Question Paper DS 5729 Oct 2009 Revised Sylabus

8/13/2019 Question Paper DS 5729 Oct 2009 Revised Sylabus

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October 2009- DS 5729

International Business Question Paper Solutions

Q1. Multinational Corporations contribute immensely for the development of economies in

the world Discuss with illustrations.

Ans. MNC contribute majorly in the development of economies in the world. In the past

quarter of a century the world has witnessed the dramatic development of the multinational

corporation into a major phenomenon in international economic relations. MNCs are depicted

in some quarters as key instruments for maximiin! world welfare are also seen as dan!erous

a!ents of imperialism in others. MNCs are major force in world trade. In many countries" a few

MNCs are responsible for a si!nificant portion of exports of manufacturers. Moreover" intra#

corporation trade has also !rown in importance.

As far as india is concerned we all know that before $%%& our country was sufferin! from the

problem of low economy but after that when MNCs came to our country the economy of our

country increased.

MNCs provide employment to our country for those who are unemployed. 'hrou!h MNCs we

can buy product at low cost which we !et at hi!her prices because of import duty. Many

!oods which were not available in India and need to be bou!ht from abroad but with the

advent of MNCs now almost %&( !oods are available in India. Alon! with that they also brin!

advance technolo!y and brin! more competition.

Q2. Discuss various methods and modes of enterin and operatin in !" with merits and

demerits of each method.

Ans. )ntry methods or strate!ies can be broadly classified into two cate!ories*

$+ ,trate!ic alliances

-+ ,tandalone entries

In many cases" no company would like to share businesses or profits that it visualies or

expects in any markets. ften" companies are forced to form strate!ic alliances while enterin!

new markets" or for that matter to continue servicin! its current markets. 'his is the result of

just one cause / inadequacy" inadequacy related to different resources required tosuccessfully service the markets and derive profits from it. ,ome of the important

inadequacies that force a company to consider or even welcome an alliance are*

Capital 0 capability to take risk

1 2nowled!e0experience about technolo!y

1 2nowled!e0experience about the market

1 2nowled!e0experience about the environment

'he nature of the strate!ic alliance usually depends on what complimentary resources theforei!n company is lookin! for in its local partner. ,trate!ic alliances can be broken down into

the followin! types*

$+ 3oint 4entures


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-+ Contract Manufacturin!

5+ 6icensin!

7+ 8ranchisin!

9+ )xportin!

,tandalone entries are done by companies which perceive themselves to have adequate

capability in takin! capital risk and are ready to !ain the knowled!e associated with the new

markets over time. Companies that enter new markets on their own have to realie and

accept the risk in not dependin! on others to !ain experience about the new markets.

3oint 4enture

'he term :3oint 4enture; applies to those strate!ic alliances where there is equity participation

from both the forei!n entrant and the local collaborator. 'he equity participation can be of

different ratios" ran!in! from a minority stake" equal stake to a controllin! stake or a more

predominant majority stake. 8rom the perspective of theforei!n entrant" a joint venture has

the followin! advanta!es*

1 by the local partner is also an

issue to deal with" especially in countries rife with piracy" like China. 'his probably explains

why the majority of companies which enter markets where wholly owned subsidiaries are

allowed" prefer that route over joint venture

Contract Manufacturin!

Contract manufacturin! has a limited role as an entry strate!y and is more often used as acompliment to other entry strate!ies. It is used in conjunction with strate!ies like wholly

owned subsidiaries or franchisin!. Contract Manufacturin! is also often used when a company

enters a new market and has an activity that is required but is not a core nor is proprietary in

nature" like the manufacturin! of clothes" or simple !oods like clothin! irons and other


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consumer !oods. In most of the industries where contract manufacturin! is resorted to" the

core activities of the company lie more in marketin! and research and development rather

than in manufacturin!. ?elow are the lists of advanta!es and disadvanta!es in resortin! to

contract manufacturin! as an entry method.

Advanta!es*

1 6ess capital required.

1 6ow mana!erial risk.

1 8ocus on core activities.

1 6ess complicated exit problems.

1 6ess complicated division of responsibility.


