INTERNATIONAL
BUSINESS
ENVIRONMENT:
Implication of environment
Differences
Module III:
Prof srikanth venkataswamy
Environment
Ecological&
Physical
Environment
Internal
Micro
EXternal
macro
Prof srikanth venkataswamy
2
Global Environment
Internal
Micro
Environment
EXternal
macro
Prof srikanth venkataswamy
3
The International Business Environment
Foreign environment
(uncontrollable)
Political/legal
forces
Economic
forces
Domestic environment
(uncontrollable)
Cultural
forces
Political/
legal
forces
Marketing
(controllable)
Price
Competitive Competitive
structure
Forces
Product
Promotion
Channels of
distribution
Environmental
uncontrollables
country market A
Geography
and
Infrastructure
Economic climate
Level of
Technology
Structure of
distribution
Prof srikanth venkataswamy
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Environmental
uncontrollables
country market B
Environmental
uncontrollables
country market C
4
TheThe
International
International
Business
Marketing
Environment
Task
Foreign environment
(uncontrollable)
The international marketer
Political/legal
Economic
must deal with two levels of
forces
forces
uncontrollable uncertainty
Domestic environment
(uncontrollable)
Cultural
forces
Political/
legal
forces
Marketing
(controllable)
Price
Competitive Competitive
structure
Forces
Product
Promotion
Channels of
distribution
Environmental
uncontrollables
country market A
Geography
and
Infrastructure
Economic climate
Level of
Technology
Structure of
distribution
Prof srikanth venkataswamy
ll
Environmental
uncontrollables
country market B
Environmental
uncontrollables
country market C
5
The International Business Environment
Foreign environment
(uncontrollable)
The international marketer
Political/legal
Economic
must deal with two levels of
forces
forces
uncontrollable uncertainty
Domestic environment
(uncontrollable)
Cultural
forces
Political/
legal
forces
Marketing
(controllable)
Price
Product
Promotion
Each foreign country in
which
a company operates
Competitive
Competitive
structure
addsForces
its own unique set of
uncontrollables
Channels of
distribution
Environmental
uncontrollables
country market A
Geography
and
Infrastructure
Economic climate
Level of
Technology
Structure of
distribution
Prof srikanth venkataswamy
ll
Environmental
uncontrollables
country market B
Environmental
uncontrollables
country market C
6
The International Business Environment
Foreign environment
(uncontrollable)
Political/legal
forces
Economic
forces
Domestic environment
(uncontrollable)
Marketing controllable
Cultural
forces
Political/
legal
forces
Price
Price
Promotion
Promotion
Geography
and
Infrastructure
Competitive Competitive
structure
Forces
Product
Product
Channels of
Channels
distribution
of
Distribution
Economic climate
Level of
Technology
Structure of
distribution
Prof srikanth venkataswamy
Environmental
uncontrollables
country market A
Environmental
uncontrollables
country market B
Environmental
uncontrollables
country market C
7
The International Business Environment
Foreign environment
(uncontrollable)
Political/legal
forces
Economic
forces
Domestic uncontrollables
Political/
legal
Political/legal
Cultural
forces
forces
forces
Marketing
(controllable)
Price
Competitive Competitive
Competitive
structure
structure Forces
Product
Promotion
Channels of
distribution
Environmental
uncontrollables
country market A
Geography
and
Infrastructure
Economic
climate
Economic climate
Level of
Technology
Structure of
distribution
Prof srikanth venkataswamy
Environmental
uncontrollables
country market B
Environmental
uncontrollables
country market C
8
The International Business Environment
Foreign
environment
Foreign
uncontrollable
(uncontrollable)
Political/legal
forces Domestic environment
Economic
forces
(uncontrollable)
Cultural
Cultural
forces
forces
Political/
legal
forces
Marketing
(controllable)
Price
forces
Product
Promotion
Geography
Geography
and
and
Infrastructure
Infrastructure
CompetitiveCompetitive
Competitive
structure
Forces
Channels of
distribution
Environmental
uncontrollables
country market A
Economic climate
Level
of
Level of
Technology
Technology
Structure
Structure ofof
distribution
distribution
Prof srikanth venkataswamy
Environmental
uncontrollables
country market B
Environmental
uncontrollables
country market C
9
Ecological & Physical
 Air and water pollution, solid
waste disposal,Conserving
natural resources
 Water,power.Skilled
manpower,low-cost labour,
transportation
Prof srikanth venkataswamy
10
Internal Environment
Strength & Weakness analysis
Company location, R &D
Facilities,production facilities,
HR,Financial resources,
Marketing
effectiveness,reputation Or
Image of company
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11
External Environment
1. Micro Environment
2. Macro Environment
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12
Micro Environment
1. Customers and competitors
2. Suppliers
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13
Macro Environment
1.
2.
3.
4.
5.
Economic
Demographic
Technological
POLITICAL/Government/Legal
Cultural & Social
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14
External Influences on Consumers
Culture
Subculture
Social class
Reference
groups
Situations
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15
Demography

