BA9209- INTERNATIONAL BUSINESS MANAGEMENT

PART B 16 marks

1. Discuss the international business environment for an industry of your

choice in India.

2. Difference between Protectionism and Liberalization.

B.Narayanan, Assistant Professor, Shivani School of Business Management

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3. Explain the advantages and disadvantages of International Business:

Advantages: Maximum Utilization of Natural Resources Economic Growth Encouragement of Industrialization Establishment of International Cooperation Development of Transport and Communication Employment Greater Competition Security from famine Stability in prices Economies of scale Earning of Foreign exchange Less Cost due to use of modern techniques

Higher standard of Living International Brotherhood Upgrading of technology Escape from domestic competition Disadvantages: Increased costs Delay in Payments Exhaustion of Natural Resources Market competition in host Lack of Home country support Foreign regulations and standards Complex organizational structures Cultural Differences National Controls Dependence Loss of Agricultural countries

4. How to assess the country attractiveness for business opportunities?

Explain with examples. Market Potential Political, Legal and Financial Environment of the Country Marketing support infrastructure in the country Brand/Company franchise relative to competing products/companies Degree of Market fit with company policies, goals and recources
5. Explain the Globalization and its impact in International business.

Globalization: the ongoing social, economic, and political process that deepens and broadens the relationships and inter-dependencies amongst nationstheir people, their firms, their organizations, and their governments International business facilitates globalization process Four Dimension of Globalization Index are: Economic, Technological, Personal Contact, and Political

The Forces Driving Globalization

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Increased in and expansion of technology Liberalization of cross-border trade and resource movements Development of services that support international business Growing consumer pressures Increased global competition Changing political situations Expanded cross-national cooperation Criticisms of Globalization Threats to national sovereignty Economic growth and environmental stress Growing income inequality and personal stress

6. Promotion of Global Business

7. Explain the role of GATT and WTO. What are the challenges for global

business? GATT/ GENERAL AGREEMENT ON TARIFFS AND TRADE The General Agreement on Tariffs and Trade (GATT) was first signed in 1947. Was designed To provide an international forum That encouraged free trade between member states By regulating and reducing tariffs on traded goods Providing a common mechanism for resolving trade disputes Was the outcome of the failure of negotiating governments to create the ITO The Bretton Woods Conference introduced the idea for an organization to regulate trade as part of a larger plan for economic recovery after World War II As governments negotiated the ITO(International Trade Organization) , 15 negotiating states began parallel negotiations for the GATT as a way to attain early tariff reductions Once the ITO failed in 1950, only the GATT agreement was left. Basic Principles of GATT Four Principles: Member countries will consult with each other trade problems Agreement provides legal instrument for negotiation Countries should protect domestic industries through tariffs, no restrictive devices such as quotas
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Trade should be conducted on a non-discriminatory basis OBJECTIVES OF GATT To provide equal opportunities to all countries in international marketing without any favour To increase the effective demand for real income growth and goods To minimize tariffs and other restrictions on trade for ensuring mutual benefits To provide solution to the disputes by giving cooperation and advices to member countries To ensure a better living standards in the world as a whole WORLD TRADE ORGANISATION The WTO was established on January 1, 1995 by the Final Act of the Uruguay Round of negotiations The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the worlds trading nations and ratified in their parliaments. The goal is to help producers of goods and services, exporters, and importers conduct their business. Location: Geneva, Switzerland Established: 1 January 1995 Created by: Uruguay Round negotiations (198694) Membership: 148 countries (since 13 October 2004) Budget: 169 million Swiss francs for 2005 Secretariat staff: 630 Head: Pascal Lamy (director-general) In brief, the World Trade Organization (WTO) is the only international organization dealing with the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible. The multilateral trading systemare the WTOs agreements, negotiated and signed by a large majority of the worlds trading nations and ratified in their parliaments. These agreements are the legal ground-rules for international commerce. Essentially, they are contracts, guaranteeing member countries important trade rights. They also bind governments to keep their trade policies within agreed limits to everybodys benefit. The agreements were negotiated and signed by governments. But their purpose is to help producers of goods and services, exporters, and importers conduct their business. The goal is to improve the welfare of the peoples of the member countries. Functions of WTO Helping developing and transition economies: most of the developing countries in transition phase They are shifting from planned economic system to market based economic system
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Specialized help for export It provides information and advice on export market and techniques It assist in establishing export promotion and marketing services and in training the personnel WTO in Global Economic Policy Making: Co-operates with other Multilateral Institutions to achieve greater coherence in global economic policy making To carry out this objective separate declaration Taking / Gathering information: Takes regular information from the member countries regarding the policies and tariffs It keeps as updated regarding developments and disseminates information to the member countries , help them to increase exports Giving /Disclosing information to public: Also disclose to the general public about the developments of the WTO and also the member countries through its publications and websites Encouraging development and Economic reform: To adjust to the more unfamiliar and difficult framework At the end of the rounds, better off countries should accelerate implementing market access countries on goods exported by LDCs
8. Explain the Theories of International Trade and Investment.

