Economics

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“LEGAL AND ECONOMIC ADVANTAGE OF CONDUCTING GLOBAL BUSINESS” Subject: ECONOMICS

Submitted to: -

Dr. Vijay Kumar Vimal

Submitted by:-

Adhish Prasad Roll no: - 904 Semester: - 3rd

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Session: - 2013-18

TABLE OF CONTENTS

1. TABLE OF CASES………………………………………………………………………3 2. AIMS & OBJECTIVE…………………………………………………………………….4 3. HYPOTHESIS………….…………………………………………………………….…...4 4. RESEARCH METHODOLOGY…………………………………………...……….…….4

5. CHPTERISATION

i.

INTRODUCTION…………………………………………………………..………5-6

ii.

ESSENTIAL ELEMENTS OF CONTRACT………………..………………..…..7-11

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OFFER OF PROPOSAL……….………………………………………...……....12-17

a. HOW AN OFFER IS MADE…………………………………………………...……….14 b. REVOCATION OF OFFER…………………………………………………..…………15 c. TYPES OF OFFER………………………………………………………………….16-17 iv.

GENERSAL PROPOSAL…………………………………………..……………….18

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CASE LAWS……………………………………………………………..……...19-22

vi.

CONCLUSION………………………………………………………………………23

BIBLIOGRAPHY

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AIMS AND OBJECTIVE The researcher aims for making this project to:1. To find out the difference between Global business and Domestic business 2. To find out the advantage of conducting Global business in India.

HYPOTHESIS Today’s Era is a Global Era. So many companies are in the position to conduct their business throughout the world to get more and more profit and help people by giving jobs to them.

RESEARCH METHODOLOGY The various books, websites, magazines and newspaper are referred for this topic. The sources from which the material for this research collected are primary and secondary. So the methodology used in the research has been Doctrinal. No non-doctrinal method has been used by the researcher in this project work.

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1. Introduction of business The role of business in an open market economy system is to create wealth for shareholders, employees, customers and society at large. No other human activity matches private enterprise in its ability to marshal people, capital and innovation under controlled risk-taking, in order to create meaningful jobs and produce goods and services profitably – profit being essential to long-term business survival and job creation. While all businesses have an implicit set of inherent values, the number of businesses that have formally written values and principles is rapidly increasing. These principles have become more and more explicit and provide the framework for corporate behaviour beyond their legal obligations. At the same time, growing numbers of companies have been adding environmental and social indicators to their economic and financial results in reports that are often entitled social reports or sustainability reports. Indeed, sustained profits and principles are mutually supportive and an increasing number of companies view corporate responsibility as integral to their systems of governance. This is part of the requirements for doing business in today's global economy. In recent years there has also been substantial growth in the number of principles, guidelines or codes produced for business by governmental and non-governmental organizations. Companies face multiple, and sometimes conflicting, demands to endorse these initiatives. This has led more companies to consider how they should approach corporate responsibility issues and, more specifically, whether they should develop their own business principles and which external codes they should use as reference points. The main purpose of this document is to make practical suggestions to companies on how to approach corporate responsibility issues. The intention is to help position individual company principles in the existing framework of generic business principles, government codes, new initiatives, and broader societal values. The document's secondary purpose is to explain to those outside business how companies can approach corporate responsibility issues.

2. ADVANTAGE OF CONDUCTING GLOBAL BUSINESS IN INDIA Doing business in India has advantages, with growing attractiveness. According to a study by Goldman Sachs, the Indian economy is expected to grow at the rate of five percent or more through the year 2050 -- which is far better than forecast growth rates in the U.S., currently at less than two percent. Such consistent growth and the adundance of a higly-skilled workforce makes India ripe for investments, and overseas business opportunities for those seeking to grow beyond the U.S. borders.

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The advantages of doing business and investing in India include a federal government system with clear powers established between the central government and state governments, a liberal and friendly investment climate, and liberal and clear policies on foreign direct investment from other major economies of the world. The government also places a high importance on infrastructure development, including highways, ports, railways, airports, power, telecom, and more, and the Indian government actively seeks domestic and private investment for its infrastructure sector development. As for the ease of doing business in India, the country is considered on the lower end of the scale among 183 global economies -- with a ranking of 134 according to The Doing Business Project, which provides objective measures for business regulations and their enforcement. Launched in 2002, The Doing Business Project looks at domestic small and medium-sized companies and measures the regulations applying them to their life cycle, according to the organization's Web site. But while India's 2011 rank is 134 out of 183, the country's doing-business conditions are improving, as India's rank in 2010 was 168. Among the country's ease attributes, protecting investors and getting credit rank highest. India is ranked 32nd among 183 economies for getting credit, and 44th in protecting investors. Among the greatest challenges for doing business in India is dealing with construction permits (177 rank) and enforcing contracts (182 rank).

