MIB603

INTERNATIONAL BUSINESS

ASSIGNMENT
MAY 2020 SEMESTER
SUBJECT CODE : MIB603

SUBJECT TITLE : INTERNATIONAL BUSINESS

LEVEL : MBA

STUDENT’S NAME : Thainmollie A/P Mani

MATRIC NO. : M60105200062

PROGRAMME : MBA

ACADEMIC FACILITATOR : PROF. DATO’ DR SAYED MUSHTAQ HUSSAIN

LEARNING CENTRE : KUALA LUMPUR

INSTRUCTIONS TO STUDENTS

1) This assignment consists of TWO (2) PARTS. Answer ALL questions.

2) Plagiarism in all forms is forbidden. Students who submit plagiarise assignment will be
penalised.
3) Your assignment will be examined based on the followings:
 a complete working solution
 ability of using methods available in the learning materials
4) This assignment carries 60% weightage toward final grade.
5) The submission date of this assignment is BEFORE or ON 27 JULY 2020. Please submit
your assignment answer via myPLS (online submission)

THERE ARE TWO [2] PAGES OF QUESTION, EXCLUDING THIS PAGE.

DECLARATION BY STUDENT

I certify that this assignment is my own work and is in my own words. All sources have been acknowledged
and the content has not been previously submitted for assessment to Asia e University or elsewhere. I also
confirm that I have kept a copy of this assignment.

Signed: _____TMolly _

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Answer PART A: Question 1:

"Globalization" means interdependence between nations and also, it influences human beings to
nest everywhere, settle everywhere, and establish relationships everywhere to promote trade. In
economic terms, it describes how a country is interdependent with countries around the world
through Free Trade.

The global value chain describes the people and activities involved in the production of goods or
services and its supply, distribution, and post-sales activities are also known as supply chains
when activities must be coordinated at the regional level. This is an argument because the U.S.
Protection policy and the COVID -19 pandemic threaten the global value chain.

Also, Protectionism in the US is a protectionist economic policy that sets tariffs and other
barriers to trading with other countries. Protective measures include tariffs and quotas on
imported goods, along with subsidies and other means, to ensure fair competition between
imported goods and local goods.

Now the COVID-19 pandemic is attacking International Trade, international finance, social life,
mental health, law and order and governance. International business will not be the same as
before because COVID-19 is now changing our understanding of the world around us. This has
challenged many of our ideologies: from capitalism to neo-liberalism, from the importance of
work to creating a work-life balance, and from globalization to nationalization. This pandemic
has disrupted international law: socially, politically, and economically. However, I feel that the
adverse effects of the pandemic on globalization are temporary, and it will encourage more
international cooperation between countries in the long run.

Relations between the US and China have deteriorated since the US became one of the worst hit
countries by the coronavirus. The US president has blamed China for misleading the world about
the scale and risk of the disease, and even threatened more tariffs as punishment. China's Foreign
Ministry has accused some U.S. officials of trying to "shift their responsibilities due to their poor
handling of the epidemic." These two pillars of globalization of the US and China are the main
reasons we are currently facing the COVID19 pandemic crisis. Large and hyperactive global
transportation systems easily turn outbreaks like COVID-19 into pandemics through
mobilization and mass communication. The large number of flights, cruises, high mobility of
workers and goods make our world more vulnerable to epidemics. COVID-19 also, in turn, has a
tremendous influence on globalization in an important aspect, namely the economic aspect.
Many of these effects have been witnessed during this time, and will likely continue in the short
term, at least during the fighting period.

However, its long-term impact on globalization is far more controversial. Many argue that the
COVID19 epidemic marks the end of economic globalization which has been a trend since the
1980s, especially the reactions faced in recent years. Even I agree that COVID-19 will have a

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major impact on the functioning of globalized globalization but it will not, and should not, stop
globalization or the global value chain.

