Master of Business Administration INTERNATIONAL BUSINESS MANAGEMENT MBA Semester 4MF0018 (MB-0037) Set- 1 Q.

1 Write a short note on Globalization. Ans. The term "globalization" has acquired considerable emotive force. Some view it as a process that is beneficial a key to future world economic development and also inevitable and irreversible. Others regard it with hostility, even fear, believing that it increases inequality within and between nations; threaten employment and living standards and thwarts social progress. This brief offers an overview of some aspects of globalization and aims to identify ways in which countries can tap the gains of this process, while remaining realistic about its potential and its risks. Globalization offers extensive opportunities for truly worldwide development but it is not progressing evenly. Some countries are becoming integrated into the global economy more quickly than others. Countries that have been able to integrate are seeing faster growth and reduced poverty. Economic "globalization is a historical process, the result of human innovation and technological progress. It refers to the increasing integration of economies around the world, particularly through trade and financial flows. The term sometimes also refers to the movement of people (labour) and knowledge (technology) across international borders. There are also broader cultural, political and environmental dimensions of globalization that are not covered here. At its most basic, there is nothing mysterious about globalization. The term has come into common usage since the 1980s, reflecting technological advances that have made it easier and quicker to complete international transactions both trade and financial flows. It refers to an extension beyond national borders of the same market forces that have operated for centuries at all levels of human economic activity village markets, urban industries, or financial centers. Globalization is not just a recent phenomenon. Some analysts have argued that the world economy was just as globalized 100 years ago as it is today. But today commerce and financial services are far more developed and deeply integrated than they were at that time. The most striking aspect of this has been the integration of financial markets made possible by modern electronic communication .There are four aspects of globalization: 1. Trade: Developing countries as a whole have increased their share of world trade from 19 percent in 1971 to 29 percent in 1999. For instance, the newly industrialize deconomies (NIEs) of Asia have done well, while Africa as a whole has fared poorly. The composition of what countries export is also important. The strongest rise by far has been in the export of manufactured goods. The share of primary commodities in world exports such as food and raw materials that are often produced by the poorest countries, has declined. 2. Capital movements: Globalization sharply increased private capital flows to developing countries during much of the 1990s. It also shows that: 1

the increase followed a particularly "dry" period in the 1980s; net official flows of "aid" or development assistance have fallen significantly since the early 1980s; and the composition of private flows has changed dramatically. Direct foreign investment has become the most important category. Both portfolio investment and bank credit rose but they have been more volatile, falling sharply in the wake of the financial crises of the late 1990s. 3. Movement of people: Workers move from one country to another partly to find better employment opportunities. The numbers involved are still quite small, but in the period 1965-90, the proportion of labour forces round the world that was foreign born increased by about one-half. Most migration occurs between developing countries. But the flow of migrants to advanced economies is likely to provide a means through which global wages converge. There is also the potential for skills to be transferred back to the developing countries and for wages in those countries to rise. 4. Spread of knowledge (and technology): Information exchange is an integral, often overlooked, aspect of globalization. For instance, direct foreign investment brings notably an expansion of the physical capital stock, but also technical innovation. More generally, knowledge about production methods, management techniques, export markets and economic policies is available at very low cost, and it represents a highly valuable resource for the developing countries.

Q.2 Describe the positives of trade liberalization. Ans. Policies that make an economy open to trade and investment with the rest of the world are needed for sustained economic growth. The evidence on this is clear. No country in recent decades has achieved economic success, in terms of substantial increases in living standards for its people, without being open to the rest of the world. In contrast, trade opening (along with opening to foreign direct investment) has been an important element in the economic success of East Asia. Opening up their economies to the global economy has been essential in enabling many developing countries to develop competitive advantages in the manufacture of certain products. In these countries, defined by the World Bank as the "new globalizers," the number of people in absolute poverty declined by over 120 million (14percent) between 1993 and 1998.There is considerable evidence that more outward-oriented countries tend consistently to grow faster than ones that are inward-looking. Indeed, one finding is that the benefits of trade liberalization can exceed the costs by more than a factor of 10. Countries that have opened their economies in recent years, including India, Vietnam, and Uganda, have experienced faster growth and more poverty reduction. On average, those developing countries that lowered tariffs sharply in the 1980s grew more quickly in the1990s than those 2

