Tag: University of Mumbai BMS Notes

International business finance is the art of managing money on a global scale. Students interested in this field study various areas of finance, such as investments and corporate finance. Before you continue your study of international markets and global financial institutions, you must understand the fundamentals of domestic operations.

As an expert in international business finance, you may pursue a career with a multinational corporation, financial institution or consulting firm. Your level of education and experience will be key to obtaining a position, as international jobs are usually reserved for candidates with strong foreign language skills and knowledge of a specialized area of finance. For example, you may work as a financial officer, helping organizations grow through mergers, contracts and expansions in the most cost-effective way possible. As a financial analyst, you’ll guide businesses and individuals through investment decisions by studying financial statements and the global economy.

1. Different Trade Patterns

International business has to deal with the business patterns among the various countries of the world.

It has to take into account these business policies of various countries which govern their imports and exports. These policies and practices impose certain constraints and restrictions on international business.

2. Regulatory Measures

Every country wants to export its surplus natural resources, agricultural produce and manufactured goods to the extent, it can and import only these goods and products which are not produced or manufactured within the country. For this purpose regulatory measures like tariff barriers (custom duties) non-tariff barriers, quota restrictions, foreign exchange restrictions, technological and administrative regulations, consulter for­malities, state trading and preferential arrangements, trade agreements and joint commis­sions etc. Come in the way of free trade and unfettered flow of foreign business.

3. Lop Sided Development of Developing Countries:

Developed counters are equipped with sophisticated, technologies capable of transforming raw materials into finished goods on a large scale. While developing countries on the other-hand lack technological knowledge and latest equipment. It leads to the lop sided development in the international business.

4. Economic Unions

There is an increasing tendency among nations to form small groups of Economic Unions which help them to negotiate terms for the business with other countries.

5. National Policy of Development

The country desirous of achieving self-sufficiency, follows a strategy of importing capital goods equipped with latest and sophisticated technology and restricting imports of less important consumer goods with a view to lowering down its import bill.

6. Procedural Difficulties

Different countries have evolved different procedures, practices and documents in order to regulate the export trade. Some of these such as foreign exchange control regulations and others have been formulated after keeping in view the national objectives and have posed certain procedural problems to exporters and importers.

7. Other Problems

Apart from the problems written above there are many other internal difficulties which restrict our export business and consequently affect the foreign exchange earnings.

They are:

(i) Business and industry have not recognised the importance of international business,

(ii) Inflation, high prices and black marketing are starting us in the face. If the situation persists it may put our price level beyond the means of our customers abroad, no matter how badly they need our export,

(iii) Our internal economy is being managed very badly in recent years. If it continues we cannot supply our own essential need. What to say about supply to other nations,

(iv) Poor business ethics is also responsible for our international business.

Provident fund is governed by the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (EPF & MP Act 1952).

It extends to whole of India except the state of Jammu and Kashmir. It is applicable to every establishment which is a factory engaged in any industry specified in Schedule I and in which 20 or more persons are employed; and such other class of establishments which the Central Government may, by notification in the Official Gazette, specify in this behalf.

An establishment to which this Act applies shall continue to be governed by this Act notwithstanding that the number of persons employed therein at any time falls below twenty.

• Eligible to become memberAll employees are eligible for becoming the member of PF who is employed in an establishment (includes employees employed through contractors, daily rated, piece rated, temporary, casual etc.).

“Excluded employees” need not be enrolled as PF members.

Excluded employees are:

a) Employee who drawing the wages (Basic + DA + Cash value of food concession) above Rs.15000/-as on the date of joining the establishment.(If the ‘wages’ of an employee is increased beyond Rs.15000 during the course of employment and after becoming a member of Employees’ Provident Fund, such employees are not to be treated as excluded employees. In such cases his contribution may be restricted to his wages up-to Rs.15000/-.

b) Employees whose Employees’ Provident Fund Accounts were once fully settled after attaining 55 years of Age or on permanent settlement abroad.

• Employees drawing wages above Rs.15000/- can also become a member of the Fund, if the employer and employee give a ‘joint declaration’ to the Regional Provident Fund Commissioner.
• Employees may voluntarily opt to contribute beyond the wage ceiling of Rs.15,000/- (i.e. up-to his ‘wages’). In such cases, an employer is not required to pay his own share of contribution above the wage ceiling of Rs.15,000/-.

