation of Employment.
 Transfer of Technology.

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 Upgradation of skill.
 Development of Management.
Overview of EPZ in India:
 EPZ includes the administrative structure and the facilities offered by the Export Promotion Zones of India.
 An Export Processing Zones bears cluster of specially designed commercial zones for aggressive promotion
of exports of India.
 The basic concept of Export Processing Zone was conceived in the year 1970s and it was implemented to
encourage the growth of export of India.
EPZ in India:
 Santa Cruz Electronic Export processing Zone (Andheri East Mumbai)
 Falta Export Processing Zone ( JC Bose Road)
 Cochin Export Processing Zone (Kakkanand, Cochin)
 Noida Export Processing Zone (Khel Gaon Marg, New Delhi)
 Madras Export Processing Zone (GST Road, Chennai)
 Vishakhapatnam Export Processing Zone (Shripuram Junction, Vishakhapatnam)
Facilities Offered by the EPZs in India:
 Uninterrupted power supply;
 Single window clearance;
 Cost effective and skilled labour;
 Water connection;
 Locational advantage;
 Proper infrastructure;
 Medical facilities.
Features of EPZ:
 EPZs allow subcontracting activities in case of manufactured goods within India as well as in foreign countries.
 Licenses are required for IT industries only.
 Tax holidays allowed for raw materials and capital goods.
 Exemption from Corporate Income Tax
 Private bonded warehouses for the purpose of import, re-export, marketing etc.
 Exemption from Custom Duty
Developmental Stages:
There are four processing zones of EPZ in India:
1. Initial Stage: The establishment of the Kandla Free Trade Zone in the city of Gujarat in the year 1965 and the
consequent establishment of the Santacruz Electronics Export Processing Zone.
Limitations:
 Lack of a proper policy and administrative control
 Weak infrastructure
 Limited scope for concessions
 Lack of adequate incentives
2. Second Stage: It witnessed the Second Oil Price Shock, which hampered the export activities significantly
and led the establishment of a number of EPZ to boost the export sector. EPZ were set up in West Bengal,
Tamil Nadu, Kerala, Uttar Pradesh and in Andhra Pradesh and were named as:
 Falta Export Processing Zone
 Cochin Export Processing Zone

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 Noida Export Processing Zone
 Chennai Export Processing Zone
 Vishakhapatnam Export Processing Zone
3. Third Stage: It witnessed economic liberalization in India and restructuring of the entire export processing
zone framework in the year 1991. This stage incorporated various measures for example:
 More fiscal incentives
 Simplification of Policy provisions
 Incorporation of more industries like horticulture, re-engineering, agriculture, aqua-culture.
4. Fourth Stage: The introduction of the concept of special economic zones in the EXIM policy of 1997-2002.
The special economic zone extended their scope to include private companies together with the government
organizations and offered space to be used for residential as well as industrial purpose. They offer various
fiscal and non-fiscal benefits to the inhabitants in the form of tax exemption, relaxation in duties, and various
incentives to enhance the Indian economy.
Advantages of EPZ:
 Promotion of foreign direct investment;
 Increase in national exports and export diversification
 Promotion of local investment
 Generate employment opportunities
 Development of Management
 Development of Skilled labour
 Attract and Encourage transfer of new technology
Disadvantages of EPZ:
 Majority of female labours
 Condition of working
 Suppression of labour rights
 Wages in rural areas mostly
 High work intensity and low wages
 Unsafe working conditions

EOU (Export Oriented Units):

This scheme was introduced by Ministry of Commerce in 1980. It was introduced as a complementary
scheme to the FTZ/EPZ introduced in the sixties, which had not attracted many units due to location restrictions.
The purpose of this scheme was basically to boost exports by creating additional production capacity with certain
minimum value addition.
Objectives of the EOU Scheme:
 To increase exports
 To generate additional employment
 Earn foreign exchange to the country
 Stimulate foreign direct investment
 Transfer of latest technologies
 Free to select the location of a project.
Obligation of EOU:
 The EOUs are required to achieve positive net foreign Exchange Earning (NFE).
 NFE shall be calculated cumulatively for a period of Five years from the date of commencement of production.
 Input/output norms to be maintained as per FTP on the resultant product.

