Chapter 11: International Business

Ans: Since the onset of the 'Financial Crisis' in 2008, the global economy has been on a slow development path, but it has just begun to show indications of recovery. In October 2017, the IMF predicted that global GDP growth will accelerate from 3.2 percent in 2016 to 3.6 percent in 2017, and then to 3.7 percent in 2018. Economic activity has increased in established market economies such as the United States, the United Kingdom, and Europe. There has been an increase in global demand, which is projected to continue. The economic performance of developing and emerging market economies has been uneven.

Investment demand has been driving the increase in global demand momentum. More precisely, since the second half of 2016, both consumer durables and capital goods output have increased. Global investment rebound, spearheaded by infrastructure and real estate investment in China; firming global commodities prices; and the end of an inventory cycle in the United States are some of the causes that have contributed to these developments.

India's development has been phenomenal, particularly since the turn of the century. The Indian economy has gone a long way since economic liberalisation, and it is now one of the world's fastest-growing major economies. While India's GDP grew at a slower pace from 2011 to 2013 due to the global economic slowdown, it grew at a solid rate of 7.5 percent from 2014 to 2016, far above other emerging and developing nations. With the implementation of the Goods and Services Tax and the demonetisation of higher currency notes in the recent year, important economic policy changes have occurred.

Overall, global growth is likely to contribute to the restoration of international trade, but downside risks, such as the potential adoption of protectionist trade policies by developed market economies around the world, are weighing on trade recovery. As a result, India and other developing market economies that rely on export-led growth must become more proactive in their support for globalisation and international commerce.

We need to alter our focus away from exporting what we can (or supply-based) and toward products that are in high demand globally. Exports could benefit greatly from a demand-based export basket diversification strategy. While India has made significant progress in recent years, it now faces an even more difficult global climate. Ensure that India repositions itself as a major engine of global economic growth is a difficult but achievable undertaking.

Ans: Following are the activities that promotes peace and harmony among nations:

• Cross-border marketing: Companies can contribute to peace through mobilising advertising efforts that bring people of different faiths and backgrounds together, as shown in the Coke Small World ads. One of their marketing campaigns, for example, used Coca-Cola vending machines with live video streams to connect people in Pakistan and India.

• Rewarding intercultural understanding: For global corporations like BMW, cross-cultural communication and cooperation are an important element of their everyday operations. The BMW Group gives an annual award for groups that propose innovative methods to intercultural understanding, including interfaith understanding and peace, in partnership with the UN Alliance of Civilizations. A Middle Eastern tour firm that offers fresh ideas to build bridges and bring civilizations together through joint Muslim-Jewish tourism in the Holy Lands is among the winners of this award.

• Fostering social entrepreneurs: The business environment provides a neutral ground for religious differences to give way to common concerns about business and economic development. For example, the Yola Innovation Machine in Adamawa State, Nigeria, works to combat extremism by assisting businesses and new entrepreneurs in conflict-affected areas. Similarly, Petrobras in Brazil encourages Afro-Brazilian company incubation, establishing models for how small businesses can benefit members of underrepresented ethno-religious communities, with a particular focus on women's development.
  
  

Ans: We are all aware that international trade has been popular for ages, and that all civilizations have conducted trade with various parts of the globe. Trading is necessary due to differences in resource availability and comparative advantage. No country can afford to stay isolated and self-sufficient in the current situation, where technology and innovation in all disciplines have thrown open borders to globalisation.

History since 16th Century

The history of international trades has been prevalent from the 16th and 17th centuries, when the barter system was in existence. The transition to liberalism began in the 18th century. During this time, Adam Smith, the father of economics, produced the classic book 'The Wealth of Nations' in 1776, in which he established the necessity of specialisation in production and placed international trade under the same umbrella. The Comparative Advantage Principle was developed by David Ricardo, and it still holds true today.

Government Policies

All of these economic ideas and principles have influenced each country's international trade strategies. Though, during the previous few centuries, governments have signed a number of pacts to progress toward free trade, in which countries do not impose taxes on imports and allow free movement of goods and services.

The Onset of 19th Century

The beginning of the nineteenth century saw a shift toward professionalism, which faded by the century's close. Around 1913, the western countries made a major shift toward economic liberty, removing quantitative limits and lowering customs taxes across the board. Gold was the universal monetary currency of exchange, and other currencies were easily convertible into it. It was simple to start a business anywhere and get work, and trade between countries was relatively unrestricted throughout this time.

First World War

The First World War altered the entire direction of global trade, with governments erecting barriers and implementing wartime controls. After World War II, it took up to five years to dismantle the wartime restrictions and restore trade to normalcy. However, the economic recession of 1920 shifted the balance of international commerce once more, and many countries saw their fortunes change due to currency fluctuations and depreciation, putting economic pressure on governments to adopt protective measures such as raising customs taxes and tariffs.

GATT

The need to relieve economic pressures and facilitate international trade between countries prompted the League of Nations to organise the World Economic Conference in May 1927, which brought together the world's most powerful industrial countries and resulted in the creation of the Multilateral Trade Agreement. This was followed in 1947 by the General Agreement on Tariffs and Trade (GATT).

Today, we have a far better grasp of international trade and the forces that influence it. The understanding and theories developed by economists based on natural resources available to various countries that give them a comparative advantage, economies of scale of large scale production, technology in terms of e-commerce as well as product life cycle changes in tune with technological advancements as well as financial market structures have guided the context of global markets.

Ans: The benefits are:

• Increased FDI in India:  More FDI is welcomed as the improved ease of doing business in India attracts a large amount of FDI.

• Boost economic growth: The Make in India programme has resulted in an increase in manufacturing and exports. Increased exports boost the economy, and India is slowly moving towards becoming a global manufacturing hub. Higher  manufacturing has also helped India's GDP and economic growth.

• A Shift from Foreign to Native Brands: Indians are drawn to international goods and ignore indigenous brands, resulting in a loss of revenue for indigenous producers. Indigenous items have started to gain respect in India as a result of Make in India, and producers have begun to profit.

• Making Business Easier: Make in India is an open call to producers from throughout the world. The government has lifted several limitations in order to invite as many firms as possible to come and manufacture in India.

• Inflow of capital: The Indian money has been spent in foreign countries since the beginning of capitalization. With the advent of Make in India, not only will the capital remain in India, but the country will also receive foreign currency. In a nutshell, India will not spend on other countries, but foreign countries would invest and pay wages in India.