FDI BASED EXPLANATIONS MONOPOLISTIC ADVANTAGE THEORY The firm controls one or more resources Offers relatively unique products and services Provide it a degree of monopoly power relative to foreign market and competitors Firm can operate foreign subsidiaries more profitably than the local compete in their own markets Advantages must be economies of scale, superior technology in marketing, management or finance FDI as an internationalization strategy tend to control certain resources and capabilities that give the power of monopoly INTERNALIZATION THEORY The firm acquires and retains one or more value-chain activities within the firm Minimizes the disadvantages of relying on intermediaries , collaborations and other external partners Ensures greater control over foreign operations
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Helping to maximize product quality, reliable manufacturing processes and sound marketing practices DUNNING ECLECTIC PARADIGM Ownership Specific Advantage - The firm own knowledge, skills, capabilities, processes or physical assets - To ensure international success, substantial enough to offset the cost in establishing and operating foreign operations - Must be specific to the MNE that possess and not readily transferable to other firms - Unique to the firm, successful to enter and conduct business in a foreign market Location Specific Advantage - Comparative advantage that exist in individual foreign countries - Each country possess a unique set of advantages from which companies can derive specific advantages - For example natural resources, skilled labour, low- cost labour and inexpensive capital - It must be profitable for the firm to locate abroad, to utilize its ownership specific advantage Internalization Advantage - The firm benefits from internalizing foreing manufacturing, distributing or other value-chain activities - advantages include the ability to control how the firms products are produced or marketed - ability to reduce buyer uncertainty about the value or products the firm offers NON-FDI BASED EXPLANTIONS International Collaborative Ventures - A collaborative venture is a form of cooperation between two or more firms. - the firm may gain access to foreign partners know-how, capital, distribution channels, marketing assets - By partnering, the firm can better position itself to create new products and enter new products - Willingness to cooperate in R&D, manufacturing , design or other value adding activites Network and Relational Assets - represents the stock of the firms economically beneficial long-term relationship - with other business entities such as manufactures, distributors, suppliers, retailers, consultants, banks, transportation suppliers., governments and other orgn. Provide needed capabilities. - Network linkages represent a key route for many firms expand their business abroad, develop new markets and new products - mutually beneficial and enduring strategic relationships provide real advantages to partners and reduce uncertainty and transactions costs
9. Discuss Regional Trade blocks role

in international business. What are its advantages and disadvantages? Intergovernmental agreement, often part of a regional intergovernmental organization, where regional barriers to trade (tariffs and non-tariff barriers) are reduced or eliminated among the participating states Bilateral agreements can occur either between neighbours or between countries that are far removed from one another Near 50%t of world trade is now conducted within these preferential trade arrangements, the most significant exception to the WTO's principle of nondiscrimination
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Governments have often entered regional economic motivated by political rather than economic considerations

agreements

primarily

A hierarchy of regional economic arrangements A free trade - ccountries remove tariffs and non-tariff barriers to the free movement of goods and services between them (90% of RTB) A customs union includes agreement on a common external tariff on all extraregional imports A common market includes a CU plus free movement of labour and capital An economic union - a common market plus a common currency and/or the harmonization of monetary, fiscal, and social policies. Why do RTB exist? An economy's welfare can be maximized, if governments lower trade barriers on a non-discriminatory basis (through unilateral action or through negotiations at the global level) RTAs can reduce global welfare by distorting the allocation of resources, and may lead to welfare losses for members The costs and benefits of preferential trade agreements: trade diversion and trade creation (J. Viner, 1950) Trade creation - imports from a regional partner displace goods that have been produced domestically at higher cost Trade diversion occurs when imports from a regional partner displace those originated outside the regional arrangement. If trade diversion outweighs trade creation then the net effect of RTB on its members' welfare can be negative. Advantages of RTB Transaction costs will be eliminated Price transparency Uncertainty caused by exchange rate fluctuations eliminated Single currency in single market makes sense Prevent war Increased trade and reduced costs to firms Protection against an aggressive global market

Disadvantages of RTB the instability of the system overestimation of trade benefits loss of sovereignty countries which are left out of the block can obtain lower welfare trade deflection will lead to a loss of tariff revenue for the economies with higher tariffs. To prevent FTA from trade deflection their members typically adopt rules of origin