In a recent survey conducted in the US, 82% of US–based companies have voted for India as their first and most preferred choice for software outsourcing. Though other outsourcing destinations like China or the Philippines also offer low cost services and fast turnaround time, it is only talent–rich India that provides unmatched quality and has the largest number of skilled resources in almost every field. Gone are the days when only back–end work such as data entry and customer support was outsourced to India. India, with its state–of–the–art technology can now handle complex turnkey projects, such as the maintenance of legacy systems, business intelligence, system integration, business process re–engineering or E–commerce.

6 The benefits of doing business with India India’s investment friendly policies, forward–thinking reforms, higher disposable incomes and rising middle class have made it an attractive outsourcing destination for foreign investors. When you do business with India, you can be sure to experience these key benefits:

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You get to work with enthusiastic and career–focused Indians, who constantly upgrade their skills through training and certificate programs

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You will not face any language or communication barriers as over 350 million people in India are fluent in the English language. India has been successful in the outsourcing industry mainly because of the fluency with which Indians speak English.

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You get access to a huge talent pool of experienced specialists. The high value placed on education in India has resulted in a highly educated workforce who have experience and knowledge in varied fields

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You will face fewer cultural challenges when you share new business ideas and endeavors with Indians, as they are always open to new ideas and opportunities

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You get dedicated employees to work for you, as many Indians work eight hour shifts for six days a week. Indians also willingly work around the clock to compensate for the time difference between India and the US or UK. Only India can give you access to committed employees who are more than willing to work long shifts over odd hours

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Regardless of a succession of government coalitions, the Indian government continues to liberalize certain markets. Extensive opportunities for trade through investment incentives, Examples include the so-called Special Economic Zones and the lowering of import tariffs for certain product groups. A huge consumer market; boasting more than 1 billion consumers, many of whom have greater spending power than ever before. Plentiful supply of young and highly qualified (technical) personnel. o India has almost 400 universities and 1,500 research institutes. o Each year, India produces 200,000 engineering graduates and 9,000 doctoral graduates. Their knowledge and command of the English language is excellent India has a good legal protection framework for investments (one of the best in Asia, according to KPMG)

advantages - causes a flow of money into the economy which stimulates economic activity - employment will increase - long run aggregate supply will shift outwards - aggregate demand will also shift outwards as investment is a component of aggregate demand - it may give domestic producers an incentive to become more efficient - the government of the country experiencing increasing levels of FDI will have a greater voice at international summits as their country will have more stakeholders in it Disadvantages - inflation may increase slightly - domestic firms may suffer if they are relatively uncompetitive - if there is a lot of FDI into one industry e.g. the automotive industry then a country can become too dependent on it and it may turn into a

7 risk that is why countries like the Czech Republic are "seeking to attract high value-added services such as research and development (e.g.) biotechnology)"A

3. DIFFERENCE between GLOBAL BUSINESS and domestic business Generally, the exchange of goods and services between one or more countries and across the borders are referred to as the international Business. The Domestic trade happens when this business is conducted within the country's border. There are many differences in the international and domestic trade, but the basic principles are quite same.

Conducting and managing international business operations is more complex than undertaking domestic business. Differences in the nationality of parties involved, relatively less mobility of factors of production, customer heterogeneity across markets, variations in business practices and political systems, varied business regulations and policies, use of different currencies are the key aspects that differentiate international businesses from domestic business. These, moreover, are the factors that make international business much more complex and a difficult activity. Differences between International Business and Domestic Business Scope:Scope of international business is quite wide. It includes not only merchandise exports, but also trade in services, licensing and franchising as well as foreign investments. Domestic business pertains to a limited territory. Though the firm has many business establishments in different locations all the trading activities are inside a single boundary. Benefits:International business benefits both the nations and firms. Domestic business have lesser benefits when compared to the former.