Answer PART A: Question 2:

To my understanding, International Business has existed as a distinct field of study for the past
three decades, but it does not have a widely accepted explanatory theory on which to base its
uniqueness as a discipline. David Ricardo's theory of comparative advantage, Raymond Vernon's
product life cycle, John Dunning's eclectic theory, new trade theory by Paul Krugman and all
others are essentially explanations of business between domestic firms or regions, as well as
international firms. They explain "multi domestic" investment and intra-national trade. Those
theories offer important insights into the functioning of companies in business anywhere,
including international companies, but they fail to focus on the distinguishing characteristics of
business operating among different nations.

Since international business is the study of business activities that cross national borders and,
therefore, is fundamentally concerned with the company’s that undertake that business and the
national Governments that regulate them, a theory that is unique to such business must explain
the responses of businesses to government policies and the policy-making of Governments
themselves towards international companies. Empirical studies have determined international
from domestic business strategies and operations, but they have not resulted in an international
theory of cross-national business behavior. The lack of a proper theoretical focus has diverted the
discipline from an emphasis on policy and on conflicts and cooperation among corporations and
Governments. Well the Ricardian theory of comparative advantages has been frequently put
forward in order to legitimate the benefits of international trade.

Below are the studies about Malaysia and Bangladesh on their competitive advantage with own
specialized export industries.

Malaysia’s competitive advantage in exporting Rubber Gloves

Rubber gloves, they are regarded as one of the significant cleaning tools. The practice of using
rubber gloves has emerged in recent years with the increase in health and hygiene awareness.
There are different types of Rubber gloves such as latex gloves, nitrile glove and vinyl gloves
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that are used in various sectors like healthcare sector, science and technology sector and
automotive sector. The primary purpose of using rubber gloves is to prevent or control the
transfer of harmful bacteria and viruses and various contagious diseases.

The demand for rubber gloves is growing globally due to the advancement in technological
applications and the emergence of various prolonged diseases. The global rubber market is
expanding vastly with the increase in global demand for rubber gloves as consumers' tastes and
preferences are changing drastically. A rise in people's income level is another important reason
behind the increased global demand. The gradual shifts in the rubber gloves demand are adding
up to the market developments.

The global rubber gloves market is majorly covered by the U.S., Asia Pacific, Thailand,
Malaysia, Indonesia and the Middle East. Malaysia and Thailand are the top rubber producing
countries that export their rubber based products to almost every corner of the world. Malaysian
rubber gloves suppliers are leading the global market because of high quality gloves, reasonable
pricing, supply stability and abundance of rubber trees. It has acquired a lion's share in the global
market because of its competitive advantage.

The global rubber gloves market is highly consolidated in nature with top 4 players including
Top Glove Corporation, Hartalega, Kosaan Rubber industries and Supermax Corporation. These
top companies have covered the major share of the global gloves market. Top Glove Corporation
is leading the market because of the high production capacity of rubber gloves as compared to
other players. The company has various advantages over its rivals because of its high quality
products and rational pricing.

Bangladesh’s competitive advantage in exporting Garments

Let’s discuss about Bangladesh’s comparative advantage in exporting Garments. The expansion
of the textile industry in Bangladesh since the introduction of free trade policies in the years
2000s, the textile sector has grown at a tremendous pace, accounting nowadays for around
Eighty percent of the country’s exports and most part of Bangladesh’s growth. This
specialization is due to the fact that the country has a comparative advantage in textile
production (i.e. a large pool of low-skilled, cheap and docile labour force), this specialization in

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turn would have led to an increase in demand for these low-skilled workers and to a reduction in
inequality due to increasing wages.

It appears thus that the opening to free trade is correlated with an increase in the country’s wealth
measured through GDP and to an increase in inequality that seems to be however under control.
In other words, free trade has made the country a lot wealthier without making the country a lot
more unequal. Firstly, most workers in textile factories are women coming from rural regions
and that they consider this job as a real opportunity to become financially independent. Secondly,
the boom of the textile sector in the country has brought a job to many people who otherwise
would be workless. To a certain extent, the theory of comparative advantages seems thus to hold
true and the welfare effect for Bangladeshi workers in the textile sector tangible. However, as
there are comparative advantages, there are also obviously comparative welfare gains.