Regional Trade Blocks Across the Globe Brief History Economic Integration European Union Nafta Asean European Free Trade Association Latin American Integration Association Saarc Escap Apec Mercosur
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Explain the 12 Pillars of Global Competitiveness Competitiveness is the contribution of a countrys assets either inherited (eg. Natural resources) or created (eg. Infrastructure) and the processes (eg. Manufacturing) which transform them into economic results. A nations competitiveness is the degree to which it can under free and fair market conditions, produce goods and services
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B.Narayanan, Assistant Professor, Shivani School of Business Management

BA9209- INTERNATIONAL BUSINESS MANAGEMENT

PART B 16 marks

11.

Illustrate the Organizational Issues in International Business.

Organization Issues in International business: Centralization versus Decentralization: When designing its organization, an MNC must make a particularly crucial decision, one that involves the level of autonomy, power, and control it desires to grant to its subsidiaries. Decentralization allows managers of subsidiaries to make decisions which serve host country needs best, but overall interests of the firm are compromised. Centralization of decision-making helps the firm retain control at headquarters and protect the overall interests of the company, but the ability of subsidiary managers to respond quickly and effectively to changes in their local market conditions in curbed. Use of subsidiary Board of Directors: Subsidiary of any international firm, particularly fully owned, will have its own board of directors to oversee the activities of the top level managers in that subsidiary. Four major areas in which MNCS use subsidiary boards have been identified: a) To advice, approve, and appraise local management b) To help the unit in responding to local conditions. c) To assist in strategic planning. d) To supervise the subsidiarys ethical conduct. Non-traditional organizational Arrangements: In recent years. MNCs have increasingly expanded their operations in ways that differ from those used in the past. These includes acquisitions and joint ventures. Role of Information technology : International businesses rely heavily on information technology because it lends competitive advantage to them. In fact, it is the search for competitive advantage that is driving the rapid development and adoption of IT. IT reduces the need for hierarchy and this helps bring down bureaucratic cost. Integrating Mechanism:
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One of the issues relating to international business relates to the need for coordination among different subsidiaries and all of them with the parent company. The need for co-ordination is not felt much in multi-domestic companies as they are basically concerned with responding to local needs. The firm look towards integrating mechanism, both formal and informal, to help achieve co-ordination: i. Formal integrating Mechanisms: a) b) c) d) Direct contact Liaison Roles Teams Matrix structures

