Thursday, January 29, 2009

case study-unit-1

ARROW AND THE APPAREL INDUSTRY


Ten years ago, Arvind Clothing Ltd., a
subsidiary of Arvind Brands Ltd., a member
of the Ahmedabad based Lalbhai Group,
signed up with the 159-year old 'Arrow
Compar:y, a division of Cluett Peabody &
Co. Inc., US, for licensed manufacture of
Arrow Shirts in India. What this brought to
India was not just another premium dress shirt
brand but new manufacturing philosophy to its
garment industry which combined high productivity,
stringent in-line quality control, and a conducive
factory ambience.
Arrow's first plant, with a 55,000 sq. ft. area
and capacity to make 3,000 to 4,000 shirts a day,
was established at Bangalore in 1993 with an
investment of Rs 18 crore. The conditions insidewith
good lighting on the workbenches, high
ceilings, ample elbow room for each worker, and
plenty of ventilation, were a decided contrast to
the poky, crowded, and confined sweCltshops
characterising the usual Indian apparel factory in
those days. It employed a computer system for
translating the designed shirt's dimensions to
automatically mark the master pattern for initial
cutting of the fabric layers. This was installed, not
to save labour but to ensure cutting accuracy and
low wastage of cloth.
The over two-dozen quality checkpoints during
the conversion of fabric to finished shirt was unique
to the industry. It is among the very few plants in
the world that makes shirts with 2 ply 140s ~nd 3
ply 100s cotton fabrics using 16 to 18 stitches per
inch. In March 2003, the Bangalore plant couid
produce stain-repellant shirts based on
nanotechnology.
The reputation of this plant has spread far and
wide and now it is loaded mostly with export orders
from renowned global brands such as GAP, Next,
Espiri, and the like. Recently the plant was identified
by Tommy Hilfiger to make its brand of shirts for
the Indian market. As a result, Arvind Brands has
had to take over four other factories in Bangalore
on wet lease to make the Arrow brand of garments
for the domestic market.
In fact, the demand pressure frorn"global brands
which want to outsource from Arvind Brands, is so
great that the company has had to set up another
large factory for export jobs on the outskirts of
Bangalore. The new unit of 75,000 sq. ft. has cost
Rs 16 crore and can turn out 8,000 to 9,000 shirts
per day. The technical collaborators are the
renowned C&F Italia of Italy.
Among the cutting edge technologies deployed
here are a Gerber make CNC fabric cutting
machine, automatic collar and cuff stitching
machines, pneumatic holding for tasks like shoulder
joining, threat trimming and bottom hemming, a
special machine to attach and edge stitch the back
yoke, foam finishers which use air and steam to
remove creases in the finished garment, and many
others. The stitching machines in this plant can
deliver up to 25 stitches per inch. A continuous
monitoring of the production process in the entire
factory is done through a computerised apparel
production management system, which is hooked
to every machine. Because of the use of such
technology, this plant will need only 800 persons
for a capacity which is three times that of the first
plant which employs 580 persons.
Exports of garments made for global brands
fetched Arvind Brands over Rs 60 crore in 2002,
and this can double in the next few years, when the
new factory goes on full stream. In fact, with the
lifting of the country-wise quota regime in 2005,
there will be a surge in demand for high quality
garments from India and Arvind is already
considering setting up 'two more such high tech
export-oriented factories.,.
It is not just in the area of manufacture but also
retailing that the Arrow brand brought a wind of
change on the Indian scene. Prior to its coming,
the usual Indian shirt shop used to be a clutter of
racks with little by way of display. What Arvind
Brands did was to set up exclusive showrooms for
Arrow shirts in which the functional was combined
with the aesthetic. Stuffed racks and clutter were
eschewed. The products were displayed in such a
manner that the customer could spot their qualities
from a distance. Of course, today this has become
standard practice with many other brands in the
country, but Arrow showed the way. 8rI!l..w today
has the largest network of 64 exclusive outlets
across India. It is also present in 30 retail chains.
It branched into multi-brand outlets in 2001, and is
present in over 200 select outlets.
From just formal dress shirts in the beginning,
the product range of Arvind Brands has expanded
in the last ten years to include casual shirts, Tshirts,
and trousers. In the pipeline are light jackets
and jeans engineered for the middle-aged paunch.
Arrow also tied up with the renowned Italian
designer, Renato Grande, who has worked with
names like Versace and Marlboro, to design its
Spring / Summer Collection 2003. The company
has also announced its intention to license the
Arrow brand for other lifestyle accessories like
footwear, watches, undergarments, fragrances, and
leather goods. According to Darshan Mehta,
President, Arvind Brands Ltd., the current turnover
at retail prices of the Arrow brand in India is about
Rs 85 crore. He expects the turnover to cross Rs
100 crore in the next few years, of which about 15
per cent will be from the licensed non-clothing
products.
In 2005, A,...,:indBrands launched a major retail
initiative for all its brands. Arvind Brands licensed
brands (Arrow, Lee and Wrangler) had grown at a
healthy 35 per cent rate in 2004 and the company
planned to sustain the growth by increasing their
retail presence. Arvind Brands also widened the
geographical presence of its home-grown brands,
such as Newport and Ruf-n-Tuf, targeting small
towns across India. The company planned to
increase the number of outlets where its domestic
brands would be available, and draw in new
customers for readymades. To improve its presence
in the high-end market, the firm started negotiating
with an international brand and is likely to launch the
brand.
The company has plans to expand its retail
presence of Newport Jeans, from 1200 outlets
across 480 towns to 3000 outlets covering 800
towns.
For a company ranked as one of the world's
largest manufacturers of denim cloth and owners of
world famous brands, the future looks bright and
certain for Arvind Brands Ltd.
Company Profile
Name of the Company : Arvind Mills
Year of Establishment: 1931
Promoters : Three brothers- Katurbhai, Narottam Bhai and Chimnabhai
Division: Arvind Mills was split in
1993 into three unitstextiles,
telecom and garments. Arvind Brands
Ltd. (textile unit) is 100
per cent subsidiary of
Arvind Mills.
Growth strategy: Arvind Mills has grown
through buying-up of sick
units, going global and
acquisition of German
and US brand names.
Questions
1. Why did Arvind Mills choose globalisation as
the major route to achieve growth when domestic
market was huge?
2. How does lifting of 'Country-wise quota regime'
help Arvind Mills?
3. What lessons can other Indian businesses learn
from the experiences of Arvind Mills?

Friday, January 23, 2009

world trading system

the meanig of world trading system
“World”
Should not connote same participation by all nations
“Trading”
Should not be taken to mean just trade in goods and services; FDI and migration are important too
“System”
Should not be taken to mean that there is some overarching mechanism or group of people that control all of these commercial transactions or state-to-state interactions


Typically refers to
•the flows of goods, services, and non-financial investments across national borders; and
•The policy regimes that governs these economic activities Policymakers that care about their firms’ interests are concerned about the impact of foreign nations’ policies
NGOs care about impact of these transactions and policies on environment, labor, etc.
nIn sum: multiple actors, different motives, different laws, and various business practices

Why care about the international rules that govern trade

Absence of rules has been historically associated with economic turmoil and war
•Great Depression and World War II
Rules reduce uncertainty in planning international transactions and operations
•Imagine what would happen if any productivity increase was matched 1-for-1 by a tariff increase
Negotiations over trade policies can result in greater access to foreign markets
Rules can protect foreign investments
Rules can improve the allocation of resources


Trade rules: the legalese


Basic idea, fancy language
Two fundamental rules against discrimination of foreign firms or investors
•“National treatment” provision
•“Most favored nation” provision (“MFN”)
Commitments
•codified as “bindings”
•Historically specified what governments will not do; but more recently include commitments to take action
Many exceptions: including regional trade agreements like NAFTA and sectors like agriculture


Explanations for the factual record


Principal explanations


Supply side factors
Policy changes
Interaction between these two explanations


"Death of Distance”
•Falling international transportation costs
•Ease of communication
•Recent doubts on the importance of these factors
Factor accumulation and changing production structure
Reductions in trade barriers
Relative importance: 2/3 policy; 1/3 other factors

Growth in FDI


“Death of distance”
Rise of export platforms
Rise of international outsourcing which, in turn, reflects
•Falling trade barriers
•Greater ability to enforce contracts with suppliers
•Changes in management thinking
Substantial liberalisation of inward FDI regimes
Less aversion to foreign takeovers and acquistions
Privatisation and deregulation reforms

Growth in international migration


Greater information flows and impact on aspirations
Large cohorts of younger people in the developing world
Falling cost of international travel
Increased premium on skill in industrialised world
Greater education opportunities in industrialised world
Aging populations in industrialised world

wto

World Trade Organisation: India is one of the (out of 104) founder members of the WTO. The GATT was not an organization but it was only a legal agreement. On the other hand WTO is designed to play the role of watchdog in the spheres of trade in goods, trade in services, foreign investment, intellectual property rights


