Oct 2009 Q1.

When domestic business offers all the business opportunities to grow and prosper, why do Indian companies resort to International usiness! Companies engage in international business for variety of reasons, but the main goal is typically company growth or expansion. Whether a company hires international employees or searches for new markets abroad, an international strategy can help diversify and expand a business. 1. Many companies look to international markets for growth. Introducing new products internationally can expand a company s customer base, sales and revenue. !. Companies go international to find alternative sources of labor. "ome companies look to international countries for lower#cost manufacturing, technology assistance and other services in order to maintain a competitive advantage. $. "ome companies go international to locate resources that are difficult to obtain in their home markets, or that can be obtained at a better price internationally. %. Companies go international to broaden their work force and obtain new ideas. & work force comprised of different backgrounds and cultural differences can bring fresh ideas and concepts to help a company grow. '. "ome companies go international to diversify. "elling products and services in multiple countries reduces the company s exposure to possible economic and political instability in a single country (eactive reasons for going international include) Market # the company is responding to demand it discovers in another location Competitive *nvironment # it sees competitors going to a particular place +olitical *nvironment changes # ,rade -arriers ,ariff or non#tariff barriers) If an exporting company finds that the government in the recipient country starts to build tariff or non#tariff barriers to block the export, then it might be a reason for the exporter to set up a manufacturing operation overseas in order to avoid the tariffs. +olitical *nvironment changes # (egulations *nvironmental regulations or changes in work.safety regulations may cause the company to go overseas to a less restrictive location *conomic *nvironment changes Costs of production at home increase, forcing the company to find a cheaper place to produce

Companies who are proactive in international business are, in most cases, better positioned than companies that simply react. If you simply react you might make a mistake and not do things properly because you are stressed for time, money or manpower. +roactive reasons for going international include) *xpanding sales by strategically seeking out advantages /aunch an offensive into a new market before competitor does +ower and prestige Incentives) sometimes the host government will offer special tax breaks to entice an investment /ower costs of labour, production and energy /ess stringent rules and regulations effecting pollution and labour Minimi0ing risk) International operations may reduce operating risk by smoothing sales and profits and from competitors gaining advantage.

Q2. "numerate different methods of entry in international business, their growth prospects and pitfalls in each method. #odes of entry into an International usiness$% ,here are some basic decisions that the firm must take before foreign expansion like) Which markets to enter, When to enter those markets, and on What scale. Which foreign mar&ets! #,he choice based on nation1s long run profit potential. #*conomic and political factors which influence foreign markets. #/ong run benefits of doing business in a country depends on following factors) # "i0e of market 2in terms of demographics3 # ,he present wealth of consumer markets 2purchasing power3 # 4ature of competition 'iming of entry$% ,he advantage is when firms enters early in the foreign market commonly known as first#mover advantage. (irst mo)er ad)antage*% 1. It1s the ability to prevent rivals and capture demand by establishing a strong brand name. !. &bility to build sales volume in that country.so that they can drive them out of market. $. &bility to create customer relationship. +isad)antage$ 1. 5irm has to devote effort, time and expense to learning the rules of the country. !. (isk is high for business failure2probability increases if business enters a national market after several other firms they can learn from other early firms mistakes3 1. ",porting$ *xporting is the process of selling of goods and services produced in one country to other countries. ,here are two types of exporting) direct and indirect. 6irect exports) 6irect exports represent the most basic mode of exporting made by a 2holding3 company, capitali0ing on economies of scale in production concentrated in the home country and affording better control over distribution. 6irect export works the best if the volumes are small. /arge volumes of export may trigger protectionism. ,ypes) 13 "ales representatives) "ales representatives represent foreign suppliers.manufacturers in their local markets for an established commission on sales. +rovide support services to a manufacturer regarding local advertising, local sales presentations, customs clearance formalities, legal re7uirements. !3 Importing distributors