that did not .Freeing trade frequently benefits the poor especially. Developing countries can ill-afford the large implicit subsidies, often channelled to narrow privileged interests that trade protection provides. Moreover, the increased growth that results from free trade itself tends to increase the incomes of the poor in roughly the same proportion as those of the population as a whole. New jobs are created for unskilled workers, raising them into the middle class. Overall, inequality among countries has been on the decline since1990; reflecting more rapid economic growth in developing countries, in part the result of trade liberalization. Although there are benefits from improved access to other countries markets, countries benefit most from liberalizing their own markets. The main benefits for industrial countries would come from the liberalization of their agricultural markets. Developing countries would gain about equally from liberalization of manufacturing and agriculture .The group of low-income countries, however, would gain most from agricultural liberalization in industrial countries because of the greater relative importance of agriculture in their economies. Further liberalization by both industrial and developing countries will be needed to realize trades potential as a driving force for economic growth and development. Greater efforts by industrial countries and the international community more broadly, are called for to remove the trade barriers facing developing countries, particularly the poorest countries. Although quotas under the so-called Multi-fibre Agreement are due to be phased out by 2005, speedier liberalization of textiles and clothing and of agriculture is particularly important. Similarly, the elimination of tariff peaks and escalation in agriculture and manufacturing also needs to be pursued. In turn, developing countries would strengthen their own economies (and their trading partners) if they made a sustained effort to reduce their own trade barriers further. Enhanced market access for the poorest developing countries would provide them with the means to harness trade for development and poverty reduction. Offering the poorest countries duty and quota free access to world markets would greatly benefit these countries at little cost to the rest of the world. The recent marketopening initiatives of the EU and some other countries are important steps in this regard. To be completely effective, such access should be made permanent, extended to all goods, and accompanied by simple, transparent rules of origin. This would give the poorest countries the confidence to persist with difficult domestic reforms and ensure effective use of debt relief and aid flows.

Q.3 Write a short note on GATT and WTO, highlighting the difference between the two? Ans: General Agreement on Tariff and Trade (GATT) The GATT was established on a provisional basis after the Second World War in the wake of other new multilateral institutions dedicated to international economic cooperation notably the "Britton Woods" institutions now known as the World Bank and the International Monetary Fund. The original 23 GATT countries were among over 50 which agreed a draft Charter for an International Trade Organization (ITO) a new specialized agency of the United Nations. The Charter was intended to provide 3

not only world trade disciplines but also contained rules relating to employment, commodity agreements, restrictive business practices, international investment and services. In an effort to give an early boost to trade liberalization after the Second World War and to begin to correct the large overhang of protectionist measures which remained in place from the early 1930s-tariff negotiations were opened among the 23 founding GATT "contracting parties" in 1946. This first round of negotiations resulted in 45,000tariff concessions affecting $10 billion or about one-fifth of world trade. It was also agreed that the value of these concessions should be protected by early and largely" provisional" acceptance of some of the trade rules in the draft ITO Charter. The tariff concessions and rules together became known as the General Agreement on Tariffs and Trade and entered into force in January 1948.Although the ITO Charter was finally agreed at a UN Conference on Trade and Employment in Havana in March 1948, ratification in national legislatures proved impossible in some cases. When the United States government announced, in 1950, that it would not seek Congressional ratification of the Havana Charter, the ITO was effectively dead. Despite its provisional nature, the GATT remained the only multilateral instrument governing international trade from 1948 until the establishment of the WTO.Although, in its 47 years, the basic legal text of the GATT remained much as it was in 1948, and there were additions in the form of plural-lateral voluntary membership agreements and continual efforts to reduce tariffs Much of this was achieved through a series of "trade rounds. The biggest leaps forward in international trade liberalization have come through multilateral trade negotiations or "trade rounds", under the auspices of GATT the Uruguay Round was the latest and most extensive. The limited achievement of the Tokyo Round, outside the tariff reduction results, was assign of difficult times to come. GATTs success in reducing tariffs to such a low level, combined with a series of economic recessions in the 1970s and early 1980s, drove governments to devise other forms of protection for sectors facing increased overseas competition. High rates of unemployment and constant factory closures led governments in Europe and North America to seek bilateral marketsharing arrangements with competitors and to embark on a subsidies race to maintain their holds on agricultural trade. Both these changes undermined the credibility and effectiveness of GATT. WTO World Trade Organization came into existence in 1995 after the desolation of General Agreement on Tariff and Trade (GATT).The WTOs overriding objective is to help trade flow smoothly, freely, fairly and predictably. It does this by: Administering trade agreements Acting as a forum for trade negotiations Settling trade disputes Reviewing national trade policies Assisting developing countries in trade policy issues, through technical assistance and training programs 4

