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Question 1. What is the role and elements of culture?

Answer : Business, like all other human activities, is conducted within the context of society.Culture is the collection of values, beliefs, behaviors, customs, and attitudes that distinguish one society from another. A societys culture determines the rules that govern how firms operate in the society. Several characteristics of culture are worth noting for their relevance to international business: Culture reflects learned behavior that is transmitted from one member of a society to another. Some elements of culture are transmitted intergenerationally, as when parents teach their children table manners. Other elements are transmitted intragenerationally, as when seniors educate incoming freshmen about a schools traditions. The elements of culture are interrelated. For example, Japans group-oriented, hierarchical society stresses harmony and loyalty, which has historically translated into lifetime employment and minimal job switching. Because culture is learned behavior, it is adaptive; that is, the culture changes in response to external forces that affect the society. For example, after World War II,. ELEMENTS OF CULTURE There are too many human variables and differents types of international business functions for an exhaustive discussion about culture. The main elements of culture are : Attitudes and Beliefs : These set of attitudes and beliefs of culture will influence nearly all aspects of human behaviours, providing guidelines and organisation to a society and its individuals. Attitudes towards Time : Every wherein the world people use time to communicate with each other . In international business, attitudes towards time are displayed in behaviour regarding punctuality, responses to business communication, responses to deadlines and the amount of time that is spent waiting in an outer office for an appointment. Attitude towards Work and Leisure :Peoples attitudes towards work and leisure are indicative of their view towards wealth and material gains. These attitudes affect the types , qualities and umbers of individuals who pursue entrepreneurial and management careers as well. Attitude towards Achievement : In some cultures, particularly those with high stratified and hierarchical societies , there is tendency to avoid personal responsibility and to work according to precise instruction received from supervisors that are followed by latter. In many industrial societies, personal responsibility and the ability to take risks for potential gain are considered valuable instruments in achieving higher goals. Attitudes towards change : The international manager must understand what aspect of a culture will resist change and how the areas of resistance differ among cultures, how the process of changes take place in different cultures and how long it will take to implements change. Attitude towards Job : The type of job that is considered most desirable or prestigious varies greatly according to difference cultures. Thus while medical and legal professions are considered extremely prestigious in the united states, civil server is considered the most prestigious occupation in several developing countries including India.

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Question 2. Write a short note on International Advertising. How is it important for international marketing? Answer : International advertisement play a very important role in the international marketing. Advertisement is paid form of non- personal presentation of ideas, good or services by the sponsor. It is a non -personal method of setting the product or in other words it is salesmans imprint. Every manufacturer wants to sell his products at a reasonable price the target buyers. The role of advertising is: 1. Communication to a target audience that differs in terms of language, literacy and other cultural factors.

2. Business activity through which a firm attempts to inform target audiences in multiple countries about itself and its product or service offering. 3. It provides reassurance to the firms and brands and reminds consumers about offerings. 4. Through the selective reinforcement of certain social roles, language and values, it acts as an important force fashioning the cognitions and attitudes that underlie behaviour not only in the market place, but also in all aspects of life. Consistent Creating a global branding and advertising program enables you to communicate consistent messages to customers in all your export markets. Consumers now receive marketing messages from a huge number of different sources, so delivering a consistent message is the most effective way to reach consumers, according to Bloomberg BusinessWeek. Risk You can reduce the risk in developing a global campaign by building on branding and advertising strategies that deliver successful results in your domestic market. Building an existing brand progressively, market by market, is the safest and most cost-effective way to create a global brand. Localization While consistency is important, your global branding and advertising program does not need to communicate exactly the same message to each local market. It's important to understand and respect the language, cultural and business differences in individual territories by adapting your communications to meet local preferences -- a process called localization. Leadership You can build on the benefits of a global brand by utilizing an approach known as brand leadership. This means defining the important elements of your brand, but using a flexible approach and customizing communications for local markets. To ensure success, you need to monitor the success of the campaign in each market with the aim of establishing brand leadership across all key territories. Management Running a consistent global branding and advertising program reduces the cost and complexity of managing your campaigns. Some multinational companies employ different advertising and marketing agencies for each territory. If each agency creates a different campaign for the local market, costs can rise rapidly because of the duplication of effort. By developing a single global branding and advertising strategy, you can reduce the number of agencies you use and eliminate duplicate costs. Media The changing pattern of media makes it easier to develop affordable global campaigns, according to Bloomberg BusinessWeek. Global advertising campaigns of the early 2000s relied heavily on mainstream television and press advertising. The emergence of social media and the importance of Web search mean that you can now focus on placing your messages in media that consumers prefer. When consumers in different countries search the Web, they receive the same consistent branding message from your website wherever they are located.

