1. Competitive Advantage - Definition
A competitive advantage is an advantage over competitors gained by offering
consumers greater value, either by means of lower prices or by providing greater
benefits and service that justifies higher prices.
Competitive Strategies
Following on from his work analysing the competitive forces in an industry, Michael
Porter suggested four "generic" business strategies that could be adopted in order to
gain competitive advantage. The four strategies relate to the extent to which the
scope of a businesses' activities are narrow versus broad and the extent to which a
business seeks to differentiate its products.
The four strategies are summarised in the figure below:
The differentiation and cost leadership strategies seek competitive advantage in a
broad range of market or industry segments. By contrast, the differentiation focus
and cost focus strategies are adopted in a narrow market or industry.
Strategy - Differentiation
This strategy involves selecting one or more criteria used by buyers in a market - and
then positioning the business uniquely to meet those criteria. This strategy is usually
associated with charging a premium price for the product - often to reflect the higher
production costs and extra value-added features provided for the consumer.
Differentiation is about charging a premium price that more than covers the additional
production costs, and about giving customers clear reasons to prefer the product over
other, less differentiated products.

2. Examples of Differentiation Strategy: Mercedes cars; Bang & Olufsen
Strategy - Cost Leadership
With this strategy, the objective is to become the lowest-cost producer in the
industry. Many (perhaps all) market segments in the industry are supplied with the
emphasis placed minimising costs. If the achieved selling price can at least equal (or
near)the average for the market, then the lowest-cost producer will (in theory) enjoy
the best profits. This strategy is usually associated with large-scale businesses offering
"standard" products with relatively little differentiation that are perfectly acceptable
to the majority of customers. Occasionally, a low-cost leader will also discount its
product to maximise sales, particularly if it has a significant cost advantage over the
competition and, in doing so, it can further increase its market share.
Examples of Cost Leadership: Nissan; Tesco; Dell Computers
Strategy - Differentiation Focus
In the differentiation focus strategy, a business aims to differentiate within just one or
a small number of target market segments. The special customer needs of the
segment mean that there are opportunities to provide products that are clearly
different from competitors who may be targeting a broader group of customers. The
important issue for any business adopting this strategy is to ensure that customers
really do have different needs and wants - in other words that there is a valid basis
for differentiation - and that existing competitor products are not meeting those
needs and wants.
Examples of Differentiation Focus: any successful niche retailers; (e.g. The Perfume
Shop); or specialist holiday operator (e.g. Carrier)
Strategy - Cost Focus
Here a business seeks a lower-cost advantage in just on or a small number of market
segments. The product will be basic - perhaps a similar product to the higher-priced
and featured market leader, but acceptable to sufficient consumers. Such products
are often called "me-too's".
Examples of Cost Focus: Many smaller retailers featuring own-label or discounted label
products.
Offensive marketing warfare strategies

3. In marketing and strategic management, marketing warfare strategies are a type of
marketing strategy that uses military metaphor to craft a businesses strategy. See
marketing warfare strategies for background and an overview. Offensive marketing
warfare strategies are a type of marketing warfare strategy designed to obtain an
objective, usually market share, from a target competitor. In addition to market share, an
offensive strategy could be designed to obtain key customers, high margin market
segments, or high loyalty market segments.
Fundamental Principles
There are four fundamental principles involved:
1. Assess the strength of the target competitor. Consider the amount of support that
the target might muster from allies. Choose only one target at a time.
2. Find a weakness in the target’s position. Attack at this point. Consider how long it
will take for the target to realign their resources so as to reinforce this weak spot.
3. Launch the attack on as narrow a front as possible. Whereas a defender must
defend all their borders, an attacker has the advantage of being able to concentrate
their forces at one place.
4. Launch the attack quickly. The element of surprise is worth more than a thousand
tanks.
Types of offensive strategies
The main types of offensive marketing warfare strategies are:
• Frontal Attack - This is a direct head-on assault. It usually involves marshaling
all your resources including a substantial financial commitment. All parts of your
company must be geared up for the assault from marketing to production. It
usually involves intensive advertising assaults and often entails developing a new
product that is able to attack the target competitors’ line where it is strong. It often
involves an attempt to “liberate” a sizable portion of the target’s customer base. In
actuality, frontal attacks are rare. There are two reasons for this. Firstly, they are
expensive. Many valuable resources will be used and lost in the assault. Secondly,
frontal attacks are often unsuccessful. If defenders are able to re-deploy their
resources in time, the attacker’s strategic advantage is lost. You will be
confronting strength rather than weakness. Also, there are many examples (in
both business and warfare) of a dedicated defender being able to hold-off a larger
attacker. The strategy is suitable when
o the market is relatively homogeneous
o brand equity is low
o customer loyalty is low
o products are poorly differentiated
o the target competitor has relatively limited resources

4. o the attacker has relatively strong resources
• Envelopment Strategy (also called encirclement strategy) - This is a much
broader but subtle offensive strategy. It involves encircling the target competitor.
This can be done in two ways. You could introduce a range of products that are
similar to the target product. Each product will liberate some market share from
the target competitor’s product, leaving it weakened, demoralized, and in a state
of siege. If it is done stealthily, a full scale confrontation can be avoided.
Alternatively, the encirclement can be based on market niches rather than
products. The attacker expands the market niches that surround and encroach on
the target competitor’s market. This encroachment liberates market share from the
target. The envelopment strategy is suitable when:
o the market is loosely segmented
o some segments are relatively free of well endowed competitors
o the attacker has strong product development resources
o the attacker has enough resources to operate in multiple segments
simultaneously
o the attacker has a decentralized organizational structure
• Leapfrog strategy -This strategy involves bypassing the enemy’s forces
altogether. In the business arena, this involves either developing new
technologies, or creating new business models. This is a revolutionary strategy
that re-writes the rules of the game. The introduction of compact disc technology
bypassed the established magnetic tape based defenders. The attackers won the
war without a single costly battle. This strategy is very effective when it can be
realized.
• Flanking attack - This strategy is designed to pressure the flank of the enemy
line so the flank turns inward. You make gains while the enemy line is in chaos.
In doing so, you avoid a head-on confrontation with the main force. (see flanking
marketing warfare strategies )
Performance indicator
A Performance Indicator or Key Performance Indicator (KPI) is an industry jargon
term for a type of Measure of Performance.[1] KPIs are commonly used by an
organization to evaluate its success or the success of a particular activity in which it is
engaged. Sometimes success is defined in terms of making progress toward strategic
goals[2], but often, success is simply the repeated achievement of some level of
operational goal (zero defects, 10/10 customer satisfaction etc.). Accordingly, choosing
the right KPIs is reliant upon having a good understanding of what is important to the
organization. 'What is important' often depends on the department measuring the
performance - the KPIs useful to a Finance Team will be quite different to the KPIs
assigned to the sales force, for example. Because of the need to develop a good
understanding of what is important, performance indicator selection is often closely
associated with the use of various techniques to assess the present state of the business,