ii. Informal integrating mechanisms: Many international firms also rely heavily on informal co-ordination mechanisms. Informal management networks can be very effective. Control system: A major task of an MNCs leadership is to control the various subsidiaries whether they are defined on the basis of function, product division, or geographical area to ensure their actions are consistent with the firms overall strategic and financial objectives. a) Distance b) Diversity c) Degree of uncertainty d) Differences in Approach Culture in International Business : Corporate culture is the set of shared values that defines for its members what the organization stands for, how it functions, and what it considers important. Managing Change in International business: Change is common in any business, more so in overseas business. Change takes place because of environmental changes and change in technology and cultural values and mores.
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Explain the types of Organisational Structures. Initial Division Structures Subsidiary Common for financial and other service firms where main export is expertise Export Arrangements Common among manufacturing firms, especially those with technologically advanced products On-site Manufacturing Operations Responds to local government pressures and competition Reduces transportation costs International Division Structure
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Description Handles all international operations out of a division created for this purpose Advantages Assures that international focus receives top management attention Unified approach to international operations Often adopted by firms still in the developmental states of international business operations Disadvantages Separates domestic from international managers May find it difficult to think and act strategically, or to allocate resources on a global basis Global Product Division Description Domestic divisions given worldwide responsibility for product groups Global product divisions operate as profit centers Advantages Helps manage product, technology, customer diversity Ability to cater to local needs Marketing, production and finance can be coordinated on a product-byproduct global basis Disadvantages Duplication of facilities and staff personnel within divisions Division manager may pursue currently attractive geographic prospects and neglect others with long-term potential Division managers my spend too much time tapping local rather than international markets Global Area Division Description Global operations are organized on a geographic rather than a product basis Advantages International operations are put on the same level as domestic operations Global division managers are responsible for all business operations in their designated geographic area Often used by firms in mature businesses with narrow product lines
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By manufacturing in a region, the firm is able to reduce cost per unit and price competitively Disadvantages Difficult to reconcile a product emphasis with a geographic orientation New R&D efforts often ignored because divisions are selling in mature market Global Functional Division Description Organizes worldwide operations primarily based on function and secondarily on product Advantages Emphasizes functional expertise, centralized control, and relatively lean managerial staff Favored by firms that Need tight, centralized coordination and control of integrated production processes Are involved in transporting products and raw materials between geographic areas Disadvantages Approach not used except by extractive companies such as oil and mining firms Coordination of manufacturing and marketing often is difficult Managing multiple product lines can be very challenging because of the separation of production and marketing into different departments Mixed or Matrix Structures Description Combination of global product, area, and functional arrangements Cross-cutting committee structures Matrix structures Advantages Structure can be designed to best meet needs Promotes an integrated strategic approach tailored to local needs and priorities Disadvantages As the matrix designs complexity increases, coordinating the personnel and getting everyone to work toward common goals often become difficult Too many groups go their own way How do you manage the global portfolio in the organization? Explain the different Strategies available for managing global portfolio.
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Global Portfolio Management GPM, International Portfolio Mgt, Foreign Portfolio Mgt means a grouping of investment assets that focuses on securities form foreign markets rather than domestic ones. Examples of portfolio mgt: Purchase of shares in a foreign company Purchase of bonds issued by a foreign government Acquisition of assets in a foreign company Factors affecting Global Portfolio Investment Tax rates on Interest or dividends: Investors prefer to invest in a country where taxes on the interest or dividend is low Assess their potential after-tax earnings from investment in foreign securities Interest rates: Money tend to flow to countries with high interest rates as long as the local currencies are not expected to weaken Exchange Rates: When investors invest in security in a foreign country, their return is affected by: The change in the value of security The change in the value of currency in which security is determined If a countrys home currency is expected to weaken, foreign investors may decide to purchase securities in other countries. Modes of Global Portfolio Management Buying foreign securities or depository receipts directly from the domestic stock exchange Portfolio Equity Portfolio bonds Approaching Global Mutual Funds -Investor buys the shares of internationally diversified mutual funds - There are many open ended mutual funds available - They prefer liquidity and try to allocate portfolio in proportion to the market capitalization Approaching close-end country - Close end funds are different from open ended - former makes and investment in internationals securities against the portfolio Buying directly the securities of domestic companies having global operations - Indirect way of participating in global economy -Investor does not have ample scope for reaping diversification benefits, in so far as the systematic risk cannot be reduced to that extent Problems of Global Portfolio Management Unfavorable Exchange rate movement - Cannot ignore the possibility of exchange rate changes - Changes influence the value of foreign portfolio as well as the earnings - If the Indian rupee depreciates, the value of Indian securities in terms of U.S dollar will be lower Frictions in International Financial Market - Market frictions manifesting in Governmental control, varying tax laws and explicit and implicit transaction costs. - Government try to administer international financial flows, through different forms of control mechanisms such as taxes on international flows and restrictions on outflow of funds. Manipulation of Security Prices - In real world, it is government and also the big brokers that influence the security prices. - government influence them through monetary and fiscal policy - Public sector institutions and bank big chunk of securities traded on stock exchange
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Unequal access to information - wide cross cultural differences that inhibit global portfolio investment - It is difficult to collect the information by the international investor - In the absence of desired information, it is difficult to act rationally

