International Business and Trade Module

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POLITICAL RISK ANALYSIS

There are number of political risk which are to be faced by international marketers. The risk,
which the marketers face from the last government are:

Confiscation – is the process of a government’s taking ownership of a property without


compensation.
Example: The Chinese government seized American property after the Chinese
communists took power in 1949

Expropriation – differs firms confiscating on that there is some compensation through not
necessarily just compensation, more often than not, a company whose property is being
expropriated agrees to sell its operation – not be choice but rather because of some explicit
or implied coercion.

Nationalization – involves government ownership and it is the government that operates the
business being taken over.
Example: Myanmar’s foreign trade is completely nationalized. In domestication,
foreign companies relinquish control and ownership either completely or partially to the
nationals. The result is that private entities are allowed to operate the confiscated or
expropriated properties.

Example: The French government after finding out that the state was not sufficiently
proficient to run the banking business, developed a plan to sell 36 French Banks.

INDICATORS OF POLITICAL INSTABILITY


To assess a potential marketing environment, a company should identify and
evaluate the relevant indicators of political difficulty, potential sources of political
complication, social unrest the attitudes of nationals and the policies of the host
government.

SOCIAL UNREST
Social disorder is caused by such underlying conditions as economic hardship, internal
dissension and insurgency and ideological, religions, racial and cultural differences.
Example: Lebanon has experienced conflict among the Christians, Muslims, and
other religious group. The Hindu-Muslim conflict in India continuous unabated

A company may not be directly involved in local disputes, but its business can still be
severely disrupted by such conflicts.

The breakup of the Soviet Union should not come as a surprise. Human nature
involves monastery (the urge to stand alone) as well as systems (the urge to stand
together), and the two concepts provide alternative ways of utilizing resources to meet a
society’s needs. Monastery encourages competition, but system emphasize cooperation as
explained by Alderson “A competitive society tend to be a closed society, closure is
essential if the group is in some sense of act as one” not surprisingly China, although
wanting to modernize its economy does not follow embrace an open economy which is
likely to encourage dissension among the various groups for the sake of its own survival, a
cooperative society may have to obstruct the dissemination of new ideas and neutralize an
external group that posses a treat, China apparent has learned a lesson from the soviet
union’s experience.

ATTITUDE OF NATIONALS
An assessment of the political climate is not complete without the investigation of
the attitudes of the citizens and government of the host country, The nationals attitude
toward foreign enterprises and citizens can be quite inhospitable, nationals are often
concerned with foreigners intentions in regard to exploitation and colonialism and these
concerns are often linked to arise of local socialist or nationalist philosophies which may be
in conflict with the policy of the company’s home country government.

POLICIES OF THE HOST GOVERNMENT


Unlike citizen inherent hostility a government attitudes toward foreigners is often relatively
short-lived. The mood can change either with time or change in leadership and it can
change for either the better or worse. The impact of a change in mood can be quite
dramatic especially in the short run, government policies formulation can affect business
operations either internally or externally. The effect in internal when the policy regulates the
firms activities in another country.
The biggest threat that India is facing today is the slow economic growth because of two
great factors. First Terrorism from across the boarder in Janny and Kashmir and other parts
of the country and, Second Poor labour legislation unless higher and fire system in the
Lebanon legislation is brought foreign companies will not like to come to India for
investment.

The greatest risk that any foreign company faces today is the instability of a government
due to the Terrorism in the country, though the government is stable in the country and is
running smoothly and efficiently. However, the threat of Terrorism in making the MNC’s to
avoid investing in a big way. It is therefore essential that Terrorism is cubed at all levels for
which the government must go all out to ensure the safety and integrity of the people and
the property of the country.

India after 1990 opened its economy to international institutions through modernization,
privatisation and globalisation. There is hope now that the economic growth of the country
will touch 6.5% of GDP as envisaged by the reserve e Bank of India Annual Report for the
year 2003-2004.

THINGS TO REMEMBER
Culture is a system of values and norms that are shared among a group of people and that
when taken together constitute a design for living.