Uruguay Round: Unintended Consequences


It could perhaps be plausibly argued that in all significant government policies the unintended consequences overwhelm the original policy objectives. The Uruguay Round is a particularly striking example of this dictum.
The Uruguay Round was the eighth negotiation under the auspices of the GATT (General Agreement on Tariffs and Trade), created in 1948 as part of the post-war international economic architecture. The primary mission of GATT was to reduce or eliminate the border barriers which had been erected in the 1930s and contributed to the Great Depression and its disastrous consequences. The GATT reflected its origins in the postwar world in that it provided rules to buffer or interface between the international objective of sustained liberalization and the objectives of domestic policy, primarily full employment and the creation of the welfare state. This paradigm appeared to be based on a consensus among the major players termed “embedded liberalism.” But there was less of a consensus between the Europeans and the United States than appeared at the creation. More of that later.
Before the Uruguay Round, GATT worked very well. Tariffs and non-tariff barriers were significantly reduced and trade grew faster than output as each fed the other. From the 1960s on the rounds were essentially managed by the European Community and the U.S. (The Big Two) though smaller countries were able to play a useful mediating role. The developing countries were largely ignored as players, although that began to change in the 1970s, of which more below. Agriculture was virtually excluded from negotiations. The Common Agricultural Policy (CAP) of the European Community was enshrined in the Treaty of Rome in 1957 and regarded as the heart of European integration, an implicit contract between France and Germany. And the United States secured a GATT waiver for its agricultural support schemes. So the transatlantic alliance, sans agriculture and helped by the Cold War’s constraint on trade frictions, was the effective manager of the international trading system.
The Uruguay Round was a watershed in the evolution of the system. Agriculture was at the centre of the negotiations. The French-German “deal” (French agricultural products for German manufactured products) was increasingly tenuous. The German market was simply not big enough for the vastly expanded European production nurtured by the CAP intervention on prices and incomes and so exports became the “solution.” By 1979 the Community became a net exporter of temperate foodstuffs. But exports required subsidies because of oversupply engendered by high internal prices. And this also required considerably more import protection. And so by the 1980s the Community’s insulation from world trade ended. The honeymoon with the Americans ended as U.S. exports to the E.C. diminished and E.C. exports flourished and even penetrated the American market. Anger at the “unfair competition” of subsidized products exploded. For the U.S. government there was only one answer. The CAP had to be reformed. And only one way to do it. A multilateral trade negotiation.
That was much easier said than done. A U.S. call for negotiation started in 1981. The Uruguay Round was launched at Punta del Este in September 1986. The delay was due to the endless foot-dragging by the Community involving complex maneuvers not only in the GATT but also the OECD and Economic Summit. This foot-dragging spawned a new single-interest coalition, the Australia-led Cairns Group, which included Southern Countries from Latin America and Asia determined to ensure that liberalization of agricultural trade would not be relegated to the periphery as it always had in the past. (And this provided a glimpse of the future as we shall see below.)
But the role of a group of developing countries, tagged the G10 hardliners and led by Brazil and India, was in many ways even more important in the Uruguay Round’s transformation of the system. The G10 were bitterly opposed to the inclusion of the so-called “new issues”--trade in services, intellectual property and investment--central to the American negotiating agenda.
Although the “new issues” are not identical -- obviously negotiations on telecommunications or financial services differ from intellectual property rights -- they do have one common or generic characteristic. Thus, they involve not the border barriers of the original GATT but domestic regulatory and legal systems embedded in the institutional infrastructure of the economy. The degree of intrusiveness into domestic sovereignty bears little resemblance to the shallow integration of the GATT with its focus on border barriers and its buffers to safeguard domestic policy space. Thus, for example, the barriers to access for service providers stem from laws, administrative actions or regulations which impede cross-border trade and investment. Intellectual property negotiations covered comprehensive standards for domestic laws, private property rights of legal persons and also detailed provisions for enforcement.
The inclusion of the new issues in the Uruguay Round was an American initiative and this policy agenda was largely driven by American MNE’s (multinational enterprises) who were market leaders in the services and high tech sectors. These corporations made it clear to the government that without a fundamental rebalancing of the GATT they would not continue to support a multilateral policy but would prefer a bilateral or regional track. But they didn’t just talk the talk, they also walked the walk, organizing business coalitions in support of services and intellectual property in Europe and Japan as well as some smaller OECD countries. The activism paid off and it’s fair to say that American MNE’s played a key -- perhaps even the key -- role in establishing the new global trading system. This merits a brief digression.
While initially opposed to the inclusion of the new issues, the E.C. later came to support negotiations especially in services and trade-related intellectual property (TRIPS). This change was almost entirely due to the policy activism of the American private sector. In Europe the role of MNEs was far weaker at the level of the Commission and was largely directed to national governments. For the E.C. the most important issue was to “broker” the policy pressures emanating for member states not private interest groups. This inward-directed focus became even stronger because of the Europe 1992 project to create a single market.
In the United States the private-sector advisory process established in the 1970s for the Tokyo Round of Multilateral Trade Negotiations was designed to cope with or broker interest group pressures acting on Congress. But in the Uruguay Round its impact spread well beyond its original objective. The U.S. service sectors were world leaders and the same was true in investment and technology. American MNEs controlled 40% of the world’s stock of foreign investment at the outset of the 1980s and the American technology balance of payments was well over $6 billion while every other OECD country was in deficit. This was high-stakes poker and the MNEs launched the game. The U.S. Advisory Committee for Trade Policy and Negotiations (ACPTN), in cooperation with other U.S. business groups, undertook the task of convincing European and Japanese corporations to lobby for the new issues. In the services sector U.S. activism extended well beyond the two trading powers. Nine country service coalitions were organized and met regularly with the GATT secretariat. In the case of intellectual property the U.S. group, called the Intellectual Property Rights Committee or IPC, working through UNICE (Union of Industries of the European Community) and the Keidanren in Japan, persuaded their counterparts to table, in Geneva, a detailed trilateral proposal for an intellectual property agreement drafted by American legal experts. This bore a remarkable resemblance to what came out of the Uruguay Round. Be that as it may it’s important to note that only in these two instances, services and intellectual property, did European business play a role in the Uruguay Round negotiations. The high profile of the American MNEs, however, was to have some unintended consequences (of which more to follow).
If the word tortuous is not too strong for the launch it could also describe the negotiations. The Round almost collapsed at a mid-term Ministerial in 1988. It was supposed to be concluded by 1990 at a Ministerial in Brussels. The transatlantic divide over agriculture was at the heart of the problem. But by the onset of the 1990s the G-10 had disappeared, decimated by the debt crisis of the 1980s and chastened by the IMF and the World Bank. French opposition to any reform of the CAP was finally overcome in Washington with the so-called Blair House Accord on agriculture between the E.C. and the U.S. at the end of 1992.
The Uruguay Round was completed in the following year. What might be called a North-South Grand Bargain was completed and was quite different from old-time GATT reciprocity -- I’ll open my market if you’ll open yours. It was essentially an implicit deal: the opening of OECD markets to agriculture and labor-intensive manufactured goods, especially textiles and clothing, for the inclusion into the trading system of trade in services, intellectual property and (albeit to a lesser extent than originally demanded) investment. Also--as virtually a last minute piece of the deal--the creation of a new institution, the WTO, with the strongest dispute settlement mechanism in the history of international law and with virtually no executive or legislative authority (apart from negotiations). (The Canadian proposal to create a new institution was supported by the E.U. as a way of curbing American unilateralism.) Since the Uruguay Round consisted of a “single undertaking” (in WTO legal-ese) the deal was pretty much take it or leave it for the Southern countries. So they took it but, it’s safe to say, without a full comprehension of the profoundly transformative implication of this new trading system (an incomprehension shared by the Northern negotiators as well I might add).
The Northern piece of the bargain consisted of some limited progress in agriculture, with a commitment to go further in new negotiations in 2000; limited progress in textiles and clothing with most of the restrictions to be eliminated later rather than sooner; a rather significant reduction in tariffs in goods in exchange for deeper cuts by developing countries with higher tariffs. On the whole not great but not bad when compared with previous rounds centred on traditional GATT – type market access negotiations. But this was not a GATT negotiation as the Southern piece of the deal so amply demonstrates. The essence of the South side of the deal – the inclusion of the new issues – requires a major institutional upgrading and change in the infrastructure of most Southern countries. These changes take time and cost money. Implementation thus involves considerable investment with uncertain medium-term results.
There were two significant unintended consequences to the Uruguay Round Grand Bargain (or Bum Deal). One is a serious North-South divide in the WTO. While the South is hardly homogenous there is a broad consensus that the WTO Round was asymmetric and the system must be rebalanced. The débacle of Seattle in 1999 ended with the walkout of virtually all the developing countries. It’s more than symbolic that the outcome of the Ministerial Meeting in Doha, Qatar, in 2001 was termed a “development agenda” and not a round. The main objective of the Doha meeting was to avoid another Seattle: thus its great success was that it didn’t fail. Both the EC and the US visited Africa to woo Ministers and the Declaration repeatedly refers to technical assistance and capacity-building. Pushed by the successful NGO (Non-governmental Organization) campaign about Aids in Africa the Americans even seemed willing to antagonize Big Pharma. So Doha was unique in its focus on the South and development. But, of course, there were many other items on the Doha agenda – including agriculture and the so-called Singapore issues of competition, investment, government procurement and trade facilitation. And, finally, the Doha Declaration was a masterpiece of creative ambiguity so the devil remained in the details of the negotiations. More about that when we get to Cancun, the next Ministerial Meeting.
But before then, it’s important to note the second and equally unintended consequence of the Uruguay Round, i.e. the rise in profile of the MNEs due to their crucial role in securing inclusion of services and intellectual property into the trade regime. The active role of the corporations made them and the WTO a magnet for what came to be called the anti-corporate globalization movement of NGOs.
This is not the time for a review of the history and role of the NGOs in the trading system. Nor am I asserting that there is a homogenous set of institutions called NGOs. My major concern has been the role of advocacy NGOs whose main objective is to shape policy and the policy agenda. But there are different groups of advocacy NGOs, for example groups rich in technical and legal expertise who usually consult “inside” the system; NGOs dedicated to assisting and advising Southern governments, a “virtual secretariat” as it were; groups centred on establishing business codes of conduct on corporate social responsibility. All these are rather different from what I’ve termed the mobilization networks, for whom a major object is to rally support for dissent at a specific event – a WTO ministerial meeting, or a meeting of the World Bank and International Monetary fund, or a G-8 Summit and so on. The NGOs have effectively utilized the internet and thus have made the market for policy ideas contestable. And they created, in effect, a new service industry: the business of dissent. They were the activists on TV in Seattle, Washington or Genoa. Dissent attracts violence and extremists, however, and after Genoa, where one protester was killed and then, of course, the terrorist attack of 911, the mobilization networks and other advocacy groups recognize the need for a new strategy. One seems to be a new anti-war movement, which has produced demonstrations around the world. Their axis of evil is the US and Israel and it’s not clear how it will evolve.
But another trend is now evident. Dissent as a brand is becoming tarnished. And there is no coherent strategy emerging from the movement. And growing criticism from supporters. As Todd Gitlin, a 1960s activist, succinctly puts it: “a bumper sticker is not an argument.” Or, as participants at the 2003 World Social Forum in Mumbai, India noted: “Delivering an hour long litany of worn conspiracy theories… Noam Chomsky almost managed the incredible feat of putting a full stadium of jubilant young people to sleep”. A yearning for some Edenic past of self-sufficient communities begins to wear thin. As does the romance of Spanish anarchism. So a move from dissent to dialogue and debate is now apparent. And the new name for the movement appears to be “the global justice movement” – read anti-poverty. Moreover, and of great significance, during the decade of the 1990s the spread of global civil society into the South was remarkable. Indeed the expansion of NGOs in low-income countries was higher than in the OECD.

