UNIVERSITY OF TURBAT

Submitted By: Mahjabeen Liaqat Ali

Submitted to: Mr Malik Dad

Subject: International Business

Program: BBA

Semester: 6th

Department: Management Sciences

Assignment no: 1

Date: 07/01/2020

FINAL ASSIGNMENT

Qno.1:

What factors have contributed to the growth of globalization in recent decades?

Ans:

Following are the factors that have contributed to the growth of globalization in recent decades:

1. Rise in application of technology

2. Liberalization of cross border trade and resource improvement
3. Development of services that support IB
4. Growth of consumer pressure
5. Increase in global competition
6. Changes in political situations and government policies
7. Expansion of cross national cooperation

1. Rise in application of technology

The world is going very fast because of the rapid rise in technological changes. The technological change
is the biggest factor that have contributed a big portion of growth of Globalization. The technology put
the overall world at a single point. Due to which the communication process became very easy. It is also
known as "the death of distance". Because it reduced the cost of communication information and
transmitting. The all type of businesses gets global because of technology by which they can sell their
products and services worldwide. And customers can get every kind of products, services and ideas
easily because of rise in application of technology.
2. Liberalization of cross border trade and resource improvement
The removal of barriers on the free exchange of goods between states and nations. Such as tariffs, and
non tariffs which include duties, Licensing and quotas. . It lowered the consumer cost and increased
efficiency and improved the overall resourced by reducing the barriers due to which the Globalization
growth increases. This factor protects it's own industries.
3. Development of services that support IB
The development of services that support international business plays a huge role in the growth of
globalization. International business needs services that support their operations and these service are
provided by government, companies, banks and transportation companies. The services that support
international business facilitate the conduct and reduce the risk of doing business globally.
4. Growth of consumer pressure
In this era, because of technogical changes and global business, the customer are alert have knowledge
regarding each product. Day by day, consumers needs, wants, and demands are increasing and they
tend to buy quality products. Due to which the world is being global and the Globalization growth is
increases. Because of high consumer pressure, the world have been forced to respond consumer
demand in order to expand it's sales and become more competitive.
5. Increase in Global competition
Increase in global competition have contributed to the growth of globalization. In global competition the
companies sell and buy products internationally by which the profit can be increased. Global
competition is like a war that company faces many companies and tend to win in every phases of
business. The companies competite by comparing their prices, target market, quick response and quick
adaption with another companies and always try to get a competive advantage so that it could be
globally successful. The increase in global competition increases the growth of globalization.
6. Changes in political situations and government policies
Changes in political situations and government policies have contributed a large portion to the growth of
globalization. Now a days, the govt is providing services to help domestic companies to engage in
international business. The government policies and political situations made an easy way of exchanging
the currencies. Due to which the Globalization is increasing. They provide information about the foreign
markets, offer insurance against non payment in the home country and it furnished the contracts with
potential buyers.
7. Expansion of cross national cooperation
The expansion of cross national cooperation is the 7th factor that have contributed to the growth of
globalization. The interests of government are addressed by international cooperation. The policies are
used to meet needs. Such as, to gain reciprocal advantage, to attack problems jointly which can not be
solved by a single company, and to deal with common areas of concerns which are outside of the
territory of nation. These policies are helping the Globalization to grow rapidly.

Qno.2
What are the critisms of Globalization?
Critisms of Globalization
Following are the critisms of Globalization;
1. Threats to National sovereignty
2. Economic growth and environmental stress
3. Growing income, inequality and personal stress
4. Off-shoring
1. Threats to national sovereignty
Threats to national sovereignty is one of the critisms of Globalization. The Globalization restricts the
locals to "act locally". Globalization has declined the power of governments to direct their businesses
and influence their economies. It has economical, cultural, social and power.
2. Economic growth and environmental stress
The economic growth and environmental stress is an another critism of Globalization. Because of
Globalization the consumption ratio of products is increasing rapidly day by day. Because of what the
firms are producing more and more products and the smokes and pollutions are creating environmental
stress which are not eco friendly. On the other hand, the high consumption is increasing the economic
growth of countries who are engaged in Globalization. The firms must use strategy and process which
are eco-friendly.
3. Growing income, inequality and personal stress
The growing income, inequality and personal stress are the critisms of Globalization. The Globalization
shifts the low skilled job from wealthier country to the poorer country. Because of Globalization, the gap
between low and high income may be widen. Such as, when the tax is lower, the wealthiest get to keep
more of their income. It reduces the bargaining power of unskilled workers and pushed up inequality
and personal stress.
4. Off-shoring
Off-shoring is a critisms if Globalization, which means to shift the business from one country to another
country. In Globalization, the external organizations are hired to perform some business functions
instead of where the products are developed and manufactured. It increases unemployment.

