New Delhi Institute of Management

PGDM (G) / PGDM (M) / PGDM (F)

PGDM 2018-20,4thSemester
End Term Examination, April, 2020
---------------------------------------------------------------------------------------------------------------------
Sub.: Global Business Management Paper Code:

M. Marks: 50 Duration: 2 Hours

NOTES: 1. Answer any FOUR Questions from Part – A (4 X 5 = 20 Marks)

2.Case study is Compulsory (Part– B) (30 Marks)
---------------------------------------------------------------------------------------------------------------------

Part- A (4X 5 = 20 Marks)

(Word limit – 100 words)

Q.1. Do you think WTO has been able to meet its objectives promoting global free trade.

Q.2.Critically evaluate the main policy instruments used by governments to influence international trade.
Do you think that such measures reduce economic welfare?

Q.3. Do you think that the recent Corona Virus situation has disrupted global supply chains ? Discuss
how it is affecting MNCs.

Q.4. The study of global business management is fine if you are going to work in MNC, but it has no
relevance for individuals who are going to work in a small firm.” Evaluate the statement with supporting
reasons.

Q.5. Which Mode of Entry is most suitable for a country like India and why?

Part B

Case Study (Mandatory) (30 Marks)

Brexit and its Impact on the Indian Market

The European Union is a unified trade and monetary body of 28 member countries. It eliminates all
border controls between members. That allows the free flow of goods and people, except for random spot
checks for crime and drugs. The EU transmits state-of-the-art technologies to its members. The areas that
benefit are environmental protection, research and development, and energy.

Public contracts are open to bidders from any member country. Any product manufactured in one country
can be sold to any other member without tariffs or duties. Taxes are all standardized. Practitioners of most
services, such as law, medicine, tourism, banking, and insurance, can operate in all member countries. As
a result, the cost of airfares, the internet, and phone calls have fallen dramatically. Its purpose is to be
more competitive in the global marketplace. At the same time, it must balance the needs of
 New Delhi Institute of Management
PGDM (G) / PGDM (M) / PGDM (F)

its independent fiscal and political members.The EU's 28 member countries are: Austria, Belgium,
Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece,
Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania,
Slovakia, Slovenia, Spain, Sweden, and the United Kingdom. That will drop to 27 after Brexit causes the
United Kingdom to leave the EU in 2019.

The Difference Between the Eurozone and the EU

The eurozone consists of all countries that use the euro.1 All EU members pledge to convert to the euro,
but only 19 have so far. They are Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece,
Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia, and
Spain. The eurozone was created in 2005. The European Central Bank is the EU's central bank. It
sets monetary policy and manages bank lending rates and foreign exchange reserves. Its target inflation
rate is less than 2%.

Euro Zone Crisis

According to the Organization for Economic Cooperation and Development, the eurozone debt crisis was
the world's greatest threat in 2011, and in 2012, things only got worse. The crisis started in 2009 when the
world first realized that Greece could default on its debt. In three years, it escalated into the potential
for sovereign debt defaults from Portugal, Italy, Ireland, and Spain. The European Union, led
by Germany and France, struggled to support these members. They initiated bailouts from the European
Central Bank (ECB) and the International Monetary Fund, but these measures didn't keep many from
questioning the viability of the euro itself.

Brexit

Brexit, an abbreviation for Britain’s Exit from the EU (European Union), has caused a lot of stir in the
world economy. The earstwhile Prime Minister of the United Kingdom, Theresa May, has strongly
favoured the exit of Britain from the EU. The UK European Union membership referendum and the
Brexit referendum took place on 23 June 2016. More than 17.4 million which is close to 52 % Britons
voted in favour of leaving he EU. This left people all over the world with shock and confustion. The
withdrawal agreement between EU and UK has been rejected three times by the UK MPs. As per the
extension granted by EU, UK had time till December 2019.