5. and its key activities. These assessments often lead to the identification of potential
improvements; and as a consequence, performance indicators are routinely associated
with 'performance improvement' initiatives. A very common method for choosing KPIs is
to apply a management framework such as the Balanced Scorecard.
[edit] Categorization of indicators
Key Performance Indicators define a set of values used to measure against. These raw
sets of values, which are fed to systems in charge of summarizing the information, are
called indicators. Indicators identifiable as possible candidates for KPIs can be
summarized into the following sub-categories:
• Quantitative indicators which can be presented as a number.
• Practical indicators that interface with existing company processes.
• Directional indicators specifying whether an organization is getting better or not.
• Actionable indicators are sufficiently in an organization's control to effect
change.
• Financial indicators used in performance measurement and when looking at an
operating index
Key Performance Indicators, in practical terms and for strategic development, are
objectives to be targeted that will add the most value to the business.[citation needed] These are
also referred to as Key Success Indicators.
[edit] Some Important Aspects
Key performance indicators (KPIs) are ways to periodically assess the performances of
organizations, business units, and their division, departments and employees.
Accordingly, KPIs are most commonly defined in a way that is understandable,
meaningful, and measurable. They are rarely defined in such a way such that their
fulfillment would be hampered by factors seen as non-controllable by the organizations
or individuals responsible. Such KPIs are usually ignored by organizations[citation needed].
In order to be evaluated, KPIs are linked to target values, so that the value of the measure
can be assessed as meeting expectations or not.
[edit] Identifying Indicators of Organization
Performance indicators differ from business drivers & aims (or goals). A school might
consider the failure rate of its students as a Key Performance Indicator which might help
the school understand its position in the educational community, whereas a business
might consider the percentage of income from returning customers as a potential KPI.
The key stages in identifying KPIs are:

6. • Having a pre-defined business process (BP).
• Having requirements for the BPs.
• Having a quantitative/qualitative measurement of the results and comparison with
set goals.
• Investigating variances and tweaking processes or resources to achieve short-term
goals.
A KPI can follow the SMART criteria. This means the measure has a Specific purpose
for the business, it is Measurable to really get a value of the KPI, the defined norms have
to be Achievable, the improvement of a KPI has to be Relevant to the success of the
organization, and finally it must be Time phased, which means the value or outcomes are
shown for a predefined and relevant period.
KPI Examples
Marketing
Some examples are:
1. New customers acquired
2. Demographic analysis of individuals (potential customers) applying to become
customers, and the levels of approval, rejections, and pending numbers.
3. Status of existing customers
4. Customer attrition
5. Turnover (ie, Revenue) generated by segments of the customer population.
6. Outstanding balances held by segments of customers and terms of payment.
7. Collection of bad debts within customer relationships.
8. Profitability of customers by demographic segments and segmentation of
customers by profitability.
Many of these customer KPIs are developed and managed with customer relationship
management (CRM) software.
Faster availability of data is a competitive issue for most organizations. For example,
businesses which have higher operational/credit risk (involving for example credit cards
or wealth management) may want weekly or even daily availability of KPI analysis,
facilitated by appropriate IT systems and tools.
Manufacturing
Overall equipment effectiveness, or OEE, is a set of broadly accepted non-financial
metrics which reflect manufacturing success.
• Cycle Time
Cycle time is the total time from the beginning to the end of your process, as defined by
you and your customer. Cycle time includes process time, during which a unit is acted

7. upon to bring it closer to an output, and delay time, during which a unit of work is spent
waiting to take the next action.
• Cycle Time Ratio
CTR = StandardCycleTime / RealCycleTime
• Utilization
• Rejection rate
IT
• Availability
• Mean Time Between Failure
• Mean Time to Repair
• Unplanned Availability
Supply Chain Management
Businesses can utilize KPIs to establish and monitor progress toward a variety of goals,
including lean manufacturing objectives, MBE (Minority Business Enterprise) and
diversity spending, environmental "green" initiatives, cost avoidance (CA) programs and
low-cost country sourcing (LCCS) targets.
Any business, regardless of size, can better manage supplier performance with the help of
KPIs robust capabilities, which include:
• Automated entry and approval functions
• On-demand, real-time scorecard measures
• Single data repository to eliminate inefficiencies and maintain consistency
• Advanced workflow approval process to ensure consistent procedures
• Flexible data-input modes and real-time graphical performance displays
• Customized cost savings documentation (CSD)
• Simplified setup procedures to eliminate dependence upon IT resources.
Main SCM KPIs will detail the following processes:
• sales forecasts
• inventory
• procurement and suppliers
• warehousing
• transportation
• reverse logistics
Suppliers can implement KPIs to gain an advantage over the competition. Suppliers have
instant access to a user-friendly portal for submitting standardized cost savings templates.
Suppliers and their customers exchange vital supply chain performance data while