Contribution

• The contribution which shall be paid by the employer to the Provident fund shall be 12% / 10% * of the basic wages, dearness allowance and retaining allowance (if any) for the time being payable to each of the employees (whether employed by him directly or by or through a contactor) and the employee’s contribution shall be equal to the contribution payable by the employer.

*10 % in case of certain establishments (Jute, Beedi, Bricks, Coir industry, Gaur gum industries) and also to any establishment which employs less than 20 persons.

• Basic Wages means all emoluments which are earned by an employee while on duty or on leave or on holidays with wages in either case, in accordance with the terms of the contract of employment and which are paid or payable in cash to him, but does not include–

(i)  The cash value of food concession;

(ii) Any DA, HRA, overtime allowance, bonus, commission or any other similar allowance payable to the employee;

(iii) any presents/gifts made by the employer;

• Employer shall pay the amount of contribution within 15 days of the close of every month pay to the PF Authority which is authorized for collection on account of contributions and administrative charge.
• Interest on PF contribution @8.50 % PA for the FY 2019-20.

For better understanding

We can say, Gross wages – [Canteen charges – DA – HRA -Overtime allowance – bonus- commission – any gift from employer] = Basic Wages

While for computing the amount on which PF calculated:

Basic Wages + [DA] + [Retaining allowances (allowances paid to all employees)]

Tax is a financial charge or levy imposed by a government on individuals, businesses, or other entities to fund public expenditures and government activities. It is a compulsory contribution that citizens and businesses are required to pay, and it is typically based on their income, profits, property, transactions, or other measurable factors. The primary purpose of taxation is to generate revenue for the government to fund public services and infrastructure, such as education, healthcare, defense, and public utilities.

Governments use taxation not only as a source of revenue but also as a tool to regulate economic activities, redistribute wealth, and achieve social and economic objectives. Taxation can take various forms, including income taxes, corporate taxes, property taxes, sales taxes, and customs duties, among others.

The tax system is often complex, with different types of taxes and various regulations governing their assessment and collection. Tax codes and laws vary between countries and are subject to change, reflecting the evolving needs and priorities of governments. Understanding taxation is crucial for individuals, businesses, and policymakers alike, as it plays a significant role in shaping economic policies and influencing individual and corporate behavior.

Features:

• Government Levy:

Tax is a mandatory financial charge imposed by the government on individuals, businesses, or other entities to fund public expenditures and government functions.

• Compulsory Contribution:

Tax is a compulsory contribution levied on individuals and businesses by the government to finance public services and infrastructure.

• Revenue Generation:

Tax is a primary source of revenue for the government, collected to fund public projects, services, and administrative functions.

• Wealth Redistribution:

Tax can be seen as a mechanism for redistributing wealth within a society, with progressive tax systems aiming to impose higher rates on those with higher incomes to reduce economic inequality.

• Economic Regulation:

Taxation serves as a tool for economic regulation, influencing consumer behavior, investment decisions, and overall economic activity.

• Social Engineering:

Some argue that taxes are a form of social engineering, as they can be used to encourage or discourage certain behaviors (e.g., tax incentives for environmentally friendly practices).

• Statutory Obligation:

Tax is a statutory obligation, meaning individuals and businesses are legally required to pay taxes as determined by the tax laws of a particular jurisdiction.

• Transaction Cost:

Tax can also be viewed as a transaction cost imposed on economic activities, affecting the cost and profitability of transactions.

• Civil Duty:

Some people see paying taxes as a civic duty, contributing to the overall well-being of society by supporting essential public services.

• Source of Public Finance:

Tax is a fundamental source of public finance, enabling the government to fulfill its responsibilities and obligations to the citizens.

Different Perspectives:

• Taxpayer’s Perspective:

For an individual taxpayer, tax might be seen as a financial obligation, a portion of their income that is required to be contributed to the government to support public services and infrastructure.

• Business Owner’s Perspective:

From the standpoint of a business owner, tax could be viewed as a cost of doing business, impacting profitability and influencing decisions such as pricing, investment, and expansion.

