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Business management (BME- 211) assignment I

Part I group assignment

1. Discuss the following terms with their advantage and disadvantages.

A. Liberalization
B. Privatization
C. Globalization

A. Liberalization

Concept of Liberalization:-

Progressive elimination of government control over economic activities is known as

liberalization.

Liberalization refers to freedom to business enterprises from excessive government control and
they are given freedom to make their own decisions regarding production, consumption, pricing,
marketing, borrowing, lending & investments.

The major elements of Liberalization include the followings:

1. De-licensing of industries:-

Abolished (cancelled), licensing for most industries which helped companies to concentrate on
productive activities.

2. Liberalization of foreign investment:-

Approval for foreign investment

3. Liberalization of foreign technology imports:-

The liberalized import of foreign technology led to technological improvement.

This helped in getting automatic permission for foreign technology imports and no permission
was required for hiring foreign technicians & foreign technology testing.

4. Liberalization of industrial location:-

This enabled the firms to set up industries at a right location of their choice without much
interference from government authority.

5. Liberal taxation:-The government has introduced liberal reduction in taxation rates on direct
tax & indirect tax, customs, excise, service which has greatly benefited the firms.
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Advantages of Liberalization:-

1. Increase in foreign investment.

2. Increase in efficiency of domestic firms.

3. Rise in the rate of economic growth.

4. Control of price.

Disadvantages of Liberalization:-

1. Increase in unemployment.

2. Loss to domestic unit.

3. Increased dependence on foreign nation.

4. Unbalanced development of sectors.

A. Privatization
Concept of Privatization:-
Privatization is the transfer of control of ownership from public sector to private sectors.
It means the conversion of property rights from the public to private owners. The two
elements of Privatization are as follows:
1. Dereservation of public sectors:-
The dereservation of public sectors has enabled the entry of private sectors in those industries
which were reserve only for public sectors. This has led to improve customers service &
efficiency of the firms.
2. Disinvestment of Public sector:-
Disinvestment is a process of selling government equity in (Public Sector Undertaking) to
private parties. The disinvestment is undertaken to achieve good customers service,
overcome political interference, overcome corruption and improve efficiency public sector
undertaking.
Advantages of Privatization:-
1. Helps in reducing the burden on government.
2. Makes the public sector undertaking competitive.
3. Greater autonomy for public sector undertaking managers.
4. Industrial growth.
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Disadvantages of Privatization:-
1. Encourages the growth of monopoly power.
2. Privatization may be preferred only for profit making public sector undertaking.
3. Unbalance development of industries.
4. Compromise of social justice & public welfare.
5. Increased in corruption.
A. Globalization
Concept of Globalization:-
Globalization is a process of rapid integration or inter-connection between countries through
trade, foreign direct investment, capital flow, migration, & the spread of technology.
The main elements of Globalization include the followings:
1. Introduction of Foreign Exchange Management Act.
The government introduced Foreign Exchange Management Act to make foreign exchange
transactions easier.
2. Reduction in custom duties:-
The government reduced the custom duties. The reduction in import duties has resulted in
cheaper import.
3. Liberalization of foreign investment:-
The government has liberalized foreign investment which in turns has given a good boost to
capital market.
4. Signing of WTO Agreement:-
A number of agreements have signed in order to expand trade worldwide.
Some of the agreement includes TRIPS (Trade Related Intellectual Property Rights), GATS
(General Agreement on Trade in Service).
Advantages of Globalization:-
1. Free flow of foreign capital.
2. Free flow of new technology & production method.
3. Increased in Industrialization.
4. Increased in employment & income.
5. Benefits for consumers.
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Disadvantages of Globalization:-
1. Loss of domestic industries.
2. Unemployment.
3. Increasing inequalities between rich & poor.
4. Cultural problems.
5. New type of political & commercial colonization.
2. Ethiopia is about to become the member of WTO in 2016 .can you forward some of
the impacts on the country?
Yes, but before I forward some of the impacts of WTO on Ethiopia I want to summarize the
historical background of WTO and then, assess its possible impacts on Ethiopia from the
perspective of consumers, manufacturers, and long term national economic development

The World Trade Organization: Its History and Institutions

The World Trade Organization (WTO) was established in 1995 as the successor to the 1947
General Agreement on Trade and Tariffs (GATT). The WTO is the umbrella international
organization responsible for the administration of global rules of trade among nations. It provides
the principal contractual obligations determining how governments frame and implement
domestic trade laws and regulations. Additionally, the WTO provides members with a platform
whereby they can engage one another in serious negotiations on trade matters, on a continuous
basis, through periodic negotiation meetings known as rounds.