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Question 3. Describe the various modes of entries in international market. Answer : A mode of entry into an international market is the channel which your organization employs to gain entry to a new international market. This lesson considers a number of key alternatives, but recognizes that alternatives are many and diverse. Here you will be consider modes of entry into international markets such as the Internet, Exporting, Licensing, International Agents, International Distributors, Strategic Alliances, Joint Ventures, Overseas Manufacture and International Sales Subsidiaries. Finally we consider the Stages of Internationalization. It is worth

noting that not all authorities on international marketing agree as to which mode of entry sits where. For example, some see franchising as a stand alone mode, whilst others see franchising as part of licensing. In reality, the most important point is that you consider all useful modes of entry into international markets - over and above which pigeon-hole it fits into. If in doubt, always clarify your tutor's preferred view The Internet The Internet is a new channel for some organizations and the sole channel for a large number of innovative new organizations. The eMarketing space consists of new Internet companies that have emerged as the Internet has developed, as well as those pre-existing companies that now employ eMarketing approaches as part of their overall marketing plan. For some companies the Internet is an additional channel that enhances or replaces their traditional channel(s). For others the Internet has provided the opportunity for a new online company. More Exporting There are direct and indirect approaches to exporting to other nations. Direct exporting is straightforward. Essentially the organization makes a commitment to market overseas on its own behalf. This gives it greater control over its brand and operations overseas, over an above indirect exporting. On the other hand, if you were to employ a home country agency (i.e. an exporting company from your country - which handles exporting on your behalf) to get your product into an overseas market then you would be exporting indirectly. Examples of indirect exporting include: Piggybacking whereby your new product uses the existing distribution and logistics of another business. Export Management Houses (EMHs) that act as a bolt on export department for your company. They offer a whole range of bespoke or a la carte services to exporting organizations. Consortia are groups of small or medium-sized organizations that group together to market related, or sometimes unrelated products in international markets. Trading companies were started when some nations decided that they wished to have overseas colonies. They date back to an imperialist past that some nations might prefer to forget e.g. the British, French, Spanish and Portuguese colonies. Today they exist as mainstream businesses that use traditional business relationships as part of their competitive advantage. Licensing Licensing includes franchising, Turnkey contracts and contract manufacturing. Licensing is where your own organization charges a fee and/or royalty for the use of its technology, brand and/or expertise. Franchising involves the organization (franchiser) providing branding, concepts, expertise, and infact most facets that are needed to operate in an overseas market, to the franchisee. Management tends to be controlled by the franchiser. Examples include Dominos Pizza, Coffee Republic and McDonald's Restaurants.Turnkey contracts are major strategies to build large plants. They often include a the training and development of key employees where skills are sparse - for example, Toyota's car plant in Adapazari, Turkey. You would not own the plant once it is handed over. International Agents and International Distributors Agents are often an early step into international marketing. Put simply, agents are individuals or organizations that are contracted to your business, and market on your behalf in a particular country. They rarely take ownership of products, and more commonly take a commission on goods sold. Agents usually represent more than one organization. Agents are a low-cost, but low-control option. If you intend to globalize, make sure that your contract allows you to regain direct control of product. Of course you need to set targets since you never know the level of commitment of your agent. Agents might also represent your competitors - so beware conflicts of interest. They tend to be expensive to recruit, retain and train. Distributors are similar to agents, with the main difference that distributors take ownership of the goods. Therefore they have an incentive to market products and to make a profit from them. Otherwise pros and cons are similar to those of international agents. Strategic Alliances (SA)