8. gaining visibility to the exact status of cost improvement projects and cost savings
documentation (CSD).
Further performance indicators
• Duration of a stockout situation
• Customer order waiting time
Problems
In practice, overseeing Key Performance Indicators can prove expensive or difficult for
organizations. Indicators such as staff morale may be impossible to quantify.
Another serious issue in practice is that once a measure is created, it becomes difficult to
adjust to changing needs as historical comparisons will be lost. Conversely, measures are
often of dubious relevance, because history does exist.
Furthermore, since businesses with similar backgrounds are often used as a benchmark
for such measures, measures based only on in-house practices make it difficult for an
organization to compare with these outside benchmarks.
Measures are also used as a rough guide rather than a precise benchmark.
Quality circle
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A quality circle is a volunteer group composed of workers (or even students), usually
under the leadership of their supervisor (but they can elect a team leader), who are trained
to identify, analyze and solve work-related problems and present their solutions to
management in order to improve the performance of the organization, and motivate and
enrich the work of employees. When matured, true quality circles become self-managing,
having gained the confidence of management.
Quality circles are an alternative to the dehumanising concept of the division of labor,
where workers or individuals are treated like robots. They bring back the concept of
craftsmanship, which when operated on an individual basis is uneconomic, but when used
in group form (as is the case with quality circles), it can be devastatingly powerful and
enables the enrichment of the lives of the workers or students and creates harmony and
high performance in the workplace. Typical topics are improving occupational safety and
health, improving product design, and improvement in the workplace and manufacturing
processes.
The term quality circles derives from the concept of PDCA (Plan, Do, Check, Act)
circles developed by Dr. W. Edwards Deming.

9. Quality circles are not normally paid a share of the cost benefit of any improvements but
usually a proportion of the savings made is spent on improvements to the work
environment.[citation needed]
They are formal groups. They meet at least once a week on company time and are trained
by competent persons (usually designated as facilitators) who may be personnel and
industrial relations specialists trained in human factors and the basic skills of problem
identification, information gathering and analysis, basic statistics, and solution
generation.[1] Quality circles are generally free to select any topic they wish (other than
those related to salary and terms and conditions of work, as there are other channels
through which these issues are usually considered).[2][3]
Quality circles have the advantage of continuity; the circle remains intact from project to
project. (For a comparison to Quality Improvement Teams, see Juran's Quality by
Design.[4]
History
a Quality circles were first established in Japan in 1962; Kaoru Ishikawa has been
credited with their creation. The movement in Japan was coordinated by the Japanese
Union of Scientists and Engineers (JUSE). The first circles were established at the
Nippon Wireless and Telegraph Company but then spread to more than 35 other
companies in the first year.[5] By 1978 it was claimed that there were more than one
million Quality Circles involving some 10 million Japanese workers.[citation needed] There are
now Quality Circles in most East Asian countries; it was recently claimed that there were
more than 20 million Quality Circles in China.[citation needed]
Quality circles have been implemented even in educational sectors in India, and QCFI
(Quality Circle Forum of India) is promoting such activities. However this was not
successful in the United States, as it (was not properly understood and) turned out to be a
fault-finding exercise although some circles do still exist. ref Don Dewar who together
with Wayne Ryker and Jeff Beardsley first established them in 1972 at the Lockheed
Space Missile Factory in California.
There are different quality circle tools, namely:
• The Ishikawa or fishbone diagram - which shows hierarchies of causes
contributing to a problem
• The Pareto Chart - which analyses different causes by frequency to illustrate the
vital cause,
• Process Mapping, Data gathering tools such as Check Sheets and graphical tools
such as histograms, frequency diagrams, spot charts and pie charts
[edit] Student quality circles

10. Student quality circles work on the original philosophy of Total Quality Management[6].
The idea of SQCs was presented by City Montessori School (CMS) Lucknow India in
1993 at a conference in Hong Kong in October 1994. It was developed and mentored by
duo engineers of Indian Railways PC Bihari and Swami Das in association with Principal
Dr Kamran of CMS Lucknow India. They were inspired and facilitated by Jagdish
Gandhi the founder of CMS after J. Gandhi's visit to Japan where he learnt about Kaizen.
The world's first student QC was made in CMS Lucknow in India with then 13 year old
student Ms. Sucheta Bihari as its leader. CMS conducts international convention on
student quality circles at its location in Lucknow since 1997 which it has repeated every 2
years to the present day. After seeing its utility, the visionary educationalists from many
countries started these circles. The World Council for Total Quality & Excellence in
Education was established in 1999 with its Corporate Office In Lucknow and Head
Office at Singapore. It monitors and facilitates student quality circle activities to its
member countries which is more than a dozen.This is considered to be a co-curricular
activity. Students Quality Circles have been established in India, Bangladesh, Pakistan,
Nepal, Sri Lanka, Turkey, Mauritius, Iran, UK (Kingston University), USA, etc.In Nepal
Prof. Dinesh P. Chapagain is promoting this innovative approach through QUEST-Nepal
since 1999. Prof. Chapagain has written a book entitled "A Guide Book on Students'
Quality Circle: An Approach to prepare Total Quality People" which is considered as
standard guide book to promote Students' Quality Circles in academia for student's
personality development.[citation needed]
Multinational Companies in India
Multinational companies are the organizations or enterprises that manage
production or offer services in more than one country. And India has been the home to a
number of multinational companies. In fact, since the financial liberalization in the
country in 1991, the number of multinational companies in India has increased
noticeably. Though majority of the multinational companies in India are from the U.S.,
however one can also find companies from other countries as well.
Destination India
The multinational companies in India represent a diversified portfolio of companies from
different countries. Though the American companies - the majority of the MNC in India,
account for about 37% of the turnover of the top 20 firms operating in India, but the
scenario has changed a lot off late. More enterprises from European Union like Britain,
France, Netherlands, Italy, Germany, Belgium and Finland have come to India or have
outsourced their works to this country. Finnish mobile giant Nokia has their second
largest base in this country. There are also MNCs like British Petroleum and Vodafone
that represent Britain. India has a huge market for automobiles and hence a number of
automobile giants have stepped in to this country to reap the market. One can easily find
the showrooms of the multinational automobile companies like Fiat, Piaggio, and Ford