Thursday, January 22, 2009

Case study on FDI

CASE STUDY
Please read the following case carefully and answer the questions given at the end.
Benefit from export competitiveness
Improving export competitiveness is important and challenging but it is not an end in itself. It is only a means to an end: the promotion of development. This raises the question of the benefits resulting from TNC associated trade, beginning with improving the trade balance, and continuing with upgrading export operations and sustaining them over time. In each case, the issue is how host developing countries can most benefit from the assets that TNCs command. Much depends on the strategies pursued by TNCs within their international production systems, on the one hand, and local infrastructure and technological, institutional and supplier capabilities as well as the policies purchased by Governments on the other.
A first approximation for assessing benefits and costs although not the most important one --- involves the trade balance. Even though export-oriented FDI helps to increase exports, foreign affiliates also import, and imports may increase significantly along with exports. In such cases, net foreign exchange earnings may be negligible. Moreover, high export values may co-exist with low levels of local value added. This is typically the case, for example, when foreign affiliates mainly assemble imported components, reflecting and relatively unimportant role assigned to them in production systems. Measuring the trade balance of export-oriented foreign affiliates as well as their value added, is fraught with difficulties. The data typically lump together export-oriented FDI and domestically-oriented FDI, making it difficult to determine the trade balance of export-oriented foreign affiliates separately. (personably, the trade balance of domestic market-oriented FDI would be negative.) Furthermore, no systematic data exist on the composition of imports by foreign affiliates, which is relevant for understanding the implications for host economies. Scattered information suggests that the imports of parts and components were high in certain industries, such as telecommunications, electric machinery and vehicles especially in countries that hosted labour-intensive activities of international production systems. Furthermore, in developing countries, one would expert that newly established affiliates (or affiliates that intend to extend their capacities) would typically need to import capital goods (just as many domestic firms do) in order to expand local productive nature more likely to be indispensable for the production of the goods or services in question to take place--- than imports of components for assembly or other inputs (for which domestic alternatives may be available or capable of being developed), yet both types of imports would be counted simply as affiliate imports.
Moreover, imports would be particularly high when production facilities are being set up and reliance on home-country or other foreign suppliers of inputs tends to be high, and then personably decline (partly as a result of the growth of local linkages). The imports of foreign affiliates China are an instructive example (although one that cannot necessarily be generalized in this respect), in that the data show that a sustained part of imports by foreign affiliates consists of capital goods. Although the trade balance effects of foreign affiliates consists of capital goods. Although the trade balance effects of foreign affiliates activities remain the same when the composition of imports is taken into account, the overall economic implications for China are different as imports of capital goods add significantly to the capital stock and productive capacity of the country.
In any event, as far as the impact on a country's balance of payments position --- often a major underlying concern for developing countries (although somewhat diminished in importance as countries' exchange rate policies have become more flexible) --- is concerned, focussing on the trade balance captures only a part of the impact of TNC activities. Additional factors that need to be taken into account are capital inflows, the repatriation of earnings and capital, and other long-term impacts on the foreign exchange earnings affiliates and associated local companies. Such an analysis of the balance of-payments impact, which would also have to be weighed against their other (structural) effects on a country's development and welfare, falls outside the scope of the present export.
The question of upgrading exports relates to the extent to which FDI involves higher technological content and domestic value added in host country export production and a restructuring of exports from those based on static comparative advantage to those based on dynamic comparative advantage. The starting point is that specialization in different segments of international production systems may imply different benefits and competitive prospects. There is therefore some concern that specialization in labour-intensive segments, even of high-technology exports, may in some ways be undesirable as it may provide few benefits in training or technology and meagre spillovers to the local economy. Besides the competitive edge of low-cost labour may disappear as wages rise. Still, labour intensive exports are economically beneficial as long as local value added is positive at world prices, even if it does not rise at the same pace as the total value of exports. In fact, where surplus labour is unlikely to be used in more remunerative or economically desirable activities, it is in the interest of the countries concerned that it be used in production for export. Any theory of comparative advantage would suggest that such countries should specialize in simple labour-intensive processes at the beginning of their export drive; the question is whether they can subsequently upgrade and sustain their exports.
TNCs can contribute to the upgrading of a country's competitiveness by either investing in higher-value added activities in industries in which they have not invested before or by shifting within an industry from low-productivity, low technology, labour intensive activities to high-productivity, high-technology, knowledge-based ones. The first of these processes is illustrated by a number of the winners discussed in this Part, especially those that experienced a notable shift --- as a result of substantial new FDI inflows and new roles in supplier networks --- from low to medium -- to high technology industries and sectors. Also rising significance is the growth of FDI associated service exports from developing countries. Intra-industry upgrading occurs in several ways. There is, first of all, the situation in which TNCs locate production facilities aimed at serving highly competitive national regional and global markets in a developing country, many of the dynamic products identified in chapter VI fall into this category. TNCs need to upgrade these production facilities continually just to survive, let alone capture higher-value products within the same industry. The success of countries such as China, Ireland, Malaysia, the Philippines and Singapore in upgrading the export competitiveness of their electronic industries in a case in point. Thus for example, Motorola, in its own interest substantially upgraded its facilities in China (box-VI.9); Ireland convinced Intel to upgrade beyond assembling and testing to water fabrication; and Malaysia established long-term relationships with Matsushita Electric and Sony working with them to upgrade their export operations for colour televisions into regional manufacturing operations. But even where strong corporate self-interest is involved government policy (often in close cooperation with TNCs) can play a role in encouraging upgrading in particular by ensuring that the production environment allows such upgrading and that it extends to more value-added functions such as R&D. The case of Motorola in China, is case in point.
Sometimes similar tends to take place in the case of foreign affiliates hitherto protected by import barriers. Under pressure from trade liberalization and competition, many TNCs restructure --- in their own interest --- import substitution activities into export-oriented operations, at least in countries in which a competitive base exists, or can be created. Some outstanding examples are the automotive industry in Maxico and the colour television industry in Malaysia and Thailand. Here, policies played an important role, In Mexico, it was the launch of the maquiladora scheme, combined with the need of the automobile industry to find low-cost production sites and the further liberalization of NAFTA with its rules of origin for the automobile industry that had a profound effect on the country's export competitiveness. The rules of origin were initially established to help United States automobile TNCs to complete better in their home market against Asian, specifically Japanese, TNCs. This worked very much in Mexico's favour as Ford, General Motors and Chrysler (now Daimler Chrysler) and their suppliers set up world-class plants there to export to the United Stated market. Then, Volkswagen, a German automobile TNC, established an export in Mexico and was obliged to bring its global suppliers into Mexico to meet the NAFTA rules of origin. The overall result was a complete restructuring of the Mexican automobile industry from a protected and inefficient import substitution activity to highly competitive export platform.
These are examples from some of the most dynamic export products of how the self-interest of TNCs combined with appropriate government policy, can produce major improvements in the export competitiveness of fast countries. In other situations, however, considerably stronger government efforts are required to capitalize the assets of TNCs and what, in the absence of such efforts, may only be temporary advantages. The garment industry exemplifies why simply attracting export-oriented activities in and itself might not be enough to move up the value - added ladder and increase national benefits.
Branded manufacturers of garments like Sara Lee and Fruit of the Loom made use of the United States' production sharing mechanism to gain competitive advantage vis-à-vis Asian producers by establishing assembly operations in the Caribbean basin. In the context of the Multifibre Arrangement quotas, this mechanism allowed these assemblers to remain competitive in the United States market in spite of the fact that wage levels in the Caribbean basin were higher than many other garment production sites. Contrary to the experience of Mexico in respect of the rules of origin of NAFTA, this mechanism did not allow host countries to progress by increasing local content, raising value added or upgrading the industry. This is because the tariffs applied to value added outside the United Stated discourage the use of local inputs For that reason, Costa Rica, for example, chose to focus on electronics and other industries. With the impending implementation of theWTO Clothing and Textile Agreement, many host countries specializing in garment exports will have great difficulties in facing competition from Asia, especially from China. In anticipation of this, some of these branded manufacturers are cutting back on their international production systems and relying more on full-package suppliers and contract manufacturers. The nature of the production-sharing mechanism that restricted the upgrading of the local operations beyond low-wage assembly has left these export platforms in difficult circumstances. Corrective national policy action is urgent in cases like this.

