MAY-2004 TOTAL MARKS-100

(3 HOURS)

N.B: (1) Question No. 8 is compulsory.

(2) Attempt any four questions from the remaining.

1.Define 'International Business'. Explain fundamental differences between domestic business

operation and International business operation using business characteristics.

2. Any indigenous organisation has potential to become global organisation in todays business
environment. Explain sequential steps which are prerequisites to emerge as global corporation with
practical Illustrations.

3. What are various strategies available for entry and operation in International Business? Give
suitable examples for every strategy.

4. Multinational Corporations are the necessary evils specially for developing countries. Discuss the
above statement with reference to strategic models generally adopted by MNCs.

5. State general agreements incorporated in WTO and discuss their impact on India industry and trade
with special focus on sectors.

6. Developing countries welcome FDI as a part of reform process. Discuss the advantages to both the
investor and the country of destination. Enumerate the risk factors which an investor takes into
account before deciding to invest.

7. "Classical international trade theories are losing their relevance in today's international trade".
Discuss.

8. SATLOV Industries Ltd.-A Case.

SATLOV Industries Ltd. is a fifty years old air-conditioner manufacturing company in India and is
determined to set up a manufacturing unit abroad. It has narrowed down to three destinations viz.,

Jebel Ali, Kualalampur and Cairo as preferred centres. It would like to manufacture and market 1 ton
air conditioners at factory price of US $ 250 per unit. The plant will have a capacity to manufacture

1,00,000 units per year.

Table below gives few vital information researched by SATLOV

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Cost components in the finished Product Costs are for 1 unit of 1 ton A/c. in US $.
Jebel Ali Kualalampur Cairo
i) Average import expenses including duty 2% 10% 7.5%

ii) Material inputs: 0 $25 $50

Local $75 $20 $25

Imported $30 $25 $20

iii) Labor $46 $45 $60

iv) Processing cost $06 $04 $05

v) Administration $15 $12 $10

vi) Selling & Distribution Cost (Local) $05 $08 $10

vii) Marketing expenses $04 $07 $10

viii)Promotion expenses $15 $15 $15

ix) Know-how fee $20 $12 $16

x) Fixed cost including capital cost

Average freight and Insurance cost per container $1000 per 50 $500 per 50 A/Cs $600 per 50
for Export 1 x 20 feet A/Cs A/Cs

50 Air Conditioners could be stuffed in one container. Following is the break-up of domestic/export
at three destinations.
Destination Domestic DemandExport Market
Jebel Ali 40% 60%
Kualalampur30% 70%
Cairo 50% 50%

It is a normal practice to incur/cover ocean freight and insurance since overseas importers are not
willing to pay for the same.

The following extra information has been gathered today from the officers of our diplomats located
in all three centers.

(a) Jebel Ali destinations is safe and Gulf Cooperation Council Countries (GCC) offer great business
potential. Kualalampur is a politically unstable city and the labour force is violent. Cairo imposes
strict pollution control norms. Mandatory power is common in Cario. But one can depend on captive
powers by putting up power generator. However, the market is very safe and assured since the whole
Sub-Sahas Africa and North Africa do not have any Aircon Company.

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(b) No export is payable at Jebel Ali. Kualalampur has a 5 years Tax Holiday to welcome foreign
companies, after which a 10% tax will be levied. Cairo has uniform rate of 15% of profits being taxed;
but no tax on products exported.

(C) The customers of Jebel Ali are very conscious and the product is returned in case customer does
not like it. It is a Common practice to take the product back to resolve Costumer complaints. Based on
the above facts and figures answer the following questions:- .

1. From pure monetary terms which is the best destination if SATLOV wants to do business for
minimum ten years. .

2. Evaluate the safest destination based on country risks and other risks given in the case.

3. Discuss strategic business development opportunities, which SALTOV must study apart from the
case information, so that overseas venture is successful.

4. What allied activities SATLOV can start at the destination in order to maximise the profit a benefit