11. Motors in India. French Heavy Engineering major Alstom and Pharma major Sanofi
Aventis have also started their operations in this country. The later one is in fact one of
the earliest entrants in the list of multinational companies in India, which is currently
growing at a very enviable rate. There are also a number of oil companies and
infrastructure builders from Middle East. Electronics giants like Samsung and LG
Electronics from South Korea have already made a substantial impact on the Indian
electronics market. Hyundai Motors has also done well in mid-segment car market in
India.
Why are Multinational Companies in India?
There are a number of reasons why the multinational companies are coming down to
India. India has got a huge market. It has also got one of the fastest growing economies in
the world. Besides, the policy of the government towards FDI has also played a major
role in attracting the multinational companies in India.
For quite a long time, India had a restrictive policy in terms of foreign direct investment.
As a result, there was lesser number of companies that showed interest in investing in
Indian market. However, the scenario changed during the financial liberalization of the
country, especially after 1991. Government, nowadays, makes continuous efforts to
attract foreign investments by relaxing many of its policies. As a result, a number of
multinational companies have shown interest in Indian market.
Following are the reasons why multinational companies consider India as a preferred
destination for business:
• Huge market potential of the country
• FDI attractiveness
• Labor competitiveness
• Macro-economic stability
List of Multinational Companies in India
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This article has multiple issues. Please help improve it or discuss these issues on the
talk page.
• It is missing citations or footnotes. Please help improve it by adding inline
citations. Tagged since July 2010.
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12. • It reads like a personal reflection or essay. Tagged since March 2009.
A multinational corporation (MNC) or enterprise (MNE),[1] is a corporation or an
enterprise that manages production or delivers services in more than one country. It can
also be referred to as an international corporation. The International Labour
Organization (ILO) has defined[citation needed] an MNC as a corporation that has its
management headquarters in one country, known as the home country, and operates in
several other countries, known as host countries.
The Dutch East India Company was the first multinational corporation in the world and
the first company to issue stock.[2] It was also arguably the world's first megacorporation,
possessing quasi-governmental powers, including the ability to wage war, negotiate
treaties, coin money, and establish colonies.[3]
The first modern multinational corporation is generally thought to be the East India
Company.[4] Many corporations have offices, branches or manufacturing plants in
different countries from where their original and main headquarters is located.
Some multinational corporations are very big, with budgets that exceed some nations'
GDPs. Multinational corporations can have a powerful influence in local economies, and
even the world economy, and play an important role in international relations and
globalization.
Contents
[hide]
• 1 Market imperfections
• 2 International power
o 2.1 Tax competition
o 2.2 Market withdrawal
o 2.3 Lobbying
o 2.4 Patents
• 3 Transnational Corporations
• 4 Micro-multinationals
• 5 Criticism of multinationals
• 6 References
• 7 External links
[edit] Market imperfections
It may seem strange that a corporation can decide to do business in a different country,
where it does not know the laws, local customs or business practices.[1] Why is it not

13. more efficient to combine assets of value overseas with local factors of production at
lower costs by renting or selling them to local investors?[1]
One reason is that the use of the market for coordinating the behaviour of agents located
in different countries is less efficient than coordinating them by a multinational enterprise
as an institution.[1] The additional costs caused by the entrance in foreign markets are of
less interest for the local enterprise.[1] According to Hymer, Kindleberger and Caves, the
existence of MNCs is reasoned by structural market imperfections for final products.[5] In
Hymer's example, there are considered two firms as monopolists in their own market and
isolated from competition by transportation costs and other tariff and non-tariff barriers.
If these costs decrease, both are forced to competition; which will reduce their profits.[5]
The firms can maximize their joint income by a merger or acquisition, which will lower
the competition in the shared market.[5] Due to the transformation of two separated
companies into one MNE the pecuniary externalities are going to be internalized.[5]
However, this does not mean that there is an improvement for the society.[5]
This could also be the case if there are few substitutes or limited licenses in a foreign
market.[6] The consolidation is often established by acquisition, merger or the vertical
integration of the potential licensee into overseas manufacturing.[6] This makes it easy for
the MNE to enforce price discrimination schemes in various countries.[6] Therefore
Hymer considered the emergence of multinational firms as "an (negative) instrument for
restraining competition between firms of different nations".[7]
Market imperfections had been considered by Hymer as structural and caused by the
deviations from perfect competition in the final product markets.[8] Further reasons are
originated from the control of proprietary technology and distribution systems, scale
economies, privileged access to inputs and product differentiation.[8] In the absence of
these factors, market are fully efficient.[1] The transaction costs theories of MNEs had
been developed simultaneously and independently by McManus (1972), Buckley &
Casson (1976) Brown (1976) and Hennart (1977, 1982).[1] All these authors claimed that
market imperfections are inherent conditions in markets and MNEs are institutions that
try to bypass these imperfections.[1] The imperfections in markets are natural as the
neoclassical assumptions like full knowledge and enforcement do not exist in real
markets.[9]
[edit] International power
[edit] Tax competition
Multinational corporations have played an important role in globalization. Countries and
sometimes subnational regions must compete against one another for the establishment of
MNC facilities, and the subsequent tax revenue, employment, and economic activity. To
compete, countries and regional political districts sometimes offer incentives to MNCs
such as tax breaks, pledges of governmental assistance or improved infrastructure, or lax
environmental and labor standards enforcement. This process of becoming more
attractive to foreign investment can be characterized as a race to the bottom, a push
towards greater autonomy for corporate bodies, or both.

