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5. CHAPTER 5: Impact of Global Recession on Indian Market 34





The global business environment can be defined as the environment in different

sovereign countries, with factors exogenous to the home environment of the
organization, influencing decision making on resource use and capabilities. The
global business environment can be classified into the environment external to the
firm and the environment internal to the firm.

The external environment includes the social, political, economic, regulatory, tax,
cultural, legal, and technological environments. To function effectively and efficiently,
companies operating internationally must understand the social environment of the host
country they are operating in. Today there are thousands of MNCs which operate in many
parts of the globe. Such companies should acquaint themselves with the language and
culture of the country in which they are operating. Religion and its philosophies influence
the working habits of people, which in turn affect business
Values determine attitudes, which have a significant impact on the conduct of
international business. Social customs and manners differ from country to country.
MNCs need to understand them to conduct business smoothly in the countries in which
they operate. The diversity of languages used in different countries poses a problem in
ensuring effective communication between the employees of an MNC. Such companies
should be very careful when translating advertisements and other communication
The quality of education in the host country also plays a key role in determining the
prospects of an international business. Every company faces political constraints in the
form of antitrust laws, fair trade decisions, tax programs, minimum usage legislation,
pollution and pricing policies, administrative activities and many other actions, aimed at
protecting the consumers and the local environment. These laws, rules and regulations
affect a company’s profits. Every market is unique and consumption patterns change as
the wealth of consumers changes in various segments of the market.

Certain crucial macroeconomic trends have to be taken into consideration for strategic
planning. These include the growth of the Gross National Product (GNP), the volume of
trade, and the level of FDI. Every country in the world follows its own system of law. A
foreign company operating in a particular country has to abide by the country’s laws as
long as it is operating in that country. In order to monitor and control the behavior of
foreign businesses, host countries enact laws. The laws relating to the conduct of trade
take the form of tariffs, subsidies, quantitative restrictions, voluntary export restraint,
licensing, and administered protection. The regulatory environment relates to the factors
that dealing with the planning and promotion by governments; these may affect the
economic activities of a business or an organization.
Regulatory bodies exist both at the national and the international levels. The
technological environment comprises factors related to the materials and machines used
in manufacturing goods and services. The receptivity to new technology in organizations
and its adoption by consumers influence decisions made in an organization. The tax
system of a country influences the performance of an organization operating in that
country to a significant extent.


"The micro environment consists of the actors in the company's immediate environment"
that effect the performance of the company. These include the suppliers, marketing
intermediaries, competitors, customers, and publics. "The macro environment consists of
the larger societal forces that affect all the actors in the company's micro environment
namely, the demographic, economic, natural, technological, political and cultural forces".
It is quite obvious that the micro environmental factors are more intimately linked with
the company than the macro factors. The micro forces need not necessarily affect all the
firms in a particular industry in the same way. Some of the micro factors may be
particular to a firm. For example, a firm, which depends on a supplier, may have a
supplier environment, which is entirely different from that of a firm whose supply source
is different. When competing firms in an industry have the same microelements, the
relative success of the firms depends on their relative effectiveness in dealing with these


An important force in the microenvironment of a company is the supplier, i.e., those who
supply the inputs like raw materials and components to the company. The importance of
reliable source/sources of supply to the smooth functioning of the business is obvious.
Uncertainty regarding the supply or other supply constraints often compels companies to
maintain high inventories causing cost increases. It has been pointed out that factories in
India maintain indigenous stocks of 3-4 months and imported stocks of 9 months as
against an average of a few hours to two weeks in Japan.
Because of the sensitivity of the supply, many companies give high importance to vendor
development. Vertical integration, where feasible, helps solve the supply problem.
It is very risky to depend on a single because a strike, lock out or any other production
problem with that supplier may seriously affect the company. Similarly, a change in the
attitude or behavior ofthe supplier may also affect the company. Hence, multiple sources
ofsupply often help reduce such risks. The supply management assumes more importance
in a scarcity environment. "Company purchasing agents are learning how to "wine and
dine" suppliers to obtain favorable treatment during periods of shortages. In other words,
the purchasing department might have to "market" itself to suppliers".

As it is often, exhorted, the major task of a business is to create and sustain customers. A
business exists only because of its customers. Monitoring the customer sensitivity is,
therefore, a prerequisite for the business success. A company may have different
categories of consumers like individuals, households, industries and other commercial
establishments, and government and other institutions. For example, the customers of a
tyre company may include individual automobile owners, automobile manufacturers,
public sector transport undertakings and other transport operators.
Depending on a single customer is often too risky because it may place the company in a
poor bargaining position, apart from the risks of losing business consequent to the
winding up of business by the customer or due to the customer's switching over the

competitors of the company. The choice of the customer segments should be made by
considering a number of factors including the relative profitability, dependability,
stability of demand, growth prospects and the extent ofcompetition.

A firm's competitors include not only the other firms, which market the same or similar
products, but also all those who compete for the discretionary income of the consumers.
For example, the competition for a company's televisions may come not only from other
T.V. manufacturers but also from two-wheelers, refrigerators, cooking ranges, stereo sets
and so on and from firms offering savings and investment schemes like banks, Unit Trust
of India, companies accepting public deposits or issuing shares or debentures etc. This
competition among these products may be described as desire competition as the primary
task here is to influence the basic desire of the consumer. Such desire competition is
generally very high in countries characterized by limited disposable incomes and many
unsatisfied desires (and, of course, with many alternatives for spending/investing the
disposable income). If the consumer decides to spend his discretionary income on
recreation (or recreation cum education) he will still confronted with a number of
alternatives choose from like T.V., stereo, two-in-one, three -in-one etc. The competition
among such alternatives, which satisfy a particular category of desire, is called generic
competition. If the consumer decides to go in for a T.V. the next question is which form
of the T.V. - black and white or colour, with remote-control or without it etc. In other
words, there is a product form competition. Finally the consumer encounters the brand
competition i.e., the competition between the different brands ofthe same product form.
An implication of these different demands is that a marketer should strive to create
primary and selective demand for his products.

The immediate environment of a company may consist of a number of marketing
intermediaries which are "firms that aid the company in promoting, selling and
distributing its goods to final buyers".

The marketing intermediaries include middlemen such as agents and merchants who
"help the company find customers or close sales with them", physical distribution firms
which "assist the company in stocking and moving goods form their origin to their
destination" such as warehouses and transportation firms; marketing service agencies
which "assist the company in targeting and promoting its products to the right markets"
such as advertising agencies, marketing research firms, media firms and consulting firms;
and financial intermediaries which finance marketing activities and insure business risks.
Marketing intermediaries are vital links between the company and the final consumers. A
dislocation or disturbance of this link, or a wrong choice of the link, may cost the
company very heavily. Retail chemists and druggists in India once decided to boycott the
products of a leading company on some issue such as poor retail margin. This move for
collective boycott was, however, objected to by the MRTP commission; but for this
company would, perhaps, have been in trouble.