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To the nations: Through international business nations gain by way of earning foreign exchange, more efficient use of domestic resources, greater prospects of growth and creation of employment opportunities. Domestic business as it is conducted locally there would be no much involvement of foreign currency. It can create employment opportunities too and the most important part is business since carried locally and always dealt with local resources the perfection in utilisation of the same resources would obviously reap the benefits.

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To the firms:The advantages to the firms carrying business globally include prospects for higher profits, greater utilization of production capacities, way out to intense competition in domestic market and improved business vision. Profits in domestic trade are always lesser when compared to the profits of the firms dealing transactions globally.

Modes of entry: A firm desirous of entering into international business has several options available to it. These range from exporting/importing to contract manufacturing abroad, licensing and franchising, joint ventures and setting up wholly owned subsidiaries abroad. Each entry mode has its own advantages and disadvantages which the firm needs to take into account while deciding as to which mode of entry it should prefer. Firms going for domestic trade does have the options but not too many as the former one. To establish business internationally firms initially have to complete many formalities which obviously is a tedious task. But to start a business locally the process is always an easy task. It doesn’t require to process any difficult formalities. Purvey: Providing goods and services as a business within a territory is much easier than doing the same globally. Restrictions such as custom procedures do not bother domestic entities but whereas globally operating firms need to follow complicated customs procedures and trade barriers like tariff etc. Sharing of Technology: International business provides for sharing of the latest technology that is innovated in various firms across the globe which in consequence will improve the mode and quality of their production. Political relations: International business obviously improve the political relations among the nations which gives rise to Cross-national cooperation and agreements. Nations co-operate more on transactional issues.

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International business can differ from domestic business for a number of other reasons including the following:

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The first difference involves the dissimilarity in currencies. Countries involved in business may use different currencies; it may force at least one party to switch its currency into another. In other words, one of the parties would have to follow the prevailing market currency exchange rate to make its business transactions viable.

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Next you may face the difference in legal systems of countries; it may compel one or more parties to adjust their practices to comply with local law. Occasionally, the consent of the legal systems may act as a barrier and be irreconcilable, creating complications for international managers.

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Difference in cultures is also considered as dissimilarity in domestic and international business. The cultures of the countries may vary according to the use of trading product and it may force each party to adjust its behavior to meet the expectation of the others. For example the difference in the use of pork and wine face different attitudes in western and Muslim cultures.

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Last is the difference in availability of resources by country. One country may be rich in natural resources but poor in skilled labor, while another may enjoy a productive, well-trained work force but lack natural resources. Thus, the way products are produce and the types of products that are produced vary among countries. Currently, this is the major difference noticed in the business between developed and third world countries.

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Before going to start an International business, people must be well-informed about cultures, legal, political and social differences among countries. They must choose the countries in which to sell their goods and from which to buy inputs with assurance and hoping that a good business is waiting ahead for them.

Global business global business pretty much means Globalization. Globalization is when countries transport goods and many other things over the border to another country. Many people think that this world has no borders because we are so connected but others complain that globalization is making the rich richer and the poor poorer. OR We can put our business on global level. As far as user is concerned he can get what he wants in any country and as far as a company is concerned, it can get customers through out the world. The use by wealthy companies of the cheapest labour in any part of the world to drive down the cost of production there increasing profit. But also globalisation is not just only business. It's an exchange of politics, trade, technology, services and economics between countries. It's basically the world getting smaller. Like China town in Melbourne; a perfect example. Globalisation has increased rapidly since the end of the cold war, and this is because it thrives under capitalist conditions. Globalisation is a concept. Globalisation can bring benefits like new technology, and peace between nations through trade. Negative effects are like the gap between the rich and the poor widening. It's a huge concept.