The socio-cultural fabric is an important environmental factor that should be analyzed while
formulating business strategies. The cost of ignoring, customs, tradition, taboos and
preferences, etc. of people can be very high.

Society and culture influence every aspect of overseas business of an MNC and successful
MNC operation - whether it marketing, finance, production, or personnel. Have to be acutely
aware of the predominant attitude, feelings, and opinions in the local government. Given the
rapid pace of technological change, it is vital that firms carefully study different elements in
the Technological segments.

The major challenge facing the international marketers today are coping with change:
understanding complexity of the changing markets dealing with competition and performing
social responsibilities majority of the MNCs have to face complex political environment
problem because they must cope with the politics of morethan one nation. In order to
analyse the political scenario of the nation companies must know the type of political system
that exist in that nation. As there is a multiplicity political environment there are various legal
environment, domestic, foreign and international. The most important characteristic of the
international market environment is the economic dimension, it includes the analysis of the
world economic system development status of the countries, the purchasing power nations
and income of the population.

KEY WORDS TO KNOW


Abolutist government:
In this the ruling government dictates the policies without considering citizens opinion

Confiscation: is the process of government taking ownership of property without


compensation

Counterfeiting: to make a copy of, usually with the intend to defraud

Culture: is the thought and behaviour patterns that member of society learns through
language and other forms of symbolic interaction their customs, habits, beliefs and values
the common viewpoints which bind them together is a social entity.

Gross National Product: it is the total value of all final goals and services produced within a
nation in a particular year.

Parliamentary Government: In this, citizens are consulted from the time to time to know their
opinions.

Purchasing Power Parity: It states that the exchange rate between one currency and
another is in equilibrium when their domestic purchasing powers at that rate of exchange
are equivalent

Religion: is one of the important social institutions influencing business. A few religions have
spread over large areas in the world.

MODES OF ENTERING INTERNATIONAL BUSINESS


The market for a number of products tends to saturate in declined in the advanced
countries. This often happens when the market potential has been almost fully tapped. In
the United states for example the number of several consumer durables like cars, TVs etc.
is almost equal to the total number of household, further the technological advances
increased the size f the optimum scale of operation substantially in any industries making it
necessary to have foreign market in addition to domestic market to take advantage of scale
economies, again when the domestic market is very small internalization is the only way to
achieve significant growth.

TYPES OF MERGER
From the perspective of business structures there is a whole host of different mergers, Here
are few types distinguished by the relationship between the two companies that are
merging:

 Horizontal merger – two companies that are in direct competition and share the
same product lines and market
 Vertical merger – a customer and company or a supplier and company think of a
core supplier merging with an ice cream maker.
 Market – extension merger two companies that sell the same product in different
markets.
 Product extension merger – two companies selling different but related product in the
same market
 Conglomeration – two companies that have no common business areas, there are
two types of merger that are distinguished by how the merger each has certain
implications for the companies involved and for investors.
 Purchase merger – as the name suggest this kind of merger occurs when one
company purchases another. The purchase is made with cash or through the issue
of some kind of debt instrument, the sale is taxable. Acquiring companies often
prefer this kind of merger because it can provide them with Tax benefits. Acquired
assets can be written up to the actual purchase price and the difference between the
book value and the purchase price of the assets can depreciate annually reducing
taxes payable by the acquiring company.
 Acquisitions – as you can see an acquisition may be only slightly different merger.
Infact, it may be different in name only. Like mergers acquisition are actions through
which companies seek economic of scale efficiencies and enhanced market visibility,
unlike all mergers all acquisition involve one firm purchasing another – there is no
exchange of stock or consolidation as a new company, acquisition are often
congenial and all parties feel satisfied with the deal. Other times acquisition are more
hostile. Regardless of their category or structure, all mergers and acquisition have
one common goal. They are all meant to create synergy that makes the value of the
combined companies greater than the sum of the two parts. The success of a
merger or acquisition depends on whether this synergy is achieved. Merger and
acquisition is often known to be a single terminology defined as a progress of
combining two or more companies together. The feet remains that the so –called
single terminologies are different terms used under different situations, Though there
is a thin line difference between the two the impact of the kind of completely different
in both cases.
 Franchising – is basically a specialized form of licensing in which the franchiser not
only sells intangible property to the franchise, but also insists that the franchise
agree to abide by strict rules on how it does business the franchiser will also often
assist franchisee to run the business on an ongoing basis.

