CHAPTER 3

INTERNATIONAL ENVIRONMENT
Q1. What is Globalisation?
Ans: Globalisation is when all the countries of the world come together and form one large market. It means the
whole world becomes a market for everyone. Every country starts depending on other countries for its buying and
selling activities.

Q2. Explain the impact of International environment on business.

Ans: The impact of international environment on Indian business is both positive also and negative also.
POSITIVE IMPACT
1. Because of globalisation market for Indian products has become large. Thus, Indian business has lot of
opportunity in the world market.
2. There is more profit potential for Indian business. There are more chances of growth of Indian business in
the world market.
3. Indian companies can make investment in foreign countries and earn more. Many Indian companies have
marketing as well as technology tie-up with foreign companies.
4. Indian companies become more competitive and efficient because of globalisation.
NEGATIVE IMPACT
1. When foreign companies enter India, they become threats to Indian businesses.
2. Foreign companies come to India with large resources. They become bigger by mergers and acquisitions
with Indian companies. As a result of this, small companies find it difficult to survive.
3. Traditional companies do not survive because of changing technology. For example, because of modern
products, traditional craft industry in India could not survive.
Since many years, Indian companies had characteristics like low productivity, old machinery, outdated technology,
low quality etc. Still Indian companies were making profit in past. But due to globalisation, now Indian companies
will face many challenges. Following are the challenges due to globalisation;
CHALLENGES
1. Uptil now customer satisfaction was not given importance. But now because of globalisation, Indian firms
will have to give importance and priority to customers also. The manager will have to produce quality
product at reasonable price.
2. Attitude of Indian businesses must change. They must grow and expand their business in many countries and
grow more and more.
3. Indian business will have to produce products of international standards with international quality
certificates.

Q3. What are the hurdles of globalisation in India / What are the obstacles/barriers of
globalisation in India?
Ans: Indian business suffer from many disadvantages with respect of globalisation. The important problems are;
1. Government policy: Government policy in India is very complex. Many business procedures are also very
complex and confusing. Government procedures and policies related to business are not very favourable for
globalisation.

2. High Cost: High cost of raw materials, power, finance, port etc reduces the competitive advantage of Indian
business.
3. Poor Infrastructure: Infrastructure in India is inadequate, costly and inefficient. Because of this business
cannot expand fast.
4. Outdated technology: Because of Obsolete technology, Indian business cannot be competitive in world.
5. Resistance to change: There is resistance to change regarding many things in India. For example, people
resist new technology because they think that they will lose their jobs because of new technology.
6. Poor quality image: Image of Indian products is very poor in foreign countries.
7. Supply problems: There is a shortage problems related to many raw materials, power etc.
8. Small size: Because of small size and less resources, Indian business cannot compete with MNCs.
9. Experience: Indian business have less experience of running International business.
10. Limited R&D and Research: Indian businesses are very poor in research activities. This does not help them
in globalising.
11. Growing Competition: There is strong competition growing in India as well as at world level.
12. Trade barriers: There are many non-tariff trade barriers existing. This creates problem to Indian businesses.

Q4. What are the drivers of globalisation? What are the factors that favour globalisation?
Ans: There are many factors that favour globalisation of Indian businesses. They are;
1. Human Resources: Cost of Labour in India is very low. This is in Indias favour. There are many software
professionals, scientists, technical manpower, MBAs in India. Labour supply and cost of labour is both in
favour of India.
2. Wide base: India has variety of resources and hence many businesses are possible in India.
3. Entrepreneurship: New and dynamic entrepreneurs are growing in India. This will help in developing
businesses.
4. Domestic market: Indian domestic market is growing and Indian businesses are entering foreign countries.
5. Niche markets: There are many business opportunities in India in the form of Niches. A niche is a small
segment of market which is not taken care of by large businesses so far.
6. Purchasing power: Indian population has now more purchasing power as compared to past. Hence Indian
businesses are getting more opportunities to expand business.
7. World becoming one market now: Because of globalisation, the whole world has become one market. This is
an opportunity for Indian business as well.
8. NRIs: There are large number of NRIs in India. They have large amount of resources. This can help in
developing business in India.
9. Liberalisation: Many licensing procedure in India is removed now. This is known as liberalisation. Because
of this, there are many new opportunities for Indian companies to grown and expand in their business.
10. Competition: Because of growing competition in India as well as at the world level, Indian businesses can
look for foreign countries for doing business.

Q5. What is WTO? What are its functions?

Ans:

Full form of WTO is world trade organisation.

It was established in January 1, 1995.
After GATT (General Agreement on Tariffs and Trade) was removed, WTO came into existence.
WTO came into existence in order to develop International business in the world.

FUNCTIONS
1. WTO shall make easy for implementation, administration and operation for making world trade more and
more. It shall help in making trade agreements between different countries (multilateral trade agreements).
2. WTO shall act as a forum (place) for negotiations between different countries for multilateral trade
agreements related to international business.

3. WTO shall make proper rules and procedures for any dispute that happens between countries while
negotiations.
4. WTO shall review policies related to international trade.
5. WTO shall cooperate with IMF (International Monetory Fund) and World bank for preparing proper policies
related to international business in the world.

Q6: What are the implications on India for and against joining WTO?
Ans:
IMPLICATIONS FOR JOINING WTO
1. India is successful in liberalising its economy. Developing countries have gained after joining WTO. So we
must also join WTO to get benefits.
2. Less developed countries are given more benefits by developed countries in WTO. Hence India must join
wto to get all those benefits.
3. If we become member of WTO, our export Industry will develop. This will help in creating more jobs, skills
and technology in India. We can also earn more foreign exchange.
4. By becoming member of WTO, India can benefit from International trade centre which is jointly operated by
WTO and United Nations. International trade centre helps in developing export promotion programmes. This
can help India.
5. Because of the member of WTO, we can get good businesses for products like clothing, agriculture, forestry,
fish, processed foods etc. Since India is competent in these products, we must take the advantage by
becoming member of WTO.
6. If we do not become member of WTO, we shall have to make more and more bilateral trading agreements
with many countries.
7. The rules and regulations of WTO are more positive for developing countries like India.
IMPLICATIONS AGAINST JOINING WTO
1. International business can help us if we have better infrastructure, technology and business policies. But all
these factors are negative for India. Hence we must not become member of WTO.
2. Many economists say that the benefits of WTO goes to developed countries only. Developing countries are
not benefitted much. Hence we must not be a member of WTO.
3. The biggest fear of WTO is the rise in prices of medicines and agricultural inputs.
4. Developing countries are at a disadvantage because of improper government policies and implementation
programs.