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 Unutilized material can be disposed on payment of applicable duties.
Benefits of EOU:
 All the imports to units are custom duty free.
 Exemption from Central excise Duty for the procurement of Capital Goods and Raw materials from domestic
market.
 Units are entitled to sell the product in local market upto50% of the products exported in value terms.
 100% of foreign equity is permissible.
 No restrictions on External Commercial Borrowings.
 Full freedom for sub-contracting.
 EOUs are free to select the location of a product.
 Unutilized raw material can be disposed off on payment of applicable duties.
Major Sectors in EOU:
 Computer / Software
 Textiles
 Granite
 Pharmaceuticals
 Food processing
 Chemicals
 Coffee
 Gem & jewellery
Eligibility Criteria:
 An EOU can be set up by any entrepreneur for manufacturing of goods and also for rendering services.
 An EOU can be set up for repair, reconditioning, re-making and re-engineering also.
 An EOU unit is required to achieve only positive Net Foreign Exchange Earning (NFE) over a period of 5 years.
 Trading activity is not allowed in the EOU scheme.
 EOU can also be set up in the sectors like agriculture, animal husbandry, aquaculture, floriculture, horticulture etc.

SPECIAL ECONOMIC ZONE

India was one of the first in Asia to recognize the effectiveness of the Export Processing Zone (EPZ)
model inpromoting exports, with Asia’s first EPZ set up in Kandla in 1965. With a view to overcome the
shortcomingsexperienced on account of the multiplicity of controls and clearances; absence of world-class
infrastructure, andan unstable fiscal regime and with a view to attract larger foreign investments in India, the
Special EconomicZones (SEZs) Policy was announced in April 2000.
This policy intended to make SEZs an engine for economic growth supported by quality
infrastructurecomplemented by an attractive fiscal package, both at the Centre and the State level, with the
minimum possibleregulations. SEZs in India functioned from 1.11.2000 to 09.02.2006 under the provisions of the
Foreign TradePolicy and fiscal incentives were made effective through the provisions of relevant statutes.
To instil confidence in investors and signal the Government’s commitment to a stable SEZ policy regime
andwith a view to impart stability to the SEZ regime thereby generating greater economic activity and
employmentthrough the establishment of SEZs, a comprehensive draft SEZ Bill prepared after extensive
discussions withthe stakeholders. A number of meetings were held in various parts of the country both by the
Minister forCommerce and Industry as well as senior officials for this purpose. The Special Economic Zones Act,
2005, waspassed by Parliament in May, 2005 which received Presidential assent on the 23rd of June, 2005.
The draft SEZRules were widely discussed and put on the website of the Department of Commerce
offering suggestions/comments. Around 800 suggestions were received on the draft rules. After extensive
consultations, the SEZ Act,2005, supported by SEZ Rules, came into effect on 10th February, 2006, providing for

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drastic simplification ofprocedures and for single window clearance on matters relating to central as well as state
governments.
The main objectives of the SEZ Act are:
(a) generation of additional economic activity
(b) promotion of exports of goods and services;
(c) promotion of investment from domestic and foreign sources;
(d) creation of employment opportunities;
(e) development of infrastructure facilities;
It is expected that this will trigger a large flow of foreign and domestic investment in SEZs, in infrastructure
andproductive capacity, leading to generation of additional economic activity and creation of employment
opportunities.
The SEZ Act 2005 envisages key role for the State Governments in Export Promotion and creation of
relatedinfrastructure. A Single Window SEZ approval mechanism has been provided through a 19 member
interministerial SEZ Board of Approval (BoA). The applications duly recommended by the respective State
Governments/UT Administration are considered by this BoA periodically. All decisions of the Board of approvalsare
with consensus.
The SEZ Rules provide for different minimum land requirement for different class of SEZs. Every SEZ is
dividedinto a processing area where alone the SEZ units would come up and the non-processing area where
thesupporting infrastructure is to be created.
The SEZ Rules provide for: Simplified procedures for development, operation, and maintenance of the
Special Economic Zonesand for setting up units and conducting business in SEZs; Single window clearance for
setting up of an SEZ
Single window clearance for setting up a unit in a Special Economic Zone; Single Window clearance on
matters relating to Central as well as State Governments; Simplified compliance procedures and documentation
with an emphasis on self certification.

Administrative set up
The functioning of the SEZs is governed by a three tier administrative set up. The Board of Approval is the
apexbody and is headed by the Secretary, Department of Commerce. The Approval Committee at the Zone
leveldeals with approval of units in the SEZs and other related issues. Each Zone is headed by a
DevelopmentCommissioner, who is ex-officio chairperson of the Approval Committee.
Once an SEZ has been approved by the Board of Approval and Central Government has notified the area
of theSEZ, units are allowed to be set up in the SEZ. All the proposals for setting up of units in the SEZ are
approvedat the Zone level by the Approval Committee consisting of Development Commissioner, Customs
Authoritiesand representatives of State Government. All post approval clearances including grant of importer-
exportercode number, change in the name of the company or implementing agency, broad banding diversification,
etc.are given at the Zone level by the Development Commissioner. The performance of the SEZ units are
periodicallymonitored by the Approval Committee and units are liable for penal action under the provision of
Foreign Trade(Development and Regulation) Act, in case of violation of the conditions of the approval.
Facilities and Incentives
The incentives and facilities offered to the units in SEZs for attracting investments into the SEZs,
includingforeign investment include:-
 Duty free import/domestic procurement of goods for development, operation and maintenance of SEZunits
 100% Income Tax exemption on export income for SEZ units under Section 10AA of the Income Tax Actfor first
5 years, 50% for next 5 years thereafter and 50% of the ploughed back export profit for next 5years.
 Exemption from minimum alternate tax under section 115JB of the Income Tax Act.