14. However, some scholars for instance the Columbia economist Jagdish Bhagwati, have
argued that multinationals are engaged in a 'race to the top.' While multinationals
certainly regard a low tax burden or low labor costs as an element of comparative
advantage, there is no evidence to suggest that MNCs deliberately avail themselves of lax
environmental regulation or poor labour standards. As Bhagwati has pointed out, MNC
profits are tied to operational efficiency, which includes a high degree of standardisation.
Thus, MNCs are likely to tailor production processes in all of their operations in
conformity to those jurisdictions where they operate (which will almost always include
one or more of the US, Japan or EU) that has the most rigorous standards. As for labor
costs, while MNCs clearly pay workers in, e.g. Vietnam, much less than they would in
the US (though it is worth noting that higher American productivity—linked to
technology—means that any comparison is tricky, since in America the same company
would probably hire far fewer people and automate whatever process they performed in
Vietnam with manual labour), it is also the case that they tend to pay a premium of
between 10% and 100% on local labor rates.[10] Finally, depending on the nature of the
MNC, investment in any country reflects a desire for a long-term return. Costs associated
with establishing plant, training workers, etc., can be very high; once established in a
jurisdiction, therefore, many MNCs are quite vulnerable to predatory practices such as,
e.g., expropriation, sudden contract renegotiation, the arbitrary withdrawal or compulsory
purchase of unnecessary 'licenses,' etc. Thus, both the negotiating power of MNCs and
the supposed 'race to the bottom' may be overstated, while the substantial benefits that
MNCs bring (tax revenues aside) are often understated
[edit] Market withdrawal
Because of their size, multinationals can have a significant impact on government policy,
primarily through the threat of market withdrawal.[11] For example, in an effort to reduce
health care costs, some countries have tried to force pharmaceutical companies to license
their patented drugs to local competitors for a very low fee, thereby artificially lowering
the price. When faced with that threat, multinational pharmaceutical firms have simply
withdrawn from the market, which often leads to limited availability of advanced drugs.
In these cases, governments have been forced to back down from their efforts. Similar
corporate and government confrontations have occurred when governments tried to force
MNCs to make their intellectual property public in an effort to gain technology for local
entrepreneurs. When companies are faced with the option of losing a core competitive
technological advantage or withdrawing from a national market, they may choose the
latter. This withdrawal often causes governments to change policy. Countries that have
been the most successful in this type of confrontation with multinational corporations are
large countries such as United States and Brazil[citation needed], which have viable indigenous
market competitors.
[edit] Lobbying
Multinational corporate lobbying is directed at a range of business concerns, from tariff
structures to environmental regulations. There is no unified multinational perspective on
any of these issues. Companies that have invested heavily in pollution control
mechanisms may lobby for very tough environmental standards in an effort to force non-
compliant competitors into a weaker position. Corporations lobby tariffs to restrict

15. competition of foreign industries. For every tariff category that one multinational wants
to have reduced, there is another multinational that wants the tariff raised. Even within
the U.S. auto industry, the fraction of a company's imported components will vary, so
some firms favor tighter import restrictions, while others favor looser ones. Says Ely
Oliveira, Manager Director of the MCT/IR: This is very serious and is very hard and
takes a lot of work for the owner.pk
Multinational corporations such as Wal-mart and McDonald's benefit from government
zoning laws, to create barriers to entry.
Many industries such as General Electric and Boeing lobby the government to receive
subsidies to preserve their monopoly.[12]
[edit] Patents
Many multinational corporations hold patents to prevent competitors from arising. For
example, Adidas holds patents on shoe designs, Siemens A.G. holds many patents on
equipment and infrastructure and Microsoft benefits from software patents.[13] The
pharmaceutical companies lobby international agreements to enforce patent laws on
others.
[edit] Transnational Corporations
A Transnational Corporation (TNC) differs from a tranditional MNC in that it does not
identify itself with one national home. Whilst traditional MNCs are national companies
with foreign subsidiaries,[14] TNCs spread out their operations in many countries
sustaining high levels of local responsiveness.[15] An example of a TNC is Nestlé who
employ senior executives from many countries and try to make decisions from a global
perspective rather than from one centralised headquarters.[16] However, the terms TNC
and MNC are often used interchangeably.
[edit] Micro-multinationals
Enabled by Internet based communication tools, a new breed of multinational companies
is growing in numbers.[17] These multinationals start operating in different countries from
the very early stages. These companies are being called micro-multinationals. [18] What
differentiates micro-multinationals from the large MNCs is the fact that they are small
businesses. Some of these micro-multinationals, particularly software development
companies, have been hiring employees in multiple countries from the beginning of the
Internet era. But more and more micro-multinationals are actively starting to market their
products and services in various countries. Internet tools like Google, Yahoo, MSN, Ebay
and Amazon make it easier for the micro-multinationals to reach potential customers in
other countries.
Service sector micro-multinationals, like Facebook, Alibaba etc. started as dispersed
virtual businesses with employees, clients and resources located in various countries.

16. Their rapid growth is a direct result of being able to use the internet, cheaper telephony
and lower traveling costs to create unique business opportunities.
Low cost SaaS (Software As A Service) suites make it easier for these companies to
operate without a physical office.
Hal Varian, Chief Economist at Google and a professor of information economics at U.C.
Berkeley, said in April 2010, "Immigration today, thanks to the Web, means something
very different than it used to mean. There's no longer a brain drain but brain circulation.
People now doing startups understand what opportunities are available to them around
the world and work to harness it from a distance rather than move people from one place
to another."
[edit] Criticism of multinationals
Main article: Anti-corporate activism
File:Adbusters NY Billboard.jpg
Anti-corporate activism in New York
The rapid rise of multinational corporations has been a topic of concern among
intellectuals, activists and laypersons who have seen it as a threat of such basic civil
rights as privacy. They have pointed out that multinationals create false needs in
consumers and have had a long history of interference in the policies of sovereign nation
states. Evidence supporting this belief includes invasive advertising (such as billboards,
television ads, adware, spam, telemarketing, child-targeted advertising, guerrilla
marketing), massive corporate campaign contributions in democratic elections, and
endless global news stories about corporate corruption (Martha Stewart and Enron, for
example). Anti-corporate protesters suggest that corporations answer only to
shareholders, giving human rights and other issues almost no consideration.[19] Films and
books critical of multinationals include Surplus: Terrorized into Being Consumers, The
Corporation, The Shock Doctrine, Downsize This, Zeitgeist: The Movie and others.
[edit] References
Treaty
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17. The first two pages of the Treaty of Brest-Litovsk, in (left to right) German, Hungarian,
Bulgarian, Ottoman Turkish and Russian
A treaty is an express agreement under international law entered into by actors in
international law, namely sovereign states and international organizations. A treaty may
also be known as: (international) agreement, protocol, covenant, convention,
exchange of letters, etc. Regardless of the terminology, all of these international
agreements under international law are equally treaties and the rules are the same. (Note
that in United States constitutional law, the term "treaty" has a special meaning which is
more restricted than its meaning in international law; see below.)
Treaties can be loosely compared to contracts: both are means of willing parties assuming
obligations among themselves, and a party to either that fails to live up to their
obligations can be held liable under international law.
Contents
[hide]
• 1 Modern usage
• 2 Bilateral and multilateral treaties
• 3 Adding and amending treaty obligations
o 3.1 Reservations
o 3.2 Protocols
• 4 Execution and implementation
o 4.1 Interpretation
o 4.2 Consequences of terminology
• 5 Ending treaty obligations
o 5.1 Withdrawal
o 5.2 Suspension and termination
• 6 Invalid treaties
o 6.1 Ultra vires treaties
o 6.2 Misunderstanding, fraud, corruption, coercion