Discuss the various approaches to control the international business with suitable examples. CONTROLLING OF IB For achieving the goals predefined processes and instruments are required which influences the performance of the organization Control is essentially concerned with regulating the activities within the organization so that they are accord with the expectations established in policies , plans and practices. A major task of the firms leadership is to control on various basis of function, product, geographical and overall strategic and financial objectives. Objectives of Control It supply data for top management for monitor, evaluate and adjust Provide the means for coordination of the units toward common objectives It provide the basis for evaluating the performance of the units and managers at each level Personal Controls: - Personal contact with the subordinates - Most widely used in the small firms, where direct supervision Also structures the relationships between managers at different levels in MNE - CEO may use a deal of personal contact to influence the behaviour of his immediate subordinates. Bureaucratic Controls A System of rules and procedure that directs the actions of sub-units Capital spending rules require headquarters management to approve exceed certain limit Output Controls It involves setting goals for subsidiaries to achieve the objectives Objectives criteria Productivity, Profitability, Growth, Market share and quality Cultural Controls It exists when employees buy into the norms and value systems of the firm Employees tend to control their own behaviour which reduces need for direct supervision In a firm with strong culture, self control reduces the need for other control systems Approaches to Control Market Approach - External market forces allowed to control the behaviour of the management within the units of MNs - Organisation are decentralized and
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transfer prices are freely negotiated - The decisions are largely directed by the market Rules Approach - Rules oriented organization - Greater reliance on strongly imposed rules and procedures - Highly developed planning and budgeting system with extensive formal reporting - This types of control uses both the input and output controls in highly formalized way. Corporate Culture Approach - The members of the organization internalize the goals by developing a strong set of beliefs and values which influence their operations - Though the orgn.have strong norms of behaviour they are informal and less explicit - Major changes naturally takes more time to bring the needed organizational changes or adjustments Reports - Powerful control mechanism Allocate resources/monitor the performance - Reward personnel - Reports must be frequent, accurate and up-to-date Visit to Subsidiaries - Not all the information exchange through - Corporate staff often visit subsidiaries to confer and socialize with local managers - Visit can serve the goal of controlling foreign operations because they enable the visitors to collect information and offer advice and directives. Management Performance Evaluation - Evaluate subsidiary managers separately from their subsidiary performance - Because of decision making authority differences something are beyond the control - Slow growth and risky economical and political environment - The company should still reward the countrys managers for doing a good job in the face of diversity Cost and Accounting Comparisons - Different cost among subsidiaries - Meaningful comparison of their operating performance - Set of book that are consistent with home country principles another to meet local reporting requirements Explain the performance measurement of global business. Establish Standard of Performance Standard of performance apply to many aspect of the orgn. Such as cost, quality, and customer service Incorporate more than one standard since they reflect expected levels of Mfg.
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performance such as process yields, product quality, overhead spending levels etc. Measure Actual Performance Measures the actual results of the process Manual or Automated data collection system are requied to gather information Standard cost system includes labour hours, machine hours, material usage etc. Analyze the Performance and Compare it with standards Measures the actual results of the process Manual or Automated data collection system are requied to gather information Standard cost system includes labour hours, machine hours, material usage etc. Construct and Implement an Action Plan Variance analysis will highlight potential problem areas Indentify the source of the problem and develop plans to correct or improve the situation Effectiveness of performance system depends upon managements ability to act on the information provided Review and Revise Standards Modern organizations are in a constant state of change Update periodically to reflect these changes Standards are updated once in a year during the standard setting process However if the variances are significant, the performance standards should be revised during the interim periods Effective Performance Measurement System Must be integrated with overall strategy of the business Be a system of regular feedback and review of actual results against original plan and performance Must be comprehensive, needs t include the factors that contribute to the organizations success such as competitive performance, quality of services and innovation Requires the range of financial and non-financial indicators Effective Performance Measurement System Owned and supported throughout the organization, the implementation must be top-down Measures must be fair and achievable System and results reporting must be simple, clear and understandable Need to prioritize and focus so that only the key performance indicators for the business in strategic terms are measured Performance Evaluation System The periodic review of operations to ensure that the objectives of the enterprise are being accomplished The MNC must have an accounting information to evaluate domestic and foreign operations The proper measurement of the performance of an individual, a division, a subsidiary or even a company as a whole is not simple Objectives of Performance Evaluation To evaluate the economic performance of its international operations To evaluate the units management performance To monitor progress toward corporate objectives including strategic goals To assist the efficient allocation of resources Various Performance Indicators Financial Measures - ROI (Return on Investment) - ROI = Division return(Segment Margin)
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Investment In division - ROI = Division controllable return(Managers Contribution Controllable Investment Most common method to evaluate the return on investment Relation ship of profit to invested capital It encompasses all the important factors in a single measure Logical motivator of the managers since they are evaluated by ROI, they will act to maximize the ROI of their units Budget as Success indicator - Budget as a accepted tool for controlling operations and forecasting future operations - Clearly set out objectives of the entity - Budget gives the managers to set their own performance standards - Headquarters must rely to greater extent on good local or regional budgets which help facilitate the strategic planning process Non Financial Measure - Market Share - Percentage of Sales - Exchange Variations - Quality Control - Productivity Improvement Types of Performance Evaluation System Budget Programming - Prepared for planning and financial control - Easy to compute the variance - To measure current performance in relation to comparable performance in the past Management Audit - Extended financial audit system - Monitors the quality management decisions in financial operations - It appraises and audits the functioning of the management Types of Performance Evaluation System PERT(Programme Evaluation Review Technique) - It is based on CPM(Critical Method) - It delineates a given project or program into network of activities or sub-activities with a view to optimize the time - The performance is measured by comparing the scheduled time and cost inputs with the actual time and cost inputs Management Information System - Ongoing information system designed to plan, operate, appraise, monitor, control and redirects the total management towards the determined targets and goals -MIS is all pervasive and encompass the financial, physical budgeting, management audit and control systems of the PERT
16. Explain the Global Supply Chain

Management

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B.Narayanan, Assistant Professor, Shivani School of Business Management

BA9209- INTERNATIONAL BUSINESS MANAGEMENT

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Discuss the various risk involved in the global business. 1) Strategic Risk (6) Environmental Risk (2) Operational Risk (7) Economic Risk (3) Political Risk (8) Financial Risk (4) Country Risk (9) Terrorism Risk (5) Technological Risk
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Strategic Risk: The ability of a firm to make a strategic decision in order to respond to the forces that are a source of risk. These forces also impact the competitiveness of a firm. Porter defines them as: threat of new entrants in the industry, threat of substitute goods and services, intensity of competition within the industry, bargaining power of suppliers, and bargaining power of consumers.