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 External commercial borrowing by SEZ units upto US $ 500 million in a year without any maturityrestriction
through recognized banking channels.
 Exemption from Central Sales Tax. – Exemption from Service Tax.
 Single window clearance for Central and State level approvals.
 Exemption from State sales tax and other levies as extended by the respective State Governments.
The major incentives and facilities available to SEZ developers include:-
 Exemption from customs/excise duties for development of SEZs for authorized operations approved bythe
BOA.
 Income Tax exemption on income derived from the business of development of the SEZ in a block of 10years
in 15 years under Section 80-IAB of the Income Tax Act.
 Exemption from minimum alternate tax under Section 115 JB of the Income Tax Act.
 Exemption from dividend distribution tax under Section 115O of the Income Tax Act.
 Exemption from Central Sales Tax (CST).
 Exemption from Service Tax (Section 7, 26 and Second Schedule of the SEZ Act).

Setting Up of SEZ
Any individual, co-operative society, company or partnership firm can file an application for setting up of
SpecialEconomic Zone. The application is to be made in Form-A (attached below) to the concerned State
Governmentand the Board of Approval (BOA) in the Department of Commerce, Government of India. However,
the applicationwould be considered by the BOA only when the State Government recommendation is received.
Minimum area requirements for setting up a SEZ are as follows:
 Multi Sector SEZ 1000 hectares
 Sector Specific SEZ 100 hectares
 FTWZ 40 hectares
IT/ITES/handicrafts SEZ Bio-technology/non-conventional energy/gems and jewellery Sector 10 hectares.
Once the BOA gives formal approval and the concerned Development Commissioner gives an inspection
reportcertifying the contiguity and vacancy of the area, the area is notified as SEZ.

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NOTES

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INTERNATIONAL BUSINESS MANAGEMENT

For

BBA - III

SEMESTER - V

Compiled by
Dr. Aditi Sontakkey
Ph.D., NET, SET, CMA, MBA (Finance)

GP
Gratulent Publications
88, New Ramdaspeth, Near Lendra Park,
Nagpur - 440 010 Phone - 0712 - 2563689

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 Gratulent Publications

© - Gratulent Publications

1st Edition - Dec., 2024

Published By - Gratulent Publications

Printed by - Shree Graphic

Price -

Available in all leading book stalls

No part of this publication should be stored in a retrieval system or transmitted in any form
or any means, electronic, mechanical, photocopying, recording and/or otherwise without the
prior written permission of the publication.

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INTERNATIONAL BUSINESS MANAGEMENT

BBA - III

SEMESTER - V

INDEX

SR. NO. TOPICS PAGE NO.

UNIT - I INTRODUCTION TO INTERNATIONAL BUSINESS 01 - 07

UNIT - II TRADING BLOCS 08 - 16

UNIT - III INTERNATIONAL BUSINESS ENVIRONMENT 17 - 28

UNIT - IV FOREIGN TRADE IN INDIA 29 - 46

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INTERNATIONAL BUSINESS MANAGEMENT

BBA - III

SEMESTER - V

SYLLABUS

SR. NO. TOPICS

UNIT - I Introduction to International Business : Introduction to International business, Need, Importance

and limitations of international trade, Factors affecting international trade, Trade Barriers : Tariuff
and Non-Tariff barriers.

UNIT - II Trading Blocs : Trading Blocs, Types of Trading Blocs Political & Economic Case for integration.
NAFTA, SAARC, ASEAN & MERCOSUR

UNIT - III International Business Environment : Macro factors affecting International Buses Environment
Political, Economic, Socio-cultural, Technological, Environmental and Legal factors.

UNIT - IV Foreign Trade in India : Flow and Trends of FDI EXIM Policy, Govt. Institutes supporting Foreign
Trade: DGFT, EXIM Bank, ECGC, Export Promotion Councils, EPZ, EOU & SEZ.

Reference Books:
1 International Business, P. Subba Rao, Himalaya Publishing Hose
2. International Business, K. Aswathappa, McGraw Hill Education
3. International Business Environment annt Management, V K. Bhalla, Anmol Publications Pvt.Ltd.

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