• Government’s Perspective:

From the government’s viewpoint, tax is a crucial source of revenue used to finance public goods and services, implement policies, and maintain the overall functioning of the state.

• Economist’s Perspective:

Economists may define tax as a tool for fiscal policy, a means of influencing the economy by adjusting tax rates to manage inflation, encourage or discourage spending, and address economic imbalances.

• Social Scientist’s Perspective:

Social scientists might define tax as a mechanism for social justice, helping to address income inequality by redistributing wealth and funding social programs that benefit the broader population.

• Tax Lawyer’s Perspective:

From a tax lawyer’s standpoint, tax is a legal obligation defined by complex statutes and regulations. Their focus may include advising clients on compliance, deductions, and legal strategies to minimize tax liabilities.

• Political Activist’s Perspective:

Political activists may see tax as a tool for advocacy, calling for changes in tax policy to address issues such as wealth inequality, environmental concerns, or social justice.

• International Organization’s Perspective:

International organizations like the International Monetary Fund (IMF) or the World Bank may define tax as a critical element in a country’s economic development and financial stability.

• Tax Policy Analyst’s Perspective:

Tax policy analysts may view tax as a policy instrument, analyzing its impact on behavior, economic growth, and societal well-being to recommend improvements or changes in tax structures.

• Average Citizen’s Perspective:

For the average citizen, tax could be seen as both a financial burden and a means of contributing to the common good, supporting public services such as education, healthcare, and infrastructure.

Types:

Everyone who earns or gets an income in India is subject to income tax. Your income could be salary, pension or could be from a savings account that’s quietly accumulating a 4% interest. Even, winners of ‘Kaun Banega Crorepati’ have to pay tax on their prize money. For simpler classification, the Income Tax Department breaks down income into five heads:

Taxpayers and Income Tax Slabs

Taxpayers in India, for the purpose of income tax includes:

• Individuals, Hindu Undivided Family (HUF), Association of Persons(AOP) and Body of Individuals (BOI)
• Firms
• Companies

Each of these taxpayers is taxed differently under the Indian income tax laws. While firms and Indian companies have a fixed rate of tax of 30% of profits, the individual,HUF, AOP and BOI taxpayers are taxed based on the income slab they fall under. People’s incomes are grouped into blocks called tax brackets or tax slabs. And each tax slab has a different tax rate. In India, we have four tax brackets each with an increasing tax rate.

• Income earners of up to 2.5 lakhs
• Income earners of between 2.5 lakhs and 5 lakhs
• Income earners of between 5 lakhs and 10 lakhs
• Those earning more than Rs 10 lakhs

Exceptions to the Tax Slab

One must bear in mind that not all income can be taxed on slab basis. Capital gains income is an exception to this rule. Capital gains are taxed depending on the asset you own and how long you’ve had it. The holding period would determine if an asset is long term or short term. The holding period to determine nature of asset also differs for different assets. A quick glance of holding periods, nature of asset and the rate of tax for each of them is given below.

Fill in the Blank Types

1. The probability of completing the project can be estimated based upon the ….Normal distribution curve.
2. In the initial stage of the project the probability of completing the project is….Low
3. The entire process of a project may be considered to be made up on number of sub process placed in different stage called the….Work Breakdown Structure (WBS)
4. Each component of the software product is separately estimated and the results aggregated to produce an estimate for the overall job….Bottom-up
5. Tool used for comparison of the proposed project to complete projects of a similar nature whose costs are known…..Analogy
6. Following are the characteristics of Project Mindset…..Time, Responsiveness, Information sharing, Processes, structured planning
7. Following is (are) the component(s) of risk management…..Risk Assessment, Risk Control, Risk Ranking
8. “Devising and maintaining a workable scheme to accomplish the business need” is…..Planning process
9. Controlling the changes in the project may affect….The progress of the project, Stage cost, Project scope

• The tool(s) for changing a process…..Change Management System (CMS), Configuration Management (CM)
• A Project is a set of activities which are networked in an order and aimed towards achieving the goals of a project.
• Resources refers to…. Manpower, Machinery, Materials
• Developing a technology is an example of…..Project
• The project life cycle consists of…..Understanding the scope of the project, Objectives of the project, Formulation and planning various activities.
• The responsibilities of the project manager…..Budgeting and cost control, Allocating resources, tracking project expenditure
• The phases of Project Management Life Cycle: Analysis and evaluation, Marketing, Design, Inspection, testing and delivery
• Design phase consist of: Input received, Output received

18. Project performance consists of…Time, Cost, and Quality
19. Five dimensions that must be managed on a project: Features, Quality, Cost, Schedule, Staff
20. Resource requirement in project becomes constant while the project is in its 80% to 95% progress stage.