A company may encounter certain publics in its environment. "A public is any group that
has an actual or potential interest in or impact on an organisation's ability to achieve its
interests. Media publics, citizens action publics and local publics are some examples.
For example, one ofthe leading companies in India was frequently under attack by the
media public, particularly by a leading daily, which was allegedly bent on bringing down
the share prices of the company by tarnishing its image. Such exposures or campaigns by
the media might even influence the government decisions affecting the company. The
local public also affects many companies. Environmental pollution is an issue often taken
up by a number oflocal publics. Actions by local publics on the issue have caused some
companies to suspend operations and/or take pollution abatement measures.


It is wrong to think that all publics are threats to business. Some ofthe actions of the
publics may cause problems for companies. However, some publics are an opportunity
for the business. Some businessmen, for example, regard consumerism as an opportunity

for the business. The media public may be used to disseminate useful information.
Similarly, fruitful cooperation between a company and the local publics may be
established for the mutual benefit of the company and the local community.


As stated earlier, a company and the forces in its microenvironment operate in a larger
macro environment of forces that shape opportunities and pose threats to the company.
The macro forces are, generally, more uncontrollable than the micro forces. A sketch
picture of the important macro-environmental forces is given below.

Economic conditions, economic policies and the economic system are the important
external factors that constitute the economic environment of a business.
The economic conditions of a country-for example, the nature of the economy, the stage
of development of the economy, economic resources, the level of income, the distribution
of income and assets, etc- are among the very important determinants of business
strategies. In a developing country, the low income may be the reason for the very low
demand for a product. The sale of a product for which the demand is income-elastic
naturally increases with an increase in income. But a firm is unable to increase the
purchasing power of the people to generate a higher demand for its product. Hence, it
may have to reduce the price of the product to increase the sales. The reduction in the
cost of production may have to be effected to facilitate price reduction. It may even be
necessary to invent or develop a new low-cost product to suit the low-income market.
Thus Colgate designed a simple, hand-driven, inexpensive ($10) washing machine for
low-income buyers in less developed countries. Similarly, the National Cash Register
Company took an innovative step backward by developing a crank-operated cash register
that would sell at half the cost of a modern cash register and this was well received in a
number of developing countries.
In countries where investment and income are steadily and rapidly rising, business
prospects are generally bright, and further investments are encouraged. There are a
number of economists and businessmen who feel that the developed countries are no

longer worthwhile propositions for investment because these economies have reached
more or less saturation levels in certain respects.

In developed economies, replacement demand accounts for a considerable part of the

total demand for many consumer durables whereas the replacement demand is negligible
in the developing economies.
The economic policy ofthe government, needless to say, has a very great impact on
business. Some types or categories of business are favorably affected by government
policy, some adversely affected, while it is neutral in respect of others. For example, a
restrictive import policy, or a policy of protecting the home industries, may greatly help
the import-competing industries. Similarly, an industry that falls within the priority
sector in terms of the government policy may get a number of incentives and other
positive support from the government, whereas those industries which are regarded as
inessential may have the odds against them.
In India, the government's concern about the concentration ofeconomic power restricted
the role ofthe large industrial houses and foreign concerns to the core sector, the heavy
investment sector, the export sector and backward regions. The monetary and fiscal
policies, by the incentives and disincentives they offer and by their neutrality, also affect
the business in different ways. An industrial undertaking may be able to take advantage
of external economies by locating itself in a large city; but the Government of India's
policy was to discourage industrial location in such places and constrain or persuade
industries undertaking, a backward area location may have many disadvantages.
However, the incentives available for units located in these backward areas many
compensate them for these disadvantages, at least to some extent. According to the
industrial policy of the Government of India until July 1991, the development of 17 of the
most important industries were reserved for the state. In the development of another 12
major industries, the state was to play a dominant role. In the remaining industries, co-
operative enterprises, joint sector enterprises and small scale units were to get preferential
treatment over large entrepreneurs in the private sector. The government policy, thus
limited the scope of private business. However, the new policy ushered in since July 1991
has wide opened many of the industries for the private sector. The scope of international

business depends, to a large extent, on the economic system. At one end, there are the
free market economies or capitalist economies, and at the other end are the centrally
planned economies or communist countries. In between these two are the mixed
economies. Within the mixed economic system itself, there are wide variations. The
freedom of private enterprise is the greatest in the free market economy, which is
characterized by the following assumptions:
(i) The factors of production (labor, land, capital) are privately owned,
and production occurs at the initiative of the private enterprise.
(ii) Income is received in monetary form by the sale of services of the
factors of production and from the profits of the private enterprise.
(iii) Members of the free market economy have freedom of choice in so
far as consumption, occupation, savings and investment are
(iv) The free market economy is not planned controlled or regulated by
the government. The government satisfies community or collective
wants, but does not compete with private firms, nor does it tell the
people where to work or what to produce.
The completely free market economy, however, is an abstract system rather than a real
one. Today, even the so-called market economies are subject to a number of government
regulations. Countries like the United States, Japan, Australia, Canada and member
countries of the EEC are regarded as market economies. The communist countries have,
by and large, a centrally planned economic system. Under the rule of a communist or
authoritarian socialist government, the state owns all the means of production,
determines the goals of production and controls the economy according to a central
master plan. There is hardly any consumer sovereignty in a centrally planned economy,
unlike in the free market economy. The consumption pattern in a centrally planned
economy is dictated by the state.
China, East Germany Soviet Union, Czechoslovakia, Hungary, Poland etc., had centrally
planned economies. However, recently several of these countries have discarded
communist system and have moved towards the market economy. In between the
capitalist system and the centrally planned system falls the system of the mixed economy,

under which both the public and private sectors co-exist, as in India. The extent of state
participation varies widely between the mixed economies. However, in many mixed
economies, the strategic and other nationally very important industries are fully owned or
dominated by the state. The economic system, thus, is a very important determinant of
the scope of private business. The economic system and policy are, therefore, very
important external constraints on business.