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In general term we can say that Globalization is a process of interaction and integration among the people, companies, and governments of different nations, a process driven by international tradeand investment and aided by information technology. This process has effects on

theenvironment, on culture, on political systems, on economic development and prosperity, and onhuman physical well-being in societies around the

world. Globalization is not new, though. For thousands of years, people—and, later, corporations—have been buying from and selling to each other in lands at great distances, such as through the famed Silk Road across Central Asia that connected China and Europe during the Middle Ages. Likewise, for centuries, people and corporations have invested in enterprises in other countries. In fact, many of the features of the current wave of globalization are similar to those prevailing before the outbreak of the First World War in 1914. But policy and technological developments of the past few decades have spurred increases in cross-border trade, investment, and migration so large that many observers believe the world has entered a qualitatively new phase in its economic development. Since 1950, for example, the volume of world trade has increased by 20 times, and from just 1997 to 1999 flows of foreign investment nearly doubled, from $468 billion to $827 billion. Distinguishing this current wave of globalization from earlier ones, author Thomas Friedman has said that today globalization is “farther, faster, cheaper, and deeper.” This current wave of globalization has been driven by policies that have opened economies domestically and internationally. In the years since the Second World War, and especially during the past two decades, many governments have adopted free-market economic systems, vastly increasing their own productive potential and creating myriad new opportunities for international trade and investment. Governments also have negotiated dramatic reductions in barriers to commerce and have established international agreements to promote trade in goods, services, and investment. Taking advantage of new opportunities in foreign markets, corporations have built foreign factories and established production and marketing arrangements with foreign partners. A defining feature of globalization, therefore, is an international industrial and financial business structure. Technology has been the other principal driver of globalization. Advances in information technology, in particular, have dramatically transformed economic life. Information technologies have given all sorts of individual economic actors—consumers, investors, businesses—valuable new tools for identifying and pursuing economic opportunities, including faster and more informed analyses of economic trends around the world, easy transfers of assets, and collaboration with far-flung partners. Globalization is deeply controversial, however. Proponents of globalization argue that it allows poor countries and their citizens to develop economically and raise their standards of living, while opponents of globalization claim that the creation of an unfettered international free market has benefited multinational corporations in the Western world at the expense of local enterprises, local cultures, and common people. Resistance to globalization has therefore taken shape both at a popular and at a governmental level as people and governments try to manage the flow of capital, labor, goods, and ideas that constitute the current wave of globalization.

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4. BEST EXAMPLES

1. Bharti Airtel Bharti Airtel Limited, ranked the fifth-largest mobile operator in the world by subscriber base, provides mobile voice and data services, fixed-line and high-speed broadband, IPTV, DTH, turnkey telecom solutions for enterprises, and national and international long-distance services to carriers. In search of a strong global footprint, it acquired Zain Telecom, the African arm of Kuwait's largest telecommunications firm, for $10,7 billion in June 2010. At that time, Zain operated in 15 African countries, including Nigeria and Chad, which together had a customer base of 65 million contributing a mere 15 percent to the group's net profit. With this acquisition, Bharti--with a total revenue of $12,4 billion and an EB1DTA margin of $4.7 billion—became the second largest operator in Africa, next to the MTN group of South Africa. Within four months of the deal, Airtel made tariff interventions in 11 of its 16 markets in Africa for the benefit of its customers and signed agreements to extend its networks to remote areas that are still not connected with the outside world.2 In November 2010, Bharti launched the Airtel brand in 16 countries in the continent, replacing Zain, At the launch of the new brand, Mittal revealed that the Airtel brand structure would be followed in all future products and services. For instance, the ZAP mobile money service was re-branded as Airtel Money with immediate effect He reiterated that Airtel's African customers would be able to enjoy the Companies need to be same brand experience as in India, Sri Lanka, and Bangladesh. As part within and outside their country. A of the new brand launch, Airtel announced the launch of a new ultra- and compete in international market low-cost handset package that included a Nokia 1280 mobile phone, a also be high. Companies selling in gl free SIM card, and free Airtel talk time and text messages to an extent that almost covered the package cost of around $23.

2. KFC Corporation KFC is the world's largest fast-food chicken chain, serving more than 12 million customers at more than 5,200 restaurants in the United States and more than 15,000 units in 109 countries and territories around the world. KFC is world famous for its Original Recipe fried chicken—made with the same secret blend of 11 herbs and spices Colonel Harland Sanders perfected more than a half-century ago. Its success in Asia is instructive: When KFC entered the Japanese market in 1970, the Japanese saw fast food as artificial, made by mechanical means, and unhealthy. To build trust in the brand, advertising depicted Colonel Sanders's beginnings in Kentucky to convey Southern hospitality, old U.S. tradition, and authentic home cooking. The campaign was hugely successful. KEG now offers sesame and soy sauce—flavored chicken and a panko-fried salmon sandwich. In China, KFC is the largest, oldest, most popular, and fastest-growing

11 quick-service restaurant chain, with over 3,400 locations in 650 towns or cities and healthy margins of 20 percent per store. Using its own supply and distribution system, it has expanded quickly into eversmaller cities. The company has also tailored its menu to local tastes with items such as the Dragon Twister, a sandwich stuffed with chicken strips, Peking duck sauce, cucumbers, and scallions. KFC even has a Chinese mascot—a kid-friendly character named Chicky, which the company boasts has become "the Ronald McDonald of China."