Operational Risk: This is caused by the assets and financial capital that aid in the day-to-day business operations. The breakdown of machineries, supply and demand of the resources and products, shortfall of the goods and services, lack of perfect logistic and inventory will lead to inefficiency of production. By controlling costs, unnecessary waste will be reduced, and the process improvement may enhance the lead-time, reduce variance and contribute to efficiency in globalization.

Political Risk: The political actions and instability may make it difficult for companies to operate efficiently in these countries due to negative publicity and impact created by individuals in the top government. A firm cannot effectively operate to its full capacity in order to maximize profit in such an unstable country's political turbulence. A new and hostile government may replace the friendly one, and hence expropriate foreign assets.

Country Risk: The culture or the instability of a country may create risks that may make it difficult for multinational companies to operate safely, effectively, and efficiently. Some of the country risks come from the governments' policies, economic conditions, security factors, and political conditions. Solving one of these problems without all of the problems (aggregate) together will not be enough in mitigating the country risk.

Technological Risk: Lack of security in electronic transactions, the cost of developing new technology, and the fact that these new technology may fail, and when all of these are coupled with the outdated existing technology, the result may create a dangerous effect in doing business in the international arena.

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Environmental Risk: Air, water, and environmental pollution may affect the health of the citizens, and lead to public outcry of the citizens. These problems may also lead to damaging the reputation of the companies that do business in that area.

Economic Risk: This comes from the inability of a country to meet its financial obligations. The changing of foreign-investment or/and domestic fiscal or monetary policies. The effect of exchange-rate and interest rate make it difficult to conduct international business.

Financial Risk: This area is affected by the currency exchange rate, government flexibility in allowing the firms to repatriate profits or funds outside the country. The devaluation and inflation will also impact the firm's ability to operate at an efficient capacity and still be stable. Most countries make it difficult for foreign firms to repatriate funds thus forcing these firms to invest its funds at a less optimal level. Sometimes, firms' assets are confiscated and that contributes to financial losses.

Terrorism Risk: These are attacks that may stem from lack of hope; confidence; differences in culture and religious philosophy, and/or merely hate of companies by citizens of host countries. It leads to potential hostile attitudes, sabotage of foreign companies and/or kidnapping of the employers and employees. Such frustrating situations make it difficult to operate in these countries.
18. Explain the factors in selection of expatriate managers