Choose One Type

Q. Which of these is not one of the constraints of a project?

1. Scope
2. Resources
3. Team
4. Budget

Q. Which of the following is not correct about initial phase of a project?

1. The cost associated at the beginning of the project is highest.
2. Stakeholders have maximum influence during this phase
3. The highest uncertainty is at this stage of the project.
4. All the above statements are correct.

Q. The project you are managing has nine stakeholders. How many channel of communications are there between these stakeholders?

1. 9
2. 8
3. 45
4. 36

Ans: (9*8) / 2 = 36

Q. Which of the following is not an example of formal communication?

1. Contract
2. email
3. Project status report
4. Status meeting

Q. Project with a total funding of Rs. 100,000 finished with a BAC value of Rs. 95,000. What term can BEST describe the difference of $5,000?

1. Cost Variance
2. Management Overhead
3. Management Contingency Reserve
4. Schedule Variance

Q. If the Earned Value is equal to Actual Cost, it means:

1. Project is on budget and on schedule
2. Schedule Variance Index is 1
3. There is no schedule variance
4. There is no cost variance

Comment:  EV – AC = Cost Variance. Therefore if EV = AC, the Cost Variance is zero (i.e. Project is on budget (but not necessarily on schedule, as there is not enough information on schedule variance)

Q. Which of the following is the most important element of Project Management Plan that is useful in HR Planning process:

1. Risk Management activities
2. Quality Assurance activities
3. Activity Resource requirements
4. Budget Control activities

Comment:  Activity Resource requirements is a primary input to HR Planning. It is used to determine the human resource needs of the project.

Q. Which of the following types of Organizational Charts can be BEST used to track project costs:

1. Hierarchical-type Organizational Chart
2. Organizational Breakdown Structure
3. Resource Breakdown Structure
4. Responsibility Assignment Matrix

Comment: RBS can be aligned with Organization’s accounting system

Q. Process Analysis is a function of:

1. Performance Analysis
2. Quality Metrics
3. Process Improvement Plan
4. Quality Improvement Plan

Q. Root Cause Analysis relates to:

1. Process Analysis
2. Quality Audits
3. Quality Control Measurements
4. Performance Measurements

Q A planning phase for an engineering component generated 80 engineering drawings. The QA team randomly selected 8 drawings for inspection. This exercise can BEST be described as example of:

1. Inspection
2. Statistical Sampling
3. Flowcharting
4. Control Charting

Q. Amit has joined as the Project Manager of a project. One of the project documents available to Andrew lists down all the risks in a hierarchical fashion. What is this document called?

1. Risk Management Plan.
2. List of risks.
3. Monte Carlo diagram.
4. Risk Breakdown Structure.

Comment:  Hierarchical description of risks is called Risk Breakdown structure.

Q. During which stage of Risk planning are risks prioritized based on probability and impact?

1. Identify Risks
2. Plan Risk responses
3. Perform Qualitative risk analysis
4. Perform Quantitative risk analysis

Comment:  Risk probability and impact are defined during Qualitative risk analysis

Q. Activity Definition is typically performed by which of the following:

1. Project Manager who created the WBS
2. Project Team Members responsible for the work package
3. Project Officer
4. Project Stakeholder

Q. Which of the following does NOT generate changes to the Project documents:

1. Define Activities
2. Sequence Activities
3. Estimate Activity Resources
4. Estimate Activity Durations

Q. Which of the following may generate a milestone list:

1. Define Activities
2. Sequence Activities
3. Estimate Activity Resources
4. Estimate Activity Durations

Q. Schedule activity may begin 10 days before the predecessor activity finishes. This is an example of:

1. Finish-to-Start
2. Start-to-Finish
3. Start-to-Start
4. Finish-to-Finish

Q. Ram Consultancy is planning to buy ten desktops for Rs. 45000 each from a leading computer store. Which type of contract will get signed in this case?