Qno.3
Why companies engage in IB?
Ans:
Companies engage in international business in order to expand their sales, to acquire resources, to
minimize risk, to lower cost of production and to broaden the workforce. Because companies are
dependent on consumer's interest and willingness to buy the product or services. While, manufacturers
and distributors look for foreign capital and technology. So that, they could reduce cost by running their
businesses at home. The international business reduces the risk. Such as, if recession comes in one
country, the firm will get benefit from another country. Labors in developing countries are much
cheaper because of what companies engage in international business. International business includes
different cultures and religions by which companies get new information and ideas which can be
beneficial for them. That's why companies engage in international business.

Qno.4
What are the different entrymodes of IB? Elaborate your answers discussing the advantages and
disadvantages alongside the relevant examples.
Ans:
Following are the entrymodes of international business;
1. Exporting
2. Turnkey Projects
3. Licensing
4. Franchising
5. Joint ventures
6. Portfolio investment
7. Foreign direct investment
8. Alliances
9. Management contract

1. Exporting
The term export is derived from the conceptual meaning of as to ship the goods and services out of the
port of the country. It is a way to expand the business rapidly.
Eg, Rice being shipped from Pakistan to China. Pakistan is the exporter and China is the importer. When
the market of a country becomes saturated, then it tends to export it's products across the borders.
There are many advantages and disadvantages of exporting.
Advantages of exporting
One of the main advantage of exporting is, it expands the market and makes a country less dependent.
By exporting, production increases and it leads to large economies of scale and better margins. The
budget of research and development work harder which changes the existing products to suit new
markets.
Disadvantages of exporting
By exporting, the local market and existing customers might be ignored or focus may be lost. It increases
the administration and have to deal with export regulations during trading across the borders. You may
lose your control in foreign market. Because there are various customers in foreign market.

2. Turnkey Projects
The Turnkey Projects are another way of entering in international market. Turnkey Projects means the
exporting process technology to other countries. In turnkey projects, the contractor agrees to handle
every deficit of the project for a foreign client. And handovers the keys to a plant which is ready for full
operation.
Example, Foreign companies built hospitals in Saudi Arabia is said to be a turkey project.
Advantages of Turnkey Projects
By engaging in turnkey projects, countries can share technological know-how, like middle eastern
companies don't want USA and other countries to take part in their oil refining and want to profit it
themselves, but don't have the knowledge of the process. The middle east enters into a turnkey project
to gain the technological know-how. It eliminates the extra expenses and increases the contractual
relationship with one person. Gives higher benefits by establishing new plants in foreign countries.
Disadvantages of Turnkey Projects
By doing turnkey projects, the competitors are automatically created. It is just a contract and the
contractor will not have a long-term business in the foreign country. Sometimes, it's difficult to find
specialists for specific projects and control is difficult. When a company enters into turnkey projects it
means that the country has no long-term interest in the country.

3. Licensing
Licensing is an entry mode of international business. Which is a business arrangement and by which a
company gives permission to another company for manufacturing it's products for a specified payment
in shape of an agreement which is called license.
For example, Mickey mouse on products.
Advantages of Licensing
It reduces the financial risk and cost way to assess market potential. It avoids tariffs and restrictions on
foreign investment. The licenser provides knowledge of local markets.
Disadvantages of Licensing
It has many disadvantages. Such as, limited market opportunities, creates possibility of future
competitors. Licensing creates dependence on licensor and conflicts may occur with licenser. It reduces
global consistency.

4. Franchising
Another way of entering into international market is franchising. It is a form of marketing and
distribution where owner of the business is called franchisor and the one who gets right to run the
business is called franchisee. In this entry mode, the franchisor grants franchisee the rights to run the
business.
For example, McDonald, KFC and Marriott etc
Advantages of Franchising
Ongoing support is offered to the franchisee by the franchisor. And the franchisee gets benefits of
advertising which is done by the franchisor. Franchisee does not need business experience. There is high
rate of success and ease of credit.
Disadvantages of Franchising
The franchisee can not sell the business without the permission of the franchisor. The agreement can be
ended at any point by the franchisor. While, franchising limited investment may be high and payments
may mean low profits.

5. Joint Ventures
Joint venture is an agreement between two or more parties to combine their resources in achieving the
common business goal by equally investing in the project in terms of money, time and efforts. Here,
both parties share ownership, returns, risks and governance. Joint ventures are created to access new
market, to gain scale of efficiency and to share risk for major investment and projects.
Advantages of Joint Venture
Joint venture helps to enter into new markets and build credibility with a particular target market by
getting a credible partner in market. It reduces risk and gives access to increase resources. It is much
easier than solely owned business.
Disadvantages of Joint Venture
Joint ventures are difficult to integrate into a global strategy. It is not a permanent structure and the
objectives of partners become incompatible and different. Joint ventures create problem while staffing
and management control.