3. Apple Apple Computer's highly successful "Mac vs, PC" ad campaign featured two actors bantering, One is hip (Apple), the other nerdy (PC). Apple dubbed the ads for Spain, France, Germany, and Italy but chose to reshoot and rescript for the United Kingdom and Japan—two important markets with unique advertising and comedy cultures. The UK ads followed a similar formula but used two well-known actors in character and tweaked the jokes to reflect British humor; the Japanese ads avoided direct comparisons and were more subtle in tone. Played by comedians from a local troupe called the Rahmens, the two characters were more alike and represented work (PC) vs. home (Mac).

4. Nokia Nokia has made a remarkable transformation over the past two decades from an obscure Finnish conglomerate to a cell phone powerhouse. Now the world's largest manufacturer of mobile telephones, it has over 1 billion users and a global market share of 33 percent in 2010. The company sells approximately 11 cell phones every second and is the standout leader in Asia, Eastern Europe, and Africa. Nokia's transformation started in the early 1990s with its strategic decision to divest its product portfolio and focus entirely on telecommunications. Business soon exploded, in part due to Nokia's mastery in innovating telecommunications technologies. Nokia was a key developer of new mobile technologies like GSM (Global System for Mobile Communications) that allow consumers to roam internationally and use new data services like text messaging. Although the firm has struggled in North America—in part because many networks there use a different wireless standard (CDMA) than in Europe (GSM)—its global footprint is still impressive. Nokia's success also derives from its broad strategic view of how to build a global brand and international consumer base. The company sells a wide range of products and services in all price ranges

12 to different types of consumers all over the world. In short, its approach is "All price points, all markets." Nokia has a practical understanding of what consumers need, value, and can afford depending on their geographical location and demographics. By providing the right products, features, and price, the firm has successfully built long-term brand value all over the world. With the bulk of industry growth coming from developing markets, Nokia has made sure its cheapest hand-sets are appealing—and profitable—in markets such as China, India, and Latin America. On the flip side, to sustain its market leadership and compete in challenging markets like Europe and the United States, it has launched a range of high-end handsets with advanced features and applications. This consumer base is so critical to Nokia's growth that it has created a business division focused entirely on creating software and services for it, including music, video, games, maps, messaging, and media. Today, Nokia's products range from $ 30 basic models to $600 smart phones that include video editing, voiceguided navigation, and thousands of applications. Nokia's future also lies in its growing line of mobile computers, devices with the advanced capabilities of a computer that fit into the palm of your hand. Nokia takes a broad perspective on competition as well, viewing Apple, Sony, and Canon as threats as much as traditional rivals Motorola and Samsung. Competitors' products like the iPhone, BlackBerry, and Android smart phones have all gained significant market share. Although 84 percent of its sales consist of cell phones, Nokia is focused on making its smart phones durable, reliable, and affordable to consumers in emerging markets, as it did with cell phones. As a global leader, Nokia understands how critical it is to have a finger on the pulse of countries and cultures all over the world. With 16 different R&D factories, manufacturing plants in 10 countries, Web sites in 7 countries, and 650,000 points-of-sale—the widest distribution net-work in the world—Nokia strives to be a global leader but locally relevant. It forms relationships with local business partners, gets involved in the community, and works to earn consumers' trust on a local level. In India, for example, the company has increased its local involvement by including in the Nokia Music Store a significant percentage of songs by local and regional artists, adding thousands of local customer care services, and supporting a local environmental initiative called "Planet Ke Rakwale" that encourages consumers to recycle their old phones and batteries. Nokia even added the tagline, "Made in India for India." Today, with a value of nearly $ 35 billion, Nokia is the fifth most valuable global brand in the Interbrand/ Business Week ranking, surpassing Google, Samsung, Apple, and BlackBerry. The brand continues to rank well in consumers' minds as high quality, robust, easy to use, and trustworthy—a perfect combination for succeeding in both emerging and mature countries.

