INTERNATIONAL ENVIRONMENT

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INTERNATIONAL ENVIRONMENT 2

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3 Business is a trading activity like the ocean which flows at all levels i.e. Local, National & International level. Local National International

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4 WHAT IS INTERNATIONAL ENVIRONMENT The Environment which includes all the factors and forces which are external to the Business organization such as economic, socio-cultural, legal demographic etc. are known as International environment.

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5 In simple word International Environment means the growth and expansion of business to a larger extent i.e. global all over the world.

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6 WHY THERE IS A NEED TO STUDY INTERNATIONAL ENVIRONMENT? Entire world at a dramatic pace. Significant changes in business all over the world. Reunification of East & West Germany. Disintegration of USSR. Financial crisis. Recession. Policies adopted by different countries etc. These are some of the events that have affected international environment. Therefore there is a need to study International Environment.

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7 FEATURES OF INTERNATIONAL ENVIRONMENT Area of operation Origin Resources Profit motive Dominance in global trade Political interference Exploitation Quality consciousness

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8 TRENDS IN THE WORLD REDUCE OR REMOVED TARIFFS AND QUOTAS

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9 Liberalization Regional economic integration Growing importance of multinational companies Environmental issues Consumerism Strategic alliances Joint venture

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10 PROBLEMS OF DEVELOPING COUNTRIES LIKE INDIA IN THE INTERNATIONAL ENVIRONMENT Bureaucratic structures Political instability Lack of adequate government support Technological gaps Trading blocs Lack of infrastructure Rising crude prices Unemployment

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11 INTERNATIONAL TRADIND ENVIRONMENT WTO (WORLD TRADING ORGANISATION) The creation of WTO on January 1, 1995 marked the biggest reform of international trade. GATT was founded in 1947 with 23 countries including India. The WTO which is based in Geneva has a larger membership than GATT with the present number being 150 including India – a founder member. WTO is a replacement of GATT.

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12 OBJECTIVES OF WTO The basic objectives of WTO are : To encourage open, fair and undistorted competition. To ensure international trade without discrimination. To create an environment of comparative advantage to expand production and trade. This would ensure optimum utilization of world’s resources. To resolve disputes between trading countries. To ensure that the developing countries secure a better share of growth n international trade. To protect and preserve the environment of the world. To raise employment opportunities in its member nations. To raise the standard of living of the people of its member nations.

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FUNCTIONS OF WTO It administers and implements the multinational trade agreements. It acts as a forum for multilateral trade negotiations. It resolves trade differences and disputes among member nation through proper forums and conciliation mechanisms. It monitors the execution of tariffs and non tariff measures as agreed by member nations. It periodically reviews trade policies of member countries to check whether they conform to WTO guidelines. It co-operates with other institutions involved in global economic policy making. It provides advise to member nations when required.

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14 TRADING BLOCS Trading bloc is a voluntary grouping of countries of a specific region for common benefits. It indicates regional economic integration of countries for mutual benefits. Generally countries close to each other geographically form trading blocs. This kind of regional economic integration has intensified over the year. European union, NAFTA, OPEC, ASEAN, SAARC etc. are some of the prominent trading blocs.

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15 OBJECTIVES OF TRADING BLOCS To remove trade restriction among participating nations. To improve political, social and cultural relations among member nations through improved trade ties. To promote growth of the region as a whole through co- operation of member countries. To encourage open transfer of resources i.e. raw material, labour & capital between nations. To establish a collective bargaining force against non-members. To levy common tariffs and other barriers against non-members. To provide assistance to member countries with special reference to international trade. To promote economic growth of the region through mass production and marketing of goods.

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17 To understand what India is and what it is not, lets compare it to China.  First, forget the hype about both China and India.  Keep in mind that despite all the talk of China or India’s rising status, both China and India are still desperately poor countries with large disparities in incomes across each country. In China nearly half of the country's labor force remains in agriculture (about 60 percent in India).  Also, despite all the talk about Indian software engineers and Nobel laureates and Chinese engineering whizzes, India has the largest number of illiterate people in the world and China also is burdened with a large number of rural poorly educated who will offer continued challenges for economic development. (India’s illiteracy rate is nearly 40 percent and China’s is nearly 10 percent according to World Bank statistics.)  Of the total of 2.3 billion people in these two countries, nearly 1.5 billion earn less than US$2 a day, according to World Bank calculations. Further, in terms of manufacturing China’s lead over India in terms of manufacturing is considerable.  China is the world’s third largest nation in terms of manufacturing after the U.S. and Japan.  India is a still impressive, but much further back 12th place in the same list according to Global Insight and the Financial Times.  This points out the fact that to this point, India’s success in expanding its service industry has yet to be as firmly demonstrated in the manufacturing sector. COMPARISON WITH CHINA

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