Strategic alliances is a term that describes a whole series of different relationships between companies that market internationally. Sometimes the relationships are between competitors. There are many examples including: Shared manufacturing e.g. Toyota Ayago is also marketed as a Citroen and a Peugeot. Research and Development (R&D) arrangements. Distribution alliances e.g. iPhone was initially marketed by O2 in the United Kingdom. Marketing agreements. Essentially, Strategic Alliances are non-equity based agreements i.e. companies remain independent and separate. Joint Ventures (JV) Joint Ventures tend to be equity-based i.e. a new company is set up with parties owning a proportion of the new business. There are many reasons why companies set up Joint Ventures to assist them to enter a new international market: Access to technology, core competences or management skills. For example, Honda's relationship with Rover in the 1980's. To gain entry to a foreign market. For example, any business wishing to enter China needs to source local Chinese partners. Access to distribution channels, manufacturing and R&D are most common forms of Joint Venture. Overseas Manufacture or International Sales Subsidiary A business may decide that none of the other options are as viable as actually owning an overseas manufacturing plant i.e. the organization invests in plant, machinery and labor in the overseas market. This is also known as Foreign Direct Investment (FDI). This can be a new-build, or the company might acquire a current business that has suitable plant etc. Of course you could assemble products in the new plant, and simply export components from the home market (or another country). The key benefit is that your business becomes localized - you manufacture for customers in the market in which you are trading. You also will gain local market knowledge and be able to adapt products and services to the needs of local consumers. The downside is that you take on the risk associated with the local domestic market. An International Sales Subsidiary would be similar, reducing the element of risk, and have the same key benefit of course. However, it acts more like a distributor that is owned by your own company. Internationalization Stages So having considered the key modes of entry into international markets, we conclude by considering the Stages of Internationalization. Some companies will never trade overseas and so do not go through a single stage. Others will start at a later or even final stage. Of course some will go through each stage as summarized now: Indirect exporting or licensing Direct exporting via a local distributor Your own foreign presences Home manufacture, and foreign assembly Foreign manufacture

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Question 4. Discuss briefly the steps involved in processing of an export order. Answer : In receiving an export order at first acknowledge it and then proceed to examine it carefully in respect of items, specification , pre- shipment inspection, payments condition, special packaging, labelling and marketing requirements, shipment and delivery , date, marine insurance , documentation etc. if you are satisfied on these aspect a formal confirmation should be sent to the buyer, otherwise clarification should be sought from the buyer before confirming the order. After confirmation of the export order, immediate step should be taken for procurement/ manufacture of the export goods. In the meanwhile, our should proceed to enter into a formal export contract with the overseas buyer.

Entering into export contract In order to avoid disputes, it is necessary to enter into an export contract with the overseas buyer. For this purpose export contract should be carefully drafted incorporating comprehensive but in precise terms, all relevant and important conditions of the trade deal, there should not be any ambiguity regarding the exact specifications of good and terms of sale including export price, mode of payments, storage and distribution methods, type packaging ,port of shipment , delivery schedule etc, different aspects of an export contract are enumerated as under 1. Product, standards and specifications 2. Quantity 3. Inspection 4. Total value of contract 5. Terms of delivery 6. Taxes, duties and charges 7. Period of delivery / Shipment 8. Packing labelling an marking 9. Terms of payments amount/ mode and currency 10. Discounts and commissions 11. Licenses and permits 12. Insurance 13. Documentary requirements 14. Guarantee 15. Force majeure of excuse for non-performance of contract 16. Remedies 17. Arbitration It will not be out of place to mention here the importance of arbitration clause in export contract. Court proceeding do not offer a satisfactory method for settlement of commercial disputes, as they involve inevitable delays, cost and technicalities.

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Question 5. Discuss briefly the various techniques to assess country risk. Give examples to illustrate your answer. Answer : Measuring a country's risk can be a tricky endeavor. From tax laws to political upheaval, investors have to take hundreds, if not thousands, of different factors into consideration. For instance, solid moves like a hike in interest rates can dramatically help a country's businesses and stock market. But even a mere comment from a prominent politician hinting at future plans can have just as large of an impact. A country's risk can generally be divided into two groups: Economic Risk: Risk associated with a country's financial condition and ability to repay its debts. For instance, a country with a high debt-to-GDP ratio may not be able to raise money as easily to support itself, which puts its domestic economy at risk. Political Risk: Risk associated with a country's politicians and the impact of their decisions on investments. For instance, desperate politicians supporting nationalizations could pose a risk to investors in certain strategic industries. Analyzing Country Risk