The WTO is the only international organization dealing with the global rules of trade among
nations by helping trade flow as smoothly, freely, and predictably as possible.

The overriding objective of the WTO is to promote the liberalization of trade by encouraging
non-discriminatory treatment in international trade through a multilateral system of trade that
provides a level playing field for all members regardless of their stages of development and the
reduction and possible elimination of trade barriers.

The Structure of the WTO

WTOs top-level decision-making body is the Ministerial Conference, which meets at least once
every two years.

Immediately below the Ministerial Council is the General Council. The General Council meets
several times a year at the WTO headquarters in Geneva, Switzer-land. When the need arises, the
General Council also meets as the Trade Policy Review Body and the Dispute-Settlement Body
of the WTO.
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At the bottom of the decision-making hierarchy of the WTO is the Secretariat. The Secretariat,
too, is based in Geneva, and is headed by a Director-General. Since decisions are made by a
consensus among members, the Secretariat does not, however, have the decision-making
responsibility that other international agencies have. Its main duties are limited to providing
technical support to the various WTO Councils and Committees, as well as to the Ministerial
Conferences. Providing technical assistance to developing countries and analyzing world trade
and explaining WTO affairs to the public and the media are also among the Secretariats main
duties.

The Functions of the WTO

In order to ensure that trade flows smoothly, freely, fairly, and predictably, the WTO performs
the following core functions:

Administering trade agreements;

Acting as a forum for multilateral trade negotiations;
Settling any trade disputes that may arise between members;
Reviewing national trade policies;
Assisting developing countries in trade policy issues, through technical assistance and
training programs; and
Cooperating with such international organizations as the IMF, the World Bank, and the
UNs Center for Trade and Development (UNCTAD).

The Basic Principles of the WTO

There are fundamental principles running through the whole body of the WTO Agreements that
are designed to ensure that the objective of freer trade is achieved. These fundamental principles
are the following:

Trade without discrimination;

Predictability;
Freer trade, gradually and through negotiations; and
Fair competition.

The Main Agreements of the WTO

Currently, the WTO consists of several Agreements to which members are a party. These are
discussed herein below.

The General Agreement on Tariffs and Trade (GATT)

The General Agreement on Tariffs and Trade (GATT) covers international trade in goods.
GATT, originally signed by 23 nations in 1947, was an informal multilateral agreement covering
international trade activities among states.
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Work relating to GATT Agreements now falls under the responsibility of the Council for Trade
in Goods (Goods Council), which is made up of representatives of all WTO-member countries.
The Goods Council has under it 11 commit-tees dealing with such specific areas as agriculture,
market access, subsidies, and anti-dumping measures. The membership of these committees is
constituted by the representatives of all member countries. Also reporting to the Goods Council
are the Textiles Monitoring Body, the Working Party on State Trading Enterprises, and the
Information Technology Agreement (ITA) Committee.

The Agreement on Agriculture (AoA)

The establishment of the WTO in 1995 saw the introduction of the first effective rules governing
international trade in agriculture and food. Following the Uruguay Round of negotiations, all
agricultural products were brought under multilateral trade rules by the WTO Agreement on
Agriculture (AoA). This instituted a framework for the liberalization of trade in agriculture
through the reduction of import duties (tariffs), trade-distorting production subsidies, and export
subsidies. Members commitments under the Agreement on Agriculture fall under three broad
areas: market access, domestic support, and export competition.

Market Access

Under AoA, all non-tariff barriers, or quantitative import restrictions (quota, controls, etc.), are
to be replaced by tariffs that are bound and subsequently reduced through a process known as
tariffication. Under the Agreement, it was decided that developed countries would be required to
reduce their tariff rates by 36 percent in six years, and developing countries by 24 percent in ten
years.