Importing distributors purchase product in their own right and resell it in their local markets to wholesalers, retailers, or both. Importing distributors are a good market entry strategy for products that are carried in inventory, such as toys, appliances, prepared food. &dvantages) Control over selection of foreign markets and choice of foreign representative companies 8ood information feedback from target market -etter protection of trademarks, patents, goodwill, and other intangible property +otentially greater sales than with indirect exporting. 6isadvantages) 9igher start#up costs and higher risks as opposed to indirect exporting 8reater information re7uirements /onger time#to#market as opposed to indirect exporting. Indirect exports) &n indirect export is the process of exporting through domestically based export intermediaries. ,he exporter has no control over its products in the foreign market. ,ypes) *xport trading companies 2*,Cs3 ,hese provide support services of the entire export process for one or more suppliers. &ttractive to suppliers that are not familiar with exporting as *,Cs usually perform all the necessary work) locate overseas trading partners, present the product, 7uote on specific en7uiries, etc. *xport management companies 2*MCs3 ,hese are similar to *,Cs in the way that they usually export for producers. :nlike *,Cs, they rarely take on export credit risks and carry one type of product, not representing competing ones. :sually, *MCs trade on behalf of their suppliers as their export departments. *xport merchants) *xport merchants are wholesale companies that buy unpackaged products from suppliers.manufacturers for resale overseas under their own brand names. ,he advantage of export merchants is promotion. ;ne of the disadvantages for using export merchants result in presence of identical products under different brand names and pricing on the market, meaning that export merchant1s activities may hinder manufacturer1s exporting efforts. Confirming houses ,hese are intermediate sellers that work for foreign buyers. ,hey receive the product re7uirements from their clients, negotiate purchases, make delivery, and pay the suppliers.manufacturers. &n opportunity here arises in the fact that if the client likes the product it may become a trade representative. & potential disadvantage includes supplier1s unawareness and lack of control over what a confirming house does with their product. 4onconforming purchasing agents ,hese are similar to confirming houses with the exception that they do not pay the suppliers directly < payments take place between a supplier.manufacturer and a foreign buyer. &dvantages

5ast market access Concentration of resources for production /ittle or no financial commitment. ,he export partner usually covers most expenses associated with international sales /ow risk exists for those companies who consider their domestic market to be more important and for those companies that are still developing their (=6, marketing, and sales strategies. ,he management team is not distracted 4o direct handle of export processes. 6isadvantages 9igher risk than with direct exporting /ittle or no control over distribution, sales, marketing, etc. as opposed to direct exporting Inability to learn how to operate overseas Wrong choice of market and distributor may lead to inade7uate market feedback affecting the international success of the company +otentially lower sales as compared to direct exporting, due to wrong choice of market and distributors by export partners. ,hose companies that seriously consider international markets as a crucial part of their success would likely consider direct exporting as the market entry tool. Indirect exporting is preferred by companies who would want to avoid financial risk as a threat to their other goals

1. -icensing $ In this mode of entry,the domestic manufacturer leases the right to use its intellectual property 2i.e.3 technology, copy rights, brand name etc to a manufacturer in a foreign country for a fee. 9ere the manufacturer in the domestic country is called licensor and the manufacturer in the foreign is called licensee. ,he cost of entering market through this mode is less costly. ,he domestic company can choose any international location and en>oy the advantages without incurring any obligations and responsibilities of ownership, managerial,investment etc. .d)antages? 1. /ow investment on the part of licensor. !. /ow financial risk to the licensor $. /icensor can investigate the foreign market without much effort on his part. %. /icensee gets the benefits with less investment on research and development '. /icensee escapes himself from the risk of product failure. +isad)antages) 1. It reduces market opportunities for both !. -oth parties have to maintain the product 7uality and promote the product. ,herefore one party can affect the other through their improper acts. $. Chance for misunderstanding between the parties. %. Chance for leakages of the trade secrets of the licensor. '. /icensee may develop his reputation @. /icensee may sell the product outside the agreed territory and after the expiry of the contract. 2. (ranchising