There are many different ways to analyze a country's risk. From beta coefficients to sovereign ratings, investors have a number of different tools at their disposal. International investors should use a combination of these techniques in order to determine a country's risk, as well as the risk associated with the international investment/security itself. Methods used to assess country risk can be grouped into two categories: Quantitative Analysis: The use of ratios and statistics to determine risk, such as the debt-to-GDP ratio or the beta coefficient of the MSCI index for a given country. International investors can find this information in reports from ratings agencies, magazines like the Economist, and through various online sources like Wikipedia. Qualitative Analysis: The use of subjective analysis to determine risk, such as breaking political news/opinion or realistic market rumors. International investors can find this information in financial publications like the Economist and the Wall Street Journal, as well as by searching on international news aggregators like Google News. But, the most common way that investors assess country risk is through sovereign ratings. By taking these quantitative and qualitative factors into account, these agencies issue credit ratings for each country and give investors an easy way to analyze country risk. The three most-watched ratings agencies are Standard & Poor's, Moody's Investor Services, and Fitch Ratings. Country Risk Checklist & Other Tips International investors can determine country risk using this simple three-step process: Check Sovereign Ratings: Look-up the country's sovereign ratings issued by the S&P, Moody's and Fitch to get a base-line look at the country's level of risk. Read the Latest News: Search on Google News or other international news aggregators for any economic news surrounding a country as a form of qualitative research. Check the Stock's Risk: Determine the specific investment's risk by looking at quantitative factors, such as the beta coefficient - a higher beta coefficient equates to greater risk. But just because a country is risky doesn't mean investors should ignore it. Sometimes increased risk equates to higher potential returns. For instance, a country undergoing an economic reform may be riskier now, but its long-term future may be brighter as a result. International investors can therefore still incorporate risk into a diversified portfolio in order to enhance potential returns. Here are a few tips to keep in mind when considering riskier investments: Stay Diversified: A diversified portfolio can help mitigate the effects of any one security falling sharply. Try and limit any one security from accounting for more than 5% of a portfolio's value. Hedge Your Bets: Some strategies, such as writing covered calls or buying index put options, can help hedge against a market downturn. Advanced investors may want to consider these options. Monitor the Situation: Always keep an eye on your investments. Things can change rapidly in international markets particularly risky ones - so make sure you see any dark clouds before the storm hits.

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Question 6. Discuss fundamental methods of exchange rate forecasting. What are the problems in forecasting exchange rates?

Answer : Many entities have an interest in being able to forecast the direction of exchange rates. Whether you are a business or a trader, having an exchange rate forecast to guide your decision making can be very important to minimize risks and maximize returns. TUTORIAL: Economic Indicators To Know There are numerous methods of forecasting exchange rates, likely because none of them have been shown to be superior to any other. This speaks to the difficulty of generating a quality forecast. However, this article will introduce you to four of the most popular methods for forecasting exchange rates. Purchasing Power Parity (PPP) The purchasing power parity (PPP) is perhaps the most popular method due to its indoctrination in most economic textbooks. The PPP forecasting approach is based off of the theoretical Law of One Price, which states that identical goods in different countries should have identical prices. For example, this law argues that a pencil in Canada should be the same price as a pencil in the U.S. after taking into account the exchange rate and excluding transaction and shipping costs. In other words, there should be no arbitrage opportunity for someone to buy pencils cheap in one country and sell them in another for a profit. Based on this underlying principle, the PPP approach forecasts that the exchange rate will change to offset price changes due to inflation. For example, suppose that prices in the U.S. are expected to increase by 4% over the next year while prices in Canada are expected to rise by only 2%. The inflation differential between the two countries is: 4% - 2% = 2% This means that prices in the U.S. are expected to rise faster relative to prices in Canada. In this situation, the purchasing power parity approach would forecast that the U.S. dollar would have to depreciate by approximately 2% to keep prices between both countries relatively equal. So, if the current exchange rate was 90 cents U.S. per one Canadian dollar, then the PPP would forecast an exchange rate of: (1 + 0.02) x (US$0.90 per CA$1) = US$0.918 per CA$1 Meaning it would now take 91.8 cents U.S. to buy one Canadian dollar. One of the most well-known applications of the PPP method is illustrated by the Big Mac Index, compiled and published by The Economist. This light-hearted index attempts to measure whether a currency is undervalued or overvalued based on the price of Big Macs in various countries. Since Big Macs are nearly universal in all the countries they are sold, a comparison of their prices serves as the basis for the index. (To learn more, check out The Big Mac Index: Food For Thought.) Relative Economic Strength Approach As the name may suggest, the relative economic strength approach looks at the strength of economic growth in different countries in order to forecast the direction of exchange rates. The rationale behind this approach is based on the idea that a strong economic environment and potentially high growth is more likely to attract investments from foreign investors. And, in order to purchase investments in the desired country, an investor would have to purchase the countrys currency - creating increased demand that should cause the currency to appreciate. This approach doesnt just look at the relative economic strength between countries. It takes a more general view and looks at all investment flows. For instance, another factor that can draw investors to a certain country is interest rates. High interest rates will attract investors looking for the highest yield on their investments, causing demand for the currency to increase, which again would result in an appreciation of the currency. Learn to trade Forex with FXCMs Free Trading Guide