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>articipation in international markets via licensin! is therefore best suited to firms with a

continuous stream of technolo!ical innovation because those corporations will be able to

move on to new products or services that retain a competitive advanta!e over imitatorD ex#

licensees.

8ranchisin!

8ranchisin! is one of the entry modes that has been widely used as a rapid method of

international expansion" most notably by fast food chains" consumer service businesses suchas hotel or car rental" and business services. A franchise is an on!oin! business relationship

where one party =@the franchisor@+ !rants to another =@the franchisee@+ the ri!ht to distribute

!oods or services usin! the franchisor;s brand and system in exchan!e for a fee. 8ranchisin!

enables rapid market expansion usin! the intellectual property of the franchisor" and the

capital and enthusiasm of a network of owner operators.

,ome of the common" but not essential" features of franchised businesses are as follows*

1 Eroup purchasin! arran!ements.

1 An exclusive territory for each franchisee.

1 Eroup advertisin! pro!rams.

1 Initial and on!oin! trainin! and support from the franchisor.

1 Assistance from the franchisor with equipment specification" site selection and premises fit#

out and si!na!e.

'he main drawback of franchisin! is the difficulty of adaptin! the franchised asset or brand to

local market tastes. A key indicator that franchisin! carries this constraint is the fact that

marketin! bud!ets at local levels are usually restricted to short#term promotions rather thanmarket development.

)xportin!

It is one of the methods that or!aniations can use to enter forei!n markets. In this entry

method" products produced in one country are marketed in another country throu!h

marketin! and distribution channels. 'hus" it requires a si!nificant investment in marketin!

strate!ies. In reality" exportin! is the most traditional and well#established form of operatin!

in forei!n markets. It can be further cate!oried into direct or indirect export.

Fholly wned ,ubsidiaries

Many or!aniations prefer to establish their presence in forei!n markets with $&&( ownership

throu!h wholly owned subsidiaries. Gnder this method" or!aniations obtain !reater control

over operations and hi!her profits since there is no ownership split a!reement. Bowever" such

entry method requires lar!e investments and faces hi!her risks" especially in the political"

le!al and economical arenas. 'here are two approaches for the wholly owned subsidiaries

entry methodH one is throu!h acquisition and the other throu!h !reenfield investments.

Ereenfield investment means usin! funds to build an entirely new facility. )ven thou!h such

approach entails full control and no risk of cultural conflicts" its costs are extremely hi!h" and

returns on investment are obtained in the lon!#run due to the extent of time required to build

the facility" start operations" and attain economies of scale and the experience#curve.

Acquisition as an entry method is preferable in the followin! situations*

1 Fhen speed of entry is important for the business; success.


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'he )uropean Gnion=)G+ / a customs union" a sin!le market and now with a sin!le

currency

'he )uropean 8ree 'rade Area=)8'A+

'he North American 8ree 'rade A!reement=NA8'A+ / created in $%%7

Mercosur # a customs union between ?rail" Ar!entina" Gru!uay" >ara!uay and

4eneuela

'he Association of ,outheast Asian Nations=A,)AN+ 8ree 'rade Area =A8'A+

'he Common Market of )astern and ,outhern Africa=CM),A+

'he ,outh Asian 8ree 'rade Area=,A8'A+ created in 3anuary -&& and containin!

countries such as India and >akistan

5+ 'rade ?arriers

'rade barriers are measures that !overnments or public authorities introduce that prevent orrestrict overseas trade and investment. 'hese measures need not necessarily take the form of

le!islation or a specific decision. 'hey may also take the form of current practice. As a resultof these measures" domestic companies receive a competitive advanta!e relative to theirforei!n counterparts.

It is accepted that in many cases" products are liable to custom duties when imported into amarket and that imported products ou!ht to be accompanied by the correct documentation.In some cases" however" customs duties may be unreasonably hi!h or customs clearance maytake an unreasonably lon! time.