This underline the importance of ensuring the sustainability of export-oriented foreign affiliates. For such affiliates not to be ephemeral, they need not only to upgrade, but to be progressively embedded in host economies through strong backward linkages. This requires policies aimed at fastening local capabilities, and, in particular technological capabilities, human resources and a competitive domestic enterprise sector. Where these policies are successful, they are likely not only to make the export involved more sustainable and beneficial for the host countries involved, but also to increase the competitiveness, but also to increase the competitiveness of the domestic enterprise sector, the bedrock of economic development. In the end, some of these domestic enterprises may become TNCs in their own right and contribute to the development of their home countries through their own global activities. The success of a number of (mainly Asian) countries in attracting export-oriented TNC activities as part of a broader national industrialization strategy offers a model for others.
TNCs play an important role in the exports of many developing countries and economies in transition. Indeed for the most dynamic products in world trade. TNCs are central for enabling these countries to reach world markets, and they provide some of the 'missing elements'' that developing countries need to upgrade their competitiveness in export markets. The potential benefits in TNCs export activity are still far from fully exploited and they are growing. Technologies are changing. Processes and functions are increasingly divisible, and the boundaries of what is internal and external to firms are shifting. The 'death' of distance -or its diminishing cost --- is stretching location maps. New activities are likely to join the globalization surge, including many from developing economies, The challenge for countries that would like to improve their export competitiveness in association with TNCs is how to link up with the international production systems of these firms and how to benefit from them.
The spread of TNC activity offers host countries oppurtunities to expand and move into higher value-added activities. Capitalizing fully on static benefits and transforming them into dynamic and sustainable advantages requires pro-active government support. To benefit most from TNC associated export competitiveness developing countries must make continuous efforts to root TNC activities in host economies raise the level of local content, increase the value added by these activities, upgrade them into more sophisticated areas and make them sustainable. TNCs, in a number of circumstances, will take initiatives of their own, in their own self-interest. But national policy efforts and the policy pace to pursue them ---- are critical for both attracting export oriented FDI and ensuring its sustainability in order to advance development.
Questions:
(a) What are the areas of concern for low exports from developing countries?(b) Do you agree that the flow of FDI to developing countries can augment their export potential? How?(c) What is the role of transnational corporations in upgrading a country's competitiveness?(d) Suggest measures to increase the competitiveness of the domestic enterprise sector in a developing country.

last 5 years papers

M. B. A. (2 years) (Third Semester)

EXAMINATION, Dec., 2004


Note : Attempt Five questions in all, selecting at least one questionfrom each unit
Each questions carry Equal marks

Before answering the question-paper candidates should ensure that they haye been supplied to
correct and complete question-paper. Complaints in this regard, if any will not be entertained after the examination.

UNIT-1
1. What is the nature of International Business Environment? Discuss its components & point out its factors which produces changes in international business environment.
2. Explain the following ,:
(a) Streams of International Business
(b) Global trends in International investment

UNIT-2
3. What is the' nature of the legal environment of International Busines? Explain the legal recourse available in resolving international business disputes.
4. Is political risk analysis a part of Country Risk Analysis? 'Explain. How would you evaluate and manage Political Risk ?

UNIT-3

5.Explain various type of tariff and non-tariff barriers to trade. Discuss the role of WTO in this regard.
6. What are International Commodity Agreements ? Discuss in detail their types and objectives.

UNIT-4
7.How does international monetary system operate? Explain the objectives & functining of Internatinal Monetary System.
8. Write a detailed note on Euro-Markets and their working. Discuss the influence, if any, of European Monetary System on Euro-Markets.


M. B. A. (2 years) (Third Semester)EXAMINATION, Dec., 2005
Note : Attempt Five questions in all, selecting at least one questionfrom each unit
Each questions carry Equal marksBefore answering the question-paper candidates should ensure that they haye been supplied to correct and complete question-paper. Complaints in this regard, if any will not be entertained after the examination.

UNIT-1
1.write a detail note on the Economic & Political Environment in the control of International Business.
2 Enumerate and explain the major indicators of country risk.
UNIT-2
3. The maintenance of exchange rate value of the currency is said to depend on the monetary authorities. What might the monetary authorities do to a currency that would cause its value to drop ?
4. Discuss the major development in the area of international trade over the last decade.
UNIT-3

5Explain the purchasing power parity theory of exchange rate determination. Is the theory relevant in real world situation ?
6. Discuss the major functions and activities of IFC. Do you think IFC has been able to fulfil its
objectives ? Comment.

UNIT-4

7."Regional tradipg agreements are creatings new obstactes In the evolutions of a fair and Just international trading system." Agree or disagree? Elaborate.
8. Identify the competitive advantages that lead companies to prefer one mode of international
expansion over another with suitable examples.


Paper- International Trade Theory & Practices
M. B. A. (2 years) (Third Semester)EXAMINATION, Dec., 2005
Note : Attempt Five questions in all, selecting at least one questionfrom each unitEach questions carry Equal marksBefore answering the question-paper candidates should ensure that they haye been supplied to correct and complete question-paper. Complaints in this regard, if any will not be entertained after the examination.

UNIT-1

1. Explain the importance of international trade in world economy. What changes have taken place in the' commodity composition of international trade ?
2. How does a country benefit from international trade? What is trade equilibrium? How can it be achieved?

UNIT-2
3. What are the basic differences between free trade and protection ? Which of two aiternaive should India have and why?
4. Explain the concept and advantages of international economic integration. In what forms can international economy be integlated "

UNIT-3

5.Explain the concept and objectives of 1fee trade zones. Also discuss their contribution to world trade of India.
6. What is the logic of state trading ? What are the main commodities covered under canalized trade in India ? Highlight the problems involved in state trading.

UNIT-4
7. Write a detailed note on composition and trends of India's exports since 1991. How can India's share of world be increased ?
8. Discuss the role of WTO informulation of India's Exim Policy. How can trade liberalisation benefit exporters ?

Paper- International Business Environment
M. B. A. (2 years) (Third Semester)EXAMINATION, Dec., 2005
Note : Attempt Five questions in all, selecting at least one questionfrom each unitEach questions carry Equal marksBefore answering the question-paper candidates should ensure that they haye been supplied to correct and complete question-paper. Complaints in this regard, if any will not be entertained after the examination.

UNIT-1
1. Summarize the globalisation debate. what are the major interest groups in the world economy.
2. Outline the major determinants of cultural values and discuss how these give rise to norms of
behaviour that affect business activities.

UNIT-2
3. Explain why the reform of formal institutional constraints is not sufficient to lower uncertainties and transactions cost.
4. Identify and evaluate the sources of conflict between pressures on companies to operate globally and the desires of governments to regulate companies and their activities within their borders.

UNIT-3

5. Explain the main elements of exchange rate determination and discuss why is it thought to be
impossible to forecast short-run movements in exchange rate.
6 Discuss in detail the implications for international monetary system of the possible development of the euro as a major world currency

UNIT-4
7. Outline the static and dynamic effects of a customs union and explain why regional integration blocs composed of small economies are unlikely to be economical1y beneficial.
8.Discuss the concept of social responsibility in the context of International business.


MBA 2 Yr. IInd Semester (NS)
International Business (2208)

Note: Attempt five questions in all, selecting one question
from each of the four units in section A and Q. No.9
in section B which is compulsory .
SECTION-A
UNIT I
1. Explain various modes of International Business
2. Critically examine Purchasing Power Parity theory of exchange rate.
UNIT-2
3. Explain the impact of FDI on Home & Host Countries.
4. Exlain the control mechanism in International Business.
UNIT-3
5. What is a distribution channel ? List the main types of
distribution channels.
6. Explain the various pricing strategies available to an
international firm.
UNIT-4

7.Explain the cross cultural challenges in international
business. How can they be managed?
8. Explain the nature and source of business ethics. How
does a firm manage its ethics
SECTION-2

Read the following case carefully and answer the
questions that follow:
As the US shows definite signs of recession, Indian
suppliers to retailers like Wal-Mart, Target and Gap are
feeling the heat. New orders are difficult to come by, &
profits are down. TVS group MD Britto M Joseph says
that business is down by around 15% since the recession.
The company has big clients such as Wal-Mart Stores
Inc & Target Inc in the US & Tesco, UK's largest retailer.
They are facing lower demand from customers and so
are hardly placing new orders" says Mr. Joseph. His
company is already bearing the brunt of the rise in rupee
and the rise in cotton prices. Besides, Target and WalMart
want him to sell at lower prices.
"Gap Inc has ordered lesser than what it did last year"
affirms Gokaldas Exports MD Rajender Hinduja. The
company is India's largest garment exporter with clients
like Gap Inc. Mr. Hinduja says that Gap has also been
negotiating for a lower selling price from Gokaldas. They
are ready to buy the same volumes but want it a lower
price than last year."
Gokaldas exports earn more than 96% of its revenue from
exports to global brands such as Tommy Helfijee, Nike
& Adidas and to large retailers such as Gap Inc. It employs
over 54000 people in 46 factories and is among the largest
employer in garment business." The orders are down
around 20% as a whole from the large US retailers and
so are the profits," affirms Apparel Export Promotion
Council director R Balaji. He says that because of
recession followed by the rupee rise, players like Gokaldas
were better prepared. Till last year, before the rise in rupee
started pinching and US recession set in, business was
good. Wal-Mart, Target and Gap Inc; three of the largest
retailers were also actively sourcing from TVS and
Gokaldas. Blackstone picked up a 50.1 % stake in
Gokaldas. Mr. Joseph is somehow coping with a big buyer
in the form of Tescos, the UK retail giant." That has offset
some of the losses one had had tl "cur" he says. Gokaldas
has offset this by being able to supply to European clients
at the same or higher prices than last year. However
cautions Hinduja" Even the market might slow down
given the US recession". Mr. Bala Ji points out another
trend - moving the processing units to rural areas - to
get lower production costs and supplying to the booming
domestic market to players like Reliance. Mr. Joseph
agrees that the domestic market is offsetting a part of the
losses.
(i) What is the main problem faced by Indian garment
exporters?
(ii) Mention the various causes of rising rupee.
(iii) Which measures have been taken by major exporters
to tackle the present problem ?
(iv) What has been done by Indian goyernment to help
exporters?
(v) Give main features of recession.

dimensions & mode sof IB, Risk in IB

Lecture No. - 3
International business

Dimensions & modes of IB

Introduction

· When any business across the border of its domestic country & reach foreign countries for carrying out their business, then it is called that, this firm is indulging in International business.
· International markets provide a wide range of opportunities compared to the domestic markets. But global business is inherently more risky than the domestic business. However, the firms prefers to go international, if the perceived benefits outweigh the anticipated risks.
· International business firms, have the fundamental goals of expanding market share, sales revenue & increase in profits.
· Expanding markets in oversees countries is one of the strategies to achieve these fundamental goals.
· The firms have alternative forign markets & alternative modes to enter that countries. Firstly the country is selected, & for the sake of it, the firms have to
(1) Analyse alternative foreign markets
(2) Evaluate the respective costs, benefits & risks & select one that hold the most potential for entry.
The firms haas to analyses the alternative foreign markets by taking the following factors into consideration:
Current & potential size of alternative markets ,which include following factors
i. Size of the population of the country/market
ii. GDP of the country & per capita GDP
iii. Urban / rural areas
iv. Purchasing power of potential customer
level of competition the firm will face in each of theseb alternative markets
Legal & political environment
socio-cultural environment

The next step in entering foreign markets is the assessment costs, benefits & risks associated with carrying out business in a particular country, which includes
Costs: direct cost , opportunity cost
Benefits: high sales profits, lower acquisition & manufacturing costs, competitive advantage, access of new technology, cheap labour & other resources in host country, foreclosing of markets to competitors, opportunity to achieve synergy
Risks: exchange rate fluctuations, operating complexity, direct financial losses due to misassessment of market potential, Govt. seizure of property





DIMENSIONS & MODES OF ENTRY IN FOREIGN MARKETS

Dimensions of International Business

(1) Trading : exporting & importing
(2) Manufacturing & Marketing : manufacturing at home country & marketing in foreign country
(3) Sourcing & Marketing: manufacturing at foreign country & marketing in home & foreign country
(4) Global Sourcing & Production: manufacturing at global level through sourcing from different forign countries & production at home or host country
(5) Services : telecommunication, banking, tourism & transportation services
(6) Investments : portfolio investment, setting wholly owned manufacturing facility in abroad, investment in foreign countries etc.