Conversely, low interest rates can also sometimes induce investors to avoid investing in a particular country or even borrow that countrys currency at low interest rates to fund other investments. Many investors did this with the Japanese yen when the interest rates in Japan were at extreme lows. This strategy is commonly known as the carrytrade. (Learn more about the carry trade in Profiting From Carry Trade Candidates.) Unlike the PPP approach, the relative economic strength approach doesnt forecast what the exchange rate should be. Rather, this approach gives the investor a general sense of whether a currency is going to appreciate or depreciate and an overall feel for the strength of the movement. This approach is typically used in combination with other forecasting methods to develop a more complete forecast. Econometric Models Another common method used to forecast exchange rates involves gathering factors that you believe affect the movement of a certain currency and creating a model that relates these factors to the exchange rate. The factors used in econometric models are normally based on economic theory, but any variable can be added if it is believed to significantly influence the exchange rate. As an example, suppose that a forecaster for a Canadian company has been tasked with forecasting the USD/CAD exchange rate over the next year. He believes an econometric model would be a good method to use and has researched factors he thinks affect the exchange rate. From his research and analysis, he concludes the factors that are most influential are: the interest rate differential between the U.S. and Canada (INT), the difference in GDP growth rates (GDP), and income growth rate (IGR) differences between the two countries. The econometric model he comes up with is shown as: USD/CAD (1-year) = z + a(INT) + b(GDP) + c(IGR) We wont go into the details of how the model is constructed, but after the model is made, the variables INT, GDP and IGR can be plugged into the model to generate a forecast. The coefficients a, b and c will determine how much a certain factor affects the exchange rate and direction of the effect (whether it is positive or negative). You can see that this method is probably the most complex and time-consuming approach of all the ones discussed so far. However, once the model is built, new data can be easily acquired and plugged into the model to generate quick forecasts. Time Series Model The last approach well introduce you to is the time series model. This method is purely technical in nature and is not based on any economic theory. One of the more popular time series approaches is called the autoregressive moving average (ARMA) process. The rationale for using this method is based on the idea that past behavior and price patterns can be used to predict future price behavior and patterns. The data you need to use this approach is simply a time series of data that can then be entered into a computer program to estimate the parameters and essentially create a model for you. Bottom Line Forecasting exchange rates is a very difficult task, and it is for this reason that many companies and investors simply hedge their currency risk. However, there are others who see value in forecasting exchange rates and want to to understand the factors that affect their movements. For people who want to learn to forecast exchange rates, these four approaches are a good place to start Problem in forecasting foreign exchange rates it is generally recognised that there is no perfect foreign exchange forecast, not even a perfect methodology to forecast foreign exchange rate. There is no accurate and precise explanation for the

manner in which exchange rates more. Movements of exchange rates depend upon the simultaneous interaction of a variety of factors. How these factors influence each other and how thy influence exchange rate movements are impossible to quantity or predict. Exchange are have been known to react violentl to single, unexpected events, which have thrown many forecasts and theories completely off balance for that period. Participants in foreign exchange markets especially corporate treasures grapple with uncertainty and use a variety of techniques to develop some sense of what exchange rates are going to do in the future.

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