Political and government environment has close relationship with the economic system
and economic policy. For example, the communist countries had a centrally planned
economic system. In most countries, apart from those laws that control investment and
related matters, there are a number of laws that regulate the conduct of the business.
These laws cover such matters as standards of products, packaging, promotion etc.
In many countries, with a view to protecting consumer interests, regulations have become
stronger. Regulations to protect the purity of the environment and preserve the ecological
balance have assumed great importance in many countries.
Some governments specify certain standards for the products (including packaging) to
be marketed in the country; some even prohibit the marketing of certain products. In
most nations, promotional activities are subject to various types of controls. Media
advertising is not permitted in Libya. Several European countries restrain the use of
children in commercial advertisements. In a number of countries, including India, the
advertisement of alcoholic liquor is prohibited. Advertisements, including packaging, of
cigarettes must carry the statutory warning that "cigarette smoking is injurious to
health". Similarly, advertisements of baby food must necessarily inform the potential
buyer that breast-feeding in the best. In countries like Germany, product comparison
advertisements and the use of superlatives like 'best' or 'excellent' in advertisements is
not allowed In the United States, the Federal Trade Commission is empowered to
require a company to provide the quality, performance or comparative prices ofits

The socio-cultural fabric is an important environmental factor that should be analysed
while formulating business strategies. The cost of ignoring the customs, traditions,
taboos, tastes and preferences, etc., of people could be very high.
The buying and consumption habits of the people, their language, beliefs and values,
customs and traditions, tastes and preferences, education are all factors that affect
For a business to be successful, its strategy should be the one that is appropriate in the
socio-cultural environment. The marketing mix will have to be so designed as best to suit
the environmental characteristics of the market. In Thailand, Helene Curtis switched to
black shampoo because Thai women felt that it made their hair look glossier. Nestle, a
Swiss multinational company, today brews more than forty varieties of instant coffee to
satisfy different national tastes.
Even when people of different cultures use the same basic product, the mode of
consumption, conditions of use, purpose of use or the perceptions of the product
attributes may vary so much so that the product attributes method of presentation,
positioning, or method of promoting the product may have to be varied to suit the
characteristics of different markets. For example, the two most important foreign markets
for Indian shrimp are the U. S and Japan. The product attributes for the success of the
product in these two markets differ. In the U.S. market, correct weight and
bacteriological factors are more important rather than eye appeal, colour, uniformity of
size and arrangement of the shrimp which are very important in Japan. Similarly, the
mode of consumption of tuna, another seafood export from India, differs between the
U.S. and European countries. Tuna fish sandwiches, an American favourite which
accounts for about 80 per cent of American tuna consumption, have little appeal in high
tuna consumption European countries where people eat it right from the can. A very
interesting example is that of the Vicks Vaporub, the popular pain balm, which is used as
a mosquito repellant in some of the tropical areas.
The differences in languages sometimes pose a serious problem, even necessitating a
change in the brand name. Preett was, perhaps, a good brand name in India, but it did not
suit in the overseas market; and hence it was appropriate to adopt 'Prestige' for the

overseas markets. Chevrolet's brand name 'Nova' in Spanish means "it doesn't go". In
Japanese, General Motors' "Body by Fisher" translates as corpse by Fisher". In Japanese,
again, 3M's slogan "sticks like crazy "translates as "sticks foolishly". In some languages,
Pepsi-Cola's slogan "come alive" translates as "come out of the grave". The values and
beliefs associated with colour vary significantly between different cultures. Blue,
considered feminine and warm in Holland, is regarded as masculine and cold in Sweden.
Green is a favourite colour in the Muslim world; but in Malaysia, it is associated with
illness. White indicates death and mourning in China and Korea; but in some countries, it
expresses happiness and is the colour of the wedding dress of the bride. Red is a popular
colour in the communist countries; but many African countries have a national distaste
for red colour.

Demographic factors like the size, growth rate, age composition, sex composition, etc. of
the population, family size, economic stratification of the population, educational levels,
languages, caste, religion etc. Are all factors that are relevant to business?
Demographic factors such as size of the population, population growth rate, age
composition, life expectancy, family size, spatial dispersal, occupational status,
employment pattern etc, affect the demand for goods and services. Markets with growing
population and income are growth markets. But the decline in the birth rates in countries
like the United States have affected the demand for baby products. Johnson and Johnson
have overcome this problem by repositioning their products like baby shampoo and baby
soap, promoting them also to the adult segment, particularly to the females.
A rapidly increasing population indicates a growing demand for many products. High
population growth rate also indicates an enormous increase in labour supply. When the
Western countries experienced the industrial revolution, they had the problem of labour
supply, for the population growth rate was comparatively low. Labour shortage and rising
wages encouraged the growth of labour-saving technologies and automation. But most
developing countries of today are experiencing a population explosion and a situation of
labour surplus. The governments of developing countries, therefore, encourage labour
intensive methods of production. Capital intensive methods, automation and even

rationalization are apposed by labour and many sociologists, politicians and economists in
these countries. The population growth rate, thus, is an important environmental factor
which affects business. Cheap labour and a growing market have encouraged many
multinational corporations to invest in developing countries.
The occupational and spatial mobilities of population have implications for business. If
labour is easily mobile between different occupations and regions, its supply will be
relatively smooth, and this will affect the wage rate. If labour is highly heterogeneous in
respect of language, caste and religion, ethnicity, etc., personnel management is likely to
become a more complex task. The heterogeneous population with its varied tastes,
preferences, beliefs, temperaments, etc. gives rise to differing demand patterns and calls
for different marketing strategies.

Geographical and ecological factors, such as natural resource endowments, weather and
climatic conditions, topographical factors, locational aspects in the global context, port
facilities, etc., are all relevant to business. Differences in geographical conditions
between markets may sometimes call for changes in the marketing mix. Geographical
and ecological factors also influence the location of certain industries. For example,
industries with high material index tend to be located near the raw material sources.
Climatic and weather conditions affect the location of certain industries like the cotton
textile industry. Topographical factors may, affect the demand pattern. For example, in
hilly areas with a difficult terrain, jeeps may be in greater demand than cars.
Ecological factors have recently assumed great importance. The depletion of natural
resources, environmental pollution and the disturbance of the ecological balance has
caused great concern. Government policies aimed at the preservation of environmental
purity and ecological balance, conservation of non-replenishale resources, etc., have
resulted in additional responsibilities and problems for business, and some of these have
the effect of increasing the cost of production and marketing. Externalities have become
an important problem the business has to confront with.