6. Portfolio Investment
Portfolio investment is a mode to enter in international business. Which means to have ownership of a
stock, bond or financial asset in a company in order to earn a return or grow. It shows the ownership of
group of assets in a firm by an entity or individual.
For example, Toyota company owns shares in AT&T, bonds in GM and HONDA; these all assets
collectively owned by Toyota company are known as Portfolio Investment.
Advantages of Portfolio Investment
Portfolio investment means not putting all the eggs in a single basket. By investment in a portfolio, the
right investment decision is made, the return is maximized and it avoids risk. It improves financial
understanding and manges liquidity.
Disadvantages of Portfolio Investment
Portfolio investment increases the risk of over diversification. Such as, investors invest funds among
large categories of assets whose control becomes impossible. There is no downside protection but it
only reduces the risk through diversification but does not provide protection. One of the main
disadvantage is faculty forecasting where the historical data collected is incorrect or unreliable and it
leads to wrong forecast.

7. Foreign Direct Investment

Foreign Direct Investment is an entry mode of international business which is an investment by a party
in one country into a business or corporation. A FDI is made by obtaining a lasting interest or by
expanding one's business into a foreign country. Such as, merger and acquisition.
Example, Papa John's opened a restaurant in Pakistan.
Advantages of FDI
FDI has many advantages. Such as, economic stimulation, development of human, increase in
employment, access to management expertise, skill and technology. One of the main advantage of FDI is
diversification by which firms get much profit and have to face low risk.
Disadvantages of FDI
The FDI has some disadvantages. Such as, profit repatriation and displacement of local businesses. The
entry of large firms may displace local businesses. While doing profit repatriation, firms may not receive
profit back into host county.
8. Alliances
It is a way to enter in international business. It is a formal agreement between two companies to
undertake a mutually beneficial project. The agreement is less binding and less complex. In alliances, the
both businesses pool resources to create a separate business.
Example, Starbucks and Barnes&Noble; the Barnes&Noble stocks books and Starbucks brew the coffee.
Both companies do best while sharing the cost of space to the benefit of both companies.
Advantages of Alliances
There are many advantages of Alliances. When a company engages in Alliances it gains new clients,
create different sources of additional income, build vulnerable intellectual capital and reduces risk.
Disadvantages of Alliances
The disadvantages of Alliances are many. When a company engages in alliances it gets difficulties to
keep objectives on target over time , poor resources allocation, less efficient communication and less
stake.

9. Management Contract
Management contract is a practice by which one company supplies another with managerial expertise
for a specific period of time by giving it a payment. The owner of the business is a third party.
For example, Heathrow airport holding limited of Britain, possess general airport management skills, in
the EEUU. Heathrow operates the Indianpolis airport under a 10 year management contract and
provides retail management at the Mall in the Pittsburgh airport.
Advantages of Management Contract
The management contract lower the cost, improve design, provides better supervision and coordination
and fast completion.
Disadvantages of Management Contract
There are many disadvantages of management contract. But the biggest disadvantage is that the
organization gives up a considerable amount of control over the services that will be provided to
customer. It delays potential time, chances of loss of product quality and business flexibility.

Qno.5
Discuss the seven main instruments of trade policy
Following are the main instruments of trade policy;
1. Tariffs
2. Subsidies
3. Import quotas
4. Voluntary export restraints
5. Local conrent requirements
6. Administrative policies
7. Antidumping duties

1. Tariffs
A tax levied on imports that effectively raises the cost of imported products relative to domestic
products. Tariffs provide protection to domestic producers again foreign competitors by increasing the
cost of imported foreign goods. It forces consumers to pay more for certain imports, increases
government revenues. The tariffs are unambiguously pro-producer and anti consumer, and tariffs
reduce the overall efficiency of the world economy.
Tariff is a tax imposed by a country on the goods and services imported from another country. Tariffs are
imposed to raise revenue, exert political leverage over other country and protect domestic industries.
Tariffs are imposed in order to restrict imports with the help of increasing the price of goods and
services imported from another country for making those imported things less attractive for domestic
consumer. There are two types of tariffs, which are specific tariff and ad-valorem tariff. Specific tariff is
like a fixed fee on the type of item where an ad-valorem tariff is based on the item's value
Example, Rs.500 tariff on a motorcycle is said to specific tariff and 5% of the value of the vehicle.