The term demographics as a
noun is often used erroneously in
place of demography, the study of
human population, its structure
and change.
 Demography focuses on
population structure,
processes and dynamics.
Prof srikanth venkataswamy
16
social scientists often group populations into categories
based on demographic variables. Some frequently
used demographic variables are:
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Age
Sex / Gender
ace/ Ethnicity
Location of residence
Socioeconomic status (SES)
Religion
Marital status
Ownership (home, car, pet, etc.)
Language
Mobility
Life cycles (fertility, mortality, migration)
Prof srikanth venkataswamy
17
Demography

The term demographics as a
noun is often used erroneously in
place of demography, the study of
human population, its structure
and change.
 Demography focuses on
population structure,
processes and dynamics.
Prof srikanth venkataswamy
18
social scientists often group populations into categories
based on demographic variables. Some frequently
used demographic variables are:
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Age
Sex / Gender
ace/ Ethnicity
Location of residence
Socioeconomic status (SES)
Religion
Marital status
Ownership (home, car, pet, etc.)
Language
Mobility
Life cycles (fertility, mortality, migration)
Prof srikanth venkataswamy
19
Demographic profiles in marketing
 Marketers typically combine several
variables to define a demographic profile.
 A demographic profile (often shortened to
"a demographic") provides enough
information about the typical member of
this group to create a mental picture of
this hypothetical aggregate.
 For example, a marketer might speak of
the single, female, middle-class, age 18 to
24 demographic.
Prof srikanth venkataswamy
20
Demographic profiles:
 Marketers typically combine several
variables to define a demographic profile.
 A demographic profile (often shortened to
"a demographic") provides enough
information about the typical member of
this group to create a mental picture of
this hypothetical aggregate.
 For example, a marketer might speak of
the single, female, middle-class, age 18 to
24 demographic.
Prof srikanth venkataswamy
21
 Marketing researchers typically have two
objectives in this regard: first to determine what
segments or subgroups exist in the overall
population; and
 secondly to create a clear and complete picture
of the characteristics of a typical member of
each of these segments.
 Once these profiles are constructed, they can
be used to develop a marketing strategy and
marketing plan.
Prof srikanth venkataswamy
22
 Marketing researchers typically have two
objectives in this regard: first to determine what
segments or subgroups exist in the overall
population; and
 secondly to create a clear and complete picture
of the characteristics of a typical member of
each of these segments.
 Once these profiles are constructed, they can
be used to develop a marketing strategy and
marketing plan.
Prof srikanth venkataswamy
23
ENVIRONMENTAL EFFECTS
 Culture: system of values, norms that are shared
among a group of people and that taken
together constitute a design for living. (or)
 Complex whole which includes knowledge,
belief, art, law, custom & other capabilities
acquired by man as a member of society.
 Values-abstract ideas about what a group
believes to be good, right, desirable/shared
assumptions about how things ought to be.
 Norms-social rules & guidelines that prescribe
appropriate behavior in particular situations.
 Society-group of people who share a common
set of values & norms.
Prof srikanth venkataswamy
Values & norms
 Values-* form the bedrock of culture
*Provide context with in which a
society’s norms are established &
justified
*include a society’s attitudes toward such
concepts as individual freedom,
justice, democracy, truth, honesty,
loyalty, love, social obligations,
collective responsibility, role of
woman, sex & marriage.
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Prof srikanth venkataswamy
Norms
 Norms-social rules that govern
people’s actions towards one another.
 2 major categories-1.folkways-routine
conventions of every day life, actions
of little moral significance.
Ex-dress code, social manners, eating
with correct utensils, neighbor
behavior, attitude towards time.
 Mores-norms that are seen as central
to the functioning of society & to its
social life.
Ex-act against thefts, adultery.
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Prof srikanth venkataswamy
Determinants of culture
Social structure
Religion
Political
Culture
Norms &
Value systems
Language
Education
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Prof srikanth venkataswamy
Economic
1.Social structure
 Refers to basic social organization
 2 important dimensions
*degree to which the basic unit of social
organization is individual as opposed to group
*degree to which a society is stratified into
classes/castes.
 Individuals & groups-group is an association of
2/more individuals who have a shared sense of
identity & who interact with each other in
structured ways on the basis of common set of
expectations about each other behavior.
*individuals are the basic building blocks of social