Physical Factors, such as geographical factors, weather and climatic conditions may call
for modifications in the product, etc., to suit the environment because these
environmental factors are uncontrollable. For example, Esso adapted its gasoline
formulations to suit the weather conditions prevailing in different markets.
Business prospects depend also on the availability of certain physical facilities. Some
products, like many consumer durables, have certain use facility characteristics. The sale
of television sets, for example, is limited by the extent of the coverage of the telecasting.
Similarly, the demand for refrigerators and other electrical appliances is affected by the
extent of electrification and the reliability of power supply. The demand for LPG gas
stoves is affected by the rate of growth of gas connections.
Technological factors sometimes pose problems. A firm, which is unable to cope with the
technological changes, may not survive. Further, the differing technological environment
of different markets or countires may call for product modifications. For example, many
appliances and instruments in the U.S.A. are designed for 110 volts but this needs to be
converted into 240 volts in countries which have that power system. Technological
developments may increase the demand for some existing products. For example, voltage
stabilisers help increase the sale of electrical appliances in markets characterised by
frequent voltage fluctuations I power supply. However, the introduction of TV's, Fridges
etc, with in built voltage stabilizer adversely affects the demand for voltage stabilizers.
Advances in the technologies of food processing and preservation, packaging etc., have
facilitated product improvements and introduction of new products and have
considerably improved the marketability ofproducts. The television has added a new
dimension to product promotion. The advent of TV and VCP/VCR has, however,
adversely affected the cinema theatres. The fast changes in technologies also create
problems for enterprises as they render plants and products obsolete quickly. Product-
market-technology matrix generally has a much shorter life today than in the past. It is
particularly so in the international marketing context. It may be interesting to note that
almost half of Hindustan Lever's 1980 export business did not exist in 1987. In fact, as

much as a third of the company's 1987 turnover was from products and markets, which
were under three years ofage.

The international environment is very important from the point of view of certain
categories of business. It is particularly important for industries directly depending on
imports or exports and import-competing industries. For example, a recession in foreign
markets, or the adoption of protectionist policies by foreign nations, may create
difficulties for industries depending on exports. On the other hand, a boom in the export
market or a relaxation of the protectionist policies may help the export-oriented
industries. A liberalization of imports may help some industries which use imported
items, but may adversely affect import-competing industries.
It has been observed that major international developments have their spread effects on
domestic business. The Great Depression in the United States sent its shock waves to a
number of other countries. Oil price hikes have seriously affected a number of
economies. These hikes have increased the cost of production and the prices of certain
products, such as fertilizers, synthetic fibres, etc. The high oil price has led to an increase
in the demand for automobile models that economise energy consumption. The demand
for natural fibres increased because of the oil crisis.
The oil crisis also prompted some companies to resort to demarketing. "Demarketing
refers to the process of cutting consumer demand for a product back to level that can be
supplied by the firm". Some oil companies-the Indian Oil Corporation, for example-have
publicized tips o how to cut oil consumption. When the fertilizer price shot up following
the oil crisis, some fertilizer companies appealed to the farmers to use fertilizers only for
important and remunerative crops. The importance of natural manure like compost as a
substitute for chemical fertilizers was also emphasized.
The oil crisis led to a reorientation of the Government of India's energy policy. Such
developments affect the demand, consumption and investment pattern. A good export
market enables a firm to develop a more profitable product mix and to consolidate its
position in the domestic market. Many companies now plan production capacities and
investment taking into account also the foreign markets. Export marketing facilitates the

attainment of optimum capacity utilization; a company may be able to mitigate the effects
of domestic recession by exporting. However, a company which depends on the export
market to a considerable extent has also to face the impact of adverse developments in
foreign markets. International business is a necessity in today's world. The gains for
greater awareness and knowledge of international business fare immense for nations,
multi-national enterprises, trading companies, exporters and even individuals. To go
global, the first step would be to understand the international business environment.
International business in nothing but extending the areas of activities of business across
the boundaries. We have discussed about the importance of understanding international
business environment in detail. The concepts of microenvironment and macro
environment with reference to the political, legal, economical and cultural background
are also discussed. Understanding international business environment requires greater
research and information. The fulfillment of this research could happen with greater
understanding of the framework for analyzing the international business environment .


What factors spur globalization? Are there driving forces that facilitate or promote the
spread of globalization? Considering that globalization has accelerated in the last
decades, answers to these questions can be sought by identifying changes that have
occurred over the latter part of the last century that may have magnified the globalization
trend. Among the many possible changes that have profoundly affected our world, four
are most prominent:

Technology: The incremental process of technological innovations punctuated by occa-

sional breakthroughs has accelerated to levels unprecedented in human history. The
advent of the Internet has opened up immense possibilities that could not even be
imagined, let alone realized, in earlier times. The speed and reliability of international
communication has given a new impetus to globalization, while vast advances in
transportation have made speedy and cost-efficient global sourcing possible.

Trade: World exchanges of goods of services have been growing in leaps and bounds,
over the last decades, thanks to the continuous technological improvement in commu-
nications and transportation, but also as a result of the lowering of barriers to trade.
Whereas in the past countries imposed high taxes on imports (tariffs) on imported goods
or limited imports in other ways, trade agreements between countries have led to a
general lowering of barriers to trade that has made further globalization possible.

Movement of Capital: Exports and imports are only one facet of international business.
The other activity linked to globalization of business activities is international
investment. The liberalization of capital markets has led to a tremendous increase in the
flow of cross-border capital movements. In search of higher return, investors have bought
foreign stocks and bonds (portfolio investment) or have invested in acquiring or building
productive facilities overseas (foreign direct investment). Foreign direct investment is an

important resource for the economic development of many countries. Foreign Direct
Investment (FDI) can come about as a result of foreign companies establishing either
manufacturing facilities or marketing\sales facilities in the host country for the purpose of
managerial control.

Movement of People: Along with capital, labor is the other major factor of production.
Developed countries increasingly face little or no population growth and a rise in the
average age of their citizens, as people decide to have fewer children and the older
generation lives longer. By contrast, developing countries continue to experience a fast
increasing young population, for whom there are few employment opportunities. These
imbalances create the conditions for legal and illegal immigration from developing
countries toward developed countries. However, the movement of people is not limited to
economic immigration. Wars and other conflicts, as well as failing harvests and famine,
trigger floods of refugees that seek the relative safety of neighboring countries. People
also travel to foreign countries for short periods for a variety of reasons including visiting
places of interest, exploring business opportunities, attending training programs, etc.
Together, these movements of people constitute the fourth driver of globalization.

The four drivers can be viewed as engines of globalization: technological improvements,

expanded trade and increased movements of capital and people make it possible to
globalize more, and faster. However, as globalization unfolds, it also influences the
drivers. More globalization leads to more technological innovations, as ideas are shared
across borders; more trade, since new opportunities are created through globalization; and
finally more movement of capital and people, as factors of production— in an
increasingly integrated and transparent world market— flow to where they are best



The simplest way to enter a foreign market is through exporting. The company may
passively export its surpluses from time to time, or it may make an active commitment to
expand exports to a particular market. In either case, the company produces all its goods
in its home country. It may or may not modify them for the export market. Exporting
involves the least change in the company product lines, organization, investments, or

Companies typically start with indirect exporting, working through independent

international marketing intermediaries. Indirect exporting involves less investment
because the firm does not require an overseas marketing organization or network. It also
involves less risk. International marketing intermediaries bring know-how and services to
the relationship, so the seller normally makes fewer mistakes.

