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Assignment of MBA SMU 4 sem
Master of Business Administration- MBA Semester 4 MB0053 –International Business Management -4 Credits (Book ID: B1724) Assignment- 60 marks Note: Answer all questions. Kindly note that answers for 10 marks questions should be approximately of 400 words. Each question is followed by evaluation scheme. Q1. The world economy is globalizing at an accelerating pace. What do you mean by globalization? Discuss the merits and demerits of Globalization. (meaning of globalization - 2 marks, merits- 4 marks, demerits- 4 marks) 10 marks Answer: Globalisation Globalisation refers to the integration of markets in the global economy. Markets where globalisation is particularly common include financial markets, such as capital markets, money and credit markets, and insurance markets, commodity markets, such as markets for oil, coffee, tin, and gold, and product markets, such as markets for motor vehicles and consumer electronics. Why has globalisation increased? The pace of globalisation has increased for a number of reasons: 1.Developments in ICT, transport and communications have accelerated the pace of globalisation over the past 30 years. The internet has enabled fast and 24/7 global communication, and the use of containerisation has enabled vast quantities of goods and commodities to be shipped across the world at extremely low cost. 2.Increasing capital mobility has also acted as a stimulus to globalisation. When capital can move freely from country to country, it is relatively straightforward for firms to locate and invest abroad, and repatriate profits. 3.The development of complex financial products, such as derivatives, has enabled global credit markets to grow rapidly. 4.Trade has become increasingly free, following the collapse of communism, which has opened up many former communist countries to inward investment and global trade. Over the last 30 years, trade openness, which is defined as the ratio of exports and imports to national income, has risen from 25% to around 40% for industrialised economies, and from 15% to 60% for emerging economies. 5.The growth of multinational companies (MNCs) and the rise in the significance of global brands like Microsoft, Sony, and McDonalds, has been central to the emergence of globalisation. The advantages of globalisation Globalisation brings a number of potential benefits to international producers and national economies, including: 1.Providing an incentive for countries to specialise and benefit fcrom the application of the principle ofcomparative advantage. 2.Access to larger markets means that firms may experience higher demand for their products, as well as benefit from economies of scale, which leads to a reduction in average production costs. 3.Globalisation enables worldwide access to sources of cheap raw materials, and this enables firms to becost competitive in their own markets and in overseas markets. Seeking out the cheapest materials from around the world is called global sourcing. Because of cost reductions and increased revenue, globalisation can generate increased profits for shareholders. 4.Avoidance of regulation by locating production in countries with less strict regulatory regimes, such as inthose in many Less Developed Countries (LCDs). 5.Globalisation has led to increased flows of inward investment between countries, which has created benefits for recipient countries. These benefits include the sharing of knowledge and technology between countries. 6.In the long term, increased trade is likely to lead to the creation of more employment in all countries that are involved. The disadvantages of globalisation There are also several potential disadvantages of globalisation, including the following:
1. The over-standardisation of products through global branding is a common criticism of globalisation. For example, the majority of the world’s computers use Microsoft’s Windows operating system. Clearly, standardising of computer operating systems and platforms creates considerable benefits, but critics argue that this leads to a lack of product diversity, as well as presenting barriers to entry to small, local, producers. 2. Large multinational companies can also suffer from diseconomies of scale, such as difficulties associated with coordinating the activities of subsidiaries based in several countries. 3. The increased power and influence of multinationals is also seen by many as a considerable disadvantage of globalisation. For example, large multinational companies can switch their investments between territories in search of the most favourable regulatory regimes. MNCs can operate as local monopsoniesof labour, and push wages lower than the free market equilibrium. 4. Critics of globalisation also highlight the potential loss of jobs in domestic markets caused by increased, and in some cases, unfair, free trade. 5. Globalisation can also increase the pace of deindustrialisation, which is the slow erosion of an economy's manufacturing base. 6. Jobs may be lost because of the structural changes arising from globalisation. Structural changes may lead to structural unemployment and may also widen the gap between rich and poor within a country. 7. One of the most significant criticisms of globalisation is the increased risk associated with the interdependence of economies. As countries are increasingly dependent on each other, a negative economic shock in one country can quickly spread to other countries. For example, a downturn in car sales in the UK affects the rest of Europe as most cars bought in the UK are imported from the EU. The Far East crisis of the 1990s was triggered by the collapse of just a few Japanese banks. 8. Most recently, the collapse of the US sub-prime housing market triggered a global crisis in the banking system as banks around the world suffered a fall in the value of their assets and reduced their lending to each other. This created a liquidity crisis and helped fuel a severe downturn in the global economy. 9. Over-specialisation, such as being over-reliant on producing a limited range of goods for the global market, is a further risk associated with globalisation. A sudden downturn in world demand for one of these products can plunge an economy into a recession. Many developing countries suffer by over-specialising in a limited range of products, such as agriculture and tourism. 10. Globalisation generates winners and losers, and for this reason it is likely to increase inequality, as richer nations benefit more than poorer ones. 11. Increased trade associated with globalisation has increased pollution and helped contribute to CO2emissions and global warming. Trade growth has also accelerated the depletion of non-renewable resources, such as oil. Q2. The international trade theories explain the basics behind international trade. Compare the Absolute and comparative cost advantage theories with the help of example. (explain the 2 theories - 6 marks, examples- 4 marks) 10 marks Answer: Neo-Ricardian trade theory: Inspired by Piero Sraffa, a new strand of trade theory emerged and was named neo-Ricardian trade theory. The main contributors include Ian Steedman (1941-) and Stanley Metcalfe (1946-). They have criticized neoclassical international trade theory, namely the Heckscher-Ohlin model on the basis that the notion of capital as primary factor has no method of measuring it before the determination of profit rate (thus trapped in a logical vicious circle). This was a second round of the Cambridge capital controversy, this time in the field of international trade. The merit of neo-Ricardian trade theory is that input goods are explicitly included. This is in accordance with Sraffa’s idea that any commodity is a product made by means of commodities. The limitation of their theory is that the analysis is restricted to small-country cases.