Cooperating with other international organizations The WTO has nearly 150 members, accounting for over 97% of world trade. Around 30others are negotiating memberships. Decisions are made by the entire membership. This is typically by consensus. A majority vote is also possible but it has never been used in the WTO, and was extremely rare under the WTOs predecessor, GATT. The WTOs agreements have been ratified in all members parliaments. The WTOs top level decision-making body is the Ministerial Conference which meets at least once every two years. Below this is the General Council which meets several times a year in the Geneva headquarters. The General Council also meets as the Trade Policy Review Body and the Dispute Settlement Body. At the next level, the Goods Council, Services Council and Intellectual Property (TRIPS) Council report to the General Council. Numerous specialized committees, working groups and working parties deal with the individual agreements and other areas such as the environment, development, membership applications and regional trade agreements. The WTO Secretariat, based in Geneva, has around 600 staff and is headed by a director-general. Its annual budget is roughly 160 million Swiss francs. It does not have branch offices outside Geneva. Since decisions are taken by the members themselves, the Secretariat does not have the decision-making role that other international bureaucracies are given with. The WTO is run by its member governments. All major decisions are made by the membership as a whole, either by ministers (who meet at least once every two years) or by their ambassadors or delegates (who meet regularly in Geneva). Decisions are normally taken by consensus. Difference between WTO and GATT:The World Trade Organization is not a simple extension of GATT; on the contrary, it completely replaces its predecessor and has a very different character. Among the principal differences are the following: The GATT was a set of rules, a multilateral agreement, with no institutional foundation, only a small associated secretariat which had its origins in the attempt to establish an International Trade Organization in the 1940s. The WTO is a permanent institution with its own secretariat. The GATT was applied on a "provisional basis" even if, after more than forty years, governments chose to treat it as a permanent commitment. The WTO commitments are full and permanent. The GATT rules applied to trade in merchandise goods. In addition to goods, the WTO covers trade in services and trade-related aspects of intellectual property. While GATT was a multilateral instrument, by the 1980s many new agreements had been added of a plural-lateral, and therefore selective, nature. The agreements which constitute the WTO are almost all multilateral and, thus, involve commitments for the entire membership. The WTO dispute settlement system is faster, more automatic, and thus much less susceptible to blockages, than the old GATT system. The implementation of WTO dispute findings will also be more easily assured.

Q.4 Think of any MNC and analyse its business strategy orientation. Ans. Multinational companies (MNC) may pursue business strategies that are home country oriented or host country oriented or world oriented. Perl mutter uses such terms as ethnocentric, polycentric and geocentric. However, ethnocentric" is misleading because it focuses on race or ethnicity, especially when the home country itself is populated by many different races, whereas "polycentric" loses its meaning when the MNCs operate only in one or two foreign countries. According to Franklin Root (1994), an MNC is a parent company that Engages in foreign production through its affiliates located in several countries, Exercises direct control over the policies of its affiliates, Implements business strategies in production, marketing, finance and staffing that transcend national boundaries.