Sellers may eventually move into direct exporting, whereby they handle their own
exports. The investment and risk are somewhat greater in this strategy, but so is the
potential return. A company can conduct direct exporting in several ways: It can set up a
domestic export department that carries out export activities. It can set up an overseas
sales branch that handles sales, distribution, and perhaps promotion. The sales branch
gives the seller more presence and program control in the foreign market and often serves
as a display center and customer service center. The company can also send home-based
salespeople abroad at certain times in order.

Joint Venturing

A second method of entering a global market is joint venturing—joining with foreign

companies to produce or market products or services. Joint venturing differs from
exporting in that the company joins with a host country partner to sell or market abroad.
It differs from direct investment in that an association is formed with someone in the
foreign country. There are four types of joint venture licensing, contract manufacturing,
and management contracting and joint ownership.


Licensing is a simple way for a manufacturer to enter international marketing. The

company enters into agreement wit a licensee in the foreign market. For a fee or royalty,
licensee buys the right to use the company's manufacturer process, trademark, patent,
trade secret, or other item of vale The company thus gains entry into the, market at little
risk; tl licensee gains production expertise or a well-known product or name without
having to start from scratch.

Coca-Cola markets internationally by licensing bottles around the world and supplying
them with the syrup needed to produce the product. In Japan, Budweiser beer flows from
Kirin breweries and Marlboro cigarettes roll off production lines at Japan Tobacco, Inc
Tokyo Disneyland Resort is owned and operated by Oriental Land Company under
license from The Walt Disney Company.

Saks recently announced that it will enter the Chinese market through licensing. By
licensing its name, Saks will become the first foreign luxury department store in this fat
growing market, but without having to operate the store itself

Licensing has potential disadvantages, however. The firm has less control over the
licensee than it would over its own operations. Furthermore, if the licensee is very

successful, the firm has given up these profits, and if and when the contract ends, it may-
find it has created a competitor

Contract Manufacturing

Another option is contract manufacturing—the company contracts with manufacturers

in the foreign market to produce its product or provide its service. Sears used this method
in opening up department stores in Mexico and Spain, where it found qualified local
manufacture to produce many of the products it sells. The drawbacks of contract
manufacturing a decreased control over the manufacturing process and loss of potential
profits on manufacturing. The benefits are the chance to start faster, with less risk, and
the later opportunity either to form a partnership with or to buy out the local

Management contracting

Under management contracting, the domestic firm supplies management know-how

to a foreign company that supplies the capital. The domestic firm exports management
services rather than products. Hilton uses this arrangement in managing hotels around the

Management contracting is a low-risk method of getting into a foreign market, and it

yields income from the beginning. The arrangement is even more attractive if the
contracting firm has an option to buy some share in the managed company later on. The
arrangement not sensible, however, if the company can put its scarce management talent
to better uses or it can make greater profits by undertaking the whole venture.
Management contracting a prevents the company from setting up its own operations for a
period of time .

Joint ownership

Joint ownership ventures consist of one company joining forces with foreign
investors to create a local business in which they the share joint ownership and control.
A company may buy an interest in a local firm or the two parties may form a new
business venture. Joint ownership may be needed for economic or political reasons. The
firm may lack the financial, physical, or managerial resources to undertake the venture
alone. Or a foreign government may require joint ownership as a condition for entry.

KFC entered Japan through a joint ownership venture with Japanese conglomerate
Mitsubishi. KFC sought a good way to enter the large but difficult Japanese fast-food
market. In turn, Mitsubishi, one of Japan's largest poultry producers, understood the
Japanese culture and had money to invest. Together, they helped KFC succeed in the
semi closed Japanese market. Surprisingly, with Mitsubishi's guidance, KFC developed
decidedly un-Japanese positioning for its Japanese restaurants

Joint ownership has certain drawbacks. The partners may disagree over investment,
marketing, or other policies. Whereas many U.S. firms like to reinvest earnings for
growth, local firms often prefer to take out these earnings; and whereas U.S. firms
emphasize the role of marketing, local investors may rely on selling.

Direct Investment

The biggest involvement in a foreign market comes through direct investment—the

development of foreign-based assembly or manufacturing facilities. If a company has
gained experience in exporting and if the foreign market is large enough, foreign
production facilities offer many advantages. The firm may have lower costs in the form
of cheaper labor or raw materials, foreign government investment incentives, and freight
savings. The firm may improve its image in the host country because it creates jobs.
Generally, a firm develops a deeper relationship with government, customers, local
suppliers, and distributors, allowing it to adapt its products to the local market better.

Finally, the firm keeps full control over the investment and therefore can develop
manufacturing and marketing policies that serve its long-term international objectives.

The main disadvantage of direct investment is that the firm faces many risks, such as
restricted or devalued currencies, falling markets, or government changes. In some cases,
a firm has no choice but to accept these risks if it wants to operate in the host country.

Assembly Operations

As Miracle and Albaum point out, a manufacturer who wants many of the advantages
that are associated with overseas manufacturing facilities and yet does not want to go that
far may find it desirable to establish overseas assembly facilities in selected markets. In a
sense, the sence, of an assembly operation represents a cross between exporting and
overseas manufacturing.

Having assembly facilities in foreign markets is very ideal when there are economies
of scale in the manufacture of parts and components and when assembly operations are
labour intensive and labour is cheap in the foreign country. It may be noted that a number
of U.S. manufacturers ship the parts and components to the developing countries, get the
product assembled there and bring it back home. The U.S. tariff law also encourages this.
Thus, even products meant to be marketed domestically are assembled abroad.
Assembling the product meant for the foreign market in the foreign market itself has
certain other advantages, besides the cost advantage.The import duty is normally low on
parts and components than on the finished product. Assembly operations would satisfy
the 'local content' demand, at least to some extent. Because of the employment
generation, the foreign government's attitude will be more favourable than towards the
import of the finished product.

Another advantage is that the investment to be made in the foreign country is very
small comparison with that required for establishing complete manufacturing facilities.
The political risks of foreign investment is, thus, not much.