Ricardo-Sraffa trade theory: John Chipman observed in his survey that McKenzie stumbled upon the questions of intermediate products and discovered that "introduction of trade in intermediate product necessitates a fundamental alteration in classical analysis." It took many years until Y. Shiozawa succeeded in removing this deficiency. The Ricardian trade theory was now constructed in a form to include intermediate input trade for the most general case of many countries and many goods. This new theory is called Ricardo-Sraffa trade theory. Based on an idea of Takahiro Fujimoto, who is a specialist in automobile industry and a philosopher of the international competitiveness, Fujimoto and Shiozawa developed a discussion in which how the factories of the same multi-national firms compete between them across borders. International intra-firm competition reflects a really new aspect of international competition in the age of so-called global competition. Absolute and comparative cost advantage theories: Absolute advantage and comparative advantage are two basic concepts to international trade. Under absolute advantage, one country can produce more output per unit of productive input than another. With comparative advantage, if one country has an absolute (dis)advantage in every type of output, the other might benefit from specializing in and exporting those products, if any exist. A country has an absolute advantage economically over another, in a particular good, when it can produce that good at a lower cost. Using the same input of resources a country with an absolute advantage will have greater output. Assuming this one good is the only item in the market, beneficial trade is impossible. An absolute advantage is one where trade is not mutually beneficial, as opposed to a comparative advantage where trade is mutually beneficial. A country has a comparative advantage in the production of a good if it can produce that good at a lower opportunity cost relative to another country. The theory of comparative advantage explains why it can be beneficial for two parties (countries, regions, individuals and so on) to trade if one has a lower relative cost of producing some good. What matters is not the absolute cost of production but the opportunity cost, which measures how much production of one good, is reduced to produce one more unit of the other good. Q3. Culture is more often a source of conflict than synergy. As an Indian manager, what management style and corporate culture you should be aware of while travelling to Japan and to USA? ( Japanese corporate culture - 5 marks, USA’s corporate culture - 5 marks) 10 marks Answer: Japanese corporate culture: Japanese business culture is wrongly perceived as the biggest obstacle to starting business in Japan for many foreign companies thinking of entering the Japanese market. Japanese business culture is purely in terms of how it affects the actual mechanics (or tactics) of successfully doing business in Japan. Based on 13 years of direct sales and executive experience in the Japanese market, I will try to give an insider's perspective of the way Japanese businesspeople think and companies make decisions, so that you may understand what is going on on 'the other side of the table'. Many foreign companies never do start business in Japan (or only enter the Japanese market through a distributor) simply because of the misconception, fueled by those infamous myths of doing business in Japan, that dealing with Japanese business culture is somehow too risky. Fortunately, Japanese business culture isnot an impenetrable barrier to successful business in Japan, as proven by the very substantial Japanese market share enjoyed by Yahoo!, BMW, Mercedes-Benz, Chanel, Louis Vuitton, Tiffany & Co. and many others. Inevitably Japanese business culture is different to that of the US or Europe, but the differences do not make it any more risky to do business in Japan than elsewhere in the world. In fact, certain aspects of Japan's business culture, especially the very stable long-term relationships resulting from the conservative Japanese sense of loyalty to trusted partners, can be very beneficial for those foreign companies that understand how to swim with the cultural tide as opposed to vainly struggling against it. So just what is Japanese business culture and how is it different?
The differences are there from the moment you arrive at Tokyo's Narita International Airport - the white-gloved baggage carriers carefully lining up your luggage on the conveyor, the incredibly polite customs inspectors, the cleaner standing at the top of the escalator (if you are going down to the Narita Express train station) making sure that the escalator hand rail is clean, the cleaning staff quickly and silently cleaning and leaving the train, the girl on the platform who politely bows to you as you board the train, the ticket inspector on the train who stands at the front of the carriage, removes his hat and bows before proceeding to inspect tickets etc. It is the same when you arrive at your hotel - when the bell-boy bows and opens the door, when the porter shows you more information about the buttons beside your bed than you can possibly remember, they are doing it for you the customer. When you enter a Japanese store or even a bar, you will be greeted by shouts of 'irrashaimase' (welcome) and when you leave there will be shouts of 'domo arigato gozaimashita' (thank you) and you will notice that everyone, even the chef will join in the 'chorus'! The difference you should notice is that they are all very service oriented and of course service is a pillar of Japanese business culture. In the US and Europe, personal service has become something that people must pay for with tips - in Japan there is no tipping, personal service is literally 'part of the service'. Many foreigners confuse the service aspect of Japanese business culture noted above as being simply a part of Japanese social culture, i.e. people are just being polite. Agreed Japanese society is very polite but all of the people noted above were doing their job when you encountered them - a big part of their job is keeping you happy and in Japan that entails good customer service. Unfortunately many foreign company executives doing business in Japan for the first time, do not recognize the differences noted above - primarily because when traveling they are 'off duty' - they consider their first encounter with Japanese business culture to be when they arrive at a Japanese customer or distributor's office for their first business meeting.