:nder franchising an independent organi0ation called the franchisee operates the business under the name of another company called the franchisor under this agreement the franchisee pays a fee to the franchisor. ,he franchisor provides the following services to the franchisee. 1. ,rade marks !. ;perating "ystem $. +roduct rotation %. Continuous support system like advertising, employee training, reservation services 7uality assurances program etc. .d)antages$ 1. /ow investment and low risk !. 5ranchisor can get the information regarding the market culture,customs and environment of the host country. $. 5ranchisor learns more from the experience of the franchisees. %. 5ranchisee gets the benefits of (= 6 with low cost. '. 5ranchisee escapes from the risk of product failure. +isad)antages) 1. It may be more complicating than domestic franchising. !. It is difficult to control the international franchisee. $. It reduce the market opportunities for both %. -oth the parties have the responsibilities to maintain product 7uality and product promotion. '. ,here is a problem of leakage of trade secrets. /. 'urn&ey 0ro1ect) & turnkey pro>ect is a contract under which a firm agrees to fully design, construct and e7uip a manufacturing. business.services facilityand turn the pro>ect over to the purchase when it is ready for operation for remuneration like a fixed price, payment on cost plus basis. ,his form of pricing allows the company to shift the risk of inflation enhanced costs to the purchaser. *g nuclear power plants, airports, oil refinery, national highways, railway line etc. 9ence they are multiyear pro>ect. 2. #ergers 3.c4uisitions) & domestic company selects a foreign company and merger itself with foreign company in order to enter international business. &lternatively the domestic company may purchase the foreign company and ac7uires it ownership and control. It provides immediate access to international manufacturing facilities and marketing network. .d)antages) 1. ,he company immediately gets the ownership and control over the ac7uired firm1s factories, employee, technology, brand name and distribution networks. !. ,he company can formulate international strategy and generate more revenues. $. If the industry already reached the stage of optimum capacity level or overcapacity level in the host country. ,his strategy helps the host country. +isad)antages$

1. &c7uiring a firm in a foreign country is a complex task involving bankers, lawyers regulation, mergers and ac7uisition specialists from the two countries. !. ,his strategy adds no capacity to the industry. $. "ometimes host countries imposed restrictions on ac7uisition of local companies by the foreign companies. %. /abour problem of the host country1s companies are also transferred to the ac7uired company. 5. 6oint 7enture ,wo or more firm >oin together to create a new business entity that is legally separate and distinct from its parents. It involves shared ownership.Aarious environmental factors like social , technological economic and political encourage the formation of >oint ventures. It provides strength in terms of re7uired capital. /atest technology re7uired human talent etc. and enable the companies to share the risk in the foreign markets. ,his act improves the local image in the host country and also satisfies the governmental >oint venture. .d)antages) 1. Boint ventures provide large capital funds suitable for ma>or pro>ects. !. "preads the risk between or among partners. $. +rovides skills like technical skills, technology, human skills, expertise, marketing skills. %. Makes large pro>ects and turn key pro>ects feasible and possible. '. "ynergy due to combined efforts of varied parties. +isad)antages$ 1. Conflict may arise !. +artner delay the decision making once the dispute arises. ,hen the operations become unresponsive and inefficient. $. /ife cycle of a >oint venture is hindered by many causes of collapse. %. "cope for collapse of a >oint venture is more due to entry of competitors changes in the partners strength. '. ,he decision making is slowed down in >oint ventures due to the involvement of a number of parties. 8. Wholly Owned 9ubsidiary$ "ubsidiary means individual body under parent body. ,his "ubsidiary or individual body as per their own generates revenue. ,hey give their own rent, salary to employees, etc. -ut policies and trademark will be implemented from the +arent body. ,here are no branches here. ;nly the certain percentage of the profit will be given to the parent body. & subsidiary, in business matters, is an entity that is controlled by a bigger and more powerful entity. ,he controlled entity is called a company, corporation, or limited liability company, and the controlling entity is called its parent 2or the parent company3. ,he reason for this distinction is that a lone company cannot be a subsidiary of any organi0ation? only an entity representing a legal fiction as a separate entity can be a subsidiary. While individuals have the capacity to act

on their own initiative, a business entity can only act through its directors, officers and employees. ,he most common way that control of a subsidiary is achieved is through the ownership of shares in the subsidiary by the parent. ,hese shares give the parent the necessary votes to determine the composition of the board of the subsidiary and so exercise control. ,his gives rise to the common presumption that 'CD plus one share is enough to create a subsidiary. ,here are, however, other ways that control can come about and the exact rules both as to what control is needed and how it is achieved can be complex 2see below3. & subsidiary may itself have subsidiaries, and these, in turn, may have subsidiaries of their own. & parent and all its subsidiaries together are called a group, although this term can also apply to cooperating companies and their subsidiaries with varying degrees of shared ownership. "ubsidiaries are separate, distinct legal entities for the purposes of taxation and regulation. 5or this reason, they differ from divisions, which are businesses fully integrated within the main company, and not legally or otherwise distinct from it. "ubsidiaries are a common feature of business life and most if not all ma>or businesses organi0e their operations in this way. *xamples include holding companies such as -erkshire 9athaway, ,ime Warner, or Citigroup as well as more focused companies such as I-M, or Eerox Corporation. ,hese, and others, organi0e their businesses into national or functional subsidiaries, sometimes with multiple levels of subsidiaries.