5. L'Oreal When it comes to globalizing beauty, no one does it better than L'Oreal. The company was founded in Paris over 100 years ago by a young chemist, Eugene Schueller, who sold his patented hair dyes to local

13 hairdressers and salons. By the 1930s, Schueller had invented beauty products like suntan oil and the first mass-marketed shampoo. Today, the company has evolved into the world's largest beauty and cosmetics company, with distribution in 130 countries, 23 global brands, and over €17.5 billion in sales. Much of the company's international expansion and success is credited to Sir Lindsay Owen-Jones, who transformed L'Oreal from a small French business to an international cosmetics phenomenon with strategic vision and precise brand management. During his almost 20 years as CEO and chairman, OwenJones divested weak brands, invested heavily in product innovation, acquired ethnically diverse brands, and expanded into markets no one had dreamed of, including China, South America, and the former Soviet Union. His quest: to achieve diversity, "meet the needs of men and women around the globe, and make beauty products available to as many people as possible." Today, L'Oreal focuses on its five areas of expertise: skin care, hair care, makeup, hair coloring, and perfume. Its brands fall into four different groups: (1) Consumer Products (52 percent of L'Oreal's portfolio, including mass-marketed Maybelline and high-technology products sold at competitive prices through mass-market retailing chains), (2) Luxury Products (prestigious brands like Ralph Lauren perfume offered only in premium stores, department stores, or specialty stores), (3) Professional Products (brands such as Redken designed specifically for professional hair salons), and (4) Active (dermo-cosmetic products sold at pharmacies). L'Oreal believes precise target marketing—hitting the right audience with the right product at the right place is crucial to its global success. Owen-Jones explained, "Each brand is positioned on a very precise [market] segment, which overlaps as little as possible with the others." The company has built its portfolio primarily by purchasing local beauty companies all over the world, revamping them with strategic direction, and expanding ew areas through its powerful marketing tt became a player (with 20 percent market share) in the growing ethnic hair care industry when it purchased and merged the U.S. companies Soft Sheen Products in 1998 and Carson Products in 2000. L'Oreal believed the competition had overlooked this category because it was previously fragmented and misunderstood. SoftSheen-Carson now derives approximately 30 percent of its annual revenues from South Africa. L'Oreal also invests money and time in innovating at 14 research centers around the world, spending 3 percent of annual sales on R&D, more than one percentage point above the industry average. Understanding the unique beauty routines and needs of different cultures, countries, and consumers is critical to L'Oreal's global success. Hair and skin greatly differ from one part of the world to another, so L'Oreal scientists study consumers in laboratory bath-rooms and in their own homes, sometimes achieving scientific beauty milestones. In Japan, for example, L'Oreal developed Wondercurl mascara specially formulated to curl Asian women's eyelashes, which are usually short and straight. The result: within three months it had become Japan's number-one selling mascara, and girls excitedly lined up in front of stores to buy it. L'Oreal continued to research the market and developed nail polish, blush, and other cosmetics aimed at this new generation of Asian girls.

14 Well known for its 1973 advertising tagline—"Because I'm Worth It"—L'Oreal is now a leader in beauty products around the world. As Gilles Weil, L'Oreal's head of luxury products. explained, "You have to be local and as strong as the best locals, but backed by an international image and strategy."

6. Hyndai Once synonymous with cheap and unreliable cars, Hyundai Motor Company has experienced a massive global transformation. In 1999, its new chairman, Mong-Koo Chung, declared that Hyundai would no longer focus on volume and market share but on quality instead. A number of changes were instituted: Hyundai began to benchmark industry leader Toyota, adopted Six Sigma processes, organized product development cross-functionally, partnered more closely with suppliers, and increased quality oversight meetings. From a place near the bottom of J.D. Power's study of U.S. new vehicle quality in 2001-32nd out of 37 brands—Hyundai zoomed to number four by 2009, surpassed only by luxury brands Lexus, Porsche, and Cadillac. Hyundai also transformed its marketing. Its "Assurance" campaign, backed by a pricey Super Bowl ad, allowed new buyers to return their cars risk-free if they lost their jobs. Other programs guaranteed customers low gas prices for a year and tax credits in advance of the government's "Cash for Clunkers" program. The U.S. market was not the only one receiving attention from Hyundai and its younger, more affordably priced brand sibling, Kia. Hyundai is the second-largest car-maker in India, it is supplying Europe with a new El billion factory in the Czech Republic, and a joint venture with Beijing Automotive is targeting China.