USA’s Corporate Culture ? Americans often take a “business-first” approach, with personal relationships playing a smaller role than in many other cultures. This is reflected in common phrases like “business is business” (meaning personal considerations shouldn’t be taken into account when making a business decision) and “it’s just business, it’s not personal” (meaning that negative consequences from a business decision are not meant to be personally hurtful or insulting). Americans will generally do business with the company they think gives them the highest value for the lowest price, not based on personal relationships. ? Americans believe that being direct is a virtue. Americans ask for what they want, say what they mean, and expect you to do the same. “Yes” usually means yes, “no” usually means no and “maybe” usually means the person hasn’t decided and wants to think more about the question. Americans expect you to get to the point, to tell them why your product or service is better, and to do so in a way that is easy to understand and meaningful to them. Being shy, unassertive or extremely deferential is often seen as weakness. Americans do not mind direct questions because they do not hesitate to say no. ? Americans expect all business interactions to be polite and professional. It is considered extremely rude to shout in a business context, even when two people strongly disagree. Likewise, it is considered rude to interrupt someone (even a junior person), or to make personal comments (e.g. “you’re an idiot”). ? Americans expect you to be positive about yourself, your products, and your capabilities. American’s tend to take information at face value, so being self-effacing or downplaying the capabilities of a product or service can be seen as evidence of poor quality. ? Americans commonly exchange business cards but they are very casual about it and there is no ritual or “right way” of doing so. ? Americans appreciate and expect persistence. It may take 10 or 15 attempts to get a response, especially from a potential customer. ? Americans expect you to ask questions if you don’t understand something. Americans are not embarrassed to ask questions if they don’t understand something, and they expect you to ask questions as well. If you do not ask questions, Americans will assume that you understand whatever is being discussed. ? Be on time to appointments as Americans consider it rude to be late in business settings. “On time” in America usually means five minute early. Being up to five minutes late is acceptable, but requires a short
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apology for making the other person wait. Being more than 5 minutes late requires a phone call to warn the other person of the delay and to apologize. Americans value numbers and using figures and statistics to support your position will help you persuade them. Americans expect meetings to be as short as possible, and do not consider a meeting a success unless it results in a tangible action or decision.
Q4. Regional integration is the bonding between nations and states through political, cultural and economic cooperation. A whole range of regional integration exists today. Discuss these 6 types in brief. (6 Types of regional integration - 10 marks) 10 marks Answer: Types of Regional Integration Agreements Types of the regional integration agreements (RIAs) are mainly defined according to the different instruments which identified and limited the scope of regional economic integration. These instruments include preferential access for specified products, internal tariff elimination, determination of common external tariff (CET), free factor mobility, harmonization of economic policies and harmonization of political policies. For this reason, each subsequent type of the RIA covers the content of the previous type in addition to its own requirements. Accordingly, it is possible to distinguish six different types first of integration. These types are: • Preferential trade area (PTA) which gives preferential access to certain products from the participating countries. This can be called as a limited or sector based free trade area. • Free trade area (FTA) that include the reciprocal removal of tariffs on member countries’ goods. In an FTA, each member is free within the limits specified by the GATT/WTO system on deciding the level of external tariffs that will be applied to non members. As there is flexibility on the interactions with the third countries, the members in an FTA are free to establish or join other FTAs. The leading examples are North American Free Trade Area (NAFTA), ASEAN Free Trade Area (AFTA) and European Free Trade Association (EFTA). • Customs union (CU) which is a type of agreement that include determination of the common external tariff (CET), in addition to the elimination of the internal tariff rates. Generally, determination of the CET is done through taking an average of all partners’ before union tariff levels. For member countries, such cooperation While these six types depict that how regional agreements can diversify and extend its limits, this kind of classification mainly resembles to the evolution of the European Union (EU). The antecedent of the EU which is now at the level of EMU was the European Coal and Steel Community (ECSC, 1951) which can be counted as an intermediate agreement between free trade area and customs union in external tariffs can only be attained through the loss of autonomy in foreign economic policies. The examples include Andean Community, the CUs of EU with Andorra, San Marino and Turkey, and Southern African Customs Union (SACU). • Common market (CM), in which there is free factor mobility –capital, investment and labor– in addition to the customs union requirements that determine free flows of goods and services. This integration requires governments to employ coordinated actions in order to ensure the equal treatment for all factors in the member countries of the CM. Caribbean Community and Common Market (CARICOM) is one of the examples of this type. • Economic and monetary union (EMU) which results from the enlargement of a common market with the additional requirement of the harmonization of economic policies, both monetary and fiscal. It further involves the creation of an independent regional central bank that has control over exchange rate policy and inflation rates. The only example that arrived to this level of integration is the European Union (EU). • Complete (political) integration (CI) is a type of agreement which includes the harmonization of economic and political policies, and so as to become a single state. This kind of integration necessitates the loss of sovereignty and the creation of domestic institutions on the international level.
Q5. The decision of a firm to compete internationally will be strategic. While formulating global marketing strategies, how should a firm deal with segmentation, market positioning and international product policy? ( segmentation-3 marks, positioning - 4 marks, product policy- 3 marks) 10 marks Answer: segmentation: As a marketer who do you consider will benefit the most from your products and services? Think of the people and their most common characteristics and attributes. One of the best ways to identify your target market is to look at your existing customer base. Who are your ideal clients? What do they have in common? If you do not have an existing customer base, or if you are targeting a completely new audience, speculate on who they might be, based on their needs and the benefits they will receive. Investigate competitors or similar businesses in other markets to gain insight. Market segmentation is the process in marketing of dividing a market into distinct subsets (segments) that behave in the same way or have similar needs. Because each segment is fairly homogeneous in their needs and attitudes, they are likely to respond similarly to a given marketing strategy. That is, they are likely to have similar feelings and ideas about a marketing mix comprised of a given product or service, sold at a given price, distributed in a certain way, and promoted in a certain way. Broadly, markets can be divided according to a number of general criteria, such as by industry or public versus private sector. Small segments are often termed niche markets or specialty markets. However, all segments fall into either consumer or industrial markets. Although it has similar objectives and it overlaps with consumer markets in many ways, the process of Industrial market segmentation is quite different. The process of segmentation is distinct from targeting (choosing which segments to address) and positioning (designing an appropriate marketing mix for each segment). The overall intent is to identify groups of similar customers and potential customers; to prioritise the groups to address; to understand their behaviour; and to respond with appropriate marketing strategies that satisfy the different preferences of each chosen segment. Improved segmentation can lead to significantly improved marketing effectiveness. With the right segmentation, the right lists can be purchased, advertising results can be improved and customer satisfaction can be increased
Positioning: Determining market position depends on three main tasks:
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Figure out your point of difference. Your unique attributes are what set you apart from your competitors and attract clients to your offering. But just being different isn’t enough for a successful positioning strategy. To position your brand, you need both attraction and distinction:
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Attraction: Provide values and attributes that customers genuinely want or need. Distinction: Provide values and attributes that customers can receive only when they work with your business or buy your product.