Modes of Entry in Foreign Markets:

Dimensions in international business show the presence of business firm in foreign market & quantity of foreign investment needed for each routes of globalization.
The usual routes of globalization on the basis of their dimensions are following:
Exports & Imports
Tourism & Transportation: including industries like shipping, airlines, hotel & travel agency
Use of assets: licensing & franchising
Performance of services: turnkey operations & management contracts
Direct investment: joint venture, wholly owned subsidiary, portfolio investment


Direct Investment

Performance of
Services

Use of
Assets

Tourism & Transportation


Exports & Imports High




Foreign
Investment





Low

Low Presence in High
Foreign Market


ROUTES OF GLOBALISATION




Lecture No. -4
Topic- STRUCTURE OF IB ENVIRONMENT
Lecture Outcome-
Internal Environment, external Environment, Types of External Encironment
STRUCTURE OF IB ENVIRONMENT

Environment of International business includes basically four environments
These are:
(1) POLITICAL-LEGAL ENVIRONMENT
(2) TECHNOLOGICAL ENVIRONMENT
(3) ECONOMY ENVIRONMENT
(4) SOCIO-CULTURAL ENVIRONMENT


Lecture No. -5
Topic-Risk in IB
Lecture Outcome-
(a) Different types of risk
political risk, legal risk, culture risk, economic risk , technology risk, other risk
(b) components of each risk
© management of all type of risk

(1) POLITICAL RISK: corporate face political risk when they conduct business with the outside world. Political risk is any governmental action or politically motivated event that could adversely affect the long term profitability or value of firm.
(a) Macro Political Risk e.g.
Barriers to repatriation of profits,
Confiscation of properties,
Loss of technology & other intellectual property
Campaigns against foreign goods
Mandatory labour legislation
Civil wars
Inflation
Currency devaluations
(b) Micro political Risk e.g.
· kidnapping,
· terrorist, threats,
· increased taxation,
· Official dishonesty

MANAGING POLITICAL RISKS
(1) Avoid Investment
(2) Adaptation
(3) Host country has no option
(4) Influence local politicians- (lobbying)
(5) Terrorism consultants

(2) LEGAL RISK

LEGAL SYSTEM
(1) Islamic Law
(2) Common Law
(3) Marxist Law
(4) Civil or code law

AREAS OF CONCERN FOR MNCs

(a) Protection of IPRS
(b) Product liability & safety
(c) Computation law
(d) Bribery & corruption
(e) Environmental law
(f) Labour laws
(g) Contracts law
(h) Shipping of goods
(i) Advertisement& sales promotion laws

(2) TECHNOLOGICAL RISK

IMPACT OF TECHNOLOGY
(a) social implication
(b) economic implication
(c) plant level changes

Implication & MNCs

MNCs
E-Commerce
Telecommunication
Transportation
Technology Transfer
Markets
Production
Technology & MNC’s



(3) CULTURAL RISK
Elements of culture:

(1) LANGUAGE
(2) EDUCATION
(3) RELIGION’
(4) AESTHETIC
(5) ATTITUDES
(6) CUSTOMS & MANNERS

IMPLECATIONS FOR IB


Multi-culture
Sread cross cultural literacy
Cultural & competitive advantage
Compatibility between strategy & culture
Managing diversity

(5) ECONOMIC RISK

COMPONENTS :

(b) income classification of countries
· Developing Countries
· Developed Countries
(c) economic system classification
· Pure market Economy
· Pure centrally planned Economy
· Mixed Economy

(d) region wise classification of countries
(e) economic trade policies
· Outward & Inward looking policies

(6) OTHERS
(a) Huge forign indebtness
(b) Exchange rate risk
(c) Entry requirements
(d) Tariff, Quatas & trade barrier
(e) Corruption
(f) Bureaucratic practices of Govt.
(g) Technological pirating
(h) High cost
Lesson Plan
The readings referred to in the table below are recommended material from
A –International Business Environment- Cherunilum, Francis
B – International Business -P. Subba Rao
C – International Business- K Aswathappa
D- International Business -Mnab Adhikari
Lecture
Topics
Readings
#


1 Introduction C-Chapter A
2 Recent global trends in International trade & finance
A- (pg.245-249)
B-(pg.249-271)
C-(pg.51-64)
3 Dimensions & modes of IB
A-(pg.457-473)
B-(pg.74-116)
C-(pg.11-13)
4 Structure of IB Envt.
A-(pg.10-78)
B-(pg.31-73)
C-(pg.73-78,105-116,123-128,
151-157)
5. Risk in IB
A-(pg.478-479)
B-(pg. 22-27,353-356)
C-(pg.19-24)
6 Motives of internationalization of firms
A-(pg.4-9
B-(pg.6-11’21-22)
C-(pg.5-10)
7. Organizational structure for IB
C-(pg.200-217)
D-(pg.284-295)
8 & 9. World trading system & impact of WTO
A-(pg.181, 144-178)
B-(pg.144-158)
C-(pg-478-491)
10. Exchange rate system
A-(pg.410-422)
B-(pg.337-341)
C-325-327)
11 & 12 Global financial system
B-(pg.333-336)
C-(pg.322-324,328-335, 340-356)

13. Barriers to IB
A-(pg.214-244)
B-(pg.206-210)
C- (pg. 165-173)
D-(pg. 26-28, 157-168)
14. IB information & communication
A-(pg.347-367)
B-(pg.524-540)
C-(pg.115-116)
D-(pg.375-385)
15. Foreign market entry strategies
A-(pg.462-473)
C-(pg.11-15)
16. Country evaluation & selection
A-(pg.381-385)
C-(pg.40-51)

17. Factors affecting foreign investment decision
A-(pg.290-297)
C-(pg.51-55)

18. Impact of FDI on home & host countries
A-(pg.294-298)
B-(pg.344-349)
C-(pg.263-264)
19 &20. Types & motives for foreign collaboration
C-(pg.438-454)
D-(pg.391-394, 378-381)

21. Control mechanism in IB
B-(pg.214-215)

22 & 23 Decision concerning global manufacturing & material mgt.
A-(pg.377-380)
B-(pg.458-473)
C-(pg.244-251)
24 Outsourcing factors
A-(pg.379-380)
C-(pg.234-241)
25. Managing global supply chain mgt.
A-(pg.373-376)
C-(pg.245-246)
26. Product & branding decisions
B-(pg. 407-419)
C-(pg.289-293)
27. Managing distribution channels
B-(pg.428-430)
C-(pg.312-315)
28. International promotion mix & pricing decisions
B-(pg.419-427, 430-436)
C-(pg.295-301,304-311)
29 Counter trade practices
B-(pg.426)
C-(pg.370-373)
30 Mechanism of international trade transactions
B-(pg.436-444)
C-(pg.363-370)
31 Harmonizing accounting difference across countries
B-(pg.311-324)
C-(pg.377-391)
32 Currency translation methods for consolidating financial statements
B-(pg.324-328)
C-(pg.389-396)
33 The LESSARD-LORANGE model
notes available

34 Cross cultural challenges in IB
B-(pg.489-496)
C-(pg.401-406,410-416)
35 International staffing decision
A-(pg.385-389)
C-(pg.407-417)
36 Compensation & performance appraisal of expatriate staff
B-(pg.496-507)
C-(pg.418-428)


37 Ethical dilemmas & social responsibility issues
A-(pg.480-497)
B-(pg.304-305), C- (CH-18)

Question Bank

QUESTION BANK : INTERNATIONAL BUSINESS

Q1 what is the structure of international business environment?

Q2 what are the different organizational structures for IB ?
Q3(a) Discuss the various factors that influence foreign investment decisions.(b) State the various distinguishing features of Transaction Cost Approach of FDI.
4 There are three major rations used as performance indicators for international business. Explain these rations bringing out their meaning and significance.
5. The decision of how much power should be delegated to a manager of a subsidiary is crucial, and depends on several factors. Examine these factors with their importance in Multinational Corporation,
6. What are the main characteristics of a global firm?7. Discuss the major barriers in overcoming organizational biases.8. Identify three types of attitudes in the choice of organizational structure.9. Discuss any one innovative production technique used in international firms to face intense competition.
10. Explain the following:
11. How to use the Source-Market Matrix in production management.12. Needs and types of interventions in International business.
13. What are basic differences between domestic and international business?
14. While some see globalization as the avenue to the development of poor nations, others see it intensifying misery and inequalities. Critically examine the above statement in today's context.