Technical competence / ability: Naturally, the persons ability to perform the required tasks in an important consideration. Technical andmanagerial skills are therefore an essential criterion. Indeed, research findings consistently indicate that multinationals place heavy reliance on relevant technical skills during the expatriate selection process. Adaptiveness: Every expatriate gains some adaptive characteristics through different cultures where they come into the contact of new environment and culture, and the MNCS select these expatriates on the basis of their Adaptiveness. Three types of adaptive characteristics influence an expatriates success when entering a new culture. Self-maintenance Developing satisfactory relationship Interpreting the immediate environment Leadership Ability : It is increasingly seen as a key to an expatriates success since expatiates often assume a greaterbreadth and depth of leadership responsibility on a foreign assignment than they likely would in the home country. Communication skills, motivation, self-reliance, courage, risk-taking and diplomacy become essential qualities for success. Skills and attitudes such as optimism, drive, adaptability foresight, experience, resilience, sensitivity, and organization are necessary for expatriates to be successful. Cross-Cultural suitability : The cultural environment in which expatriates operate is an important factor in determining successful performance. A part form the obvious technical ability and managerial skills, expatriates require cross-cultural abilities that enable the person to operate in a new environment. There appears to be a consensus that desirable attributes should include cultural empathy, adaptability, diplomacy, language ability, positive attitude, emotional stability and maturity.
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Family requirements : The contribution that the family, particularly the spouse, makes to the success of the overseas assignment is now well documented, in relation to the impact of the accompanying spouse/partner on early return. MNE Requirements : Situational factors often have an influence on selection decisions. For example, MNE may consider the proportion of expatriates to local staff when making selection decisions, mainly as an outcome of its staffing philosophy. Country / cultural requirements: International firms are usually required to demonstrate that a HCN is not available before the host government will issue the necessary work permit and entry visa for the desired PCN or TCN. LANGUAGE : The ability to speak the local language is an aspect often linked with crosscultural ability. However, have been chosen to stress language as situation determined in terms of its importance as a factor in the selection decision. Discuss the various ethical issues involved in international business with current examples. ETHICAL ISSUES IN INTERNAIONAL BUSINESS: sexual and racial discrimination : Various U.S. and European laws prohibit business from discriminating on the basis of sex, race, religion, or disabilities in their hiring, firing and promotion decisions. However , the problem of discrimination is still a reality in the world. Human Rights : Corporate concern for global human rights emerged in the1990s as news stories depicting the opportunistic use of child labor, payment of low wages, and abuses in foreign factories helped to re-shape the attitudes about acceptable behavior for organizations. price discrimination ; A major ethical issue in international business is how products sold in other countries are priced, when a firm charges different prices to different groups of customers, it may be accused of price discrimination. Bribery: In many cultures, giving bribes also known as facilitating payments is an acceptable business practice. In mexico, a bribe is called la mordida while south Africans call it dash. In the middle east, India and Pakistan a tip or gratuity given by a superior, is widely used. The germans call it schimengeld grease money and the Italians call it bustarella a little envelope. Ethical dimensions of labor conditions: A major challenge facing MNEs is the globalization of the supply chain and the working conditions of laborers. Pressures from external stakeholders to adopt responsible employment practices in overseas operations are extensive. Harmful products: Governments in advanced industrialized nations have banned the sale of certain products considered harmful. However, some companies in those nations continue to sell such products in other countries where they remain legal. Environmental issues and ethics ; Whereas many legal and ethical violations have limited impacts in the case of environmental issues the effects of abuses can be far-reaching and long-term. Telecommunications issues: With the advent of satellites, e-mail and the internet, information can be accessed in a matter of seconds instead of weeks and as a result businesses can become the
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victims as well as the perpetrators of unethical actions. The ease of information access poses ethical issues, particularly with regard to privacy, that can differ by country. Some internet-based firms have responded to privacy issues responsibsly whereas others have not. Intellectual property protection: Intellectual property refers to the ideas and creative materials people develop to solve problems carry out applications, educate, and entertain others. It is generally protected through patents, copyright, and trademarks. Discuss the role of negotiations in international business. Role of international agencies in negotiation: Role of international finance corporation -IFC performance standards, common approaches, equator principles-opportunity to raise standards. -Importance of conflict risk -social and environmental risks Role of multilateral Investment Guarantee Agency: MIGA promotes foreign direct investment into developing countries by insuring investors against political risk, advising governments on attracting investment, sharing information through online investment information services, and mediating disputes between investors and governments.
20.

Role of international center for settlement of investment disputes (ICSID) in negotiation: The international center for settlement of investment disputes,was found in 1966 pursuant to the convention on the settlement of Investment disputes between states and nationals of other states. Its an institution of the World Bank group. In total, 155 countries had signed the ICSID convention. ICSID has an administrative council, chaired by the World Banks president, and a secretariat. Role of international chamber of commerce in negotiation: The international chamber of commerce is an international organization that works to promote and support global economy, in the interest of economic growth, job creation, and prosperity. As a global business organization, made-up of member states, it helps the development of global outlooks on business matters. 1. ICC international court of arbitration 2. World council, national committees, and international secretariat 3. Business actions stopping counterfeit and piracy (BASCAP) Role of world trade organization in negotiation: Step: 1 Consultation- up to 60 days Step: 2 The panel-up to 45 days for a panel to appointed, plus 6 months for the panel to conclude: Before the first hearing First hearing Rebuttals Experts First draft Interim report Review Final report Cross cultural negotiation strategies: 1. Competitive negotiation 2. Problem-solving negotiation.
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21. Discuss the ethical issues in international business management.