Decide which customers you serve the best. Focus on the market segment you serve best. Instead of trying to please all people in all ways, great brands please some people — a defined segment of market — in an extraordinary way because of the unique and meaningful attributes and experiences the brands offer. Find your place in the competitive landscape. Look at how your offering fits within your competitive landscape, including
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How your customers think your offering ranks. How you think your offering ranks.
If people misunderstand your brand, you can’t just wave a magic wand to change their minds. You have to move strategically from the position your brand currently occupies in customers’ minds to where you want it to be. You also have to be sure that the position you want your brand to hold in the marketplace isn’t already taken by some other brand.
If you try to slot your brand into a market or mind position already taken by a competitor, you face a long and tough uphill battle. An equally bad idea is trying to leverage off someone else’s brand. By likening your brand to someone else’s, all you do is cast a spotlight on a competitor and point out your own second-string position. product policy: A strategic rule or rules covering how a good or service is promoted to potential consumers. A typical product policy created by a business for a manufactured product might attempt to manage how the item will be perceived by its target market and could also contain information about how durable the product is.
Q6. Global sourcing industry is on a growth run as there are sound business reasons to it. Discuss these reasons with examples. ( reasons for global sourcing- 7 marks, examples- 3 marks) Answer: reasons for global sourcing One of the biggest trends in business today is global sourcing. In 2001, the United States alone sourced over $1.3 trillion in goods to low-cost suppliers around the globe. Of course, the biggest reason for global sourcing is the cost savings; which can be significant. Most companies report an average savings of up to 30% when they begin global sourcing (also known as offshoring). Despite this savings, however, many pitfalls can prevent these cost-conscious companies from finding the success with overseas suppliers that they had planned for. The biggest pitfall that many companies have found during offshoring is that those initial savings don't always equal total savings in the long run. For example, it may cost less to produce the goods in China, but when the costs of shipping the raw materials, dealing with government taxes and tariffs, and bringing the finished products back to the home company, the actual cost of production may actually be higher. Also, some companies have found out the hard way that they often get exactly what they pay for. Cheap labor in other countries can spell lower productivity, poorer quality, and more defective goods, which further increase the overall costs of production. Many of these companies have fallen into these traps simply because they only looked at the cost factor instead of realizing that global sourcing is only effective when it involves a total evaluation of all factors. These other factors include the costs of the materials, of the transportation, of the inventory carrying costs, of the tariffs and taxes, of the operational performance, and of the operational risks. Only when all of these factors are taken into consideration can a clear picture about the effectiveness of global sourcing be predicted. Additionally, companies sometimes fail to realize the importance cultural differences can play in the success or failure of an offshoring venture. Most western business individuals simply do not have significant knowledge of other cultures to effectively work with them. If these business people fail to realize this problem beforehand, they can doom the partnership before it ever gets off the ground. For example, do not tend to believe women should be involved in business. If a U. S. company looking to outsource some of their projects in that country sent a top female executive to conduct the negotiations, this company might be making a major error in judgment. In order to work in different countries, western companies must be willing to train their employees to work with different cultures and understand how these paradigms play out in business relationships. Another aspect of the global sourcing process involves being knowledge about changes in trade regulations and costs in other countries. For this reason, individuals involved in global sourcing need to be extremely familiar with both the Harmonized System Code and the International Commerce Terms. The Harmonized System (HS) Codes are six to ten digit numbers that represent different trade regulations and tariffs around the globe. Hundreds of these codes exist and appropriate codes must be applied to any goods that need to cross any border. The International Commerce Terms (Incoterms) are a collection of 13 standards that dictate the rules and responsibilities of buyers and sellers responsible for goods that are being transported across borders. When businesses attempt to do business overseas without a thorough understanding of the HS Codes or the Incoterms, those situations might become somewhat problematic. Overall, global sourcing is not as simple as just moving production from the United States or other higher-cost country to a lower-cost country like China or India. While companies can save money through offshoring activities, they must also take the time to evaluate the big picture that includes multiple factors such as shipping costs, tariffs,
and potential risks. They must also be willing to do their homework on other cultures and to expand their knowledge to include the HS codes, Incoterms, and other regulations so that they can carry out their offshore operations smoothly and cost-effectively. Examples: Common examples of globally sourced products or services include: labor-intensive manufactured products produced using low-cost Chinese labor, call centers staffed with low-cost English speaking workers in the Philippines and India, and IT work performed by low-cost programmers in India and Eastern Europe. While these examples are examples of Low-cost country sourcing, global sourcing is not limited to low-cost countries. Majority of companies today strive to harness the potential of global sourcing in reducing cost. Hence it is commonly found that global sourcing initiatives and programs form an integral part of thestrategic sourcing plan and procurement strategy of many multinational companies. Global sourcing is often associated with a centralized procurement strategy for a multinational, wherein a central buying organization seeks economies of scale through corporate-wide standardization and benchmarking. A definition focused on this aspect of global sourcing is: "proactively integrating and coordinating common items and materials, processes, designs, technologies, and suppliers across worldwide purchasing, engineering, and operating locations.