Third Country Location

Third country location is sometimes used as an entry strategy. When there are no
commercial transactions between two nations because of political reasons or when direct
transactions between two nations are difficult due to political reasons or the like, a firm in
one of these nation which wants to enter the other market will have to operate from a
third country base. For example. Taiwanese entrepreneurs found it easy to enter People's
Republic of China through bases in Hong Kong.

Third country location may also be helpful to take advantage of the friendly trade
relation between the third country and the foreign market concerned. Thus, for example,
Rank Xerox found . it convenient to enter the erstwhile USSR through its Indian joint
venture Modi Xerox

There are several cases of countries not having direct commercial transactions. For
example it was true of Israel and Arab Countries. In the past, government of India did not
permit trade South Africa and Mauritius.

Sometimes commercial reasons encourage third country location. For example, several
Japanese companies established production facilities in developing countries to
circumvent the non tariff barriers' (like quotas, voluntary export restraints and orderly
marketing arrangement) tc countries like the United States and also to avail of the
preferential treatment according developed countries to the imports from the developing

Further, third country location may be resorted to reduce cost of production and there
by increase price competitiveness to facilitate market entry or for improving/maintaining
the market position. The incentives offered by governments, particularly of the
developing countries for-investment and

exports encourage such third country location. The export procession- particularly
attractive in this respect.

Strategic Alliance

Strategic alliance has been becoming more and more popular in international business.
Also known by such names as entente and coalition, this strategy seeks to enhance the
long term competitive advantage of the firm by forming alliance with its competitors,
existing or potential in critical areas, instead of competing with each other. "The goals are
to leverage critical capabilities, increase the flow of innovation and increase flexibility in
responding to market and technological changes.

Strategic alliance is also sometimes used as a market entry strategy. For example, a firm
may enter a foreign market by forming an alliance with a firm in the foreign market for
marketing or distributing the former's products. A U.S. pharmaceutical firm may use the
sales promotion and contribution infrastructure of a Japanese pharmaceutical firm to sell
its products in Japan. In return, the Japanese firm can use the same strategy for the sale of
its products in the U.S. market. Strategic alliance, more than an entry strategy, is a
competitive strategy.

There are different types of alliances according to purpose- or structure. Based on the
description of the generic forms of coalitions by Michael Porter and Mark Fuller,
Magsaysay classifies alliances according to purpose as follows."

1. Technology development alliances like research consortia, simultaneous

engineering agreements, licensing or joint development agreements.

2 Marketing, sales and service alliances in which a company makes use of the
marketing infrastructure etc., of another company, in the foreign market, for its
products. This may help easy penetration of the foreign market and pre-emption of
potential competitors.

3. Multiple activity alliance which involves the combining of two or more

types of alliances. While marketing alliances are often single country alliances,
as international firms take on different allies in each country, technology

development and operations alliances are usually multi-country since these kinds
of activities can be employed over several countries.
4. Multiple activity alliance involves the combining of two or more types of
alliances. While marketing alliances are often single country alliances, as
international firms take on different marketingallies in each country, technology
development and operations alliances are usually multi-country since these kinds
of activities can be employed over several countries.

Strategic alliances also differ according to how they are structured. They can be
equity based joint ventures) or non-equity based. Non-equity based alliances such as
technology transfer licensing agreements, marketing agreements etc., are proving to be
more dynamic, more constructive and more strategic, according to Magsaysay.

As indicated above, several areas of business - from R and D to distribution provide

scope for alliance. Whether it is in R and D, manufacturing or marketing, an important
objective of the collaboration is to maximize marginal contribution to fixed cost.

Counter trade

Although the major reason for the substantial growth of counter trade is its use as
a strategy to increase exports, particularly by the developing countries, countertrade has
been successfully used by a number of companies as an entry strategy. For example,
Pepsi Co gained entry to the USSR by employing this strategy. Countertrade is a form of
international trade in which certain export and import transation are directly linked with
each other and in which import of goods are paid for by export of instead of money

In the modern economies, most transactions involve monetary payments and

receipt either immediate or deferred. As against this, "countertrade refers to a variety of
unconventional international trade practices which link exchange of goods directly or
indirectly - in an attempt to dispense with currency transactions

Forms of Counter trade

Barter: Barter refers to direct exchange of goods of equal value, with no money and no
third party involved in it. For example, a counter trade deal between the Minerals and
Metals Trading Corporation of India (MMTC) and a Yugoslavian company involved
import of 50000 tonnes of, rails of the value of about $ 38 million by the MMTC and the
purchase by the Yugoslavian of iron ore concentrates and pellets of the same value.

Buy Back: Under the buy back agreement, the supplier of plant, equipment or technology
agrees to purchase goods manufactured with that equipment, or technology. Under the
buy back scheme, the full payment may be made in kind or a part may be made in kind
and the balance in cash. Thus, a Rs. 20 crore buy back agreement with the Soviet Union
provided for the import of 200 sophisticated looms by the National Textiles Corporation.
The buy back ratio was 75 percent

Compensation Deal: Under this arrangement, the seller receives a part of the payment in

and the rest in products.

Counter purchase: Under the counter purchase agreement the seller receives the
full payment

in cash but agrees to spend an equivalent amount of money in that country within a
specified period. A classic example of this kind of an agreement was Pepsi Cola's trade
with the USSR.Pepsi Cola got paid in Rubles for the sale of its concentrates in the USSR
but spent this amount for purchase of Russian products like Vodka and wine


A trade barrier is a general term that describes any government policy or regulation
that restricts international trade. The barriers can take many forms, including the
following terms that include many restrictions in international trade within multiple
countries that import and export any items of trade. Most trade barriers work on the same
principle: the imposition of some sort of cost on trade that raises the price of the traded
products. If two or more nations repeatedly use trade barriers against each other, then a
trade war results.

Economists generally agree that trade barriers are detrimental and decrease overall
economic efficiency, this can be explained by the theory of comparative advantage. In
theory, free trade involves the removal of all such barriers, except perhaps those
considered necessary for health or national security. In practice, however, even those
countries promoting free trade heavily subsidize certain industries, such as agriculture
and steel. types of trade barriers are given below..

1. Import quota- An import quota is a type of protectionist trade restriction that sets
a physical limit on the quantity of a good that can be imported into a country in a given
period of time. It is a limit on the amount of the good that can be imported. For
example, a country might limit sugar imports to 50 tons per year. Quotas, like other trade
restrictions, are used to benefit the producers of a good in a domestic economy at the
expense of all consumers of the good in that economy.

Critics say quotas often lead to corruption (bribes to get a quota allocation), smuggling
(circumventing a quota), and higher prices for consumers.

In economics, quotas are thought to be less economically efficient than tariffs which in
turn are less economically efficient than free trade.

