Question No. 6 - MMPC 03 - Business Environment - MBA and MBA (Banking & Finance)

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                            MBA and MBA (Banking & Finance)

MMPC 03 - Business Environment

MMPC-003/TMA/JULY/2022

Question No. 6. Write notes on the following:                              
a) Measures to reduce barriers to foreign trade. 

Free trade refers to elimination of all barriers to international trade. Several numbers of organizations and trade agreements are working out to ease the barriers to trade, thereby promoting more of trade and mutual economic gains from it. Some of the important initiatives taken to remove those barriers are discussed below:

1. General Agreement on Tariffs and Trade (GATT): Post the Great Depression and World War II, international trade faced stringent cross-border restrictions. To eliminate those, twenty-three nations came forward and united in 1947 to sign the General Agreement on Tariffs and Trade (GATT). GATT encouraged free trade through proper regulation and reduction in tariffs and also provided a forum for resolving trade related disputes among its signatories. 

2. World Trade Organization (WTO) and Regional Trading Agreements (RTAs): Founded in 1995 by the members of GATT, located in Geneva, Switzerland and with approximately 159 member countries at present, WTO encourages global trade through lowering of trade barriers, introducing multilateral trading systems through Regional Trading Agreements (RTAs), enforcement of international trade rules and providing a forum for resolving trade disputes. It is also empowered to monitor a country’s trade policy and can guide the “guilty” members in eliminating all disputed trade restrictions imposed, if any. Non-discrimination is the core principle of WTO, and its members have committed not to favour any one trading partner over others. An exception to these is the Regional Trade Agreements (RTAs), which are discriminatory by nature – in the sense that only its member signatories can enjoy more favourable market-access conditions. The RTAs aim at facilitating trade between its signatories but do not raise trade barriers with the other trading countries. WTO member countries can enter into the RTAs under specific conditions which will cover: i) formation and operations of customs unions and free trade areas covering trade in goods, ii) regional or global arrangements for trade in goods between developing member countries and iii) agreements covering trade in services. In general, RTAs must cover all trade in goods and services and help in promoting more of free trade among the countries under RTA. As of June 2016, all WTO member countries now have an RTA in force. 

3. The World Bank and the IMF: The primary determinant in helping the poorer nations or the less developing economies to involve as active members in the global trading system is by providing financial assistance. This has been a major shared goal of two international organizations – The International Monetary Fund (IMF) and the World Bank. The IMF lends financial assistance to the needy economies, with conditions imposed, which might include some of the tender financial or economic reforms. The World Bank, on the other hand, provides economic assistance to the poor and the least developing economies so as to ameliorate the lives of the people through communitysupport programs which are mainly designed to ensure the provision of better health, education, nutrition, infrastructure and other social services. 

4. Trading Blocs: In some parts of the world, a group of countries have integrated to allow free flow of commodities and services among their mutual boundaries. Such groups of countries are known as Trading Blocs. The North American Free Trade Association (NAFTA) – (agreement signed for mutual flow of trade among the US, Mexico and Canada) and the European Union ( EU) (signed by 27 countries of Europe to open their borders for free trade) are the two most powerful trading blocs at present. 

b) Impact of technological environment on international business.

Every businessman or marketer around the globe is now well aware of how important technology is for the businesses and what are its effects on a business environment? There are both negative and positive effects of technology for a business. Initially, the businesses were dependent on a labour force. But with the rise in technology, businesses do not want to lag behind. They have already started implementing newer technologies to flourish worldwide. Here are some of the ways in which the technology affects the global business environment.

1. Technology helps in diminishing business security risks by hiring best of security specialists for preventing sudden cyber-attacks and with the use of AI and ML, such threats are being minimized. 

2. Technology ensures business growth by enabling almost all business actions to be automated, thereby reducing involvement of human labour. This has helped in increasing the sales, revenue and profit for the businesses and the usage of internet have enabled them to grow online and expand worldwide. 

3. Online presence through social media channels is one of the business-oriented targets that the enterprises are trying to fulfil to grow along with the broadening of its client base. Technological tools that help businesses identify their preferred content, optimum time of posting their service contents, automated posting and location- specific targeting to expand their business, are actually helping to establish the business better in the online world. Tools like Google analytics are playing a major role in this. 

4. Technology helps in increasing employee productivity for a business through various computer programming and software such as AI, ML, and cloud computing that helps businesses to process more information, sitting anywhere in the world, than manual methods, thereby reducing much of human involvement in such tasks. Organizations are also using fundamental business technologies for employee performance appraisal information in the online framework to supervise the performance of its employees and create measurable goals for their employees to achieve and thereby sustain the business objectives. 

5. Business technologies are now allowing companies to outsource certain business functions to other businesses in the national and global business framework. Technical support and customer service are the two most common outsourced functions. Outsourcing therefore helps companies lower their business costs and focus on completing their business functions, which they are best at. With the help of several technological innovations, businesses can also outsource their functions to the least expensive areas possible, including those in foreign countries as well.