18. o 6.3 Peremptory norms
• 7 Role of the United Nations
• 8 Relation between national law and treaties by country
o 8.1 Brazilian law
o 8.2 United States law
• 9 Treaties and indigenous peoples
o 9.1 United States
• 10 Rhetorical usage
• 11 See also
• 12 Notes
• 13 References
• 14 External links
[edit] Modern usage
A treaty is an official, express written agreement that states use to legally bind
themselves.[1] A treaty is that official document which expresses that agreement in words;
and it is also the objective outcome of a ceremonial occasion which acknowledges the
parties and their defined relationships.
[edit] Bilateral and multilateral treaties
Bilateral treaties are concluded between two states[2]
A multilateral treaty is concluded among several countries.[2] Treaties of "mutual
guarantee" are international compacts, e.g., the Treaty of Locarno which guarantees each
signatory against attack from another.[2]
[edit] Adding and amending treaty obligations
[edit] Reservations
Main article: Reservation (law)
Reservations are essentially caveats to a state's acceptance of a treaty. Reservations are
unilateral statements purporting to exclude or to modify the legal obligation and its
effects on the reserving state.[3] These must be included at the time of signing or
ratification—a party cannot add a reservation after it has already joined a treaty.
Originally, international law was unaccepting of treaty reservations, rejecting them unless
all parties to the treaty accepted the same reservations. However, in the interest of
encouraging the largest number of states to join treaties, a more permissive rule regarding
reservations has emerged. While some treaties still expressly forbid any reservations,
they are now generally permitted to the extent that they are not inconsistent with the
goals and purposes of the treaty.

19. When a state limits its treaty obligations through reservations, other states party to that
treaty have the option to accept those reservations, object to them, or object and oppose
them. If the state accepts them (or fails to act at all), both the reserving state and the
accepting state are relieved of the reserved legal obligation as concerns their legal
obligations to each other (accepting the reservation does not change the accepting state's
legal obligations as concerns other parties to the treaty). If the state opposes, the parts of
the treaty affected by the reservation drop out completely and no longer create any legal
obligations on the reserving and accepting state, again only as concerns each other.
Finally, if the state objects and opposes, there are no legal obligations under that treaty
between those two state parties whatsoever. The objecting and opposing state essentially
refuses to acknowledge the reserving state is a party to the treaty at all.[4]
There are three ways an existing treaty can be amended. First, formal amendment
requires States parties to the treaty to go through the ratification process all over again.
The re-negotiation of treaty provisions can be long and protracted, and often some parties
to the original treaty will not become parties to the amended treaty. When determining
the legal obligations of states, one party to the original treaty and one a party to the
amended treaty, the states will only be bound by the terms they both agreed upon.
Treaties can also be amended informally by the treaty executive council when the
changes are only procedural, technical change in customary international law can also
amend a treaty, where state behavior evinces a new interpretation of the legal obligations
under the treaty. Minor corrections to a treaty may be adopted by a procès-verbal; but a
procès-verbal is generally reserved for changes to rectify obvious errors in the text
adopted, i.e. where the text adopted does not correctly reflect the intention of the parties
adopting it.
[edit] Protocols
In international law and international relations, a protocol is generally a treaty or
international agreement that supplements a previous treaty or international agreement. A
protocol can amend the previous treaty, or add additional provisions. Parties to the earlier
agreement are not required to adopt the protocol; sometimes this is made clearer by
calling it an "optional protocol", especially where many parties to the first agreement do
not support the protocol.
Some examples: the United Nations Framework Convention on Climate Change
(UNFCCC) established a framework for the development of binding greenhouse gas
emission limits, while the Kyoto Protocol contained the specific provisions and
regulations later agreed upon.
[edit] Execution and implementation
Treaties may be seen as 'self-executing', in that merely becoming a party puts the treaty
and all of its obligations in action. Other treaties may be non-self-executing and require
'implementing legislation'—a change in the domestic law of a state party that will direct

20. or enable it to fulfill treaty obligations. An example of a treaty requiring such legislation
would be one mandating local prosecution by a party for particular crimes.
The division between the two is often not clear and is often politicized in disagreements
within a government over a treaty, since a non-self-executing treaty cannot be acted on
without the proper change in domestic law. If a treaty requires implementing legislation,
a state may be in default of its obligations by the failure of its legislature to pass the
necessary domestic laws.
[edit] Interpretation
The language of treaties, like that of any law or contract, must be interpreted when the
wording does not seem clear or it is not immediately apparent how it should be applied in
a perhaps unforeseen circumstance. The Vienna Convention states that treaties are to be
interpreted “in good faith” according to the “ordinary meaning given to the terms of the
treaty in their context and in the light of its object and purpose.” International legal
experts also often invoke the 'principle of maximum effectiveness,' which interprets
treaty language as having the fullest force and effect possible to establish obligations
between the parties.
No one party to a treaty can impose its particular interpretation of the treaty upon the
other parties. Consent may be implied, however, if the other parties fail to explicitly
disavow that initially unilateral interpretation, particularly if that state has acted upon its
view of the treaty without complaint. Consent by all parties to the treaty to a particular
interpretation has the legal effect of adding an additional clause to the treaty - this is
commonly called an 'authentic interpretation'.
International tribunals and arbiters are often called upon to resolve substantial disputes
over treaty interpretations. To establish the meaning in context, these judicial bodies may
review the preparatory work from the negotiation and drafting of the treaty as well as the
final, signed treaty itself.
[edit] Consequences of terminology
One significant part of treaty making is that signing a treaty implies recognition that the
other side is a sovereign state and that the agreement being considered is enforceable
under international law. Hence, nations can be very careful about terming an agreement
to be a treaty. For example, within the United States agreements between states are
compacts and agreements between states and the federal government or between agencies
of the government are memoranda of understanding.
Another situation can occur when one party wishes to create an obligation under
international law, but the other party does not. This factor has been at work with respect
to discussions between North Korea and the United States over security guarantees and
nuclear proliferation.
The terminology can also be confusing because a treaty may and usually is named
something other than a treaty, such as a convention, protocol, or simply agreement.