2. Subsidies
Money granted by a state or public body to an industry or business in order to help them is called
subsidies. It is given to decrease burden in shape of a benefit.
For example, when govt gives money to a farmer to plant a specific farm crop.
The money which is given to the farmer by the government is called subsidy.
A subsidiy is also said to be government incentive because it's a form of financial aid with the aim of
promoting social and economic policy. According to WTO, cash, tax, loans, guarantees, government
procurement and stocks these all are subsidies because they reduce the cost of doing business.

3. Import Quotas
Import quota is a main instrument of trade policy. Which is a type of trade restriction that sets a limit on
the quantity of imported good. These are used to benefit the producers within the country. Quota is also
known as protectionism. It is used to protect domestic industry and are used to protect domestic
industry and used in international trade to regulate the volume of trade between countries. Highly
restrictive quota are compared with high tariffs and lead to trade disputes and other problems among
the nation's.

4. Voluntary Export Restraints

Voluntary export restraints is another basic instrument of trade policy. Which is a restriction on export
imposed by government by keeping a limit on some goods during a specified time period. It is debited by
VER. It was established in 1930 and got popularity in 1980. These are considered as non tariff barriers.
Such as, embargoes and quotas. VERs reduce national welfare by creating negative trade tariff.

5. Local Content Requirements

Local Content Requirements is represented by LCR. LCR are the policies imposed by government in order
to require firms to use domestically supplied service or goods in order to operate an economy. LCRs can
come at high costs through distorting trade flows by increasing the cost of domestic production and
transferring higher prices to consumer.
6. Administrative Policies
Administrative policies are the main instruments of trade policy adopted by government bureaucracies
which are used to restrict imports and boost exports. The administrative policies hurt consumers by
denying access to possibly superior Foreign products.

7. Anti Dumping Duties

Anti dumping duties are also main instrument of trade policy. Before discussing anti dumping duties,
first we must know that what is dumping ...!
Dumping means selling of goods in a foreign market below their fair market value or at cost of
production. Where, anti dumping duties are rules to punish foreign firms that are engaged in dumping.
The goal of anti dumping duties is to protect domestic producers from unfair foreign competition. The
anti dumping duties are called counter vailing duties.

Qno.6
Write down notes on the following international organizations:
1. IMF
2. GATT
3. WORLD BANK
4. WTO

Ans:
1. IMF
IMF stands for international monetary fund. It is an international organization that was established on
27 , December, 1945 in Washington on the recommendation of Bretton Woods conference and started
working on 1st March, 1947. The IMF consists of 185 countries which are accounting for 90% of world
trade and 80+% of total world production.
The main aim of IMF is to facilitate the expansion and balance growth of international trade, to promote
International monetary cooperation, to remove all restrictions and exchange controls and help member
countries with funds that they could adjust their balance of payment. The countries which are the
member of IMF, have quota based on it's economic and financial strength and serve in world trade it
also determines the voting power of a member country.

2. GATT
GATT stands for General Agreement on Tariffs and Trade. It is an international organization that brings
legal agreement between many countries. The purpose of GATT is to promote International trade by
reducing criss country trade barriers such as, tariffs and quotas.
The GATT was established on 30 October 1947 in order to liberalize and supervise the world trade.
Where, 23 countries signed a legal agreement. The GATT reached an agreement among 117 countries
after seven years of negotiation. Currently, it consists of 164 members worldwide. The tariff levels
among the contracting parties was lower by the GATT and tariff rates among participants became under
5%.
3. World Bank
The world bank is an international and financial organization that provides financial advices, loans, and
research to develop into nations in order to aid their economic advancement. It was founded by John
Maynard Keynes and Harry Dexter White in July 1944 out of Bretton Woods agreement.
The head quarter of world bank is in Washington DC. It has more than 10000 employees and 120 offices
worldwide. It attempts to fight poverty by providing developmental assistance to low and middle
income countries. It is owned by 187 countries. The role of world bank is to lend money to the
government in order to reduce poverty of it's poorer member and to improve their economy and
standard of living of their people.

4. WTO
WTO stands for world trade organization. It is an international and global organization that was
established to serve all multilateral trade agreements. It was founded in 1948 and consists of 23 nations
and it was hired organization by GATT in 1995. Recently, it has more than 160 members. The WTO
enforces and sets rules for international trade, provides forum for negotiating and monitoring trade
liberalization, to increase decision making transparency. The objective of WTO is to resolve trade
disputes, help developing countries by giving them benefits from the global trading system. The
international trade of WTO members exceeds 90% of the global market. It's headquarter is in Geneva ,
Switzerland. It is operated by its members and decisions are also made by the members concerns and
suggestions. It has 164 members and 24 observers. Yet, 24 countries are negotiating to become the
member of WTO.

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