It is best to say that whichever country has a comparative advantage in producing a particular
good when it can produce it at a lower opportunity cost than another country. Therefore, each
country should end up specializing in the production of the good for which it has a comparative
advantage, resulting in an increase in world output, efficiency gains and potential welfare gains.

Answer PART B: QUESTION 1

Business Report on Potential Medical Product Business in Dubai, UAE

Summary

The United Arab Emirates (UAE) has been the top United States (U.S.) export market in the
Middle East. The UAE has a 9.4 million of population which is about 85% are expatriates. The
creation of a world-class healthcare infrastructure is a top priority for the government of the
UAE and, as a result, the sector has advanced and expanded significantly during the past few
years. The World Health Organization determined that a third of adults in the UAE are obese,
and one out of five people live with diabetes. As the incidences of lifestyle diseases increase,

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these populations, supported by relatively high levels of income, will demand greater quality of
healthcare. The government’s focus is on developing a healthcare infrastructure to address this
demand.

The UAE government is liberalizing policies to attract foreign investments to improve the
healthcare standard and boost the healthcare industry. The UAE government wants to boost the
number of medical tourists coming to the UAE in order to establish Dubai as a center of
healthcare excellence in the region. The country has a robust transportation and logistics
infrastructure and is geographically well-positioned to be the center of a transportation network
that links the economies of India and China to Europe and the U.S. These factors also make the
country an attractive location for establishing a regional distribution center for medical products.

Ownership of Company in the UAE

When establishing a local company or other commercial entity, foreign ownership is generally
limited to 49%, with the remaining 51% to be held by UAE nationals. Under the Commercial
Companies Law (CCL) there are 5 forms of recognised commercial entity. They include general
partnership, public joint stock company, limited liability company (LLC), limited partnership
and private joint stock company.

Healthcare sector in the UAE

The UAE’s healthcare sector is developing due to steady population growth, increased health
awareness, high per capita income and rising prevalence in lifestyle diseases

Legal considerations in the UAE

You need to comply with the federal laws governing business activity including the Commercial
Companies Law, Commercial Register Law, Commercial Agencies Law and Civil &
Commercial Codes.

Standards and technical regulations in the UAE

The UAE prohibits and restricts the import of some products.
A Certificate of Origin is needed for all exports to clear customs. Certificates of Origin must be
provided by the original exporter and recognised by an authorised representative in Malaysia

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You should contemplate cultural norms and values when designing and developing product
packaging.

Tax and customs considerations in the UAE

1. Income tax in the UAE
Income tax legislation is only applied in practice to foreign banks, oil and gas companies. There
is no direct personal taxation in the UAE. Most emirates levy various municipal taxes. Indirect
taxation through official fees is commonplace. There is no taxation on capital gains.

2. Value Added Tax (VAT) in the UAE

VAT was implemented in the UAE on the 1 January 2018 at 5%.

3. Customs in the UAE
The UAE generally levies customs duties on imported goods at the rate of 5%. Higher rates of
duty apply to alcohol and tobacco. Some categories of goods are exempt, such as certain
agricultural products, printed material and pharmaceuticals. Exemptions may also be granted for
goods imported for industrial or manufacturing purposes. Where goods are imported into
a UAE free zone, customs duties are not payable. Goods can only be imported into the UAE by a
company that is registered in the UAE and the goods must be relevant to the licensed business
activity of the business. There are no duties or tariffs on exports. Goods manufactured in Israel
cannot be imported into the UAE. Pornographic material, ivory/rhino horns, cannabis, alcoholic
beverages, firearms, fireworks, narcotics and opium are strictly prohibited. All printed matter,
films and tapes must be cleared by the Ministry of Information.