organization.
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Prof srikanth venkataswamy
Social stratification
(categories)
Social strata-typically defined on the basis of
characteristics such as family income, background,
occupation.
 Social mobility-refers to the extent to which
individuals can move out of the strata into which they
are born.
-varies from society to society
-the most rigid system of stratification is caste system.
 Class system-less rigid form of social stratification in
which social mobility is possible.
-is a form of open stratification in which the position a
person has by birth can be changed through his/her
own achievements
 Significance-class consciousness-refers to a condition
where people tend to perceive themselves in terms of
their class background & this shapes their
relationships with members of other classes.
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Prof srikanth venkataswamy
2.Religious & ethical
systems
 Religion-system of shared beliefs
& rituals that are concerned with
the realm of sacred.
 Ethical systems-refer to a set of
moral principles/values that are
used to guide & shape behavior &
product of religions.
 4 dominant religions-Christianity,
Islam, Hinduism, Buddhism
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Prof srikanth venkataswamy
Religions
 Christianity-wider practiced religion in
the world.
-roman catholic church (Catholicism)
-orthodox church (Protestantism)
*by Weber-protestants believed in hard
work & wealth creation & absence of
interest in worldly pleasures.
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Prof srikanth venkataswamy
Islam
-2nd largest, dates back to 610 AD.
Characteristics:
-respect to parents -not committing adultery
-being generous -respecting rights of others
-avoid killing –equal dealing with other
-being of pure heart & mind –being humble
-safe guarding possessions of orphans
 Islamic fundamentalism
-modernization in Islam in rich urban societies
-impoverished urban & rural societies
Ex-killing of foreign tourist, WTO, Pentagon attacks
 Economic implications of Islam-free enterprise &
earning of profits
-interest was a sin
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Prof srikanth venkataswamy
Hinduism
-believes in dharma, reincarnation,
rebirth, karma, nirvana
 Economic implications of
Hinduism- Weber
-individuals should not be judge by
material achievements but by
spiritual achievements
-supports caste system
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Prof srikanth venkataswamy
Buddhism
-6th century by Siddhartha
Gauthama
-nirvana, spiritual enlightment
-life is comprised of suffering
-eight fold path: right seeing,
thinking, speech, action, living,
effort, meditation, mindfulness
-no support for caste system
-believe in after life & spiritual
achievement
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Prof srikanth venkataswamy
Confucianism
-5th century by Confucius, china, Korea,
Japan
-teaches the importance of attaining
personal salvation through right action
 Economic implications of Confucianism
-loyalty to one’s superiors is regarded as
sacred duty, so it binds the employees
to the heads of their organization and
reduces the conflict between
management & labor
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Prof srikanth venkataswamy
3.Language
 Both spoken & unspoken means
of communication
 Spoken language-enable people
to communicate with each other
-direct the attention of its members
to certain features of the world
-English common in IB
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Prof srikanth venkataswamy
4.Education
-Formal education plays a key role
in society
-medium through which individuals
learn many of language,
conceptual & mathematical skills
-high skilled individuals are an
asset for country.
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Prof srikanth venkataswamy
5.Culture & work place
 4 dimensions
-power distance: people are
unequal in physical & intellectual
capabilities
-individualism vs. collectivism
-uncertainty avoidance
-masculinity vs. femininity
 Cultural change-changes in value
systems can be slow & painful for
a society
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Prof srikanth venkataswamy
Implications for business
1.Cross cultural literacyethnocentrism, polycentrism,
regiocentrism, geocentrism
2.Culture & competitive advantage
3.Culture & business ethics
-respect for core human values
-respect for local tradition
-respect for freedom
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Prof srikanth venkataswamy
Cultural awareness
1.Problem areas that hinder managers
are
-subconscious reactions to
circumstances
-the assumption that all societal
subgroups are similar
2.A company’s need for cultural
knowledge increases as
-its number of foreign functions
increases
-the number of countries of operations
increases
-its moves from
external to internal
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handling of operations
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Identification & dynamics of
culture
 The nation as a point of reference
 Cultural formation & dynamics