DIFFERENT TYPES OF FRANCHISING


 Product franchise – the manufacturer uses the franchise agreement to determine
how the product is distributed by the person buying the franchise
 Manufacturing franchise – the franchise is permitted to manufacturer the product
under license and sell them using the originators trademark and name
 Business Franchise venture – the franchisee purchases and distributes the products
for the franchise owner. A client base is provided by the product owner for the
franchisee to maintain
 A business format franchise – this opportunity is very popular and involves providing
the franchisee a proven business model using a recognized product and brand.
Training is provided by the franchise owner and assistance in setting up the
business, supplies are purchased from the franchisor and franchisee pays royalty
fee.
 Social Franchising – In recent years the idea of franchising picked up by the social
enterprises sector which hopes to simplify and expedite the process of setting up
new business. A number of business ideas such as soap making whole food
retailing, aquarium maintenance and hotel operation have been identified as suitable
for adoption by social firms employing disabled and disadvantage people. Social
franchising also refers to a technique used by government and aid to provide
essential clinical health services in the developing world
 Event Franchising – is the duplication of public events in other geographical areas
while retaining the original brand (logo) mission concept and format of the event

BENEFITS OF FRANCHISING
There are several benefits of franchising, the major benefits includes:
 Branding – the first thing franchises often franchisees is a strategic identity that is not
only affective it has cumulative market impact, corporate brand identities are proven.
 Advertising – can be one of the biggest expenses for any new business and for good
reason you can’t survive without effective advertisement and effective advertising is
expensive.

DISADVANTAGES/LIMITATIONS OF FRANCHISES ARE:


 Loss/Lack of control – independent franchises often has to follow the guidelines set
forth by the franchisee including what kinds of tables to use wallpapers and more. If
you don’t want to give up that control this won’t be the business for you.
 Less long-term profits – franchises are a big business but making it rich isn’t always
there, you will earn a descent income but nothing like Microsoft or any of other
fortune 500 company.
 Hard to sell – when you have a franchise, it’s harder to get out from underneath.
Especially if it seems the parent company is having problems

POSSIBILITY OF PARENT COMPANY GOING OUT OF BUSINESS


It doesn’t matter if your business is doing well or not if the parent company goes under, so
will you, make sure you choose a company that’s been doing well, both in good times and in
bad.

POSSIBILITY OF GETTING A BAD NAME


When franchise fails to do well you could be indirectly affected by it.
INTERNATIONAL INVESTMENT THEORIES
 Monopolistic advantage theory.- these advantages must be economies of scale,
superior technology or superior knowledge in marketing management or finance,
foreign direct investment took place because of the product and factor market
imperfections.
 Product and factor market imperfection – the customers would prefer to similar
locally made goods and thus would give the firm some control over the selling price
and an advantage over indigenous firms. To support these contentions some noted
that companies investing overseas work in industries that typically engaged in heavy
product research and marketing effort.
 Cross investment theories – EM Graham noted a tendency for cross investment by
European and American firms in certain oligopolistic industries that is European firms
tend to invest in the limited status when American companies had gone to Europe he
postulated that such investment would permit the American subsidiaries of European
firm to retaliate in the home market of US companies if the European subsidiaries of
these companies initiated some aggressive tactics such as price cutting in the
European Market.
 The internalization theory – it is the extension of the market imperfection theory by
investing in a foreign subsidiary rather than licensing. The company is able to send
the knowledge across boarders while maintaining it with the firm where it presumably
yields a better return on the investment made to produce it.
 Other International Investment theory – other theories relate to financial factors,
Robert Aliber believes the imperfection in the foreign exchange markets may be
responsible for foreign in investment. He explained this in terms of the ability of firms
from countries with strong currencies to borrow or raise capital in domestic or foreign
markets with weak currencies which in turn enabled them to capitalize their expected
income streams at different rates of interest. Structural imperfections in the foreign
exchange gains through the purchase on sales of assets in an individual or
overvalued currency.