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Assignment of MBA SMU 4 sem
Master of Business Administration- MBA Semester 4 MB0053 –International Business Management -4 Credits (Book ID: B1724) Assignment- 60 marks Note: Answer all questions. Kindly note that answers for 10 marks questions should be approximately of 400 words. Each question is followed by evaluation scheme. Q1. The world economy is globalizing at an accelerating pace. What do you mean by globalization? Discuss the merits and demerits of Globalization. (meaning of globalization - 2 marks, merits- 4 marks, demerits- 4 marks) 10 marks Answer: Globalisation Globalisation refers to the integration of markets in the global economy. Markets where globalisation is particularly common include financial markets, such as capital markets, money and credit markets, and insurance markets, commodity markets, such as markets for oil, coffee, tin, and gold, and product markets, such as markets for motor vehicles and consumer electronics. Why has globalisation increased? The pace of globalisation has increased for a number of reasons: 1.Developments in ICT, transport and communications have accelerated the pace of globalisation over the past 30 years. The internet has enabled fast and 24/7 global communication, and the use of containerisation has enabled vast quantities of goods and commodities to be shipped across the world at extremely low cost. 2.Increasing capital mobility has also acted as a stimulus to globalisation. When capital can move freely from country to country, it is relatively straightforward for firms to locate and invest abroad, and repatriate profits. 3.The development of complex financial products, such as derivatives, has enabled global credit markets to grow rapidly. 4.Trade has become increasingly free, following the collapse of communism, which has opened up many former communist countries to inward investment and global trade. Over the last 30 years, trade openness, which is defined as the ratio of exports and imports to national income, has risen from 25% to around 40% for industrialised economies, and from 15% to 60% for emerging economies. 5.The growth of multinational companies (MNCs) and the rise in the significance of global brands like Microsoft, Sony, and McDonalds, has been central to the emergence of globalisation. The advantages of globalisation Globalisation brings a number of potential benefits to international producers and national economies, including: 1.Providing an incentive for countries to specialise and benefit fcrom the application of the principle ofcomparative advantage. 2.Access to larger markets means that firms may experience higher demand for their products, as well as benefit from economies of scale, which leads to a reduction in average production costs. 3.Globalisation enables worldwide access to sources of cheap raw materials, and this enables firms to becost competitive in their own markets and in overseas markets. Seeking out the cheapest materials from around the world is called global sourcing. Because of cost reductions and increased revenue, globalisation can generate increased profits for shareholders. 4.Avoidance of regulation by locating production in countries with less strict regulatory regimes, such as inthose in many Less Developed Countries (LCDs). 5.Globalisation has led to increased flows of inward investment between countries, which has created benefits for recipient countries. These benefits include the sharing of knowledge and technology between countries. 6.In the long term, increased trade is likely to lead to the creation of more employment in all countries that are involved. The disadvantages of globalisation There are also several potential disadvantages of globalisation, including the following:
1. The over-standardisation of products through global branding is a common criticism of globalisation. For example, the majority of the world’s computers use Microsoft’s Windows operating system. Clearly, standardising of computer operating systems and platforms creates considerable benefits, but critics argue that this leads to a lack of product diversity, as well as presenting barriers to entry to small, local, producers. 2. Large multinational companies can also suffer from diseconomies of scale, such as difficulties associated with coordinating the activities of subsidiaries based in several countries. 3. The increased power and influence of multinationals is also seen by many as a considerable disadvantage of globalisation. For example, large multinational companies can switch their investments between territories in search of the most favourable regulatory regimes. MNCs can operate as local monopsoniesof labour, and push wages lower than the free market equilibrium. 4. Critics of globalisation also highlight the potential loss of jobs in domestic markets caused by increased, and in some cases, unfair, free trade. 5. Globalisation can also increase the pace of deindustrialisation, which is the slow erosion of an economy's manufacturing base. 6. Jobs may be lost because of the structural changes arising from globalisation. Structural changes may lead to structural unemployment and may also widen the gap between rich and poor within a country. 7. One of the most significant criticisms of globalisation is the increased risk associated with the interdependence of economies. As countries are increasingly dependent on each other, a negative economic shock in one country can quickly spread to other countries. For example, a downturn in car sales in the UK affects the rest of Europe as most cars bought in the UK are imported from the EU. The Far East crisis of the 1990s was triggered by the collapse of just a few Japanese banks. 8. Most recently, the collapse of the US sub-prime housing market triggered a global crisis in the banking system as banks around the world suffered a fall in the value of their assets and reduced their lending to each other. This created a liquidity crisis and helped fuel a severe downturn in the global economy. 9. Over-specialisation, such as being over-reliant on producing a limited range of goods for the global market, is a further risk associated with globalisation. A sudden downturn in world demand for one of these products can plunge an economy into a recession. Many developing countries suffer by over-specialising in a limited range of products, such as agriculture and tourism. 10. Globalisation generates winners and losers, and for this reason it is likely to increase inequality, as richer nations benefit more than poorer ones. 11. Increased trade associated with globalisation has increased pollution and helped contribute to CO2emissions and global warming. Trade growth has also accelerated the depletion of non-renewable resources, such as oil. Q2. The international trade theories explain the basics behind international trade. Compare the Absolute and comparative cost advantage theories with the help of example. (explain the 2 theories - 6 marks, examples- 4 marks) 10 marks Answer: Neo-Ricardian trade theory: Inspired by Piero Sraffa, a new strand of trade theory emerged and was named neo-Ricardian trade theory. The main contributors include Ian Steedman (1941-) and Stanley Metcalfe (1946-). They have criticized neoclassical international trade theory, namely the Heckscher-Ohlin model on the basis that the notion of capital as primary factor has no method of measuring it before the determination of profit rate (thus trapped in a logical vicious circle). This was a second round of the Cambridge capital controversy, this time in the field of international trade. The merit of neo-Ricardian trade theory is that input goods are explicitly included. This is in accordance with Sraffa’s idea that any commodity is a product made by means of commodities. The limitation of their theory is that the analysis is restricted to small-country cases.