2. Subsides- In economics, a subsidy (also known as a subvention) is a form of

financial assistance paid to a business or economic sector. A subsidy can be used to

support businesses that might otherwise fail, or to encourage activities that would
otherwise not take place.

Subsidies can be regarded as a form of protectionism or trade barrier by making domestic

goods and services artificially competitive against imports. Subsidies may distort
markets, and can impose large economic costs. Financial assistance in the form of a
subsidy may come from one's government, but the term subsidy may also refer to
assistance granted by others, such as individuals or non-governmental institutions,
although these would be more commonly described as charity.

3. Export restriction-A "voluntary" export restraint (VER) or "voluntary" export

restriction is a government imposed limit on the quantity of goods that can be exported
out of a country during a specified period of time. Usually the importing country coerces
the exporter into a "voluntary" restraint agreement, and the word voluntary is in quotes to
indicate it's not truly voluntary.

Typically VERs arise when the import-competing industries seek protection from a surge
of imports from particular exporting countries. VERs are then offered by the exporter to
appease the importing country and to deter the other party from imposing even more
explicit (and less flexible) trade barriers. VERs are rarely completely voluntary. They
represent a Beggar thy neighbour policy that seeks to shift economic activity (or preserve
it) for the importing country, and has the effect of increasing costs for consumers there.

Also, VERs are typically implemented on a bilateral basis, that is, on exports from one
exporter to one importing country. VERs have been used since the 1930s at least, and
have been applied to products ranging from textiles and footwear to steel, machine tools
and automobiles. They became a popular form of protection during the 1980s, perhaps in
part because they did not violate countries' agreements under the GATT. As a result of
the Uruguay round of the General Agreement on Tariffs and Trade (GATT), completed in
1994, World Trade Organization (WTO) members agreed not to implement any new
VERs and to phase out any existing VERs over a four year period. Exceptions can be
granted for one sector in each importing country.

4. Embargo- In international commerce and politics, an embargo is the prohibition of
commerce (division of trade) and trade with a certain country, in order to isolate it and to
put its government into a difficult internal situation, given that the effects of the embargo
are often able to make its economy suffer from the initiative.

The embargo is usually used as a political punishment for some previous disagreed
policies or acts, but its economic nature frequently raises doubts about the real interests
that the prohibition serves. For example Israeli and philistine war.

5. Import license- An import license is a document issued by a national government

authorizing the importation of certain goods into its territory. Import licenses are
considered to be non-tariff barriers to trade when used as a way to discriminate against
another country's goods in order to protect a domestic industry from foreign competition

Major international institution who are promoting the international
trade by removing the trade barriers and to providing the financial
help. These are given below



1. WTO- the world trade organization is an international organization designed to

supervise and liberalize international trade. The WTO came into being on 1 January
1995, and is the successor to the General Agreement on Tariffs and Trade (GATT),
which was created in 1947, and continued to operate for almost five decades as a de facto
international organization.

The World Trade Organization deals with the rules of trade between nations at a near-
global level; it is responsible for negotiating and implementing new trade agreements,
and is in charge of policing member countries' adherence to all the WTO agreements,
signed by the majority of the world's trading nations and ratified in their parliaments.[4][5]

Most of the issues that the WTO focuses on derive from previous trade negotiations,
especially from the Uruguay Round. The organization is currently working with its
members on a new trade negotiation called the Doha Development Agenda (Doha round),
launched in 2001.[4][3]

The WTO has 153 members, which represents more than 95% of total world trade. [6] The
WTO is governed by a Ministerial Conference, which meets every two years; a General
Council, which implements the conference's policy decisions and is responsible for day-
to-day administration; and a director-general, who is appointed by the Ministerial
Conference. The WTO's headquarters is in Geneva, Switzerland.

2. IMF- The International Monetary Fund (IMF) is an international organization that

oversees the global financial system by following the macroeconomic policies of its
member countries, in particular those with an impact on exchange rates and the balance
of payments. It is an organization formed to stabilize international exchange rates and
facilitate development.[2] It also offers financial and technical assistance to its members,
making it an international lender of last resort. Its headquarters are located in
Washington, D.C., USA.

3. World bank- The World Bank Group (WBG) is a family of five international
organizations responsible for providing finance and advice to countries for the purposes
of economic development and eliminating poverty. The Bank came into formal existence
on 27 December 1945 following international ratification of the Bretton Woods
agreements, which emerged from the United Nations Monetary and Financial Conference
(1 July – 22 July 1944). It also provided the foundation of the Osiander-Committee in
1951, responsible for the preparation and evaluation of the World Development Report.
Commencing operations on 25 June 1946, it approved its first loan on 9 May 1947
($250M to France for postwar reconstruction, in real terms the largest loan issued by the
Bank to date). Its five agencies are:

• International Bank for Reconstruction and Development (IBRD)

• International Development Association (IDA)
• International Finance Corporation (IFC)
• Multilateral Investment Guarantee Agency (MIGA)
• International Centre for Settlement of Investment Disputes (ICSID)

4. Regional blocks- A trade bloc is a large free trade zone or near-free trade zone
formed by one or more tax, tariff and trade agreements. Typically trade pacts that define
such a bloc specify formal adjudication bodies, e.g. NAFTA trade panels. This may
include even a parliament, as in the EU.

George Orwell predicted that trade blocs would evolve into continent-spanning empires
with ever-changing alliances. The eastward expansion of the EU and use of the Euro,
southern expansion of NAFTA into the FTAA, and increasing co-operation in Asia
would seem to validate this prediction.

Particularly since the demise of most of the world's empires, a number of international—
generally regionally based—economic blocs have been developed to promote trade
between member states.

Several blocs also have stated or implicit political goals—notably the EU. Varieties of
economic blocs include free trade areas, customs unions, single markets, and economic
and monetary unions.

CHAPTER 5: Impact of Global Recession on Indian Market

The recession in the US market and the global meltdown termed as Global recession have
engulfed complete world economy with a varying degree of recessional impact. World
over the impact has diversified and its impact can be observed from the very fact of
falling Stock market, recession in jobs availability and companies following downsizing
in the existing available staff and cutting down of the perks and salary corrections.
Globally the financial sector sacking the existing base of employees in high numbers in
US the major example being CITI Group same still followed by others in hospitality
industry Jet and Kingfisher Airlines too. The cut in salary for the pilots being 90 % can
any one imagine such a huge cut in salary.

In the globalized market scenario, the impact of recession at one place/ industry/ sector
percolate down to all the linked indusrty and this can be truly interpreted from the current
market situation which is faced by the world since approx 2 month and still the situation
is not in control in spite of various measures taken to fight back the recession in the
market. The badly hit sector at present being the financial sector, and major issue being
the "LIQUIDITY Crises" in the market.