MEANING OF FDI
Foreign Direct Investment (FDI) is defined as an investment made by an investor of one
country to acquire an assets in another country with the intend to manage that assets (IMF
1993).The IMF definition of FDI includes as many as following elements, equity, capital,
reinvested earning of foreign companies, inter companies debt transaction including short-
term and long term loans, overseas commercial borrowing, non-cash acquisition of equity,
investment made by foreign venture capital investor, earning data of indirectly held FDI
enterprises, control premium, non-competition fee and so on…. Foreign investment and
technology play an important role in the economic development of a nation and have been
exploited by a number of developing countries.

Example: The economic health of transition countries in Eastern Europe, Russia and
Central Asia is smoother due to FDI. Even communist countries like China have welcomed
foreign investment to improved their economies. Government of developing nation are
attracting FDI along with the technology and management skills that accompany it. To
attract multinational companies. Government are offering tax holidays. Import duty
exemption subsidized land and power and many other incentives. FDI are supposed to
bring many benefits to the economy. They contribute to GDP, capital formation balance and
generate employment.

 Foreign direct investment occurs when a firm invests directly in the facilities to
produce a product in a foreign country. It also occurs when a firm buys an existing
enterprise in a foreign country.
 Liberalization is not the sole reason to attract FDI. There are many other
determinants of FDI. India may lag there like demand conditions, factor conditions,
supporting industries and firm strategy.
 The benefits of FDI to a host country arise from resource –Transfer effects,
employments effects, balance of payment effects, and its ability to promote
competition.
 The costs of FDI to a host country include adverse effects on competition and
balance of payments and a perceived loss of national sovereignty.
 The benefits of FDI to the home (source) country include improvement in the balance
of payment are a result of the inward flow of foreign earnings, positive employment
effects when the foreign subsidiary create demand for home country exports and
benefits from a reverse resource – Transfer effect, a reverse resource – Transfer
effect arises when the foreign subsidiary learns valuable skills abroad that can be
transferred back to the home country.
 The costs of FDI to the home country include adverse balance-of-payments effects
that arise from the initial capital outflow and from the export substituting effects of
FDI. Costs also arise when FDI exports jobs abroad.
 Government of developing nations are attracting FDI along with the Technology and
management skills that accompany it. To attract multinational companies,
governments are offering tax holidays, import duty exemption, subsidized land and
power and many other incentives.
Drivers of Globalization

Two main factors seem to underlie the trend toward greater globalization. The first is the
decline in barriers to the free flow of goods, services, and capital that has occurred since the
end of World War II. The second factor is technological change, particularly the dramatic
developments in recent years in communication, information processing, and transportation
technologies.

Declining Trade and Investment Barriers

During the 1920’s and 30’s, many of the nation-states of the world erected formidable
barriers to international trade and foreign direct investment. International Trade occurs when
a firm exports goods or services to consumers in another country. Foreign direct investment
occurs when a firm invests resources in business activities outside its home country. Many
of the barriers to international trade took the form of high tariffs on imports of manufactured
goods, the typical aim of such tariffs was to protect domestic industries from foreign
competition.

Having learnt from this experience, the advanced industrial nations of the West committed
themselves after World War II to removing barriers to the free flow of goods, services and
capital between nations. This goal was enshrined in the treaty known as the General
Agreement on Tariffs and Trade (GATT). It started in 1947 as a set of rules to ensure non-
discrimination transport procedures, the settlement of disputes and the participation of the
lesser-developed countries in international trade.