21. Conversely some legal documents such as the Treaty of Waitangi are internationally
considered to be documents under domestic law.
[edit] Ending treaty obligations
See also: Denunciation
[edit] Withdrawal
Treaties are not necessarily permanently binding upon the signatory parties. As
obligations in international law are traditionally viewed as arising only from the consent
of states, many treaties expressly allow a state to withdraw as long as it follows certain
procedures of notification. Many treaties expressly forbid withdrawal. Other treaties are
silent on the issue, and so if a state attempts withdrawal through its own unilateral
denunciation of the treaty, a determination must be made regarding whether permitting
withdrawal is contrary to the original intent of the parties or to the nature of the treaty.
Human rights treaties, for example, are generally interpreted to exclude the possibility of
withdrawal, because of the importance and permanence of the obligations.[citation needed]
If a state party's withdrawal is successful, its obligations under that treaty are considered
terminated, and withdrawal by one party from a bilateral treaty of course terminates the
treaty. When a state withdraws from a multi-lateral treaty, that treaty will still otherwise
remain in force between the other parties, unless, of course, otherwise should or could be
interpreted as agreed upon between the remaining states parties to the treaty.[citation needed]
[edit] Suspension and termination
If a party has materially violated or breached its treaty obligations, the other parties may
invoke this breach as grounds for temporarily suspending their obligations to that party
under the treaty. A material breach may also be invoked as grounds for permanently
terminating the treaty itself.[citation needed]
A treaty breach does not automatically suspend or terminate treaty relations, however.
The issue must be presented to an international tribunal or arbiter (usually specified in the
treaty itself) to legally establish that a sufficiently serious breach has in fact occurred.
Otherwise, a party that prematurely and perhaps wrongfully suspends or terminates its
own obligations due to an alleged breach itself runs the risk of being held liable for
breach. Additionally, parties may choose to overlook treaty breaches while still
maintaining their own obligations towards the party in breach.[citation needed]
Treaties sometimes include provisions for self-termination, meaning that the treaty is
automatically terminated if certain defined conditions are met. Some treaties are intended
by the parties to be only temporarily binding and are set to expire on a given date. Other
treaties may self-terminate if the treaty is meant to exist only under certain conditions.
[citation needed]

22. A party may claim that a treaty should be terminated, even absent an express provision, if
there has been a fundamental change in circumstances. Such a change is sufficient if
unforeseen, if it undermined the “essential basis” of consent by a party, if it radically
transforms the extent of obligations between the parties, and if the obligations are still to
be performed. A party cannot base this claim on change brought about by its own breach
of the treaty. This claim also cannot be used to invalidate treaties that established or
redrew political boundaries.[citation needed]
[edit] Invalid treaties
There are several reasons an otherwise valid and agreed upon treaty may be rejected as a
binding international agreement, most of which involve problems created at the formation
of the treaty.[citation needed] For example, the serial Japan-Korea treaties of 1905 1907 and
1910 were protested;[5] and they were confirmed as "already null and void" in the 1965
Treaty on Basic Relations between Japan and the Republic of Korea.[6]
[edit] Ultra vires treaties
A party's consent to a treaty is invalid if it had been given by an agent or body without
power to do so under that state's domestic law. States are reluctant to inquire into the
internal affairs and processes of other states, and so a “manifest” violation is required
such that it would be “objectively evident to any State dealing with the matter". A strong
presumption exists internationally that a head of state has acted within his proper
authority. It seems that no treaty has ever actually been invalidated on this provision.
[citation needed]
Consent is also invalid if it is given by a representative who ignored restrictions he is
subject to by his sovereign during the negotiations, if the other parties to the treaty were
notified of those restrictions prior to his signing.[citation needed]
According to the preamble in The Law of treaties, treaties are a source of international
law. If an act or lack thereof is condemned under international law, the act will not
assume international legality even if approved by internal law.[7] This means that in case
of a conflict with domestic law, international law will always prevail.[8]
[edit] Misunderstanding, fraud, corruption, coercion
Articles 46-53 of the Vienna Convention on the Law of Treaties set out the only ways
that treaties can be invalidated—considered unenforceable and void under international
law. A treaty will be invalidated due to either the circumstances by which a state party
joined the treaty, or due to the content of the treaty itself. Invalidation is separate from
withdrawal, suspension, or termination (addressed above), which all involve an alteration
in the consent of the parties of a previously valid treaty rather than the invalidation of that
consent in the first place.
A state's consent may be invalidated if there was an erroneous understanding of a fact or
situation at the time of conclusion, which formed the "essential basis" of the state's