What is Globalisation? „Globalisation‟ means ‘the reduction of the difference between one economy and another’ so that trade within and between different countries is increasingly similar all over the world. Globalisation has become a big buzz word in the last 10/15 years, but it has been going on for centuries, and especially since 1945. What has changed is the pace of this trend; it used to be quite a slow process and in recent years it has become much faster. Background In the 17th Century new ship design allowed Europeans to start trading with the rest of the world in a much bigger way, although trade was still a tiny part of the economy compared to agriculture. Later developments in transport, steam ships, the railways and now aircraft, have all contributed to the development of trade. Aircraft also move people around quickly, so the sense of the size and distances of the world „shrinks‟ making us feel that far-away places are no longer so strange. The internet now allows international communication in a way that was not possible before; your favourite site could just as easily be in New Zealand as in London. The WTO has, since 1945, made major reductions to the barriers to trade, and this has led to an enormous increase in international trade compared with domestic trade. Because world trade has consistently grown much faster than world GDP, the proportions of domestic versus international business have changed; much more of all countries‟ business is now done overseas than used to be the case. Increasing Economic Integration

15 A second important idea is that of ‘integration’. In the past, an economy was largely self-contained, and imports and exports were something that happened almost co-incidentally. Now, economies depend closely on each other for inputs eg raw material and for markets for outputs. A recession in one economy (especially a large economy like Japan or the US) affects many other economies. Consumer markets are the most important in any economy. There has been a rapid convergence of consumer tastes and buying habits, so the purchases of consumers all over the world have an increasing amount in common (although there are still many important differences); a business can sell much the same product in many different markets. A global brand like „Coca-Cola is very good examples of this. Multinational companies ("MNCs") have existed for many years, but today there are many more of them and their importance to all economies has become much greater. Their example, and their success, has led many businesses to change their strategic objectives and their management thinking so „thinking globally but acting locally‟ is now much more common; many businesses used to almost ignore what went on elsewhere. Factors Affecting Globalisation The following main factors have fuelled the pace of globalisation: 1. Technological change, especially in communications technology. For example, UK businesses and data by satellite to India (taking advantage of the difference in time zones) where skilled but cheaper data handlers input the data and return it by satellite for the start of the UK working day. 2. Transport is much cheaper and faster. This is not just aircraft, but also ships. The development of containerisation in the 1950s was a major breakthrough in goods handling, and there have been continuing improvements to shipping technology since then. 3. Deregulation. From the 1980s onwards (starting in the UK) many rules and regulations in business were removed, especially rules regarding foreign ownership. Privatisation also took place, and large areas of business were now open to purchase and/or take-over. This allowed businesses in one country to buy those in another. For example, many UK utilities, once government businesses, are owned by French and US businesses. 4. Removal of capital exchange controls. The movement of money from one country to another was also controlled, and these controls were lifted over the same period. This allowed businesses to move money from one country to another in a search for better business returns; if investment in one‟s own country looked unattractive, a business could buy businesses in another country. During the 1990s huge sums of money, mainly from the US, have come into the UK economy. See, for example, this news story: http://news.bbc.co.uk/1/hi/business/2250903.stm 5. Free Trade. Many barriers to trade have been removed. Some of this has been done by regional groupings of countries such as the EU. Most of it has been done by the WTO. This makes trade cheaper and therefore more attractive to business. 6. Consumer tastes have changed, and consumers are more willing to try foreign products. The arrival of global satellite television, for example, has exposed consumers to global advertising. Consumers are more aware of what is available in other countries, and are keen to give it a try. 7. Emerging markets in developing countries, especially the „Tigers‟ of SE Asia eg Thailand. There has been high growth of incomes in these countries, which makes large consumer markets with money to spend. Indonesia, for example, whilst still not particularly rich, has some 350 myn consumers. Both India and China are very poor countries, but there are small middle classes who are doing very well and have money to spend. Although these groups are small in the context of the country, the overall populations are so huge (over 1 byn) that a small middle class adds up to many millions of consumers.

5. CONCLUSION