The Role of Technological Change, microprocessors and Telecommunications. Perhaps the


single most important innovation has been the development of the microprocessor, which
enabled the explosive growth of high-power, low-cost computing, vastly increasing the
amount of information that can be processed by individuals and firms. The microprocessor
also underlies many recent advances in Telecommunications Technology.
The Internet and the World Wide Web: The phenomenal growth on the Internet and the
associated world wide web is the latest expression of this development.

Transportation Technology: In addition to developments in communication technology,


several major innovations in transportation technology have occurred since World War II. In
economic terms, the most important are probably the development of commercial fleet
aircraft and super freighters and the introduction of containerization, which simplifies
transshipment from one mode of transport to another. The advent of commercial jet travel,
by reducing the time needed to get from one location to another, has effectively shrunk the
globe.

Globalization of Markets

The globalization of markets refers to the merging of historically distinct and separate
national markets into huge global marketplace. Falling barriers to cross-border trade have
made it easier to sell internationally. It has been argued for some time that the tastes and
preferences of consumers in different nations are beginning to converge in some global
norm, thereby helping to create a global market.

Despite the global prevalence of Citicorp credit cardsand Mc Donald’s hamburger, it is


important not to push too far the view that national markets are giving way to the global
market. Very significant differences still exist between national markets along many relevant
dimensions, including consumer tastes and preferences, distribution channels, culturally
embedded value systems and the like. For example, automobile companies will promote
different car models depending on the range of factors such as local fuel costs, income
levels, traffic congestion and cultural values.

The most global markets are not marketing for consumers product – where national
differences in tastes and preferences are still often important enough to act as a brake on
globalization – but global markets for industrial goods and materials that serve a universal
need the world over. These include the markets for commodities such as aluminum, oil and
wheat, the markets for industrial products such as microprocessor, computer memory chips
and commercial jet aircraft. In many global markets, the same firms frequently confront each
other as competitors in nation after nation.

Example: Coca-Cola’s rivalry with Pepsi is a global one, as are the rivalries between Ford
and Toyota, Boeing and Airbus, Caterpillar and Komatsu. If one firm moves into a nation
that is not currently served by its rivals, those rivals are sure to follow to prevent their
competitor from grinning an advantage.

Transition from Domestic to International to Global Markets

After a company decides to go international, it must decide the degree of marketing


involvement and commitment it is prepared to make. Generally, a domestic company enters
emerge as an international company through the following stages:

1. No direct foreign marketing: A company in this stage does not actively cultivate
customers outside national boundaries, however, the company’s product may reach
foreign marketing. Sales may be made to trading companies as well as foreign
customers who come directly to the firm or products may reach foreign markets via
domestic wholesalers or distributors who sell abroad without explicit encouragement
or even knowledge of the producer. As companies develop websites on the Internet,
many receive orders from international web surfers.
2. Infrequent foreign marketing: Temporary surpluses caused by variations in
production levels on demand may result in infrequent marketing overseas. the
surpluses are characterized by their temporary nature, therefore, sales to foreign
markets are made as goods are available, with little or no intention of maintaining
continuous market representation.
3. Regular foreign marketing: At this level, the firm has permanent productive capacity
devoted to the production of goods to be marketed in foreign markets. A firm may
employ foreign or domestic overseas middlemen to it may have its own sales force
or sales subsidiaries in important foreign markets. The primary focus on operations
and production is to service domestic market needs. However as overseas demand
grows production is allocated for foreign markets.
4. International Marketing: Companies in this stage are fully committed and involved in
international marketing activities, such companies seek markets all over the world
and sell products that are a result of planned production for markets in various
countries, this generally entails not only the marketing but also the production of
goods outside the home market. At this point, a company becomes an international
or multinational marketing firm.
5. Global marketing: At the global marketing level, the most profound change is the
orientation of the company toward markets and associated planning activities. At this
stage, companies treat the world, including their home market, as one market.
Market segmentation decisions are no longer focused on national borders. Instead,
market segments are defined by income levels usage patterns or other factors that
often spam countries and regions. Often, this transition international marketing to
global marketing is catalyzed by a company’s crossing the threshold of rare than half
its sales revenue coming from abroad.
WTO and Inequalities

Multilateral trade has not yielded the desired results in respect of least developing countries
(LDC’s) and the developing countries due to years of economic exploitation suffered by
them. One important objective of the WTO is to reduce inequalities by giving smaller
countries more voice. Unfortunately, these countries are still at the receiving end, despite
various ministerial meetings starting with the 1986 Uruguay Round to the latest Doha Meet.
It is time LDCs and developing countries got more favorable treatment from the advanced
nations. In fact, developed countries should realize that, by doing so, they are not conferring
any favor on LDCs, but rather mitigating the hardships being inflicted upon them.