* choice/imposition
* contact with other cultures
 Language as a cultural stabilizer
 Religion as a cultural stabilizer
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Prof srikanth venkataswamy
Social & cultural
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Culture facilitates communication
Cultural attitude & IB
Culture & thinking process
Cross cultural communication process
& negotiations
Cultural universals
Communication through languages
Time & culture (appointment)
Space & culture
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Prof srikanth venkataswamy
Social & cultural
Culture & agreement
Culture of friendship
Culture & superstition
Culture & color
Culture & gifts
Culture prescriptive-the kinds of
behavior considered acceptable in the
society
EX-consumption of wine
-US acceptable
-India socially not acceptable
-Saudi socially & legally unacceptable
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Prof srikanth venkataswamy
Behavioral practices affecting
business
 1.Social stratification systems -group affiliation
*Performance orientation
*Gender based groups
*Age based groups
*Family based groups
*Occupation
• 2.Motivation
*Materialism & leisure
*Expectation of success & reward
*Assertiveness
*Need hierarchy (recognition, attention,
appreciation, maslow’s hierarchy)
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Prof srikanth venkataswamy
Behavioral practices affecting
business
 3.Relationship preferences
*Power distance
*Individualism vs. collectivism
 4.Risk taking behavior
*Uncertainty avoidance
*Trust
*Future orientation
*Fatalism
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Prof srikanth venkataswamy
Behavioral practices affecting
business
 5.Information & task processing
*Perception of cues, obtaining
information
*Information processing
-monochromic: people like to finish
work one after one
-polychromic: people concentrate
on all tasks at one time
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Prof srikanth venkataswamy
Strategies for dealing with
cultural differences
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Making little/no adjustment
Communication
Silent language
Culture shock (expatriate)
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Prof srikanth venkataswamy
Company & Management
orientations
 Polycentrism-control is decentralized
 Ethnocentrism-superiority
 Geocentrism
Strategies for instituting change
Value system -the more a change upsets
important values, the more resistance
it will encounter
Cost benefit of change
 Economic cost
 Psychic cost
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Prof srikanth venkataswamy
Strategies for instituting
change
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Resistance to too much change
Participation
Reward sharing
Opinion leaders
Timing
Learning abroad
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Prof srikanth venkataswamy
Political environment
 Political process functions include
*interest articulation-politicians,
individuals, businesses, interest
groups
*policy making
*interest aggregation
*policy implementation &
adjudication
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Prof srikanth venkataswamy
Political environment
a. Basic political ideologies
b. Impact of ideological differences on
national boundaries
*a political spectrum
*political rights & civil liberties
*stability in democracy
c. Impact of political system on
management decisions
*political risk
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Prof srikanth venkataswamy
Political environment
Types & causes of political risk
*Opinions of political leadership
*Civil disorder
*External relations
*Micro&macro political risks
d. Government intervention in the economy
*individualistic paradigm-minimal government
intervention, democratic & economically free
*communitarian paradigm-authoritative &
prestigious government, defines needs &
priorities
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Prof srikanth venkataswamy
Formulating & implementing
political strategies
 Identify the issue
 Define the political aspect of the issue
 Assess the potential political action of
other companies & special interest
groups
 Identify important institutions & key
individuals
 Formulate strategies
 Determine the impact of
implementation
 Select the most appropriate strategy &
implement itProf srikanth venkataswamy
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Political environment
 Collectivism & individualism
 Socialism
*Communists *Social democrats
 Democracy & totalitarianism
*Communist totalitarianism-dictatorship
*Theocratic totalitarianism-by a
party/group
*Tribal totalitarianism
*Rightwing totalitarianism-gives
economic freedom but restricts
political freedom
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Prof srikanth venkataswamy
Legal environment
Kinds of legal systems
 Common law-based on tradition,
custom, usage & interpretation by
courts Ex. US,UK
 Civil law-codified legal system,
legal codes Ex. Germany, France,
Japan
 Theocratic law-based on religious
precepts Ex. Islamic countries
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Prof srikanth venkataswamy