Business strategy of a MNC can be analysed with the help of Three Stages of Evolution 1. Export stage initial inquiries - firms rely on export agents expansion of export sales further expansion - foreign sales branch or assembly operations (to save transport cost)

2. Foreign Production Stage There is a limit to foreign sales (tariffs, NTBs).Once the firm chooses foreign production as a method of delivering goods to foreign markets, it must decide whether to establish a foreign production subsidiary or license the technology to a foreign firm. Licensing is usually first experience (because it is easy) it does not require any capital expenditure it is not risky payment = a fixed % of sales

e.g.: Kentucky Fried Chicken in the U.K. Problem that may arise while following a particular business strategy: The mother firm may find it difficult in exercise of any managerial control over the licensee (as it is independent).Secondly, the licensee may transfer industrial secrets to another independent firm, thereby creating a rival. The next stage for supplementing any particular business strategy is Investments involved. It requires the decision of top management because it is a critical step.

It is risky (lack of information) (for example-US firms tend to establish subsidiaries in Canada first. Singer Manufacturing Company established its foreign plants in Scotland and Australia in the 1850s) Plants are established in several countries Licensing is switched from independent producers to its subsidiaries. Export continues

3. Multinational Stage: The company becomes a multinational enterprise when it begins to plan, organize and coordinate production, marketing, R&D, financing, and staffing. For each of these operations, the firm must find the best location. This is how a MNC decides its business strategy orientation.

Q.5 what does FDI stand for? Why do MNCs opt for FDI to enter international market? Ans. FDI stands for Foreign Direct Investment. New MNCs do not pop up randomly in foreign nations. It is the result of conscious planning by corporate managers. Investment flows from regions of low anticipated profits to those of high returns. When NC incorporated in one country, invests in another country, it is said that the FDI has flowed into the other country from some foreign origin. The main reasons for MNCs to opt for FDI to enter international market are stated as follows: Growth motive: A company may have reached a plateau satisfying domestic demand, which is not growing. Looking for new markets. Protection in the importing countries: Foreign direct investment is one way to expand. FDI is a means to bypassing protective instruments in the importing country. European Community imposed common external tariff against outsiders. US companies circumvented these barriers by setting up subsidiaries. Japanese corporations located auto assembly plants in the US, to bypass VERs. High Transportation Costs: Transportation costs are like tariffs in that they are barriers which raise consumer prices. When transportation costs are high, multinational firms want to build production plants close to the market in order to save transportation costs. Multinational firms that invested and built production plants in the United States are better off than the exporting firms that utilized New Orleans port to ship and distribute products through New Orleans, provided that they built plants in a safe area. Exchange Rate Fluctuations: Japanese firms invest here to produce heavy construction machines to avoid excessive exchange rate fluctuations. Also, Japanese automobile firms have plants to produce automobile parts. For instance, Toyota imports engines and transmissions from Japanese plants, and produce the rest in the U.S. Market competition:

The most certain method of preventing actual or potential competition is to acquire foreign businesses. GM purchased Monarch (GM Canada)and Opel (GM Germany). It did not buy Toyota, Datsun (Nissan) and Volkswagen. They later became competitors. Cost reduction: United Fruit has established banana-producing facilities in Honduras. Cheap foreign labour. Labour costs tend to differ among nations. MNCs can hold down costs by locating part of all their productive facilities abroad. (Maquildoras)