Q/: Write 9hort ;otes on$ a: <omparati)e .d)antage$ Comparative advantage exists when a country has a margin of superiority in the production of a good or service i.e. where the opportunity cost of production is lower. ,he basic theory of comparative advantage was developed by 6avid (icardo (icardo s theory of comparative advantage was further developed by 9eckscher, ;hlin and "amuelson who argued that countries have different factor endowments of labour, land and capital inputs. Countries will specialise in and export those products which use intensively the factors of production which they are most endowed. If each country specialises in those goods and services where they have an advantage, then total output and economic welfare can be increased 2under certain assumptions3. ,his is true even if one nation has an absolute advantage over another country. &ssumptions underlying the concept of comparative advantage 0erfect occupational mobility of factors of production # resources used in one industry can be switched into another without any loss of efficiency <onstant returns to scale 2i.e. doubling the inputs in each country leads to a doubling of total output3 ;o e,ternalities arising from production and.or consumption 'ransportation costs are ignored If businesses exploit increasing returns to scale 2i.e. economies of scale3 when they specialise, the potential gains from trade are much greater. ,he idea that specialisation should lead to increasing returns is associated with economists such as +aul (omer and +aul ;rmerod. What determines comparati)e ad)antage! Comparative advantage is a dynamic concept. It can and does change over time. "ome businesses find they have en>oyed a comparative advantage in one product for several years only to face increasing competition as rival producers from other countries enter their markets. 5or a country, the following factors are important in determining the relative costs of production) ,he 4uantity and 4uality of factors of production a)ailable 2e.g. the si0e and efficiency of the available labour force and the productivity of the existing stock of capital inputs3. If an economy can improve the 7uality of its labour force and increase the stock of capital available it can expand the productive potential in industries in which it has an advantage. In)estment in research 3 de)elopment 2important in industries where patents give some firms significant market advantage3 # for more information on this have a look at this page #o)ements in the e,change rate. &n appreciation of the exchange rate can cause exports from a country to increase in price. ,his makes them less competitive in international markets. -ong%term rates of inflation compared to other countries. 5or example if average inflation in Country E is %D whilst in Country - it is FD over a number of years, the goods and services produced by Country E will become relatively more expensive over time. ,his worsens their competitiveness and causes a switch in comparative advantage.

Import controls such as tariffs and 4uotas that can be used to create an artificial comparative advantage for a country s domestic producers# although most countries agree to abide by international trade agreements. ;on%price competiti)eness of producers 2e.g. product design, reliability, 7uality of after#sales support3

b: 0urchasing power parity$ &ccording to +++ theory, when exchange rates are of a fluctuating nature, the rate of exchange between two currencies in the long run will be fixed by their respective purchasing powers in their own nations. 5oreign currency is demanded by the people because it has some purchasing power in its own nation. &lso domestic currency has a certain purchasing power, because it can buy some amount of goods.services in the domestic economy. ,hus, when home currency is exchanged for any foreign currency, in fact the domestic purchasing is being exchanged for the purchasing power, because it can buy some amount of goods. services in the domestic economy. ,hus, when home currency is exchanged for any foreign currency, in fact the domestic purchasing power is being exchanged for the purchasing power of that foreign currency. ,his exchange of the purchasing power takes place at some specified rare where purchasing of two currencies nations gets e7uali0ed. ,hus, the relative purchasing power of the two currencies determines the exchange rate. ,he exchange rate under this theory is in e7uilibrium when their domestic purchasing powers at that rate of exchanges are e7uivalent e.g., "uppose certain bundle of goods. services in :.".&. costs :.". G 1C and the same bundle in India costs, (s. %'C.# then the exchange rate between Indian (upee and :.". 6ollar is G1 H (s. %'. -ecause this is the exchange rate at which the parity between the purchasing power of two nations is maintained. & change in the purchasing power of any currency will reflect in the exchange rates also. 9ence under this theory the external value of the currency depends on the domestic purchasing power of that currency relative to that of another currency.

c: <ompetiti)e ad)antage of nations$ ,he 6iamond model of Michael +orter for the Competitive &dvantage of 4ations offers a model that can help understand the competitive position of a nation in global competition. ,his model can also be used for other ma>or geographic regions. ,raditionally, economic theory mentions the following factors for comparative advantage for regions or countries) &. /and -. /ocation