ETHICAL ISSUES IN INTERNAIONAL BUSINESS: a. sexual and racial discrimination : Various U.S. and European laws prohibit business from discriminating on the basis of sex, race, religion, or disabilities in their hiring, firing and promotion decisions. However, the problem of discrimination is still a reality in the world. b. Human Rights : Corporate concern for global human rights emerged in the1990s as news stories depicting the opportunistic use of child labor, payment of low wages, and abuses in foreign factories helped to re-shape the attitudes about acceptable behavior for organizations. c. price discrimination ; A major ethical issue in international business is how products sold in other countries are priced, when a firm charges different prices to different groups of customers, it may be accused of price discrimination. d. Bribery: In many cultures, giving bribes also known as facilitating payments is an acceptable business practice. In mexico, a bribe is called la mordida while south Africans call it dash. In the middle east, India and Pakistan a tip or gratuity given by a superior, is widely used. The germans call it schimengeld grease money and the Italians call it bustarella a little envelope. e. Ethical dimensions of labor conditions: A major challenge facing MNEs is the globalization of the supply chain and the working conditions of laborers. Pressures from external stakeholders to adopt responsible employment practices in overseas operations are extensive. f. Harmful products: Governments in advanced industrialized nations have banned the sale of certain products considered harmful. However, some companies in those nations continue to sell such products in other countries where they remain legal. g. Environmental issues and ethics ; Whereas many legal and ethical violations have limited impacts in the case of environmental issues the effects of abuses can be far-reaching and long-term. h. Telecommunications issues: With the advent of satellites, e-mail and the internet, information can be accessed in a matter of seconds instead of weeks and as a result businesses can become the victims as well as the perpetrators of unethical actions. The ease of information access poses ethical issues, particularly with regard to privacy, that can differ by country. Some internet-based firms have responded to privacy issues responsibsly whereas others have not. i. Intellectual property protection: Intellectual property refers to the ideas and creative materials people develop to solve problems carry out applications, educate, and entertain others. It is generally protected through patents, copyright, and trademarks. j. world trade organization : The world trade organization was established in 1995 at the Uruguay round of negotiations of the general agreement on Tariffs and Trade (GATT). Today, the WTO has 133 member nations and an additional 33 nation that have applied for membership and hold observer status. On behalf of its membership, the WTO administers its own trade agreements. Facilitates future trade negotiations, settles trade disputes and monitors the trade policies of member nations.
22. What

are the sources of conflict and explain the conflict resolution techniques in the international business scenario. HOST COUNTRY FACTORS: Size and equity
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Sovereignty Information disclosure Visibility Regulation and competition Employment Technology Balance payment Taxation

Specific concerns of the less developed countries. HOME COUNTRY FACTOR: National security Dumping Embargos and sanctions Exports and imports control

BOP Local industry Local jobs

COMBINED FACTORS: Nationality Business practices Taxation Local laws

CONFLICT RESOLUTION ACTIONS IN INTERNATIONAL BUSINESS CONTRACT: It is essential that conflicts in international business e avoided to the extent possible. One of the best ways to avoid conflicts in international business is to have a clearly drafted contract with all terms and conditions well-understood by both parties. Resolving dispute: Despite the insertion of all precautionary clauses into a contract , disputes may emerge. Usually, the method adopted to deal with such situations is either arbitration or litigation, but there are some interim dispute resolution methods that quicker and less expensive. Local courts. Local remedies : If dispute are not resolved by the informal methods, parties to the contracts have at least two possible paths of dispute resolution to pursue, commercial litigation and international arbitration , which assume that other method of dispute resolution have been ineffective. Principle of comity: The principle of sovereignty provides for international etiquette in the form of countries reciprocal respect for each others laws and powers regarding the actions of citizens aboard. Litigation : The litigation of international disputes involves the use of courts to apply both domestic and international law to resolve conflicts between parties. Explain the role of international agencies in negotiation: Role of international finance corporation -IFC performance standards, common approaches, equator principles-opportunity to raise standards. -Importance of conflict risk -social and environmental risks
23.

Role of multilateral Investment Guarantee Agency: MIGA promotes foreign direct investment into developing countries by insuring investors against political risk, advising governments on attracting investment, sharing information through online investment information services, and mediating disputes between investors and governments. Role of international center for settlement of investment disputes (ICSID) in negotiation: The international center for settlement of investment disputes,was found in 1966 pursuant to the convention on the settlement of Investment disputes between states and nationals of other states. Its an institution of the world bank group. In total, 155 countries had signed the ICSID convention. ICSID has an
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administrative council, chaired by the world Banks president, and a secretariat. Role of international chamber of commerce in negotiation: The international chamber of commerce is an international organization that works to promote and support global economy, in the interest of economic growth, job creation, and prosperity. As a global business organization, made-up of member states, it helps the development of global outlooks on business matters. 1. ICC international court of arbitration 2. World council, national committees, and international secretariat 3. Business actions stopping counterfeit and piracy (BASCAP) Role of world trade organization in negotiation: Step: 1 Consultation- up to 60 days Step: 2 The panel-up to 45 days for a panel to appointed, plus 6 months for the panel to conclude: Before the first hearing First draft First hearing Interim report Rebuttals Review Experts Final report

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B.Narayanan, Assistant Professor, Shivani School of Business Management