Q.6 Viewing culture as a multi-level construct, describe various levels it consists of ? Ans. There are two kinds of approach construct of culture. One is a multi-level approach viewing culture as a multi-level construct that consists of various levels nested within each other from the most macro-level of a global culture, through national cultures, organizational cultures, group cultures, and cultural values that are represented in the self at the individual level. The second is based on Scheins (1992) model viewing culture as a multi layer construct consisting of the most external layer of observed arti facts and behaviours, the deeper level of values, which is testable by social consensus, and the deepest level of basic assumption, which is invisible and taken for granted. The present model proposes that culture as a multi layer construct exists at all levels from the global to the individual and that at each level change first occurs at the most external layer of behaviour, and then, when shared by individuals who belong to the same cultural context, it becomes a shared value that characterizes the aggregated unit (group, organizations, or nations).In the model, the most macro-level is that of a global culture being created by global networks and global institutions that cross national and cultural borders. The dynamic of top-downbottom-up processes across levels of culture. Given the dominance of Western MNCs, the values that dominate the global context are often based on a free market economy, democracy, acceptance and tolerance of diversity, respect of freedom of choice, individual rights, and openness to change. Below the global level are nested organizations and networks at the national level with their local cultures varying from one nation or network to another. Further down are local organizations, and although all of them share some common values of their national culture, they vary in their local organizational cultures, which are also shaped by the type of industry that they represent, the type of ownership, the values of the founders, etc. Within each organization are sub-units and groups that share the common national and organizational culture, but that differ from each other in their unit culture on the basis of the differences in their functions (e.g., R&D vs manufacturing),their leaders values, and the professional and educational level of their members. At the bottom of this structure are individuals who through the process of socialization acquire the cultural values transmitted to them from higher levels of culture. Individuals who belong to the same group share the same values that differentiate them from other groups and create a group level culture through a bottom-up process of aggregation of shared values. For example, employees of an R&D unit are selected into the unit because of their creative cognitive style and professional expertise. Their leader also 8

typically facilitates the display of these personal characteristics because they are crucial for developing innovative products. Thus, all members of this unit share similar core values, which differentiate them from other organizational units. Groups that share similar values create the organizational culture through a process of aggregation; and local organizations that share similar values create the national culture that is different from other national cultures. Both top-down and bottom-up processes reflect the dynamic nature of culture, and explain how culture at different levels is being shaped and reshaped by changes that occur at other levels, either above it through top-down processes or below it through bottom-up processes. Similarly, changes at each level affect lower levels through a top-down process, and upper levels through a bottom-up process of aggregation. Global organizations and networks are being formed by having local-level organizations join the global arena. That means that there is a continuous reciprocal process of shaping and reshaping organizations at both levels. For example, multinational companies that operate in the global market develop common rules and cultural values that enable them to create a synergy between the various regions, and different parts of the multinational company. These global rules and values filter down to the local organizations that constitute the global company, and, over time, they shape the local organizations. Reciprocally, having local organizations join a global company may introduce changes into the global company because of its need to function effectively across different cultural boarders.

Master of Business Administration INTERNATIONAL BUSINESS MANAGEMENT MBA Semester 4MF0018 (MB-0037) Set- 2

Q.1 Write a short note on Bill of Lading. (10 Marks) Ans. A Bill of Lading is a type of document that is used to acknowledge the receipt of shipment of goods and is an essential document in transporting goods overland to the exporters international carrier. A through Bill of Lading involves the use of at least two different modes of transport from road, rail, air and sea. The term derives from the noun bill", a schedule of costs for services supplied or to be supplied, and from the verb "to lade" which means to load a cargo onto a ship or other form of transport. In addition to acknowledging the receipt of goods, a Bill of Lading indicates the particular vessel on which the goods have been placed, their intended destination, and the terms for transporting the shipment to its final destination. Inland, ocean, though, and airway bill are the names given to bills of lading. Q.2 Discuss the strategic management process in an MNC. (10 Marks) Ans. Strategic Management is all about identification and description of the strategies that managers can carry so as to achieve better performance and a competitive advantage for their organization. An organization is said to have competitive advantage if its profitability is higher than the average profitability for all companies in its industry. Strategic management can also be defined as a bundle of decisions and acts which a manager undertakes and which decides the result of the firms performance. The manager must have a thorough knowledge and analysis of the general and competitive organizational environment so as to take right decisions. They should conduct a SWOT Analysis (Strengths, Weaknesses, Opportunities, and Threats), i.e., they should make best possible utilization of strengths, minimize the organizational weaknesses, make use of arising opportunities from the business environment and shouldnt ignore the threats. Strategic management is nothing but planning for both predictable as well as unfeasible contingencies. It is applicable to both small as well as large organizations as even the smallest organization face competition and, by formulating and implementing appropriate strategies, they can attain sustainable competitive advantage. Strategic Management is a way in which strategists set the objectives and proceed about attaining them. It deals with making and implementing decisions about future