The so-called developed countries expect other countries to come to discussion table with
an assurance that they will reduce their subsidies. Why cannot the developed countries
come forward to do the same in the interest of prior countries, which constitute the majority
membership in the WTO?

The irony is, majority makes no authority in WTO deliberations as LDCs and developing
countries are not in a position to assert their position diplomatically or get issues focused in
their favor.

Objective of WTO

In its preamble, the agreement establishing the World Trade Organization reiterates the
objectives of GATT. These are raising standards of living and incomes, ensuring full
employment, expanding production and trade and optimal use of the world’s resources. The
preamble extends these objectives to services and make them more precise.

 It introduces the idea of “Sustainable Development” in relation to the optimal use of


the world’s resources, and the need to protect and preserve the environment in a
manner consistent with various levels of national economic development.
 It recognizes that there is a need for positive efforts to ensure the developing
countries, and especially the least developed among them, secure a better share of
the growth in international trade.
Functions of WTO
The agreement establishing WTO provides that it should perform the following four
functions:

I. It shall facilitate the implementation, administration and operation of the Uruguay


Round legal instruments and of any new agreements that may be negotiated in the
future.
II. It shall provide a forum for further negotiations among member countries on matters
covered by the arguments as well as on new issues falling within its mandate.
III. It shall be responsible for the settlement of differences and disputes among its
member countries.
IV. It shall be responsible for carrying out periodic reviews of the trade policies of its
member countries
Most Favored Nations Status

According to WTO all the signatory countries are given the most favored nations (MFN)
status that these countries have market access to each other’s, trading areas. India has
already given a most favored nation status to Pakistan. However, Pakistan has not so far
reciprocated. India in any case, is not going to suffer because of the acrimonious attitude of
Pakistan.

The WTO Structure

Its highest authority – the ministerial conference – dominates the structure of the WTO. This
body is composed of representatives of all the WTO members. It meets at least every two
years and is empowered to make decisions on all matters under any of the multilateral trade
agreements.
The day-to-day work of the WTO is entrusted to a number of subsidiary bodies, principally,
the General Council, also composed of all WTO members, which is required to report to the
Ministerial Conference. The General Council also convenes in two particular forms – as the
Dispute Settlement Body and the Trade Policy Review Body. The former overseas the
dispute settlement procedure and the latter conducts regular reviews of trade policies of
individual WTO members.

The General Council delegates responsibility to three other bodies namely the Council for
Trade in Goods, Trade in Services and Trade-Related Aspects on Intellectual Property
Rights (TRIPS). The Council of Goodsoverseas the implementation and functioning of all
the agreements covering Trade in Goods, things many such agreements have their own
specific overseeing bodies. The latter two council have responsibility for their respective
WTO agreements and may establish their own subsidiary bodies as necessary.
The Ministerial Conference reports to the General Council which delegates responsibility to
three other bodies as mentioned above. The Committee on Trade and Development is
concerned with issues relating to the developing countries and especially to the “least
Developed” among them. The Committee on Balance of Payments is responsible for
consultations among WTO members and countries which resort to trade and restrictive
measures in order to cope with their balance of payments difficulties. Finally, a Committee
on Budget, Finance and Administration deals with issues relating to WTO’s financing and
budget. Each of the plurilateral agreement of the WTO – those on civil aircraft, government
procurement, diary products and bovine meat – establish their own management bodies
which are required to report to the General Council.