Ricardo-Sraffa trade theory: John Chipman observed in his survey that McKenzie stumbled upon the questions of intermediate products and discovered that "introduction of trade in intermediate product necessitates a fundamental alteration in classical analysis." It took many years until Y. Shiozawa succeeded in removing this deficiency. The Ricardian trade theory was now constructed in a form to include intermediate input trade for the most general case of many countries and many goods. This new theory is called Ricardo-Sraffa trade theory. Based on an idea of Takahiro Fujimoto, who is a specialist in automobile industry and a philosopher of the international competitiveness, Fujimoto and Shiozawa developed a discussion in which how the factories of the same multi-national firms compete between them across borders. International intra-firm competition reflects a really new aspect of international competition in the age of so-called global competition. Absolute and comparative cost advantage theories: Absolute advantage and comparative advantage are two basic concepts to international trade. Under absolute advantage, one country can produce more output per unit of productive input than another. With comparative advantage, if one country has an absolute (dis)advantage in every type of output, the other might benefit from specializing in and exporting those products, if any exist. A country has an absolute advantage economically over another, in a particular good, when it can produce that good at a lower cost. Using the same input of resources a country with an absolute advantage will have greater output. Assuming this one good is the only item in the market, beneficial trade is impossible. An absolute advantage is one where trade is not mutually beneficial, as opposed to a comparative advantage where trade is mutually beneficial. A country has a comparative advantage in the production of a good if it can produce that good at a lower opportunity cost relative to another country. The theory of comparative advantage explains why it can be beneficial for two parties (countries, regions, individuals and so on) to trade if one has a lower relative cost of producing some good. What matters is not the absolute cost of production but the opportunity cost, which measures how much production of one good, is reduced to produce one more unit of the other good. Q3. Culture is more often a source of conflict than synergy. As an Indian manager, what management style and corporate culture you should be aware of while travelling to Japan and to USA? ( Japanese corporate culture - 5 marks, USA’s corporate culture - 5 marks) 10 marks Answer: Japanese corporate culture: Japanese business culture is wrongly perceived as the biggest obstacle to starting business in Japan for many foreign companies thinking of entering the Japanese market. Japanese business culture is purely in terms of how it affects the actual mechanics (or tactics) of successfully doing business in Japan. Based on 13 years of direct sales and executive experience in the Japanese market, I will try to give an insider's perspective of the way Japanese businesspeople think and companies make decisions, so that you may understand what is going on on 'the other side of the table'. Many foreign companies never do start business in Japan (or only enter the Japanese market through a distributor) simply because of the misconception, fueled by those infamous myths of doing business in Japan, that dealing with Japanese business culture is somehow too risky. Fortunately, Japanese business culture isnot an impenetrable barrier to successful business in Japan, as proven by the very substantial Japanese market share enjoyed by Yahoo!, BMW, Mercedes-Benz, Chanel, Louis Vuitton, Tiffany & Co. and many others. Inevitably Japanese business culture is different to that of the US or Europe, but the differences do not make it any more risky to do business in Japan than elsewhere in the world. In fact, certain aspects of Japan's business culture, especially the very stable long-term relationships resulting from the conservative Japanese sense of loyalty to trusted partners, can be very beneficial for those foreign companies that understand how to swim with the cultural tide as opposed to vainly struggling against it. So just what is Japanese business culture and how is it different?
The differences are there from the moment you arrive at Tokyo's Narita International Airport - the white-gloved baggage carriers carefully lining up your luggage on the conveyor, the incredibly polite customs inspectors, the cleaner standing at the top of the escalator (if you are going down to the Narita Express train station) making sure that the escalator hand rail is clean, the cleaning staff quickly and silently cleaning and leaving the train, the girl on the platform who politely bows to you as you board the train, the ticket inspector on the train who stands at the front of the carriage, removes his hat and bows before proceeding to inspect tickets etc. It is the same when you arrive at your hotel - when the bell-boy bows and opens the door, when the porter shows you more information about the buttons beside your bed than you can possibly remember, they are doing it for you the customer. When you enter a Japanese store or even a bar, you will be greeted by shouts of 'irrashaimase' (welcome) and when you leave there will be shouts of 'domo arigato gozaimashita' (thank you) and you will notice that everyone, even the chef will join in the 'chorus'! The difference you should notice is that they are all very service oriented and of course service is a pillar of Japanese business culture. In the US and Europe, personal service has become something that people must pay for with tips - in Japan there is no tipping, personal service is literally 'part of the service'. Many foreigners confuse the service aspect of Japanese business culture noted above as being simply a part of Japanese social culture, i.e. people are just being polite. Agreed Japanese society is very polite but all of the people noted above were doing their job when you encountered them - a big part of their job is keeping you happy and in Japan that entails good customer service. Unfortunately many foreign company executives doing business in Japan for the first time, do not recognize the differences noted above - primarily because when traveling they are 'off duty' - they consider their first encounter with Japanese business culture to be when they arrive at a Japanese customer or distributor's office for their first business meeting.