Role of RTAs in WTO

Regional trade agreements (RTAs) are a key fixture in international trade relations. Over the years RTAs
have not only increased in number but also in depth and complexity. The World Trade Organization
(WTO) members and the Secretariat work to gather information and foster discussions on RTAs to
 New Delhi Institute of Management
PGDM (G) / PGDM (M) / PGDM (F)

enhance transparency and to increase understanding of their impact on the wider multilateral trading
system.

The WTO members are permitted to enter into RTAs under specific conditions which are spelled out in
three sets of rules. These rules cover the formation and operation of customs unions and free-trade areas
covering trade in goods (Article XXIV of the General Agreement on Tariffs and Trade 1994), regional or
global arrangements for trade in goods between developing country members (Enabling Clause), as well
as agreements covering trade in services (Article V of the General Agreement on Trade in Services).
Generally speaking, RTAs must cover substantially all trade - unless they are under the Enabling Clause -
and help trade flow more freely among the countries in the RTA without raising barriers to trade with the
outside world.

The Single Market and Brexit

To foster economic cooperation among the countries from the European region, an economic and political
partnership involving 28 countries as fromed after the world war. It became a “single market” allowing
goods, services, capital and people to move around freely. Currently 19 member countries out of 28 have
Euro as ther official currency. Their parliament sets the rules in the ares like consumer rights, transport,
environment, etc. The case is about the likely effects of Brexit on Britain as well as on India.

Brexit would certainly impact Britain’s economy in short and medium term. The EU’s common market is
the world’s largest trading bloc. The Breexit is likely to weaken the pound and would slow down the
growth significantly. Lots of consequencnces majorly depend on the settlement negotiations. Cruicial
decisions related to the freedom of movement and labour for EU citizens would directly influence the
access to the single market for duty-free trade and the financial services. The critical agenda before and
during the referendum campaign was clear. There must be a tight control over people who will be
coming to Britain from Europe. The UK is willing to annual their own comprehensive trade agreements
with other countries. It is possible that there will be phased process of implementation. Those who
favour an exit believe that Britain would be a better position by 2030.

The present Prime Minister Boris Johnson has shown his preparation even in the face of no-deal
Brexit. It is anticipated that there will be severe food and medicine shortage in a no-deail exit scenario.

What does Brexit mean for India?

India being one of the lucarative and largest emerging markets for foreign investors, will certainly get
impacted by major political or economic changes across the globe. A substantial amont of India’s foreign
exchange reserve comes from the export earnings and other inflows from the UK and the EU. A former
British colony, India has close trade, economic, cultural and political ties with the UK.
 New Delhi Institute of Management
PGDM (G) / PGDM (M) / PGDM (F)

The Brexit negotiation talks have created a sense of “pervasive uncertainty” about the future trade costs.
The possibility of increase in trade barriers would be unfavourable for global supply chains and would
slow the spread of new technologies which will lower the global productivity and welfare.

Concerns

Brexit is causing a situation of uncertainty among retail consumers. The retailers are apprehensive about
the possible change. Regulatory requirements related to safety, quality and consumer protection which
are curretnly constant across the EU member states will change. The pharma industry is worried about
the after effects. Brexit would possible bing uncertainty related to research funding.

The Update

A substantial number of Indians visit the UK for travel and study purposes every year. After the Brexit
vote. British Poud slipped by around 8% as compared to the Indian rupee. It is anticipated that the fall
would continue for some time, making it more affordable for Indians to travel to the UK for travel and
study purposes. For real estate investors, it means better investment opportunity in short term. Brexit
offers an opportunity for better trade ties with India making free trade agreement possible between Britain
and India. Few experts believe that there would be positiive changes in the UK immigration policies.This
might prove to be favourable for India. Some exporters also believe that Brexit would open doors for
high-skilled workers from India.

Case Discussion Questions

1. What are the regional trading agreement provisions in the WTO?

2. What is the concept of Single Market?
3. What according to you is the possible impact of Brexit on India?
4. Should India go for Comprehensive Economic Partnership Agreement with the UK?