15.Explain Localisation of global strategy16. Technology contracting (licensing) as an alternative to FDI or ownership strategy.17. Major factors contributing to the success of international strategic alliances.
18. Explain the role of " Power Distance" in understanding Hofsted's work on cross-cultural prospective. How does this help in managing international environment?
19. Discuss the relationship between an MNE and its subsidiaries in the context of the "make or buy" decision. What are the implications so far as the organization structure/design is concerned?
QUESTION BANK : INTERNATIONAL BUSINESS

20. Explain the role of bargaining power" in managing negotiations in international business.
21. Briefly discuss the direct and indirect impacts of FDI on LDCs.
22. (a) What are the dimensions of international business?(b) Discuss the factors that have led to the gloabalisation of business.
23. Factors on which ownership strategy depends in the context of international business.24. Barriers to overcoming organisational biases in the context of managing a multi-focal strategy.25. What are the different mechanisms adopted for coordinating subsidiaries by different MNEs? What is the need for flexibility?
26. Explain the different approaches to control in multi-national enterprises.27. It has been said that MNCs often introduce new efficiency oriented management practices. What can developing host country learn from the MNCs in this respect?
28. What factors influence hybrid/mixed strategies involving partial rationalisation of production and marketing facilities and partial local manufacturing?29. Briefly explain the stages in cross-cultural negotiation process.
30. Explain : Dynamics of regional trade groupings
31. Explain MNEs and New International Economic Order32. Explain WTO and the promotion and regulation of world trade
33. Compare Heckscher-Ohlin and Leantief trade models. Examine the two models in the light of contemporary global trade situation.
34. Discuss the determinants of international investment decisions. What different strategies could a firm follow in this respect?
35. What key questions in relation to control arise in international the control process?
36. Are there any basic differences between Japanese and American work cultures, particularly in relation to human resource management practices? Explain what can India learn from such cultures and practices?

QUESTION BANK : INTERNATIONAL BUSINESS

37. What factors influence the decision regarding location of production facilities? What complexities and trade-offs might be involved?
38. What is meant by "globalisation of business" What implications it has for problems if any, created by glabalisation of business?
39. Explain the theory of "Comparative cost advantage" How do firms in two different countries benefit from international trade in terms of this theory? Explain with examples.
40. What kind of strategy issues might arise in international between multinational parent company and subsidiaries? What development path's a subsidiary could adopt vis-à-vis if parent company?
41. What are the issues that need to be considered decision. What are the risks investment decision. What are the risks associated with these decisions and how can a company minimize these?
42. MNCs are supposed to build considerable market power. How does it influence that host country? Elaborate your answer with examples.
43.What are three sources of competitive advantage available to international businesses that are not available to domestic firm?
44.Why is organizational structure important What form of organizational structure is best suited to a custom made product produced in a stable environment and a mass product produced in an unstable?
Q45 A democratic political system is an essential for sustained economic progress?

Q46What is a transnational organization?

Q47 Foreign direct investment helps in accelerating the rate of economic growth of host country Discuss and also explain the limitations of foreign direct investment?

Q48 What is difference between stock market average and stock market index? Q49 Distinguish the blue-collar worker from white -collar worker?
Q50 What are some merits and demerits of globalization? Q51 What are trading blocs?
QUESTION BANK : INTERNATIONAL BUSINESS

Q52 What is the importance of tourism? Q53 The significance and the role of e-commerce in India?Q54 Which are the Top 10 countries trading resources and minerals? Q55 Factors causing conflicts in international business? Q56 What are the political factors for mnc taken in to consider while start there business in new country?
Q57Iam looking for a job in dubai with a multinational company is there any companies list that I can check? Q58 1 which suitable strategies you suggest for an Aviation industry for targeting the market and sales promotion? Q59 What roll did leadership play in the decline and recovery at Firestone?Q60What are the challangesof international business? Q61 How and why the one particular company of Your choice expanded abroad?Q62Introduction of internal business evironment?Q63Describe the flow of information through a secondary sector engineering company regarding sales?Q64Banking procedures involved in international market?
Q65. How do you set up a business? How will you raise capital? What laws and regulations will govern your business or investment?
Q66. A. Write a note on the environment of international marketing.67. Writ a note on principles of World Trade.68. . Explain the role of Trade Development Authority.69. Explain the assistance of Export financing institution. QUESTION BANK : INTERNATIONAL BUSINESS

70. A. Writ a note on Export Incentives,71. List out documents for Export Trade.72. A. Explain credit schemes/conditions.73. Explain the procedure for Preshipment credit.74. A. What are the primary purposes of IMF?75. Explain large source of imports and diversification of imports.76. A. Briefly explain India's trade.77. Describe the role of government in foreign trade,78. A. Briefly explain the export promotion.79. Explain the salient features of Export Import policy of India.
80. A. List and explain the procedure for executing an exporter trade.81. Describe the role of a Forwarding agent.82. A. Explain the payment terms in Export Finance.83. Explain the role of ECGC.84. A. Explain about WTO.85. Explain the functions of World Bank.

86 Discuss the ethical issues in International Business.
87What are the items covered under the definition of ‘Foreign Exchange’?
88 Describe and differentiate the characteristics of business restricted to a country and international business.
89 It is easy to enter foreign market than local market – Comment.

QUESTION BANK : INTERNATIONAL BUSINESS

90. Infrastructure for export promotion is very poor in this country – Comment with regard to(a) Government of India’s role(b) Institutional role.
91. Detail any five sources and types of export credit. Illustrate to which sector they are useful.
92 Write a note on India’s current status of Foreign Trade.
93. Bring out the recent import controls.
94Explain the significance of product planning for a export market as compared to domestic market.
95 Explain the meaning and importance of international business?
96.What is NAFTA? What are its objectives?
97.Write a short note on UN code of conduct of MNC’s.
98.What is WTO and state its features and development?
99.Explain the benefits of MNC’s.
100.State the objectives of UNCTAD.
101.What are the major facts which need consideration while selecting a country for establishment of joint ventures?
102.Explain anti-dumping duties and how it is differ from countervailing duties. 103.Define international business? State its concept and classifications.
104.Describe the strength and regulations of MNC’s.
105.State the functions of international institutions.
106.Briefly explain the term UN code of conduct of transfer of technology.
107.Discuss the role of commercial arbitration in settlement of disputes in international business.


QUESTION BANK : INTERNATIONAL BUSINESS
108.Discuss the impact of international business on the economic development of a country.

109 What motivates people to encourage or discourage trade in a country like India?
110.Discuss the role of SAPTA.EC in International business of its member countries?
111 Explain in brief the various reasons for International Business.112. Briefly explain the following theories of IB :a) Product Life Cycle Theoryb) Theory of Absolute Cost Advantage.113. What is a Joint Venture ? Explain its merits and demerits.114. What is Globalisation ? Briefly explain the globalisation of production, markets, technology and investment 115What is meant by Technology? What is its influence on business.
116 What are the functions of WTO?
117What is international business environment?
118 How do cultural factors influences international business?
119 State the importance of business ethics.
120 What are the different dimensions of economic environment?
121 What are the steps taken by government to improve FDI.
122 What are the functions of UNO?.
QUESTION BANK : INTERNATIONAL BUSINESS

123 Foreign investment are necessary aid for developing countries like India” – Discuss.
124Discuss in detail the environmental factors that affect a business.
125 What is privatisation? What are its merits and limitations?
126.What are the role and functions of WTO in international relations?
127.The changes taking place in socio-cultural environment in India is a boon for business’ – Discuss.
128.Explain the challenges of globalisation of Indian industries.
129 Describe the factors which are affecting the growth of International business.
130. Differentiate between balance of trade and balance of payments and indicate how balance of payment analysis can be useful to the international marketer.

131. Explain the various types of invoices and certificates involved in foreign trade.

132. How are export credit needs financed? Evaluate the export credit and finance system in India.

133. Explain in detail the stages through which an export transaction has to pass.

134. Explain the various function of Foreign Exchange Dealers Association of India.

135. Give a brief outline of exchange control system in India.

136. Differentiate between IMF and World Bank.


QUESTION BANK : INTERNATIONAL BUSINESS

137. Differentiate balance of trade and balance of payment and indicate how: balance of payment analysis can be useful to the international Marketer.
.
138. Explain the procedures and conditions involved in opening a letter of credit meant for financing imports into India.

139. What are the advantages and disadvantages of a floating exchange rate? –

140. What do you mean by devaluation? What are its objectives? 'Under what conditions these objectives can be achieved?
141. Discuss the objects, functions, organisations and resources of Asian Development bank.

assignments sheets

Assignment-I
Issue date: 02-02-09 Due date: 09-02-09

Q. Explain the recent global trends in international trade & finance.
Q. Explain: Internationalization process in Detail, which includes the following key points:
- Approaches to internationalization.
- International decision process.
- Market entry mode.


Assignment-II
Issue date:26-02-09 Due date:5-03-09

Q (a) Give a Detail note on Globalization, MAI , IMF & World Bank
(b) What factors can affect foriegn investment in a developing economy? Discuss.

Assignment-III
Issue date: Due date:

Q (a) Suppose you just want to start a new business at international level. Then what are the different sources you have available for financing your business & How could You manage your business finance. Explain.
(b) What are the different modes of corporate information & communication in International Business

Assignment-IV
Issue date: Due date:

Q1(a).What are the basic issues involved in recruiting & selecting managers for foreign assignments?
(b) If you were being assigned to a foreign position, what specific training requests would you make of your employer?