1. Purchase Order
2. Cost plus Fee
3. Fixed cost
4. Time and Material

Q. Radha is a Project Manager. She is coordinating a bidder conference to allow vendors to get clarification on the work that needs to be performed. Which phase of Project Management is in progress?

1. Conduct Procurements
2. Plan Procurements
3. Control Procurements
4. Close Procurements

Comment: During the Conduct Procurements process, bidders can clarify their doubts using bidder conference.

Q. The process of Control Procurements falls under which process group

1. Planning
2. Closing
3. Monitoring and Control
4. Executing

Comment: Control procurement is part of Monitoring and Control process group

Sufficient and reliable information is a pre-requisite for proper decision making, be it domestic business or international marketing.

Viewed in a broad sense, the general subject of international marketing intelligence includes the collection, processing, analysis and interpretation of all types of information, from all available sources, to aid business management in making international marketing decision.

Proper business intelligence is essential to make all the series of strategic decisions in international marketing viz., international marketing decision, market selection decision, entry and operating decision, marketing mix decision and organization decision.

Information Requirements:

The broad areas of information requirement for international marketing are the following.

Different types of information are needed to take the critical decision as to whether to go international or not. These include information about the prospects of the foreign markets, competition, other characteristics o the foreign market, domestic market prospects etc.

Information on a large number of factors is needed for evaluation and selection of the markets. There are many general factors like political and economic stability, currency stability, government policy and regulations, etc about which information is required. Market selection also requires specific information about the product or industry concerned like the demand trends, government policy and regulations, competitive situation etc.

The includes consumer tastes and preference about the product like unit size/ quantity, shape, color, product form, packaging etc; mode, time, frequencies and rates of consumption; purpose of use/uses etc; regulatory aspects and so on.

Price related information needed include prevailing price ranges, price trends, margins, pricing practices, government policies and regulations, price elasticity of demand, role of price as a strategic marketing variable etc.

For formulating the promotion strategy data on many aspects like media availability and effectiveness, Government regulations, customs/practices of promotion in the market concerned, competitive behavior etc are required.

This includes information on factors like channel alternatives and characteristics, relative effectiveness of different channels, customs and practices of the trade, power and influence of channel members etc.

A company will also need information about the competitive environment including the extent of competition, major competitors, relative strengths and weaknesses of competitors, strategies and behavior of competitors etc.

There are a number of export promotion organizations in India which are important sources of information pertaining to foreign markets. While some of these are general others are product specific. Most of them have periodic publications which disseminate useful information. Several of them have also brought out publications intended to provide general guidance and education to exporters. They also carry out market potential studies and other relevant studies.

These organizations include India Trade Promotion Organization (ITPO), State Trading Corporations, Chambers of Commerce, Confederation of Indian Industry (CII), FIEO, and Export Promotion Councils/Commodity Boards / Export Development Authorities. Organizations like the Indian Institute of Packaging, Export Inspection Council are also important sources for certain types of information. The Exim Bank has carried out a number of market studies. Although the Exim Bank is primarily a financial institution, it is also an important source of guidance for exporters.

The offices of the consulates/embassies in India of foreign governments provide a lot of information about the respective countries. Educational and research organizations like Indian Institute of Foreign Trade, Management Schools/Departments of Universities etc, could be useful to exporters. Valuable information can sometimes be obtained from other exporters, export houses and trading houses, banks, ECGC etc. The international Trade Centre, Geneva is a very important source of information and assistance to exporters, particularly from developing countries

Offices of the Indian embassies abroad and concerned departments/organizations of the foreign governments may be approached for certain types of information.

Several governments, like that of Japan, give a lot of importance to import development and they are very much interested in providing the information relevant to importing to these countries. The Japan External Trade organization (JETRO), for example , has brought out publications entitled Access to Japan’s Import Market pertaining to every important item of Japan. These publications give a lot of information related to the import trade of different products.

There are also certain international organizations related to specific products. Organizations like the World Bank also make studies and reports regarding certain products. The World Trade Organization (WTO) is an important source for different types of information.

In many case a lot of information can be obtained from publications like journals and research publications “national, foreign and international. As mentioned earlier, the various export promotion organizations have periodical and other publications. Besides these, there are a number of general and specialized publications carrying useful information for the exporters. Similarly, there are a number of foreign and international publications, general and product specific.