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direction of an organization. It helps us to identify the direction in which an organization is moving. Strategic management is a continuous process that evaluates and controls the business and the industries in which an organization is involved; evaluates its competitors and sets goals and strategies to meet all existing and potential competitors; and then revaluates strategies on a regular basis to determine how it has been implemented and whether it was successful or does it needs replacement. Strategic Management gives a broader perspective to the employees of an organization and they can better understand how their job fits into the entire organizational plan and how it is co-related to other organizational members. It is nothing but the art of managing employees in a manner which maximizes the ability of achieving business objectives. The employees become more trustworthy, more committed and more satisfied as they can co-relate themselves very well with each organizational task. They can understand the reaction of environmental changes on the organization and the probable response of the organization with the help of strategic management. Thus the employees can judge the impact of such changes on their own job and can effectively face the changes. The managers and employees must do appropriate things in appropriate manner. They need to be both effective as well as efficient. One of the major role of strategic management is to incorporate various functional areas of the organization completely, as well as, to ensure these functional areas harmonize and get together well. Another role of strategic management is to keep a continuous eye on the goals and objectives of the organization.

Q.3 A Europe based MNC wants to introduce its fruit juice drinks in India. What product strategy of international marketing do you think will be suitable for its product? (10 Marks) Ans.The five major product strategies in international marketing. A.Product communications extensionThis strategy is very low cost and merely takes the same product and communication strategy into other markets. However, it can be risky if misjudgements are made. For example, CPC International believed the US consumer would take to dry soups, which dominate the European market. It did not work. B. Extended product communications adaptation If the product basically fits the different needs or segments of a market it may need an adjustment in marketing communications only. Again this is a low cost strategy, but different product functions have to be identified and a suitable communications mix developed.

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C.Product adaptation communications extension: The product is adapted to fit usage conditions but the communication stays the same. The assumption is that the product will serve the same function in foreign markets under different usage conditions. D. Product adaptationcommunications adaptation-: Both product and communication strategies need attention to fit the peculiar need of the market. E.Product invention This needs a totally new idea to fit the exclusive conditions of the market. This is very much a strategy which could be ideal in a Third World situation. The development costs may be high, but the advantages are also very high. The choice of strategy will depend on the most appropriate product/market analysis and is a function of the product itself defined in terms of the function or need it serves, the market defined in terms of the conditions under which the product is used, the preferences of the potential customers and the ability to buy the product in question, and the costs of adaptation and manufacture to the company considering these product communications approaches. In this case the European MNC should undertake the Product adaptation communications adaptation strategy. This is because the fruit drink is entering a totally a new market, India, whose preferences are quite dissimilar from Europe. At the same time as culturally India is different from Europe there is need for adaptation in communications also as the product will get exposed to a whole new market segment.

Q.4 Discuss the need for regional integration? (10 Marks)

Ans: Regional integration is a process in which states enter into a regional agreement in order to enhance regional cooperation through regional institutions and rules. The objectives of the agreement could range from economic too political to environmental, although it has typically taken the form of a political economy initiative where commercial interests have been the focus for achieving broader socio-political and security objectives, as defined by national governments. Regional integration has been organized either via supranational institutional structures or through intergovernmental decision-making, or a combination of both. Past efforts at regional integration have often focused on removing barriers to free trade in the region, increasing the free movement of people, labour, goods, and capital across national borders, reducing the possibility of regional armed conflict (for example, through Confidence and Security-Building Measures), and adopting cohesive regional stances on policy issues, such as the environment, climate change and migration.