Gurgaon Institute of Technology and Management

Department: MBA
Semester : 2nd
Subject Name &Code : International Business

Issue Date:

Pages :

Faculty : Meenu Sharma




ASSIGNMENT SHEET

Tuesday, January 20, 2009

INTERNATIONAL FINANCE IN THE PERIOD OF GLOBALIZATION: CURRENT TRENDS

The contemporary debate about globalization has a very large impact on the structure and the practices of international public finance. As many critics are calling for reform of the IMF and World Bank, others fear the consequences of the continued dominance of less developed countries by the wealthy few. The games of power politics and economics play out even less equitably in the globalized world, according to the anti-globalizers. Undoubtedly, however, and despite the recent financial crisis, current trends show that private capital flows are high; institutional investors are more inclined to use their leverage ; access to quick information that is not always thorough is increasing financial market instability ; and hedging and speculation are on the rise . As Ross Buckley concludes, "[e]ach of these aspects of globalization tends to increase the volume of portfolio capital flows to emerging market nations and the volatility of such flows. Indeed, there is considerable evidence that the globalization of financial markets increases the volatility of such markets." Therefore, the increase of globalization produces higher financial risks, and consequently also increased need for bailouts.
Pro-globalization advocates support the process of globalization, arguing that its long-term benefits will outweigh the short-term difficulties, with respect to the less developed nations. They split, however, regarding the means of establishing a more globalized economic and financial system. Some argue that structure in the system is necessary in order to produce stability and more accountability. Others maintain that a laissez-faire approach is most favorable to the higher levels of development, and to the absolute wealth gain.
Anti-globalization movements are gaining increasing strength in their opposition to the globalized economy. They point to the increased poverty and militarization, hazards to environment, and lack of protection of human rights as evidence of the lack of success of the current state of affairs.
A. CURRENT PRACTICES OF THE IMF AND THE WORLD BANK
The IMF and the World Bank continue to play their traditional roles in world global finance, encouraging global capital movements, both private and public, and stepping in to provide managed defaults and structured bail-outs. For example, the IMF dealt with the global financial crisis of 1997-1998 by ensuring the bailout of large banks and other lenders to the countries in crisis. Less developed countries have generous access to foreign capital, which, as many would argue, is not beneficial for those countries, either politically and economically. Examples of Mexico, the Asian states, and Russia, all demonstrate that whatever the benefits globalization may have, it also produces many undesirable effects.
1. GLOBALIZATION AND DEVELOPMENT
It is hardly disputed, at least with regards to the short term situation, that the globalization of capital can have bad effects on the less developed states. The repayment of loans leads to higher national taxes, reduction of price substitution for essential products, and decreasing spending on public health care, education, and infrastructure (many recognize that the liberal capital inflows into these countries often end up enriching the local rich who, when they cannot make the payments on these capital inflows, subject their populations to the consequences of the capital outflows).
Still others point out the risks found in incurring further debt to finance the existing loans "[b]ecause private banks and institutions often view a credit package as a "seal of approval" that the nation is a reasonable investment, the IMF and the Bank have developed into de facto analysts of a nation's economic health." Moreover, the IMF bailouts are essentially long-term loans that are used to repay short-term creditors , particularly private and commercial developed world banks. Therefore, the bailouts are funds to creditors who made bad loan decisions, rather than to the nations themselves. Critics calling for reform of the IMF and World Bank, or for an alternative regime, support their position by arguing that "even though the IMF identified poor local prudential regulation and underdeveloped local capital markets as two of the principal contributing causes to the [1997-1998 financial] crisis, the IMF-orchestrated bailouts contained not one dollar to correct these weaknesses.

Even the supporters of the globalized financial system and, in general, supporters of the IMF and the World Bank, criticize their current programs. Because the IMF and the WB have a flawed vision of development, they argue, the continuous lending to governments increases the state sector at the expense of the private sector. This produces further debt, not development, and it stalls reform. These critics argue that the organizations finance governments whose anti-growth policies of trade barriers, state-owned corporations, and investment restrictions, among others, resulted in very high debt.
2. THE LOCAL ENFORCEMENT PROBLEMS
Certain critics argue that the current situation is not conducive to globalization because the majority of entrants to the global marketplace lack developed financial structures, poor legal, accounting and regulatory framework, history of political interference and cronyism.
3. THE CONTINUING ROLE OF DEBT
Many countries presently spend large amounts of their GDP, and millions of dollars servicing their international debts. The IMF and G7 creditor nations have instituted a debt relief plan for the most impoverished states (Heavily Indebted Poor Countries Initiative), which are located mostly in Africa. The HIPC Initiative has provided for a Trust Fund, administered by the World Bank, which provides debt relief owed to multilateral institutions, funded by the World Bank and certain donor countries. It also provides an ESAF-HIPC Trust which extends grants and loans to these countries, and subsidizes interest rates through donors and IMF's Special Disbursement Account.
The problems inherent in these debt relief programs are that they are nevertheless within the IMF conditionality principle. The IMF provides the relief contingent on the country's meeting the structural reforms required by the IMF, such as reduction in government spending, which inevitably reduces state employment and social benefits. Moreover, the IMF limits the "dimensions of the goal of broad participation" by limiting the number of countries that are eligible and by imposing structural adjustment programs. The proponents of debt relief on the pro-globalization side argue, however, that debt relief coupled with reforms will eventually lead to a more efficient, high-growth economy.

There are many critics who call for flexible debt relief, especially for the least developed nations, arguing in some cases that servicing the debt forces violations of human rights in those countries: "By continuing to insist that poor states use their scarce resources for debt service payments, rather than for improved access to health care, education, food, and basic shelter for their impoverished populations, the international community becomes complicit in the wide-scale violation of human rights."
B. ALTERNATIVES TO THE CURRENT GLOBAL FINANCIAL SYSTEM
The current international financial system is governed by the IMF, the World Bank, the WTO, and the OECD. The IMF regulates the transparency practices for central banks, government finances, fiscal and monetary policy, and possesses broad economic, financial, and sociodemographic data. The World Bank governs the development project loans and the cross-border insolvency. The OECD regulates the principles of corporate governance. The WTO replaces GATT, essentially regulating international trade.
Both the anti-globalizers and the pro-globalizers argue for some kind of alternative to the current system. Some pro-globalizers still maintain their position that the laissez faire approach is the best way to deal with financial issues in a globalized world. Along the same lines, some anti-globalizers argue against a globalized monetary system per se. In the middle, both the anti and the pro globalization advocates argue for a reformed monetary institutional system. They differ in their specification of the kind of system that would best serve the nation-states.
1. GLOBAL LENDER OF LAST RESORT
A lender of last resort lends to state and private banks "freely and quickly, on good security and at high interest rates, at times of need." As a result, the depositors do not bail at the first sign of financial trouble, because they are sure that their banks will be able to meet their account balances. This, in essence, assures that the debt crisis of the 1980s does not happen again. Although some refer to the IMF as an international lender of last resort, the IMF actually does not lend "freely and quickly", but instead conditions its loans on specified economic criteria. Moreover, the IMF disburses the funds slowly as compliance with its criteria is proven. Finally, because of its difficulties in securing funds from its wealthy members, it does not have a sufficient amount of capital to serve as a lender of last resort.

On the other hand, the establishment of a true lender of last resort would require that both the borrowers and the lenders take responsibility for bad loans: "borrowers should repay their debts, even when it is painful to do so [and] banks and investors who make errors should suffer the consequences". Furthermore, such a lender would have to make loans available for bailouts of international banks and member states so that they can repay their loans, rather than to meet the financial needs of short-term private creditors who make bad loans.
2. GLOBAL BANKRUPTCY COURT
Although not really a viable alternative due to the substantial limitations on sovereignty that it would impose, an international bankruptcy court would be able to more equitably allocate losses and improve the functioning of the system. On the other hand, many nations have already surrendered their sovereignty to a number of international courts and arbitration panels, as well as to the IMF and the World Bank.
3. REFORM OF THE IMF AND THE WORLD BANK PRACTICES
The IMF and the World Bank are criticized for their role in a globalized financial system. Critics point out that these two organizations do not monitor their own standards given the conflicts of interests they have inherent in their many roles, the political role of their governance, and the increased bureaucratization and concentration of power in the institutions.
Instead of advocating the withdrawal of the IMF and the World Bank, some argue that these institutions still have an important role to play in a global financial system, but that they need to reform their lending practices. For example, the organizations could lend to the nation without conditions and demand payment at the end of a specified period, which, if left unpaid, would result in a lack of extension of further loans. The problem with this approach is that defaults would still inevitably occur, and when they did, especially in economically and politically important nations whose stability is essential in a geopolitical sense, the IMF and World Bank would have to step in. This, in turn would affect their credibility, in addition to not solving the bailout problem.

In the alternative, the IMF and the World Bank could impose limited conditionality, which allows for discrimination on the basis of the type of economic problems causing the repayment difficulties (i.e., those problems that are caused by the nation's policies and those that are beyond a nation's control). However, this approach also produces challenges in that it would be extremely difficult for these organizations to police these issues and to accurately identify their causes. The significance of this problem is magnified in the global interdependent economy.
Milena Makich-Macias argues that the IMF bailout program should remain intact, coupled with a number of changes that would make it function better. Her proposal calls for strengthening the macroeconomic stabilization policies, expanding the structural adjustment reforms (such as low interest loans to poor countries), and exploring innovative approaches to address social concerns so that emerging growth countries can become and remain self-sufficient. Macias states that "[f]ocusing on macroeconomic stabilization and structural adjustment reforms allows the IMF to ameliorate social concerns...In addition, by its promotion of a stable system of exchange rates which promote the balanced growth of international trade, the IMF contributes to sustainable economic and human development."
4. SINGLE WORLD REGULATOR
Fratianni and Pattison argue that a single regulatory body would achieve the efficiency and the ease of acting when mandated, to impose the best solution, limited by standards of accountability. These standards would ensure that the regulator takes a strictly regulatory approach, instead of a market-friendly regulatory approach. The agency should also not be amenable to any particular country, and should be made in reliance on an international agreement.
CONCLUSION
Globalization has produced an increase in interdependence of monetary and fiscal policies, with the resulting movement of private and public capital and increased risks. The globalization debate has certainly invaded the area of IMF and World Bank policies. Depending on the particular side that one takes in the debate, different proposals as to how to deal with challenges and problems of the interdependent world are made. The one thing that all the commentators agree on, however, is that the system needs change. They only differ as to the means for implementing this change.