Legal environment
 Consumer safeguards-product liability
issues
 Legal profession
 Legal issues in IB
*national laws affect all local business
activities
*national laws affect cross border
activities
*international treaties, cross border
transactions
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Prof srikanth venkataswamy
Legal systems
 Property rights
*public & private action
 Protection of intellectual property
*patents *copyrights *trademarks
 Product safety & liability
 Contract law
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Prof srikanth venkataswamy
Economic environment
Key economic forces
*general economic framework of a
country
*economic stability
*existence & influence of capital
markets
*market size
*availability of economic
infrastructure
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Prof srikanth venkataswamy
Economic environment
An economic description of countries
 Factor/production conditions-HR,
physical resources, knowledge
resources, capital resources,
infrastructure
 Demand conditions
*composition of home demand (quality of
demand)
*size & growth of demand (quantity of
demand)
*internalization of demand
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Prof srikanth venkataswamy
Economic environment
Countries classified by income
1. Gross national income (GNI)
2. Gross national product (GDP)
3. World bank:
-5 closely associated institutions
*IBRD (International bank for reconstruction &
development)
*IDC (International development association)
*IFC (International finance corporation)
*MIGA (Multilateral guarantee agency)
*ICSID (International center for settlement of
investment disputes)
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Prof srikanth venkataswamy
Economic environment
Countries classified by region
 East Asia & pacific
 Latin America & the Caribbean
 The Middle east & North Africa
 South Asia
 Sub-Sahara Africa
Importance of regional groupings of countries
 Similar economic conditions
 Mirrors the way companies organize their firms
geographically
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Prof srikanth venkataswamy
Economic environment
Countries classified by economic systemevery government struggles for
ownership & control of economy
*Ownership-who own the resources
engaged in economic activity
-can be public sector, private sector/both
*Control-whether resources are allocated
& controlled by the public/private
sector
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Prof srikanth venkataswamy
Economic environment
Factors that determine economic freedom
 Trade policy
 Fiscal burden of government
 Government intervention in the
economy
 Monetary policy
 Capital flows & investment
 Banking & finance
 Wages & prices
 Property rights & regulation
 Black market activity
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Prof srikanth venkataswamy
Economic environment
 State capitalism-Japan, Korea
 Market economy-private sector
*consumer sovereignty
 Command economy-public sector
 Mixed economy
*Inflation-condition in which prices are
going up
-inflation rate is the percentage increase
in the change in prices from one period
to the next, usually a year
-to measure inflation the following
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Prof srikanth venkataswamy
Economic environment
*consumer price index (CPI)
*surpluses & deficits
*balance of payments (BOP):
-current account: trade in goods &
services & income from assets abroad
-merchandise trade balance: net balance
of exports minus imports of
merchandise
-deficit: imports exceed exports
-surplus: exports exceed imports
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Prof srikanth venkataswamy
Economic environment
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External debt
Internal debt
Privatization
Transition to a market economyincludes liberalizing economic
activity & establishing legal &
institutional framework
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Prof srikanth venkataswamy
Economic environment
Process of transition
 Russian transition
*includes political & economic transition at the
same time
*initial transition steps resulted in steep economic
declines
*soft budgets, subsidies & other government
supporting activities have continued
*hard administrative constraints have disappeared
& are being replaced with connections &
corruption
*debts & deficits-both internal & external area real
challenge
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Prof srikanth venkataswamy
Economic environment
 China’s transition
*Chinese growth has been far
stronger than for other countries
in transition
*china has maintained totalitarian
political control while loosening
the economy
*a major challenge is privatizing
state owned enterprises
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Prof srikanth venkataswamy
Economic environment
The future of transition
*continued macro stability
*maintaining economic growth
*continued improvement in
institutional & structural areas
*the solution of social issues such
as poverty, child welfare,
HIV/AIDS
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Prof srikanth venkataswamy