'rade barriers may take the form of" for example*

Customs duties

Customs procedures 'echnical re!ulations" standards" etc. # for example for the purpose of consumer

protection" health protection" protection of the environment" etc

estrictions on access to primary products # for example in the form of export

levies that drive up prices artificially or special export prices that are hi!her than

the price of the same primary products for use in national processin! industries

Insufficient protection of intellectual property ri!hts # both with respect to the

scope of protection and with respect to the possibilities of le!al protection. 'his

includes" for instance" protection of patents" copyri!hts" trademarks and

!eo!raphical indications of ori!in

?arriers to trade in services # for example in the form of discriminatoryconditions

estrictions on access to investment # for example throu!h national participation

requirements or restrictions on access to repatriation of profits

Gnfair application of state aid and other forms of subsidies


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>acka!in!

Inventory Mana!ement

Material Bandlin!

Information ,ystems

esponse times are normally lon!er internationally because of distance" slower

movement by sea frei!ht" and more documentation. Consi!nees normally adjust their needs to a slower response time if the order is

complete and accurate.

esearch studies have indicated that only $( of international shipments have

been found to be complete and accurate.

6oss" dama!e" and theft incur additional costs


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dated equipment and techniques that can reduce the productivity of workers and lead to theproduction of !oods of a lower standard

5. Improvement in export competitiveness

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Many in India are concerned that the 8'A will adversely affect India;s trade balance with

some Asean countries. A few countries like China will route their products into India

throu!h Asean.

'he Indian domestic industry must be prepared to face the challen!e of cheap imports

from Asean floodin! the Indian market. )ven without this trade a!reement" India faces

lar!e trade deficits with Indonesia and other Asean countries. ?ut overall" the Asean#India

8'A must be considered a positive development. Asean and India need each other. 8or

Asean" India;s workin!#a!e population is !rowin!" while the workin!#a!e population inother Asian economies" such as China" 2orea and 3apan" is declinin!. India is also a world

leader in information technolo!y and an attractive destination for forei!n investment. 8or

India" the trade will drive existin! economic reforms" assistin! the nation in establishin!

itself as a !rowin! economic power in Asia.

Q ( Competitive advantae of nations propounded by michael porter has complete

functional value manaement inputs and strateic relevance in todays 3lobal business+

Discuss

Ans.

In this competitive business world" proper mana!ement is vital for any or!aniation@s

success. >rofit maximiation subject to the bud!et constraint is the main objective of any

business or!aniation. 8or this" any or!aniation need !ood business plan. Mana!ement is

the process of !ettin! thin!s done" effectively and efficiently" with the help of people.

?asically" plannin!" or!aniin!" leadin! and controllin! are the main processes of business

mana!ement. ?usiness plannin! is a roadmap which !uides any or!aniation about what

to and how to do. >lannin! includes definin! !oals" establishin! strate!y" and developin!

plans to coordinate activities. It is concerned with ends =what is to be done+ as well as with

means =how it is to be done+. orter =-&&7+" An effective competitive strate!y takes offensive ordefendable position a!ainst the five competitive forcesD. A competitive advanta!e is the

thin! that differentiates a business from its competitors. It is what separates you from

everyone else. And" it@s usually the reason you are in business. It answers the question"

why should I buy from youD Bow are you better than my current supplierD .4alue#

creatin! products and different from competitors makes comparative advanta!e

sustainable. 'here are different opinions about competitive advanta!e propounded by

different scholars. Bowever" it advocates mainly how a company is best at what and why

Case Study- Pharma Offshoring Market: A Bright Future for India

1. Discuss the competitive advantaes of !ndia in pharma offshorin mar4ets

Ans*


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'he competitive advanta!e of India in >harma ffshorin! markets are*

$. A key driver of offshorin! on outsourcin! is the risin! cost of < which is forcin!

majors in the G, and )urope to look for low cost < destinations such as India

-. Another incentive is cost of basic production in India" which is up to 9&( lower than

in the G, 8harma companies are workin! on the in#sourcin! and outsourcin! model to increase

efficiency" and reduce lead time in dru! discovery. 'he various in#house and

outsourced departments function as horiontally and vertically linked

networks.Companies are explorin! the benefits of balanced bud!etin! in each

department" primarily based on I and profitability from individual cost centres. 'he

network model is !reatly supported by product life cycle mana!ement.

Question Paper DS 5729 Oct 2009 Revised Sylabus

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