Categories for Information Requirements

Importance of identifying the problem:

• Managers are seldom criticized on the grounds that they cannot solve the problems.
• This they can do most of the times.
• But they solve the wrong problem.
• The managers are often better at finding the right answers than asking themselves the right questions.
• The real problem in management is that executives are likely to come up with right answer to wrong problem.

To improve decision making managers need to focus to first understand the environment and issues properly. If their understanding of the issues is correct and comprehensive then they are much more likely to be able to make correct decisions with respect to the issues.

Difficulties in rational decision making:

• Managers’ capacity for information processing is significantly limited.
• Managers tend to follow what is called the law of small numbers, whereby even small samples are viewed as representative of the population from which they are drawn, and they are likely to underestimate the errors and unreliability inherent in such small samples.
• They are also subject to the availability fallacy, whereby they are led to draw conclusions on the evidence that they have because it is available rather than because it is relevant.
• There is abundant evidence that managers overestimate their own abilities and suffer from illusions of control.
• A common way manager obtain confidence about a decision is by structuring thesis.

Marketing intelligence must drive marketing research because in ever- changing competitive market place more emphasis will be on determining where to move the business? and why?, and less on how to get there.

Categories for global marketing information requirements:

Managers need a vast variety of information for successfully operating in international markets. In the following are described seven categories in which managers need timely and comprehensive information to make appropriate business decisions.

• Marketing Mix: To add, delete, change products, stage of product life cycle, marketing/sales campaign, distribution channel selection, price/demand and profitability analysis.
• Competitor information: Corporate, business, functional strategies, market share.
• Foreign exchange info: Interest rates, exchange rates, balance of payment, attractiveness of a country’s currency, and expectations of analysts.
• Market potential: Demand estimates, consumer behavior, review of products, channels, communication media, and market performance.
• Prescriptive info: Laws, regulations, rulings concerning taxes, earnings, dividends in both home & host countries.
• Resource info: Availability of human, financial, information, physical resources.
• General conditions: Overall review of socio-cultural, political, technological environments.

1. Domestic Company

Market potential is limited to the home country. Production and marketing facilities are located at home only. Surplus may or may not be exported. There are no overt efforts to develop foreign markets. It may add new product lines, serve new local markets but whole planning is limited to national markets only.

Features of Domestic Company

• Their focus remains with domestic market.
• Their productions facilities remain based in home country.Their analysis is focused on the national market.
• They do not think globally and avoid taking risk in going global.
• Their top management may have traditional kind of business management competency and less global expertise.
• They perceive that there is risk in expanding into global market and thus they try to play safe and satisfied with whatever gains they are getting in domestic market.

2. International Company

Some ambitious efficient domestic companies after going beyond their domestic marketing capacities start thinking of expanding their operations in International Markets. The main strategies for entering international market is:

• Off-shoring/global outsourcing (seeking cheaper source of raw material or labour)
• Exporting
• Licensing
• Franchising
• Joint Ventures/Acquisitions
• Direct Investments

Even though they think of international markets, still they are of ethnocentric or domestic oriented. These companies adopt the strategy of locating the branches of their companies in other countries and practice the same domestic operations in foreign markets, including the same promotion, price, product etc. policies.

Features of International Company

• Focus on going beyond, domestic
• Their management remains ethnocentric with a vision to expand internationally. They extend their domestic products, domestic prices and other business practices to foreign countries.
• They keep their marketing mix constant and extend their operations to new countries.
• Their management style remains centralized for their home nation and extended top down to the overseas market country.

3. Multinational Company

After sometime, international companies realize that the domestic model and practices adopted through extension policies do not serve the purpose. The foreign customers may not prefer the products that are sold in domestic market. Hence, these companies respond to the needs of different customers in different countries and produce such goods and services  that will satisfy them.

Features of Multinational Company

• Companies when they spread their wings to more nations become multinational companies.
• Sooner or later they realize that they have to change their marketing mix according to the foreign market.
• This can also be termed as multi domestic, in which different strategies are adopted for different market.
• The management of such companies remains decentralized and even production may be in the host country.
• Performance evaluation is done at different host countries.