USA’s Corporate Culture ? Americans often take a “business-first” approach, with personal relationships playing a smaller role than in many other cultures. This is reflected in common phrases like “business is business” (meaning personal considerations shouldn’t be taken into account when making a business decision) and “it’s just business, it’s not personal” (meaning that negative consequences from a business decision are not meant to be personally hurtful or insulting). Americans will generally do business with the company they think gives them the highest value for the lowest price, not based on personal relationships. ? Americans believe that being direct is a virtue. Americans ask for what they want, say what they mean, and expect you to do the same. “Yes” usually means yes, “no” usually means no and “maybe” usually means the person hasn’t decided and wants to think more about the question. Americans expect you to get to the point, to tell them why your product or service is better, and to do so in a way that is easy to understand and meaningful to them. Being shy, unassertive or extremely deferential is often seen as weakness. Americans do not mind direct questions because they do not hesitate to say no. ? Americans expect all business interactions to be polite and professional. It is considered extremely rude to shout in a business context, even when two people strongly disagree. Likewise, it is considered rude to interrupt someone (even a junior person), or to make personal comments (e.g. “you’re an idiot”). ? Americans expect you to be positive about yourself, your products, and your capabilities. American’s tend to take information at face value, so being self-effacing or downplaying the capabilities of a product or service can be seen as evidence of poor quality. ? Americans commonly exchange business cards but they are very casual about it and there is no ritual or “right way” of doing so. ? Americans appreciate and expect persistence. It may take 10 or 15 attempts to get a response, especially from a potential customer. ? Americans expect you to ask questions if you don’t understand something. Americans are not embarrassed to ask questions if they don’t understand something, and they expect you to ask questions as well. If you do not ask questions, Americans will assume that you understand whatever is being discussed. ? Be on time to appointments as Americans consider it rude to be late in business settings. “On time” in America usually means five minute early. Being up to five minutes late is acceptable, but requires a short
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apology for making the other person wait. Being more than 5 minutes late requires a phone call to warn the other person of the delay and to apologize. Americans value numbers and using figures and statistics to support your position will help you persuade them. Americans expect meetings to be as short as possible, and do not consider a meeting a success unless it results in a tangible action or decision.
Q4. Regional integration is the bonding between nations and states through political, cultural and economic cooperation. A whole range of regional integration exists today. Discuss these 6 types in brief. (6 Types of regional integration - 10 marks) 10 marks Answer: Types of Regional Integration Agreements Types of the regional integration agreements (RIAs) are mainly defined according to the different instruments which identified and limited the scope of regional economic integration. These instruments include preferential access for specified products, internal tariff elimination, determination of common external tariff (CET), free factor mobility, harmonization of economic policies and harmonization of political policies. For this reason, each subsequent type of the RIA covers the content of the previous type in addition to its own requirements. Accordingly, it is possible to distinguish six different types first of integration. These types are: • Preferential trade area (PTA) which gives preferential access to certain products from the participating countries. This can be called as a limited or sector based free trade area. • Free trade area (FTA) that include the reciprocal removal of tariffs on member countries’ goods. In an FTA, each member is free within the limits specified by the GATT/WTO system on deciding the level of external tariffs that will be applied to non members. As there is flexibility on the interactions with the third countries, the members in an FTA are free to establish or join other FTAs. The leading examples are North American Free Trade Area (NAFTA), ASEAN Free Trade Area (AFTA) and European Free Trade Association (EFTA). • Customs union (CU) which is a type of agreement that include determination of the common external tariff (CET), in addition to the elimination of the internal tariff rates. Generally, determination of the CET is done through taking an average of all partners’ before union tariff levels. For member countries, such cooperation While these six types depict that how regional agreements can diversify and extend its limits, this kind of classification mainly resembles to the evolution of the European Union (EU). The antecedent of the EU which is now at the level of EMU was the European Coal and Steel Community (ECSC, 1951) which can be counted as an intermediate agreement between free trade area and customs union in external tariffs can only be attained through the loss of autonomy in foreign economic policies. The examples include Andean Community, the CUs of EU with Andorra, San Marino and Turkey, and Southern African Customs Union (SACU). • Common market (CM), in which there is free factor mobility –capital, investment and labor– in addition to the customs union requirements that determine free flows of goods and services. This integration requires governments to employ coordinated actions in order to ensure the equal treatment for all factors in the member countries of the CM. Caribbean Community and Common Market (CARICOM) is one of the examples of this type. • Economic and monetary union (EMU) which results from the enlargement of a common market with the additional requirement of the harmonization of economic policies, both monetary and fiscal. It further involves the creation of an independent regional central bank that has control over exchange rate policy and inflation rates. The only example that arrived to this level of integration is the European Union (EU). • Complete (political) integration (CI) is a type of agreement which includes the harmonization of economic and political policies, and so as to become a single state. This kind of integration necessitates the loss of sovereignty and the creation of domestic institutions on the international level.
Q5. The decision of a firm to compete internationally will be strategic. While formulating global marketing strategies, how should a firm deal with segmentation, market positioning and international product policy? ( segmentation-3 marks, positioning - 4 marks, product policy- 3 marks) 10 marks Answer: segmentation: As a marketer who do you consider will benefit the most from your products and services? Think of the people and their most common characteristics and attributes. One of the best ways to identify your target market is to look at your existing customer base. Who are your ideal clients? What do they have in common? If you do not have an existing customer base, or if you are targeting a completely new audience, speculate on who they might be, based on their needs and the benefits they will receive. Investigate competitors or similar businesses in other markets to gain insight. Market segmentation is the process in marketing of dividing a market into distinct subsets (segments) that behave in the same way or have similar needs. Because each segment is fairly homogeneous in their needs and attitudes, they are likely to respond similarly to a given marketing strategy. That is, they are likely to have similar feelings and ideas about a marketing mix comprised of a given product or service, sold at a given price, distributed in a certain way, and promoted in a certain way. Broadly, markets can be divided according to a number of general criteria, such as by industry or public versus private sector. Small segments are often termed niche markets or specialty markets. However, all segments fall into either consumer or industrial markets. Although it has similar objectives and it overlaps with consumer markets in many ways, the process of Industrial market segmentation is quite different. The process of segmentation is distinct from targeting (choosing which segments to address) and positioning (designing an appropriate marketing mix for each segment). The overall intent is to identify groups of similar customers and potential customers; to prioritise the groups to address; to understand their behaviour; and to respond with appropriate marketing strategies that satisfy the different preferences of each chosen segment. Improved segmentation can lead to significantly improved marketing effectiveness. With the right segmentation, the right lists can be purchased, advertising results can be improved and customer satisfaction can be increased
Positioning: Determining market position depends on three main tasks:
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Figure out your point of difference. Your unique attributes are what set you apart from your competitors and attract clients to your offering. But just being different isn’t enough for a successful positioning strategy. To position your brand, you need both attraction and distinction:
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Attraction: Provide values and attributes that customers genuinely want or need. Distinction: Provide values and attributes that customers can receive only when they work with your business or buy your product.