In-spite of the various measures to subsidize the impact of the recession and cut down the
inflation present nothing really sound have been done.

Various steps taken by RBI to curb the present recession in the economy and counter act
the prevailing situation.
The sudden drying-up of capital inflows from the FDI which were invested in Indian
stock markets for greater returns visualizing the Potential Higher Returns flying back is
continuing to challenge liquidity management. At the heart of the current liquidity
tightening is the balance of payments deficit, and this NRI deposit move should help in
some small way.

To curb the liquidity crises the RBI will continue to initiate liquidity measures as long as
the current unusually tight domestic liquidity environment prevails. The current step to
curb these being lowering of interest rates and reduction of PLR.However, the big-picture
story remains unchanged – all countries in the world with current account deficits and
strong credit cycles are finding it difficult to bring cost of capital down in the current
environment. India is no different. New measures do not change our view on the growth
outlook. Indeed, we remain concerned about the banking sector and financial sector. The
BOP- Balance of Payment deficit – at a time when domestic credit demand is very high –
is resulting in a vicious loop of reduced access to liquidity, slowing growth, and increased
risk-aversion in the financial system.

In total the recession have turned down the growth process and have set the minds of
economists and others for finding out the real solution to sustain the economic growth
and stability of the market which is desired for the smooth running of the economy.

Complete business/ industry is in dolledrum situation and this situation persist for a
longer duration will create the small business to vanish as they have lower stability and to
run smoothly require continous flow of liquidity which is drived from the market.

In present situation down fall in one sector one day leads to a negative impact on the
other sector thus alltogether everyone feel the impact of the Financial crises with the
result of the current recession which started in US and slowly and gradually due to linked
global world have impacted everyone.

Solution for the problem still remain at the top of the mind of every one, still everyone
facing the impact of recession but how long is the major question which is of great
importance .


The company has no limit to growth opportunities it can pursue both in India and in the
developing world, and even here in the U.S. But it also means the challenges for the
company become more diverse and complex, from increasing headcount thousands of
miles from home, to dealing with higher attrition rates in China, to calculating just how
much growth can be achieved internally versus through buying businesses, to cultivating
the next group of executives

Here's his list of the most important transformational trends out there today:

-The sensor Internet. He believes that sensors of all types will gradually become vital
pieces of the Internet. "We'll move from an Internet of people to an Internet of appliances
and people."

-Social networking. "Thanks to social networking, power is shifting from organizations to

individuals." The first major example of this phenomenon at work is the open source
software movement.

-The explosion of data. The data is there, but it's not being taken advantage of yet. "We
leave a digital trail everywhere we go."

-Mobile computing. "We got used to desktop computing, but the user interfaces of today
don't really some natural to us. With mobile computing, we'll create more natural

Nandan Nilkeni , 5 Themes that dominate the new world:

Future Customers - Rise of the Emerging market , China / India, Significant growth rates,
implications on the global GDP and its reallocation over the next 30-40 years

Global Age Arbitrage - Demographics driving the world , Next 20 years the young
people are going to be in places like India, Countries that are aging need to tap countries
with the younger workforce - Global Arbitrage of age, Outsourcing phenomenon will
continue to raise, trend is expected to continue for many years to come.

Moores law still goes strong - Nobody predicting the end of the compounding
improvements of computing power of computers , faster forms of computing - silicon,
molecular & atomic. Along with improvement in communication networks (Satellite to
T1,T2, Broadband moving towards wireless and mobility). Leading to increase
collaboration, virtual work rooms and a virtual work force.

Increased Granularity of information - Realtime nature of information that clients are

having is on the increase, the future competitive advantages for all customers are going to
be coming from those who take advantage of this information and make money from the
same.Looking at information systems as a source of profit.

Manage Global Regulations - Pressure on companies as they globalize in this

environment is that they have to deal with the complexities of increasing global
regulations. Sarbox, BaselI, BaselII , Anti Money laundering act etc etc.

To Survive - Every company no matter what the value proposition , will have to become
the most efficient low cost provider for products and services.
To factor all these companies will have to undergo a lot of fundamental transformation.
Winning in the turn - Companies that can take advantage of these shifts in the market
place , companies which have information management to respond quickly to market
changes, those that can respond to demand supply or strategic change in direction.

This collection of international business blunders was not gathered with the
intention of using it to poke fun at multinational companies or to make them appear inept.
Rather, it was assembled to provide valuable, vicarious examples of business practices
that should be avoided. The blunders others have experienced provide us with interesting
lessons—ones surely preferable to learning through experience.
In reality, companies are generally quite competent. Considering the many ways a
firm can blunder, it must be doing most things correctly just to survive. This thought was
best expressed by a senior executive from General Motors when he was asked to verify
one of the problems reported in this book. He replied that although GM may have made a
few errors overseas, when that very small number is compared with the many decisions
made by GM, it is “a good batting average.” This is true. Most firms make few serious
mistakes and even fewer avoidable blunders. If they did make many blunders, they
simply would not be in business long. Although numerous errors have been committed,
one must realize that the mistakes have been made by many different companies over a
number of years. The fact that firms make these mistakes should not be all that surprising
anyway. After all, it is not really a company that blunders, but its employees. Employees
are only human, and we all make mistakes. Sometimes our errors are personal, but
sometimes they are made on behalf of corporations.
It should also be noted that the blunders reported may not be totally accurate.
Although most of the anecdotes have been reported in the media and efforts were made to

verify them, verification has not been easy. Many corporations have been reluctant to
respond to inquiries. Several firms have replied with a version of “we are sorry but we
cannot provide you with the information about that possible event. The person who had
been responsible for that area is no longer with the company.” These statements possibly
bear an added message: if one wants to remain with a firm, avoid making blunders.
Since firms do not appreciate appearing foolish, they sometimes deny a witnessed event.
But as the public becomes more and more aware that all firms have made some mistakes,
these denials become less necessary. There are cases, however, where reports of company
blunders have proven to be false. The wrong companies have been identified or the entire
story has been fictionalized. This author discovered an excellent example of a false report
when trying to verify a story regarding Exxon’s ventures in Thailand. The report stated
that Exxon’s ad “Put a tiger in your tank” failed in Thailand because the tiger does not
represent power and strength there. However, a series of letters and investigations in both
Asia and the United States revealed what had really happened. Overzealous competitors
had deliberately planted the false story, hoping the U.S. media would pick it up. In fact,
not only is the tiger a symbol of strength in Thailand, Exxon continued to use the ad
effectively and was able to capture a large share of the local market .