4. Global

The global company adopts global strategy for marketing its products. It may produce either in the home country or in any other single country and market its products throughout the world. It may also produce the products globally and market them domestically.

Features of Global

• Such companies have a global marketing strategy.
• They either produce in home country or in a single country and focus marketing globally.
• They adapt to the market conditions according to the foreign market.
• Their performance evaluation is done worldwide.

5. Transnational Company

Transnational Company operates at the global level by way of utilizing global resources to serve the global markets. It has geocentric orientation and has integrated network. Its key assets are dispersed and every sub-unit of the company contributes towards achievement of the company objectives. It produces best quality raw materials from the cheapest source in the world, process them in the country wherever it is economical and sells the finished products in those markets where prices are favourable.

Feature:

• Transnational companies have a geocentric approach, which means they think globally and act locally.
• Transnational companies collect information worldwide and scan it for use beyond geographical boundaries.
• The vision of such to grow more in a global way.
• The R&D,management,product development are shared worldwide.
• Their human resources procurement and development remains globally.

Globalization is the word used to describe the growing interdependence of the world’s economies, cultures, and populations, brought about by cross-border trade in goods and services, technology, and flows of investment, people, and information. Countries have built economic partnerships to facilitate these movements over many centuries. But the term gained popularity after the Cold War in the early 1990s, as these cooperative arrangements shaped modern everyday life. This guide uses the term more narrowly to refer to international trade and some of the investment flows among advanced economies, mostly focusing on the Asia and Europe.

The wide-ranging effects of globalization are complex and politically charged. As with major technological advances, globalization benefits society as a whole, while harming certain groups. Understanding the relative costs and benefits can pave the way for alleviating problems while sustaining the wider payoffs.

Globalization or globalisation is the process of interaction and integration among people, companies, and governments worldwide. As a complex and multifaceted phenomenon, globalization is considered by some as a form of capitalist expansion which entails the integration of local and national economies into a global, unregulated market economy. Globalization has grown due to advances in transportation and communication technology. With the increased global interactions comes the growth of international trade, ideas, and culture. Globalization is primarily an economic process of interaction and integration that’s associated with social and cultural aspects. However, conflicts and diplomacy are also large parts of the history of globalization, and modern globalization.

Features of Globalization

1. Liberalization

It stands for the freedom of the entrepreneurs to establish any industry or trade or business venture, within their own countries or abroad.

2. Free trade

It stands for free flow of trade relations among all the nations. It stands for keeping business and trade away from excessive and rigid regulatory and protective rules and regulations.

3. Globalization of Economic Activity

Economic activities are be governed both by the domestic markets and also the world market. It stands for the process of integrating the domestic economies with the world economy.

4. Liberalization of Import-Export System

It stands for liberalization of the import-export activity involving a free flow of goods and services across borders.

5. Privatization

Globalization stands for keeping the state away from ownership of means of production and distribution and letting the free flow of industrial, trade and economic activity among the people and their corporations.

6. Increased Collaborations

Encouraging the process of collaborations among the entrepreneurs with a view to secure rapid modernization, development and technological advancement, is a feature of Globalization.

7. Economic Reforms

Encouraging fiscal and financial reforms with a view to give strength to free trade, free enterprise and market forces of the world. Globalisation stands for integration and democratisation of the world’s culture, economy and infrastructure through global investments.

Globalization Background

The progress of industrial revolution in the 20th century was accompanied by a replacement of the police state by a welfare state. The state came to be an active actor in the economic life of the society. In the socialist states, state ownership of means of production and distribution became the rule.

State-controlled command economies were operationalised and regarded as the best means for rapid socio-economic development. In several other countries, nationalization of key industries and enterprises was undertaken with a view to provide goods and services to the people. State began performing several socio-economic functions.

India, like several other new states, adopted a mixed economic model. Ownership and control over key industries was entrusted to the public sector. It was deemed essential for securing a better mobilisation of resources and for providing better services to the people. State regulation of economy and industry was practiced and the public sector was patronised by the state. Private sector was given a lesser role in the economic system.

However, the experience with the working of command economy and mixed economy models was found to be inadequate slow and unproductive. By 1980s economies of socialist countries began collapsing. Around 1985, Indian economy also began showing big strains. Indian public sector now appeared to be a liability and foreign exchange reserves came to be in very bad shape. Industrial growth became very slow and inflation assumed alarming proportions.