Decide which customers you serve the best. Focus on the market segment you serve best. Instead of trying to please all people in all ways, great brands please some people — a defined segment of market — in an extraordinary way because of the unique and meaningful attributes and experiences the brands offer. Find your place in the competitive landscape. Look at how your offering fits within your competitive landscape, including
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How your customers think your offering ranks. How you think your offering ranks.
If people misunderstand your brand, you can’t just wave a magic wand to change their minds. You have to move strategically from the position your brand currently occupies in customers’ minds to where you want it to be. You also have to be sure that the position you want your brand to hold in the marketplace isn’t already taken by some other brand.
If you try to slot your brand into a market or mind position already taken by a competitor, you face a long and tough uphill battle. An equally bad idea is trying to leverage off someone else’s brand. By likening your brand to someone else’s, all you do is cast a spotlight on a competitor and point out your own second-string position. product policy: A strategic rule or rules covering how a good or service is promoted to potential consumers. A typical product policy created by a business for a manufactured product might attempt to manage how the item will be perceived by its target market and could also contain information about how durable the product is.
Q6. Global sourcing industry is on a growth run as there are sound business reasons to it. Discuss these reasons with examples. ( reasons for global sourcing- 7 marks, examples- 3 marks) Answer: reasons for global sourcing One of the biggest trends in business today is global sourcing. In 2001, the United States alone sourced over $1.3 trillion in goods to low-cost suppliers around the globe. Of course, the biggest reason for global sourcing is the cost savings; which can be significant. Most companies report an average savings of up to 30% when they begin global sourcing (also known as offshoring). Despite this savings, however, many pitfalls can prevent these cost-conscious companies from finding the success with overseas suppliers that they had planned for. The biggest pitfall that many companies have found during offshoring is that those initial savings don't always equal total savings in the long run. For example, it may cost less to produce the goods in China, but when the costs of shipping the raw materials, dealing with government taxes and tariffs, and bringing the finished products back to the home company, the actual cost of production may actually be higher. Also, some companies have found out the hard way that they often get exactly what they pay for. Cheap labor in other countries can spell lower productivity, poorer quality, and more defective goods, which further increase the overall costs of production. Many of these companies have fallen into these traps simply because they only looked at the cost factor instead of realizing that global sourcing is only effective when it involves a total evaluation of all factors. These other factors include the costs of the materials, of the transportation, of the inventory carrying costs, of the tariffs and taxes, of the operational performance, and of the operational risks. Only when all of these factors are taken into consideration can a clear picture about the effectiveness of global sourcing be predicted. Additionally, companies sometimes fail to realize the importance cultural differences can play in the success or failure of an offshoring venture. Most western business individuals simply do not have significant knowledge of other cultures to effectively work with them. If these business people fail to realize this problem beforehand, they can doom the partnership before it ever gets off the ground. For example, do not tend to believe women should be involved in business. If a U. S. company looking to outsource some of their projects in that country sent a top female executive to conduct the negotiations, this company might be making a major error in judgment. In order to work in different countries, western companies must be willing to train their employees to work with different cultures and understand how these paradigms play out in business relationships. Another aspect of the global sourcing process involves being knowledge about changes in trade regulations and costs in other countries. For this reason, individuals involved in global sourcing need to be extremely familiar with both the Harmonized System Code and the International Commerce Terms. The Harmonized System (HS) Codes are six to ten digit numbers that represent different trade regulations and tariffs around the globe. Hundreds of these codes exist and appropriate codes must be applied to any goods that need to cross any border. The International Commerce Terms (Incoterms) are a collection of 13 standards that dictate the rules and responsibilities of buyers and sellers responsible for goods that are being transported across borders. When businesses attempt to do business overseas without a thorough understanding of the HS Codes or the Incoterms, those situations might become somewhat problematic. Overall, global sourcing is not as simple as just moving production from the United States or other higher-cost country to a lower-cost country like China or India. While companies can save money through offshoring activities, they must also take the time to evaluate the big picture that includes multiple factors such as shipping costs, tariffs,
and potential risks. They must also be willing to do their homework on other cultures and to expand their knowledge to include the HS codes, Incoterms, and other regulations so that they can carry out their offshore operations smoothly and cost-effectively. Examples: Common examples of globally sourced products or services include: labor-intensive manufactured products produced using low-cost Chinese labor, call centers staffed with low-cost English speaking workers in the Philippines and India, and IT work performed by low-cost programmers in India and Eastern Europe. While these examples are examples of Low-cost country sourcing, global sourcing is not limited to low-cost countries. Majority of companies today strive to harness the potential of global sourcing in reducing cost. Hence it is commonly found that global sourcing initiatives and programs form an integral part of thestrategic sourcing plan and procurement strategy of many multinational companies. Global sourcing is often associated with a centralized procurement strategy for a multinational, wherein a central buying organization seeks economies of scale through corporate-wide standardization and benchmarking. A definition focused on this aspect of global sourcing is: "proactively integrating and coordinating common items and materials, processes, designs, technologies, and suppliers across worldwide purchasing, engineering, and operating locations.
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