23. consent. Consent will not be invalidated if the misunderstanding was due to the state's
own conduct, or if the truth should have been evident.
Consent will also be invalidated if it was induced by the fraudulent conduct of another
party, or by the direct or indirect "corruption" of its representative by another party to the
treaty. Coercion of either a representative, or the state itself through the threat or use of
force, if used to obtain the consent of that state to a treaty, will invalidate that consent.
[edit] Peremptory norms
A treaty is null and void if it is in violation of a peremptory norm. These norms, unlike
other principles of customary law, are recognized as permitting no violations and so
cannot be altered through treaty obligations. These are limited to such universally
accepted prohibitions as those against genocide, slavery, torture, and piracy, meaning that
no state can legally assume an obligation to commit or permit such acts.[citation needed]
[edit] Role of the United Nations
The United Nations Charter states that treaties must be registered with the UN to be
invoked before it or enforced in its judiciary organ, the International Court of Justice.
This was done to prevent the proliferation of secret treaties that occurred in the 19th and
20th century. The Charter also states that its members' obligations under it outweigh any
competing obligations under other treaties.
After their adoption, treaties as well as their amendments have to follow the official legal
procedures of the United Nations, as applied by the Office of Legal Affairs, including
signature, ratification and entry into force.
In function and effectiveness, the UN has been compared to the pre-Constitutional United
States Federal government by some, giving a comparison between modern treaty law and
the historical Articles of Confederation.
[edit] Relation between national law and treaties by
country
[edit] Brazilian law
The Brazilian federal constitution states that the power to enter into treaties is vested in
the president and that such treaties must be approved by Congress (articles 84, clause
VIII, and 49, clause I). In practice, this has been interpreted as meaning that the executive
branch is free to negotiate and sign a treaty, but its ratification by the president is
contingent upon the prior approval of Congress. Additionally, the Federal Supreme Court
has ruled that, following ratification and entry into force, a treaty must be incorporated
into domestic law by means of a presidential decree published in the federal register in
order to be valid in Brazil and applicable by the Brazilian authorities.

24. The Federal Supreme Court has established that treaties are subject to constitutional
review and enjoy the same hierarchical position as ordinary legislation (leis ordinárias,
or "ordinary laws", in Portuguese). A more recent ruling by the Supreme Court in 2008
has altered that scheme somewhat, by stating that treaties containing human rights
provisions enjoy a status above that of ordinary legislation, though they remain beneath
the constitution itself. Additionally, as per the 45th amendment to the constitution, human
rights treaties which are approved by Congress by means of a special procedure enjoy the
same hierarchical position as a constitutional amendment. The hierarchical position of
treaties in relation to domestic legislation is of relevance to the discussion on whether
(and how) the latter can abrogate the former and vice versa.
The Brazilian federal constitution does not have a supremacy clause with the same effects
as the one on the U.S. constitution, a fact that is of interest to the discussion on the
relation between treaties and state legislation.
[edit] United States law
Main articles: Treaty Clause and Foreign policy of the United States
In the United States, the term "treaty" has a different, more restricted legal sense than
exists in international law. U.S. law distinguishes what it calls treaties from executive
agreements, congressional-executive agreements, and sole executive agreements. All four
classes are equally treaties under international law; they are distinct only from the
perspective of internal American law. The distinctions are primarily concerning their
method of ratification. Whereas treaties require advice and consent by two-thirds of the
Senate, sole executive agreements may be executed by the President acting alone. Some
treaties grant the President the authority to fill in the gaps with executive agreements,
rather than additional treaties or protocols. And finally, congressional-executive
agreements require majority approval by both the House and the Senate, either before or
after the treaty is signed by the President.
Currently, international agreements are executed by executive agreement rather than
treaties at a rate of 10:1. Despite the relative ease of executive agreements, the President
still often chooses to pursue the formal treaty process over an executive agreement in
order to gain congressional support on matters that require the Congress to pass
implementing legislation or appropriate funds, and those agreements that impose long-
term, complex legal obligations on the U.S.
See the article on the Bricker Amendment for history of the relationship between treaty
powers and Constitutional provisions.
[edit] Treaties and indigenous peoples
Treaties formed an important part of European colonization and, in many parts of the
world, Europeans attempted to legitimize their sovereignty by signing treaties with
indigenous peoples. In most cases these treaties were in extremely disadvantageous terms
to the native people, who often did not appreciate the implications of what they were
signing.

25. In some rare cases, such as with Ethiopia and Qing Dynasty China, the local governments
were able to use the treaties to at least mitigate the impact of European colonization. This
involved learning the intricacies of European diplomatic customs and then using the
treaties to prevent a power from overstepping their agreement or by playing different
powers against each other.
In other cases, such as New Zealand and Canada, treaties allowed native peoples to
maintain a minimum amount of autonomy. In the case of indigenous Australians, unlike
with the Māori of New Zealand, no treaty was ever entered into with the indigenous
peoples entitling the Europeans to land ownership, under the doctrine of terra nullius
(later overturned by Mabo v Queensland, establishing the concept of native title well after
colonization was already a fait accompli). Such treaties between colonizers and
indigenous peoples are an important part of political discourse in the late 20th and early
21st century, the treaties being discussed have international standing as has been stated in
a treaty study by the UN.
[edit] United States
Prior to 1871 the government of the United States regularly entered into treaties with
Native Americans of the United States but the Indian Appropriations Act of March 3,
1871 (ch. 120, 16 Stat. 566) had a rider (25 U.S.C. § 71) attached that effectively ended
the President’s treaty making by providing that no Indian nation or tribe shall be
acknowledged as an independent nation, tribe, or power with whom the United States
may contract by treaty. The federal government continued to provide similar contractual
relations with the Indian tribes after 1871 by agreements, statutes, and executive orders.[9]
[edit] Rhetorical usage
The treaty name becomes a trope. As an instance of metonymy, the name of a "treaty" in
an abstract sense can refer to the subject of the pact or the elements of the pact itself[10] or
something else -- for example, the Eulsa Treaty is another name for the Japan-Korea
Treaty of 1905.[11]
Schengen Treaty represented as a Euler diagram.
Treaties are sometimes identified by the place the place in which negotiations were
concluded -- for example, the Schengen Agreement[12] is often called the "Schengen
treaty" because it was signed near the town of Schengen in Luxembourg.[13]
Schengen illustrates nuance and persistent metonymy in treaty names. It is a useful
example despite or because the actually signing ceremony was held in the Moselle River
at the tripoint borders of Germany, France and Luxemburg.[14] This metonymic name has
continued to be used, even after Schengen's official status as a treaty was lost[15] and even
after Schengen's express provisions were encompassed within subsequent EU treaties.[16]

26. In other words, the term treaty conflates the explicit words of the treaty, the signing of the
treaty, and the actual implementation and consequences intended by those who drafted
the words and those who affixed signatures[17] Sometimes the treaty is also known by a
name which is not explicitly contemplated by those