Ib-trends( history)

INTERNATIONAL FINANCE IN THE PERIOD OF GLOBALIZATION: CURRENT TRENDS

The contemporary debate about globalization has a very large impact on the structure and the practices of international public finance. As many critics are calling for reform of the IMF and World Bank, others fear the consequences of the continued dominance of less developed countries by the wealthy few. The games of power politics and economics play out even less equitably in the globalized world, according to the anti-globalizers. Undoubtedly, however, and despite the recent financial crisis, current trends show that private capital flows are high; institutional investors are more inclined to use their leverage ; access to quick information that is not always thorough is increasing financial market instability ; and hedging and speculation are on the rise . As Ross Buckley concludes, "[e]ach of these aspects of globalization tends to increase the volume of portfolio capital flows to emerging market nations and the volatility of such flows. Indeed, there is considerable evidence that the globalization of financial markets increases the volatility of such markets." Therefore, the increase of globalization produces higher financial risks, and consequently also increased need for bailouts.
Pro-globalization advocates support the process of globalization, arguing that its long-term benefits will outweigh the short-term difficulties, with respect to the less developed nations. They split, however, regarding the means of establishing a more globalized economic and financial system. Some argue that structure in the system is necessary in order to produce stability and more accountability. Others maintain that a laissez-faire approach is most favorable to the higher levels of development, and to the absolute wealth gain.
Anti-globalization movements are gaining increasing strength in their opposition to the globalized economy. They point to the increased poverty and militarization, hazards to environment, and lack of protection of human rights as evidence of the lack of success of the current state of affairs.
A. CURRENT PRACTICES OF THE IMF AND THE WORLD BANK
The IMF and the World Bank continue to play their traditional roles in world global finance, encouraging global capital movements, both private and public, and stepping in to provide managed defaults and structured bail-outs. For example, the IMF dealt with the global financial crisis of 1997-1998 by ensuring the bailout of large banks and other lenders to the countries in crisis. Less developed countries have generous access to foreign capital, which, as many would argue, is not beneficial for those countries, either politically and economically. Examples of Mexico, the Asian states, and Russia, all demonstrate that whatever the benefits globalization may have, it also produces many undesirable effects.
1. GLOBALIZATION AND DEVELOPMENT
It is hardly disputed, at least with regards to the short term situation, that the globalization of capital can have bad effects on the less developed states. The repayment of loans leads to higher national taxes, reduction of price substitution for essential products, and decreasing spending on public health care, education, and infrastructure (many recognize that the liberal capital inflows into these countries often end up enriching the local rich who, when they cannot make the payments on these capital inflows, subject their populations to the consequences of the capital outflows).
Still others point out the risks found in incurring further debt to finance the existing loans "[b]ecause private banks and institutions often view a credit package as a "seal of approval" that the nation is a reasonable investment, the IMF and the Bank have developed into de facto analysts of a nation's economic health." Moreover, the IMF bailouts are essentially long-term loans that are used to repay short-term creditors , particularly private and commercial developed world banks. Therefore, the bailouts are funds to creditors who made bad loan decisions, rather than to the nations themselves. Critics calling for reform of the IMF and World Bank, or for an alternative regime, support their position by arguing that "even though the IMF identified poor local prudential regulation and underdeveloped local capital markets as two of the principal contributing causes to the [1997-1998 financial] crisis, the IMF-orchestrated bailouts contained not one dollar to correct these weaknesses.

Even the supporters of the globalized financial system and, in general, supporters of the IMF and the World Bank, criticize their current programs. Because the IMF and the WB have a flawed vision of development, they argue, the continuous lending to governments increases the state sector at the expense of the private sector. This produces further debt, not development, and it stalls reform. These critics argue that the organizations finance governments whose anti-growth policies of trade barriers, state-owned corporations, and investment restrictions, among others, resulted in very high debt.
2. THE LOCAL ENFORCEMENT PROBLEMS
Certain critics argue that the current situation is not conducive to globalization because the majority of entrants to the global marketplace lack developed financial structures, poor legal, accounting and regulatory framework, history of political interference and cronyism.
3. THE CONTINUING ROLE OF DEBT
Many countries presently spend large amounts of their GDP, and millions of dollars servicing their international debts. The IMF and G7 creditor nations have instituted a debt relief plan for the most impoverished states (Heavily Indebted Poor Countries Initiative), which are located mostly in Africa. The HIPC Initiative has provided for a Trust Fund, administered by the World Bank, which provides debt relief owed to multilateral institutions, funded by the World Bank and certain donor countries. It also provides an ESAF-HIPC Trust which extends grants and loans to these countries, and subsidizes interest rates through donors and IMF's Special Disbursement Account.
The problems inherent in these debt relief programs are that they are nevertheless within the IMF conditionality principle. The IMF provides the relief contingent on the country's meeting the structural reforms required by the IMF, such as reduction in government spending, which inevitably reduces state employment and social benefits. Moreover, the IMF limits the "dimensions of the goal of broad participation" by limiting the number of countries that are eligible and by imposing structural adjustment programs. The proponents of debt relief on the pro-globalization side argue, however, that debt relief coupled with reforms will eventually lead to a more efficient, high-growth economy.

There are many critics who call for flexible debt relief, especially for the least developed nations, arguing in some cases that servicing the debt forces violations of human rights in those countries: "By continuing to insist that poor states use their scarce resources for debt service payments, rather than for improved access to health care, education, food, and basic shelter for their impoverished populations, the international community becomes complicit in the wide-scale violation of human rights."
B. ALTERNATIVES TO THE CURRENT GLOBAL FINANCIAL SYSTEM
The current international financial system is governed by the IMF, the World Bank, the WTO, and the OECD. The IMF regulates the transparency practices for central banks, government finances, fiscal and monetary policy, and possesses broad economic, financial, and sociodemographic data. The World Bank governs the development project loans and the cross-border insolvency. The OECD regulates the principles of corporate governance. The WTO replaces GATT, essentially regulating international trade.
Both the anti-globalizers and the pro-globalizers argue for some kind of alternative to the current system. Some pro-globalizers still maintain their position that the laissez faire approach is the best way to deal with financial issues in a globalized world. Along the same lines, some anti-globalizers argue against a globalized monetary system per se. In the middle, both the anti and the pro globalization advocates argue for a reformed monetary institutional system. They differ in their specification of the kind of system that would best serve the nation-states.
1. GLOBAL LENDER OF LAST RESORT
A lender of last resort lends to state and private banks "freely and quickly, on good security and at high interest rates, at times of need." As a result, the depositors do not bail at the first sign of financial trouble, because they are sure that their banks will be able to meet their account balances. This, in essence, assures that the debt crisis of the 1980s does not happen again. Although some refer to the IMF as an international lender of last resort, the IMF actually does not lend "freely and quickly", but instead conditions its loans on specified economic criteria. Moreover, the IMF disburses the funds slowly as compliance with its criteria is proven. Finally, because of its difficulties in securing funds from its wealthy members, it does not have a sufficient amount of capital to serve as a lender of last resort.

On the other hand, the establishment of a true lender of last resort would require that both the borrowers and the lenders take responsibility for bad loans: "borrowers should repay their debts, even when it is painful to do so [and] banks and investors who make errors should suffer the consequences". Furthermore, such a lender would have to make loans available for bailouts of international banks and member states so that they can repay their loans, rather than to meet the financial needs of short-term private creditors who make bad loans.
2. GLOBAL BANKRUPTCY COURT
Although not really a viable alternative due to the substantial limitations on sovereignty that it would impose, an international bankruptcy court would be able to more equitably allocate losses and improve the functioning of the system. On the other hand, many nations have already surrendered their sovereignty to a number of international courts and arbitration panels, as well as to the IMF and the World Bank.
3. REFORM OF THE IMF AND THE WORLD BANK PRACTICES
The IMF and the World Bank are criticized for their role in a globalized financial system. Critics point out that these two organizations do not monitor their own standards given the conflicts of interests they have inherent in their many roles, the political role of their governance, and the increased bureaucratization and concentration of power in the institutions.
Instead of advocating the withdrawal of the IMF and the World Bank, some argue that these institutions still have an important role to play in a global financial system, but that they need to reform their lending practices. For example, the organizations could lend to the nation without conditions and demand payment at the end of a specified period, which, if left unpaid, would result in a lack of extension of further loans. The problem with this approach is that defaults would still inevitably occur, and when they did, especially in economically and politically important nations whose stability is essential in a geopolitical sense, the IMF and World Bank would have to step in. This, in turn would affect their credibility, in addition to not solving the bailout problem.

In the alternative, the IMF and the World Bank could impose limited conditionality, which allows for discrimination on the basis of the type of economic problems causing the repayment difficulties (i.e., those problems that are caused by the nation's policies and those that are beyond a nation's control). However, this approach also produces challenges in that it would be extremely difficult for these organizations to police these issues and to accurately identify their causes. The significance of this problem is magnified in the global interdependent economy.
Milena Makich-Macias argues that the IMF bailout program should remain intact, coupled with a number of changes that would make it function better. Her proposal calls for strengthening the macroeconomic stabilization policies, expanding the structural adjustment reforms (such as low interest loans to poor countries), and exploring innovative approaches to address social concerns so that emerging growth countries can become and remain self-sufficient. Macias states that "[f]ocusing on macroeconomic stabilization and structural adjustment reforms allows the IMF to ameliorate social concerns...In addition, by its promotion of a stable system of exchange rates which promote the balanced growth of international trade, the IMF contributes to sustainable economic and human development."
4. SINGLE WORLD REGULATOR
Fratianni and Pattison argue that a single regulatory body would achieve the efficiency and the ease of acting when mandated, to impose the best solution, limited by standards of accountability. These standards would ensure that the regulator takes a strictly regulatory approach, instead of a market-friendly regulatory approach. The agency should also not be amenable to any particular country, and should be made in reliance on an international agreement.
CONCLUSION
Globalization has produced an increase in interdependence of monetary and fiscal policies, with the resulting movement of private and public capital and increased risks. The globalization debate has certainly invaded the area of IMF and World Bank policies. Depending on the particular side that one takes in the debate, different proposals as to how to deal with challenges and problems of the interdependent world are made. The one thing that all the commentators agree on, however, is that the system needs change. They only differ as to the means for implementing this change.