MAY-2005 TOTAL MARKS-100

N.N.: 1. Question No. 8 is compulsory.

2. Attempt any four questions from the remaining.

3. All questions carry equal marks.

Q.1 "International Business is more complex and different from domestic business". Explain the
difference by using ton functional parameters.

Q .2 Multinationals and FDIs have become an integral part of developing economies like India. State
the merits and demerits of permitting MNCs nad FDIs from international experiences witnessed by
few nations during the previous decade.

Q. 3 Explain with practical illustrations 'International Product life cycle theory' propounded by
Raymond Vernon. Discuss similarities and contrast aspects of PLC theory with David Ricardo's two
product and two-country model.

Q. 4 Export or Physical movement of goods and services alone cannot justify International Business. If
so, discuss other modes of International Business with examples.

Q . 5 "WTO aims at removing non tariff barriers and reducing tariff barriers". If so, critically evaluate
achievements and problem areas, which WTO has to encounter Inorder to succeed in the above
objective.

Q . 6 Answer any two of the following

a. Doing business with expanded Europe.

b. Doing business with ASEAN.

c. Doing business with China.

Q .7. Discuss any two of the international issues:

a. Intellectual Properly Rights.

b. Current trends and application of Purchase Power Parity theory.
c. G 20 and impact on India's foreign trade.

Case:

1
8. CRAZY LEATHER. Where to invest and grow?

'Crazy Leather', a 20 million dollar export turn over company located in Chennai has become a
successful Leather goods manufacturing company today. Mr. Prasad, 55 years old self mode business
man started this company in 1975 as trader of footwear, had ups and downs in the 1980's and finally
made a strong network in Europe and North America. By 2000 he launched a \Vide range of leather
jackets which lured thousands of new customers. Leather jacket as a product, has few extra advantages
as compared to footwear (i) premium price (ii) few competitor (iii) scope for new design and style (iv)
cold and affluent countries are the markets. Therefore, Prasad has now a product focus. But there are
few limitation's while the product moves from India from business angle, though India has a raw
material base, cheep labour and favorable government policy.

Western countries do not pay high price due to India's inability to build brand for loather jackets.
Fashion and design aspects percolate to India late. Hence, Indian manufacturer fails to skim the
market. While Italian brands command high price countries like Pakistan and Ethiopia enter into many
markets by quoting ridiculously low prices for their jackets. Indian manufacturers, including Crazy
Leather have to work out different strategy to sustain in the world market.

The option is to expand business by setting up overseas manufacturing unit Mr. Prasad has selected
two locations as an outcome of six month's study and planned to start leather jacket production
by Jan.2006. Ono ideal destinations should be immediately finalized for manufacturing 60.000 jackets
per year.

Parameters Kenya Italy

1. Investment Minimum ($ 1m) 5 times higher
2. Labour Cheap ($ 2/day) 20 times higher
3. Raw Material Available nearby Imported from faroff
4. Demand in the mkt.Local - Nil - only exportHuge, the whole Europe
5. Govt. incentives In many forms Nil
6. Bureaucracy high low
7. Productivity Only through workforceThrough automation
8. Ownership Wholly owned Only through local partner

Questions:

I. What kind of business approach Crazy Leather should have 10 sot up a unit in Italy?
II. By investing in Kenya, will Crazy Leather have cost advantages? Categories them.
III. Apply Porter's model of Competitive advantages of nations to both the destinations.
IV. Enumerate the risks, which are involved in the business operations both in Kenya and Italy