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Intra-regional trade refers to trade which focuses on economic exchange primarily between countries of the same region or economic zone. In recent years countries within economic-trade regimes such as ASEAN in Southeast Asia for example have increased the level of trade and commodity exchange between themselves which reduces the inflation and tariff barriers associated with foreign markets resulting in growing prosperity. Regional integration agreements (RIAs) have led to major developments in international relations between and among many countries specifically increases in international trade and investment and in the formation of regional trading blocs. As fundamental to the multi-faceted process of globalization, regional integration has been a major development in the international relations of recent years. As such, Regional Integration Agreements has gained high importance. Not only are almost all the industrial nations part of such agreements, but also a huge number of developing nations too are a part of at least one, and in cases, more than one such agreement. The amount of trade that takes place within the scope of such agreements is about 35%, which accounts to more than one-third of the trade in the world . The main objective these agreements are to reduce trade barriers among those nations concerned, but the structure may vary from one agreement to another. The removal of the trade barriers or liberalization of many economies has had multiple impacts, in some cases increasing Gross domestic product (GDP), but also resulting in greater global inequality, concentration of wealth and an increasing frequency and intensity of economic crises. The number of agreements agreed under the rules of the GATT and the WTO and signed in each year has dramatically increased since the 1990s. There were 194 agreements ratified in 1999 and it contained 94 agreements form the early 1990s. The last few years have experienced huge qualitative as well as quantitative changes in the agreements related to the Regional Integration Scheme. The top three major changes were: Deep Integration Recognition Closed regionalism to open model Advent of trade blocs Deep Integration Recognition

Deep Integration Recognition Deep Integration Recognition analyses the aspect that effective integration is a much broader aspect, surpassing the idea that reducing tariffs, quotas and barriers will provide effective solutions. Rather, it recognizes the concept that additional barriers tend to segment the markets. This in turn impedes the free flow of goods and services, along with ideas and investments. Hence, it is now recognized that the current framework of traditional trade policies are not adequate enough to tackle these barriers. Such deepintegration was first implemented in the Single Market Program in the European Union. However in the light of the modern context, this debate is being propounded into the clauses of different regional integration agreements arising out of increase in international trade.(EU). Closed regionalism to Open Model The change from a system of Closed regionalism to a more Open Model had arisen out of the fact that the section of trading blocs that were created among the developing 13

countries during the 1960s and 1970s were based on certain specific models such as those of import substitution as well as regional agreements coupled with the prevalence generally high external trade barriers. The positive aspect of such shifting is that there has been some restructuring of certain old agreements. These agreements tend to be more forward in their outward approach as well as show commitment in trying to advance international trade and commerce instead to trying to put a cap on it by way of strict control.

Q.5 what are the key factors affecting the recruitment of expats? (10 Marks) Ans: Expatriate is a person who leaves his country to work and live in a foreign country. Generally, expatriates are the nationals from the other countries than the host and the MNCs parent country, i.e. expatriates are the third country nationals. The unavailability of the required skills and talents takes the organisation to source talent from other countries. The procedures and processes of recruiting and selecting the human resources are never uniform even within a single organisation. The procedures vary according to the post, the skill set required, the nature of work etc. More of it is seen in the case of recruitment of expatriates. The recruitment and selection procedures and considerations are drastically different for expatriates than that of the domestic employees. Recruitment of expatriates involves greater time, monetary resources and other indirect costs. Improper recruitment and selection can cause the expatriates to return hastily or a decline in their performance. A mismatch between job (its requirements) and people can reduce the effectiveness of other human resource activities and can affect the performance of the employees as well as the organisation.