Ethical issues in IB
 Utilize natural resources optimally &
appropriately
 Benefit should accrue to the host country in the
nature of production/export
 Technology transfer, employment, training of
host country’s personnel, equal treatment to be
done
 Social segment responsibility to be discharged
 Accounting should be transparent
 Do not involve in host country’s politics
 Avoid bribery
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Prof srikanth venkataswamy
Regional Integrations,
Trading Blocks -
Prof srikanth venkataswamy
ANDEAN PACT :
Prof srikanth venkataswamy
ANDEAN PACT :
 The Andean Community of Nations (Spanish:
Comunidad Andina de Naciones, CAN) is a trade
bloc comprising the South American countries of
Bolivia, Colombia, Ecuador and Peru. The trade
bloc was called the Andean Pact until 1996, and
came into existence in 1969 with the signing of
the Cartagena Agreement.
Andean Community headquarters are located in
Lima, Peru.
 The trading bloc encompasses a combined
population of 101 million (2010).
Prof srikanth venkataswamy
Facts on the Andean Pact :
 The Andean Community has 120 million
inhabitants in an area of 4,700,000 square
kilometers, and a Gross Domestic Product of US
$900 billion (excluding Venezuela).
 The Andean Community and Mercosur comprise
the two main trading blocs in South America.
 The Community organization includes Andean
Presidential Council, Foreign Minister’s Council
Commission, justice tribunal, congress and
reserve Fund.
 With the cooperation agreement with Mercosur,
the Andean Community gained five new
associate members: Argentina, Brazil, Paraguay,
Chile and Uruguay.
Prof srikanth venkataswamy
Mercosur:
Common Market of the South
Prof srikanth venkataswamy
75
Mercosur:
 The "Common Market of the South," is the
largest trading bloc in South America.
 Mercosur's full members include
Argentina, Brazil, Paraguay, and Uruguay.
Venezuela's entry as a full member is still
pending
 Mercosur's five associate members -Chile, Bolivia, Colombia, Ecuador, and
Peru
 Mercosur's primary interest has been
eliminating obstacles to regional trade,
like high tariffs, income inequalities, or
conflicting technical requirements for
bringing products
to market.
Prof srikanth venkataswamy
Mercosur:
 Yet experts say Mercosur has become somewhat
paralyzed in recent years, with its members
divided over the future of the organization.
 Some countries, like Brazil, want to keep
Mercosur focused on regional trade. Other
countries, like Venezuela, which has yet to
attain full membership in the bloc, would like to
expand the group's mandate to political affairs.
 The creation of a new regional organization in
2008, the Union of South American Nations
(Unasur), has raised further questions about
Mercosur's utility.
Prof srikanth venkataswamy
MERCOSUR’S Members and Associated Members
Prof srikanth venkataswamy
Trading Blocs & Economic Integration in South America: MERCOSUR
Prof.
78
What is Mercosur?
 The Mercosur trade bloc's purpose, as stated in
the 1991 Treaty of Asunción, is to allow for free
trade between member states, with the ultimate
goal of full South American economic
integration.
 The trade bloc's "grand aspiration is to unify the
Southern Cone and then all of South America in
an economic bloc,"
 "It gives them more trading security."
Mercosur's full members include Argentina,
Brazil, Paraguay, and Uruguay. Venezuela's
entry as a full member is still pending
ratification by Brazil and Paraguay.
 Brazil is the region's largest economy with a
gross domestic product (GDP) of over $1.6
trillion in 2008.
Prof srikanth venkataswamy
The Juridical-Institutional System of the
MERCOSUR
Characteristics of the Juridical-Institutional System
• MERCOSUR: (Ouro Preto Agreement, 1994)
– Juridical Personality in International
Law since the Protocol of Ouro Preto
– Intergovernmental: no sovereignty
transfer by the Members
– Temporary Structure
Common Market Council (CMC):
-Ministerial Meetings
Organs
with
DecisionMaking
Powers
-Permanent Representatives Commission
(CRPM) (2003) President. They coordinate –Ad
Hoc Group Structural Convergence Funds
(GAHE-FOCEM) (2005)
Common Market Group (GMC)
Trade Commission of the MERCOSUR (CCM)
-Technical Committees. (Common External
Tariff)
Prof srikanth venkataswamy
Trading Blocs & Economic Integration in South America: MERCOSUR
Prof.
80
The Origins of the MERCOSUR
1991: Treaty of Asunción: Argentina, Brazil, Uruguay,
Paraguay
• Establishment of a Free Trade Area and a Customs Union during the
Transition Period (1991-1994)
• Intending to establish a Common Market at the end of the Transition
Period
– Trade Liberalization: scheduled, lineal and automatic. Included
lists of exceptions (Final Adaptation Regime)
– Fixation of a Common External Tariff: included exceptions.
Intention of incentivating external competitiveness
– Coordination of Macroeconomic Policies: just consultations,
no harmonization
– Adoption of Sector Agreements
– General Origin Regime
Prof srikanth venkataswamy
Trading Blocs & Economic Integration in South America: MERCOSUR
Prof.
81
The Juridical-Institutional System of the
MERCOSUR
Characteristics of the Juridical-Institutional System