Put simply, the required policy options relate to the removal of all trade-distorting measures,
including high tariffs and other restrictions on exports from developing countries.

Domestic Support

The main concern about policies which support domestic prices or subsidize production is that
they result in overproduction.

While developing countries were forced to reduce their subsidies, as a result of the Structural
Adjustment Program, other loans, and poor fiscal conditions, developed countries, especially EU
members and the USA, were allowed to provide huge subsidies to their farmers under various
schemes. At the outset, these subsidies have been controversial and trade-distorting. The
following are noted to be among the several negative consequences of these policies:

Dumping of agricultural products by developed countries on developing-country markets;

Rendering producers in developing countries uncompetitive with highly subsidized goods
from developed countries; and
Adversely affecting rural livelihood and food security in poor countries.
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Domestic support measures are disciplined through reductions in the Total Aggregate
Measurement of Support (AMS).

Each WTO member has to do calculations to determine its AMS wherever applicable.
Commitments made require a 20-percent reduction in Total AMS for developed countries over
six years. The reduction in total AMS for developing countries is, nonetheless, 13 percent over
ten years. There are no reduction requirements for least-developed countries (LDCs).

Export Competition

The Agreement on Agriculture prohibits export subsidies on agricultural products unless the
subsidies are specified on a members list of commitments. Where they are listed down, the
Agreement requires that WTO members cut down on both the amount they spend on ex-port
subsidies and the quantities of the exports that receive subsidies.

Yet OECD-member countries provide huge support for agricultural ex-ports in the form of
export-credit guarantees and similar mechanisms. The Hong Kong Ministerial Meeting has, in
this regard, made a decision on a parallel elimination of all forms of export subsidies and
disciplines on all export measures, with an equivalent effect to be completed by the end of 2013.

Non-Agricultural Market Access (NAMA)

As their name suggests, WTO negotiations on Non-Agricultural Market Access (NAMA) aim at
reaching an agreement on market access that covers non-agricultural products. All products
outside the AoA are, therefore, included. These products are mostly industrial, but natural
resources such as fisheries, forests, gems, and minerals are also being considered.

Market access for non-agricultural products relates to the reduction of and eventual elimination
of tariffs and non-tariff barriers on industrial goods.

The General Agreement on Trade in Services (GATS)

The WTO Agreement on services, known as the General Agreement on Trade in Services
(GATS), represents a first step toward the liberalization of inter-national trade in services, which
is the entry of foreign services and foreign-services providers into a country.

The Agreement on Trade-Related Intellectual Property Rights (TRIPS)

Intellectual property rights can be defined as the rights given to people over the creations of their
minds. Intellectual property rights usually give the creator an exclusive right over the use of
his/her creations for a certain period of time. The components of the TRIPS Agreement and the
main categories of intellectual property rights are summarized here below:
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The Components of the TRIPS Agreement

Part I of the Agreement reaffirms the basic GATT principle of national treatment under which
the nationals of other members must be given treatment no less favorable than that accorded to a
members own nationals with regard to the protection of intellectual property. It also contains the
most-favored nation (MFN) clause under which any ad-vantage a member gives to the nationals
of another member must normally be extended to the nationals of all other members.
Part II of the Agreement addresses different kinds of intellectual property rights and provides
guidance on how to protect them.
The Main Categories of TRIPS
Conventionally, intellectual property rights have two main categories: copyright and related
rights and industrial property rights.
The Basic Issue under TRIPS
The introduction of intellectual property rules on plants and seeds under the WTO Agreement on
TRIPS could damage the livelihoods of billions of farmers worldwide and undermine food self-
sufficiency and food security.
The introduction of the TRIPS Agreement has made it mandatory for all WTO members to
provide for internationally acceptable and enforceable patent protection for new inventions in all
areas of technology. TRIPS are, therefore, forcing developing countries to extend intellectual
property rights to plant varieties and seeds, with consequent impacts on agriculture.
The very idea of granting intellectual property rights over life forms and processes has been one
of the most intensely debated subjects of our time.

The possible impacts of world trade organization on Ethiopia from the perspectives of
consumers, manufacturers and long term national economic development.

