Competition has always been central to the agenda of firms. It has become one of the enduring themes of our times and the rising intensity of competition has continued until this day thereby spreading to more and more countries. As a result of globalization, most industries with the topics of international business and competitive advantage have received much attention from business executives, public policy makers and scholars in recent years. This; in conjunction with the rise of global competitors has helped to explain why a country’s competitive advantage can be determined by the strength of its business firms. This has resulted in numerous rankings, where industries and firms are compared on a global scale to see which are the most competitive. Most firms prefer to compete in the business environment so that it will help determine the competitive advantage of the country in which they operate. A firm’s ability to Continue reading
International Economics
Foreign Capital
Foreign capital or investment has become significant part of sources of funding for various projects in every country. This source of funding has received the attention of both the government as well as the corporate sector that there has been increasing reliance on this source for planning and execution of projects by the government as well as the corporate sector. Foreign capital can come into a country in different forms. Let us first understand these forms of foreign capital before discussing the need for foreign capital. Forms of Foreign Capital Direct Entrepreneurial Investment: In this form of foreign capital, the foreign investors can start a company abroad mainly for the purpose of establishing its branches and subsidiaries in other countries. For instance an American business group may invest in a new project in India directly and start its own affiliate or branch or even a subsidiary. Sometimes, the investors abroad Continue reading
European Economic and Monetary Union (EMU)
The basis of the European Economic and Monetary Union (EMU) was the American desire to see a united Western Europe after the World War II. This desire started taking shape when the Europeans created the European Coal and Steel Community, with a view to freeing trade in these two sectors. The pricing policies and commercial practices of the member nations of this community were regulated by a supranational agency. In 1957, the Treaty of Rome was signed by Belgium, France, Germany, Italy, Luxembourg and the Netherlands to form the European Economic Community (EEC), whereby they agreed to make Europe a common market. While they agreed to lift restrictions on movements of all factors of production and to harmonize domestic policies (economic, social and other policies which were likely to have an effect on the said integration), the ultimate aim was economic integration. The European countries desired to make their firms Continue reading
Schumpeter’s Innovation Theory – Mechanism, Principles, Strengths, and Limitations
Schumpeter’s Innovation Theory provides that the leading role of an entrepreneur in the economic field is the introduction of innovations from which the reward is gaining profits. The model stipulates that entrepreneurship plays a decisive role in fiscal development and that successful creativities are the only way to achieve such goals as financial stability within an organization. It explains that invention could occur in such ways as launching or upgrading a product, introducing new production methods, acquiring advanced supply sources, and bringing unique business structures. The business approach was developed by Joseph Alois Schumpeter, an Austrian political economist and foundational contributor to the topic of development and technological advancements. The idea is based on the more elaborate theory of monetary growth, which focuses on entrepreneurship and its role in industrial empowerment with innovativeness as the linkage. In this regard, Schumpeter worked towards defining and explaining the change in a perspective Continue reading
Demand and Supply for Foreign Exchange
The foreign exchange rate is determined in the free foreign exchange markets by the forces of ‘demand and supply for foreign exchange’. To make the demand and supply functions to foreign exchange, like the conventional market demand and supply functions, we define the rate of exchange as the price of one unit of the foreign currency expressed in terms of the units of the home currency. The Demand for Foreign Exchange Generally, the demand for foreign currency arises from the traders who have to make payments for imported goods. If a person wants to invest his capital in foreign countries, he requires the currency of that country. The functional relationship between the quantity of foreign exchange demanded and the rate of foreign exchange is expressed in the demand schedule for foreign exchange (which shows the different rates of foreign exchange). It is understood from the demand schedule that the relationship, Continue reading
Theories of International Investments
International investments mean investments beyond borders. International investments refer to investments by entities of a nation in nations other than their own. Foreign investments involve export of capital. The opportunity for International investments is directly emanating from economic reformist policies adopted by most of the countries of the world including centrally planned and command economies. Liberalization, Privatization and Globalization (LPG) are vigorously pursued by the countries giving an up-thrust on investment opportunities. Broadly there are two types of foreign investment, namely, foreign direct investment (FDI) and foreign portfolio investment (FPI). FDI refers to investment in a foreign country where the investor retains control over the investment. It typically takes the form of starting a subsidiary, acquiring a stake in an existing firm or starting a joint venture in the foreign country. Direct investment and management of the firms concerned normally go together. If the investor has only a sort of Continue reading