MERCOSUR Parliament (PM) (2005)

Economic and Social Advisory Forum (FCES)

Administrative Secretariat (SAM)

Dispute Settlement Mechanism: Permanent Court of Review (TPR) (2005)

MERCOSUR’s international Agreements

4+1 : MERCOSUR + USA: Trade Negotiations. Investment’s Protection
Agreement. (1991)

MERCOSUR-EU (1995) Cooperation Agreement Framework. Interregional
Association Agreement : market access vs agriculture

Chile & Bolivia: associated members (1995-1996) Free Trade Area

CAN-MERCOSUR (2003) Free Trade Area

South American Community of Nations (2004) UNASUR
Prof srikanth venkataswamy
Trading Blocs & Economic Integration in South America: MERCOSUR
Prof.
82
Global sourcing and its
Impact on Indian Industry.
Prof srikanth venkataswamy
Global sourcing and its Impact
on Indian Industry
 India has retained its’ position as the leading
global shoring destination with a 55 per cent
share of global ITO and BPO market in 2010,
and been able to increase its market share in
spite of competitive challenges presented by
emerging off shoring destinations.
 This has been only possible due to the
development of a set of factors unique to India,
that multiply India’s value proposition manifold.
 While the cost advantage is unparalleled, India
has the world’s largest pool of employable
talent, service delivery infrastructure across
multiple geographically dispersed locations
within the country, and a supportive policy
regime.
Prof srikanth venkataswamy
Global sourcing and its Impact
on Indian Industry
 However, the Indian global sourcing
industry is no longer hinging its value
proposition on cost, talent,
infrastructure and processes which are
considered as basic tools to operate in
the global sourcing landscape.
 With customers also pushing for more
collaborative contracts where there is
business metric performance
measurement and greater risk-reward
sharing,
Prof srikanth venkataswamy
Global sourcing :
Indian industry is
increasingly being driven by the following four
factors
1. Transformational Business impact – Client
business transformation happening through-
 -


Verticalised solutioning – A number of organisations have
restructured themselves around verticals and Centres of
Excellences - so as to develop and deliver end to end services
keeping in mind customer needs, creating products aimed at
growing emerging markets and creating a substantial revenue
impact for them. These verticalised business units act as a source of
innovation and development of proof of concept solutions
- Technology enablement – Development of solutions around
platforms, cloud based products integrating business intelligence,
and application development tools are proving to be game changers
for an increasing set of customers. This is also prompting customers
to move from CAPEX to OPEX based models
-Process innovation/re-engineering – Coupled with
automation and six sigma skills, incremental set of
enhancements imbibing best in class learning and practices
in established service delivery processes also have the
ability to create wide ranging transformation for clients
Prof srikanth venkataswamy
Global sourcing :Indian industry is
increasingly being driven by the following four
factors
2.Service Delivery maturity
 India is the most mature outsourcing
market, with Indian service providers
having developed end to end service
delivery capabilities around all verticals.
 Further, there is increased globalisation in
service delivery, cross border collaboration
and partnerships to enhance service off
erings, and reengineering of the talent pool
for greater productivity and efficiency
Prof srikanth venkataswamy
Global sourcing :Indian industry is
increasingly being driven by the following four
factors
3. Scalability –
 India’s scale and fl exibility is unique- a vast
labour pool, network of Tier II/III cities off
ering further cost reduction and increased
infrastructure spend are the cornerstones to this
advantage off ered by India over other
locations.
 The demand side has also been maturing
gradually, moving away from commoditised
services at lowest possible cost to demand for
higher end solutions and measurable business
value.
 There is a highly rationalised and competent
provider base which is again one factor where
India scores over other countries
Prof srikanth venkataswamy
Global sourcing :Indian industry is
increasingly being driven by the following four
factors
4. Sustainability –
Industry focusing on
sustainable practices –
including diversity, green and
corporate social responsibility
Prof srikanth venkataswamy