C. 4atural resources 2minerals, energy3 6. /abor *. /ocal population si0e. &s a rule Competitive &dvantage of nations has been the outcome of % interlinked advanced factors and activities in and between companies in these clusters. ,hese can be influenced in a pro#active way by government. ,hese interlinked advanced factors for Competitive &dvantage for countries or regions in +orters 6iamond framework are) 1. 5irm "trategy, "tructure and (ivalry) +orter argues that the best management styles vary among industries. "ome countries may be oriented toward a particular style of management. ,hose countries will tend to be more competitive in industries for which that style of management is suited. &lso +orter argues that intense competition spurs innovation. Competition is particularly fierce in Bapan, where many companies compete vigorously in most industries !. 6emand Conditions) Michael +orter argues that a sophisticated domestic market is an important element to producing competitiveness. 5irms that face a sophisticated domestic market are likely to sell superior products because the market demands high 7uality and a close proximity to such consumers enables the firm to better understand the needs and desires of the customers $. (elated "upporting Industries) +orter also argues that a set of strong related and supporting industries is important to the competitiveness of firms. ,his includes suppliers and related industries. %. 5actor Conditions) 5actor conditions refers to inputs used as factors of production # such as labour, land, natural resources, capital and infrastructure. ,his sounds similar to standard economic theory, but +orter argues that the IkeyI factors of production 2or speciali0ed factors3 are created, not inherited. "peciali0ed factors of production are skilled labour, capital and infrastructure.

Q8: W'O%+oha =ound$ /aunched in 6oha, Jatar, in 4ovember !CC1, at the W,;1s 5ourth W,; Ministerial Conference. 8oal) (educe trade barriers in order to expand global economic growth, development, and opportunity. 4egotiations offered an opportunity to revive confidence in global trade and to lay the groundwork for the robust global trading system of tomorrow. ,he negotiations focused on the following areas) a. &griculture b. "ervices c. ,rade facilitation d. 6evelopment :" 5eels that the developing countries were not reciprocating on trade concessions 6eveloped countries ma>orly the :" wanted what would seem like a fair deal) rich countries open their market, and poor countries do the same in return. ;n the contrary developing countries advocated that Kmarket access1 would displace millions of farmers. +roblems developing countries are having in implementing current trade obligations. /ack of media attention.

,he negotiations collapsed on !L Buly over issues of agricultural trade between the :nited "tates, India, and China. In particular, there was insoluble disagreement between India and the :nited "tates over the special safeguard mechanism 2""M3, a measure designed to protect poor farmers by allowing countries to impose a special tariff on certain agricultural goods in the event of animport surge or price fall. "everal countries blamed each other for the breakdown of the negotiations. ,he :nited "tates and some *uropean :nion members blamed India for the failure of the talks. India claimed that its position 2i.e. that the :.". was sacrificing the world s poor for :."..*uropean commercial interests3 was supported by over 1CC countries. -ra0il, one of the founding members of the 8#!C, broke away from the position held by India. 6eveloping countries claim that they have had problems with the implementation of the agreements reached in the earlier :ruguay (ound because of limited capacity or lack of technical assistance. ,hey also claim that they have not reali0ed certain benefits that they expected from the (ound, such as increased access for their textiles and apparel in developed#country markets. ,hey seek a clarification of language relating to their interests in existing agreements. &griculture has become the most important and controversial issue. &griculture is particularly important for developing countries, because around M'D of the population in developing countries live in rural areas, and the vast ma>ority are dependent on agriculture for their livelihoods ,he :nited "tates is being asked by the *uropean :nion 2*:3 and the developing countries, led by -ra0il and India, to make a more generous offer for reducing trade#distorting domestic

support for agriculture. ,he :nited "tates is insisting that the *: and the developing countries agree to make more substantial reductions in tariffs and to limit the number of import#sensitive and special products that would be exempt from cuts. Import#sensitive products are of most concern to developed countries like the *uropean :nion, while developing countries are concerned with special products < those exempt from both tariff cuts and subsidy reductions because of development, food security, or livelihood considerations. ,hese were the ma>or issues which lead to the failure of the 6oha (ound.