As a principle trade is good". If you look at the development of civilization trade helped
increase commerce which helped people get rich which they then used to invest to both
maximize pleasure and increase commerce. The WTO sets the rules for global trade and it comes
into force when ALL countries agree to it. For a country like Ethiopia it opens new markets for
its products based on agreed rules. It also opens our market for foreign goods which allows our
consumers to access the best products besides developing our economy by further giving
business to the non manufacturing sectors like the retail trade, warehousing, advertising etc.

We are all consumers. The prices we pay for our food and clothing, our necessities and
luxuries, and everything else in between, are affected by trade policies.

Lowering trade barriers allows trade to increase, which adds to incomes national incomes and
personal incomes.

But when you are bullied/pressured to accept certain condition for trade that allow foreign
producers to sell vastly superior products in a developing country thereby killing local
manufacturers of these imported products. So most countries wait till they develop local
strengths before allowing imports so that local manufacturers can compete with global
manufacturers on an equal footing. Agriculture is one such sector where many countries have not
mechanized sufficiently to compete with highly mechanized agriculture economies of the US,
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Canada, Australia etc thereby putting large sections of Ethiopians farmers under economic
pressure if we allow imports.

The richest world's population consumes more of the world's resources while the poorest
consume just less. WTO rules have hastened these trends by opening up countries to foreign
investment and thereby making it easier for production to go where the labor is cheapest and
most easily exploited and environmental costs are low.

Many important decisions get made in a process whereby our countrys' negotiators are not even
invited to closed door meetings.

We do not do not even have enough trade personnel to participate in all the negotiations

We are too poor to defend ourselves from WTO challenges.

Part II individual assignment

The nature of marketing intermediaries of Alema farms plc

Alema Farms P.L.C was established in [Link] is one of leading companies in Ethiopia in the
meat industry sector. the company focuses on poultry, butchery and pig farming and import the
best quality parent stock.

To satisfy its customer need the company further process chicken, beef and pork meat to
produces different kinds of meat products in its well organized butchery.

Marketing intermediaries of Alema farms plc: Help the company to promote, sell, and
distribute its products to final buyers.

Alema farms plc use third parties or intermediaries to bring its products to market. The
company tries to forge a distribution channel - a set of interdependent organizations involved in
the process of making a product or service available for use or consumption by the consumer or
business user.

Marketing intermediaries, also known as middlemen or distribution intermediaries are an

important part of the product distribution channel of Alema farms plc. According to Business
Dictionary, the four basic types of marketing intermediaries are agents, wholesalers, distributors
and retailers. But Alema farms plc uses two of them, namely whole sellers and retailers.

Wholesalers

Wholesalers are independently owned firms that take title to the merchandise they handle. In
other words, the wholesalers own the products they sell. Wholesalers purchase product in bulk
and store it until they can resell it. Wholesalers generally sell the products they have purchased
to other intermediaries, usually retailers, for a profit.
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Retailers

A retailer takes title to, or purchases, products from the firm. Retailers can be independently
owned and operated. The retailer will sell the products it has purchased directly to the end user
for a profit.

Intermediaries in a distribution channel provide services that enable alema farms plc to reach
different types of customers. They may hold stock and carry out logistical and marketing
functions on behalf of the firm.

Role of channels of distribution

Channel of Distribution plays a very important role in achieving the marketing objectives of a
company. Undoubtedly, the manufacturer of product or services creates involve utility but the
distribution channels create time and place utilities. According to Drucker, "both the market and
distribution channels are offer more crucial than the product. They are primary; the product is
secondary.

The roles of whole seller and retailer for alema farms plc

The searching out of buyers and seller.

Matching goods to requirements of the market (merchandising)
Offering products in the form of assortments packages of items usable and acceptable by
the consumers /users.
Persuading and influencing the prospective buyers to favor a certain products and its
maker.
Implementing pricing strategies in such a manner that would be acceptable to the buyers
and ensure effective distribution functions.
Participating actively in the creation and establishment of market for a new product.
Offering pre- and after sales service to customer
Transferring of new technology to the users along with the supply of products and
playing green resolution in our country.
Providing feels back information, marketing intelligence and sales forecasting services
for their regions their suppliers.