In 1990s, the world witnessed the collapse of socialist economies, in particular the Soviet economy and political system. In 1991, the USSR suffered a disintegration. The weaknesses of all socialist economies became fully clear and all socialist countries began witnessing a process of overthrow of socialist systems.

Liberalization of politics and economy came to be recognised as the necessity of the day. All countries of the world began realising the merits of the market economy, free trade, privatization, liberalization, delicensing and deregulation of trade, industry and business.

In July 1991, the Government of India decided to go in for liberalization of economy. A new economic policy was formulated and implemented with an emphasis new upon economic reforms. These were governed by the principles of liberalization, privatization, market economy, free trade, deregulation and delicencing. These reforms paved the way for initiating the process of liberalization and globalization of Indian economy. Similar changes were adopted by other states.

At the international level, all the states agreed to freely develop financial, business, trade and industrial relations among their people. Adoption of new trade and tariff agreement leading to the establishment of World Trade Organisation was made. Globalization became the order of the day.

In today’s time, all thanks to advancement in technology nothing or no business is restricted to one place, one city or even one country anymore. Everything is global. In the past few years e-commerce industry has taken a ride and has come to become the need of the hour. E-Commerce industry as a whole is evolving at a great pace and as for 2016 and 2017, it has already risen tremendously.

There are new trends emerging in this space, such as:

(1)  Moving to Mobile Commerce

As per a recent report, it is predicted that by the end of 2016 almost a third of the world’s population will have access to Smartphone. Having this feature has become more of a necessity. E-Commerce stores must fit in all screens in order to enhance customer experience or they may be losing on some serious business. As per recent Forbes study, 87 % of the gen-X people spend most of their time on digital devices every day than ever.

(2) Choose how you want to pay

Convenient and more payment options new businesses are emerging to facilitate new payment models to enhance online shopping experience. They aim not only to make wider options available but also to increase payment security for both buyers and sellers. In the past few years, many new models and gateways have emerged like e-wallets, Chip card readers, magnetic cards , EMV and cashback services.

(3) Multi Channel Model

Inspite of booming eCommerce market, retailers have come to an understanding that Omni Channel /Multiple channel is must for any business model. Though there has been a lot of buzz on online shopping comfort, in reality it has been recorded that many customers may surf net all day but at the end do need a brick and mortar store to make the final purchase. However, new technologies such as instore digital services are emerging to make the physical store experience better.

(4) Seamless Shopping experience

Many new features are being added by all companies to facilitate seamless shopping for example stores are now offering easy on the spot or online payments , easy wallets with discounts and coupons or unique store debit cards .

(5) Social Ecommerce

Retailers are adopting social media as their lead sales medium . Social network has come to play the most important role in the retail world lately , almost 40 % purchases are made because of social media handles . Thus , social network is sure expected to rise in the coming time.

(6) Quality rather than quantity

Retailers have come to an understanding that now having more variety will not win them customers, thus the focus has shifted to enhancing customized shopping experience by introducing new features. The emphasis is now being laid on unique online features like virtual trial rooms, zoom in pictures, 360 degree image view.

(7) Customer Relationship

With the increasing variety available the customer loyalty is now completely out of picture. It requires well integrated technology supporting easy payments and high tech shopping experience. The focus is now being shifted from discounts to better integrated technology services.

(8) Customer service

With the increasing online shopping, people are becoming more and more comfortable with the concept of choosing amongst great variety at the comfort of their own space anywhere, anytime 24/7 . Thus , there will be a rise in customer support service feature in the coming time .

(9) Smarter Customers

With more shopping and payment options than ever , customers are more informed and empowered now the stakes are much highe. It is utmost important to win their trust now than ever, but maintaining quality and logistics.

(10) Merging online and offline

It has become important to merge online /offline systems to facilitate easy working. A well integrated technology is crucial.

“Change is the essence of life” in order to survive and make a mark in today’s time retailers must be extremely flexible and mouldable towards the smart customers changing needs. It requires tools like social media monitoring , customer feedback & so on . It is the need today to stay upbeat with the changing trends and technology to stay long.