Recruiting expatriates require special considerations and skills to select the best person for the job. Except for a few expatriate selection policies, the expatriate selection criterion is generally organisation and nation specific. The recruiters for recruiting the expatriates should be carefully selected and trained. The recruitment strategies for expatriates should be aligned with requirements of the job. The interviews of expatriates are designed in a manner to judge there: Adaptability to the new culture Intercultural interaction Flexibility Professional expertise Past international work experience Tolerance and open-mindedness Family situation Language ability Attitude and motivation Empathy towards local culture

A few researches in this field also suggest that women are more likely to be successful in certain positions as expatriates as they are more sensitive towards new culture and people. Recruitment of expatriates should be followed by cultural and sensitivity training, and language training.

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Q.6 Describe various entry strategies available to a firm when it wants to enter a foreign market. (10 Marks) Ans.The various strategies available to a firm when it enters a foreign market are as follows:1. Supplying Products to Foreign Buyers: Foreign production is not always an answer. Foreign markets can be better served by exporting, rather than by creating foreign subsidiary if there are economies of scale. If large scale production reduces unit cost, it is better to concentrate production in one place. MES is the minimum rate of output at which Average Cost (AC) is minimized. If minimum efficient scale (MES) is not achieved, then export. In other words, if there is excess capacity, why not utilize that and export outputs to other countries? There is no point in creating another plant overseas when domestic capacity is not fully utilized. If the foreign demand exceeds the minimum efficient scale, then FDI. 2. International Joint Ventures: JV is a business organization established by two or more companies that combines their skills and assets. A JV is formed by two businesses that conduct business in a third country. (US firm + British firm jointly operate in the Middle East) Joint venture with a local firm (GM + Shanghai Automobile Company) Joint venture may include local government (Bechtel Company-US; Messerschmitt Boelkow Blom, Germany; Iran Oil Investment Company; National Iranian Oil Company)International JV has certain benefits. These are Large capital costs costs are too large for a single company Protection LDC governments close their borders to foreign companies Bypass protectionism. e.g.: US workers assemble Japanese parts. The finished goods are sold to the US consumers. The new venture increases production, lowers price to consumers. The new business is able to enter the market that neither parent could have entered singly. Cost reductions (otherwise, no joint ventures will be formed) increased market power

3. Tax Policy towards MNCs: Operating in many countries, MNCs are subject to multiple tax jurisdictions, i.e., they must pay taxes to several countries. National tax systems are exceedingly complex and differ between countries. Differences among national income tax systems affect the decisions of managers of MNCs, regarding the location of subsidiaries, financing, and the transfer prices (the prices of products and assets transferred between various units of MNCs).Multiple Tax Jurisdictions creates two problems, overlapping and under lapping jurisdictions. When overlapping occurs, two or more governments claim tax 15

jurisdictions over the same income of an MNC. The overlapping may result in doubletaxation.Conversely, when under lapping occurs, an MNC falls between tax jurisdictions and escape taxation. Under lapping encourages tax avoidance? National governments may choose a territorial jurisdiction or national tax jurisdiction or both. 4. Transfer Pricing: MNCs try to reduce their overall tax burden. An MNC reports most of its profits in a low tax country, even though the actual profits are earned in a high tax country. tp= tax rate in the parent country; th= tax rate in the host country If tp> th, then under-price its exports to the subsidiary in the host country, and over price its imports from the subsidiary in order to lower tax. Purpose is to manipulate prices between headquarter and the subsidiaries so that profits are highest in the low tax country. Thus, a multinational companys overall tax could be paid at the minimum of all tax rates of the countries in which it operates. 5. Taxation and Gains from Factor Mobility: It is seen that US firms invest overseasbecause the returns are higher there. Assume both countries have the same corporate tax rates = 40%US CanadaPretax profits 10% 12%Tax 4% 4.8%Net to investors 6% 7.2% Total Gains from domestic investment = 10% (= 4% + 6%) because tax revenues can be used for public purposes. Total Gains from foreign investment = 7.2% (because US government gets nothing).The tax revenue which could have been used to build US highways would be used by Canadian government to build their highways. A firm has to evaluate all such kinds of complex factors to fix up any strategy before choosing to enter a foreign market

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