The WTO Secretariat and Budget

The WTO secretariat is located in Geneva. It has 155 members and is headed by its
Director General SupachiPanitchpakdi and four deputy directors. Its responsibilities include
the servicing of WTO delegate bodies with respect to negotiations and the implementation
of agreements. It has particular responsibility to provide technical support to developing
countries, and especially the least developed countries. WTO economists and statisticians
provide trade performance and trade policy analysis while its legal staff assists in the
resolution of trade disputes involving the interpretation of WTO rules and precedents. Other
secretariat work is concerned with accession negotiations for new members and providing
advice to governments considering membership.

Norms for joining WTO

Most WTO members were previously by GATT members who signed the final Act of the
Uruguay Round and concluded their market access negotiations on goods and services by
the Marrakech meeting in 1994. A few countries which joined the GATT later in 1994.
Signed the final act and concluded negotiations in their goods and services schedules, and
became WTO members. Other countries that had participated in the Uruguay Round
negotiations concluded their domestic ratification procedures only during the course of 1995
and became members thereafter.

Aside from these agreements, which related to “original” WTO membership, any other state
on customs territory having full autonomy in the conduct of its trade policies may accede to
the WTO on terms agreed with WTO members.
In the first stage of the accession procedures, the applicant government is required to
provide the WTO with a memorandum covering all aspects of its trade and economic
policies having a bearing on WTO agreements. This memorandum becomes the basis for a
detailed examination of the accession request in a working party.

Along side the working party’s efforts, the applicant government engages in bilateral
negotiations with interested members governments to establish its concessions and
commitments on goods and its commitments on services.

This bilateral process, among other things, determines the specific benefits for WTO
members in permitting the applicant to accede. Once both, the examination of the
applicant’s trade regime and market access negotiations, are complete the working party
draws up basic terms of accession.

Finally, the results of the working party’s deliberations contained on its report, a draft
protocol of accession, and the agreed schedules resulting from the bilateral negotiations are
presented to the General Council on the ministerial conference for adoptions. If a two-thirds
majority of WTO members vote in favor, the applicant is free to sign the protocol and to
accede the organization when necessary, after ratification in its national parliament or
legislative.

The General Council convenes, as appropriate to discharge the responsibilities of the


dispute settlement understanding as will of the Trade Policy Review Body. These bodies
may have their own chairman.
HONE YOUR SKILLS
ACTIVITY (INTERNATIONAL BUSINESS & TRADE)

TEST I: State whether the following statement is True of False. If the answer is False, write
the word to make it correct. Write your answer on the blank provided before the number.

__________1. Foreign direct investment occurs when a firm invests resources in business
activities outside its home country.

__________2. The fast changes in Technology have helped in rapid globalization.

__________3. World Trade Organization now administers international trade and


investment accords.

__________4. The director general of the WTO is the highest authority of the WTO that can
dominates the structure of such.

__________5. To become a member of the WTO, new membering countries must have to
sign the Act of the Uruguay Round.

__________6. The ministerial conference is the top decision-making body of the World
Trade Organization.

__________7. The GATT, is a multilateral treaty among membering countries that lays
down agreed rules for conducting international trade.

__________8. New Technology helps developed international business.

__________9. Naturalization involves government ownership to the operation and control of


business being taken over.

__________10. Confiscation is the process of a government’s taking ownership of a


property without compensation.
TEST II: Write your answer on a separate paper; 10 pts. each correct answer.

1. Through society and culture do not appear to be a part of business situations, yet
they are actually key elements in showing how business activities being conducted.
Discuss.
2. Discuss the key economic issues that influence international business.
3. Why is it difficult for a marketer to position products in a culturally diverse nation like
India?
4. The development of new technologies helped international business. Do you agree?
Justify your answer.
5. Explain Globalization.
6. Why do companies engage in International Business?
7. Describe the structure of WTO in detail, also state the functions of WTO.
8. Explain the concept of most favoured rating.
III – Video Presentation (send to [email protected])
Make a video presentation of you: (assuming that you are in International Business,
promote your product(s) as well how to use strategies and techniques.

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