Q>: (+I%0arameters the In)estors must consider. 13&de7uacy of cash flows in the sector Investors give clear priority to ade7uate cash flows for ensuring a reasonable prospect of recovering costs and making an investment a success. Investors considered payment discipline and enforcement even more important in determining the success ofan investment. &de7uate cash flows in the sector are a high priority forboth firms with investments in distribution and those withinvestments in generation. *ven though firms investing in generation are at a remove from retail customers, experience has led them to be more cautious about investing in sectors where collections are a problem. "ome of the other factors considered are 4onpayment by customers is a problem that investors cannot fix without the government1s commitment to payment enforcement. & track record of improving payment discipline can lead investors to seriously consider bids for distribution concessions. Investors would like some security to cover the risk of nonpayment. !3"tability and enforcement of laws and contracts 5or international investors the test of a good legal framework is its clarity and the enforceability of contracts, particularly contracts with government agencies. Investors base long#term investment decisions on the reliability, applicability, and enforceability of laws and contracts. ,o have some assurance that these investments will succeed, investors want to see that the rights and obligations of private investors are clearly defined and that applicable laws and contracts are enforced. Indeed, investors rated a legal framework that clearly defines the rights and obligations of private investors as by far the most important factor in decisions to invest in a developing country. $38overnment responsiveness to the needs and time frames of investors 6elays in government approvals and licensing have an opportunity cost for international investors responding to concession auctions and solicitations for bids. ,he survey responses indicate that this opportunity cost is significant in the power sectors of developing countries. 8overnments of developing countries need to be aware that international investors are less likely than domestic investors to continue to put up with the costs of administrative inefficiency. %3Investors1 control over their investments & key issue is the demand for transparency from investors 2known as /imited +artners, or also /+s3, as well as for sector specific investments and a shortened time frame within which they can exit their investments. Investors today hesitate to make blind pool investments. ,hey want industry specific investment. ,he entire money coming into a +* fund is pooled and invested at the discretion of the fund managers, usually in proportion to the contribution of investors. -ut now investors want to be involved in the process of investment. ,he desire to exercise greater control over investment is a result of high expectations and the promise from private e7uity in !CCM, which unfortunately got short#circuited by the financial crisis. Many high net#worth individuals 294Is3 are stuck with their earlier investments. &lso, 94Is who have made money

from being entrepreneurs in control of finances do not want to lose control of their investments. ;ne of the concerns /+s have is the lack of knowledge and the status of their investment over the years. '3 (egulatory independence In theory, independent regulators differ from other regulatory institutions with regard to their tasks, their basis of legitimacy, the way they are held accountable to the public and how their relations with both the regulated industry and government are organised. ,herefore, an understanding of the particular characteristics of independent regulators is important to understand their role in the regulation of liberalised markets. &lthough correcting market failure is often the most important task for independent regulators, the main reason why they are given independence is their role in limiting government failure. Control and the separation of the state as owner or potential seller of utilities and the state as regulator is extremely important for the liberalisationprocess to be credible.,hus independent regulators often stress that such regulators can limit political interference in business decisions and regulatory risks.

Q?: <ase 9tudy$ .: 0olitical ris&s +olitical risk is a type of risk faced by investors, corporations, and governments. It is a risk that can be understood and managed with reasoned foresight and investment. -roadly, political risk refers to the complications businesses and governments may face as a result of what are commonly referred to as political decisionsNor Oany political change that alters the expected outcome and value of a given economic action by changing the probability of achieving business ob>ectives. +olitical risk faced by firms can be defined as Othe risk of a strategic, financial, or personnel loss for a firm because of such nonmarket factors as macroeconomic and social policies 2fiscal, monetary, trade, investment, industrial, income, labor,

and developmental3, or events related to political instability 2terrorism, riots, coups, civil war, and insurrection3 "uccession +olitics) ,he politics of determining who will fill the vacancies when the current president steps down is increasingly preoccupying decision#makers, slowing policymaking and deterring the government from taking significant decisions. "ocial unrest, *thnic unrest, *conomy +rotests and strikes put the government on edge. 5lare#ups of ethnic discontent.Chinese government efforts to contain sources of protest, which could also affect companies, especially Internet and telecoms ones like 6urby ,elecom /td. "uch pressures encourage a mixture of tough security and aversion to policy gambles and could be risky for 6urby /td. International (elations China1s political e7uation with India remains on the knife#edge be it the Pashmir visa issue, the construction of dams to block to flow of water in the -ramaputra river, continuing and undeterring support of +akistan by supplying various arms and ammunitions to their army or the &runachal +radesh /and dispute. &ll these factors lead to a very fragile relationship between the two governments. &s a result any dispute between the two governments can have adverse effects on 6urby /td or any other company which invests in China.