Documentation in the UAE
The documents needed for the import and export of goods to and from the UAE are invoices –
initiated by supplier, a certificate of origin and bills of lading /airway bill

Business behaviour in the UAE

1. The UAE has a diverse and multi-cultural society with 80% of the UAE population
expatriates. As a result the UAE is regarded as relatively liberal within the region and
provides schools, cultural centres and restaurants catering for international cultures. The

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national culture revolves around the religion of Islam. Other religions are respected and
churches and temples can be found alongside mosques.
2. The Islamic dress code is not compulsory. Most UAE national (Emiratis) males wear a
kandura, an ankle length white shirt and most Emirati women wear an abaya, a black flowing
over garment covering most of the body.

3. English is widely spoken throughout the country. Although it’s common for written
correspondence to be in English, Arabic is often preferred within some public sector
organisations. It’s preferable to have one side of your business card printed in Arabic.
4. Face-to-face meetings are preferred because phone calls and emails are sometimes seen as
impersonal.
5. The working week is Sunday to Thursday.

Entry requirements into the UAE

Visas are available for business and tourists visits, transit and residency. If you are a UK citizen
you can get a 30 day visa on arrival. Business visitors can be sponsored by an employer with a
business licence. If you establish your own business in the UAE you’ll be responsible for getting
your residency visa. You can apply for your residency visa once you’ve got your trade licence.

The Risks and Opportunities of Doing Business in the UAE

For every company considering market opportunities in the UAE, the region’s political and
economic stability is of great concern. In addition, many UAE nations face pervade problems
with corruption, payment obligations, currency risks and physical security threats. But the
rewards of doing business in UAE cannot be ignored. Organizations that pursue and adhere to
strict principles of risk management can generate very profitable business growth.

Understanding the Risks

For companies that project sufficient return on investment for expanding into the UAE region,
the next step is identifying the threats to achieving this return.

Although the primary risks have been and will remain geopolitical and macroeconomic, there are
countless variables to doing business in UAE that can change quickly and influence potential

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risk. You need to laser-in on one country, do your homework, put your boots on the ground, get a
feel for the culture, and partner with an outside firm to assist you along the way.

Financial Exposures
To outsiders, UAE is a region rife with civil and international conflicts, social unrest and the
growing presence of extremists. Such detrimental dangers increase the risk of asset
expropriation, currency manipulation and contract repudiation, and threats to personnel security.
Economic problems can also affect the timing of anticipated payments for products or services
already rendered, at the end of the day it often boils down to a single risk. Fluctuations in foreign
currency exchange rates can impact payments, increasing the risk of capital loss.

Corruption and Compliance

Corrupt public officials are another risk of doing business in the UAE. It is not uncommon for
government contracts to include “commissions” and “surcharges” that are effectively bribes and
kickbacks. Even with several governments in the region stepping up their enforcement of anti-
bribery laws, the situation remains murky. Nevertheless, foreign entities caught engaging in such
crimes can suffer reputational damage affecting their business across the globe.

Cultural Differences
Companies also need to be aware of the social and cultural dynamics of doing business in the
UAE and endeavor to build authentic personal relationships with their business partners. “Take
time to study their cultures, particularly as this relates to business comportment and conduct.

Proceed with Caution

It is important for both multinational corporations and regional companies doing business in
UAE countries to have a human presence on their side. By dispatching their own personnel to the
region or retaining a local partner that understands the risks of doing business in a particular
country, companies can more closely monitor changes to their risk profile and take advantage of
the region’s investment opportunities.

Current Market Trends

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100% foreign ownership through branches, single or multiple shareholder companies - known as
Free Zone Enterprises, Free Zone Companies or Free Zone Limited Liability Companies.

Main Competitors

The UAE market is wholly dependent on imports for medical devices; while United State.
suppliers enjoy some advantages, including competitive prices, language, and exchange rate,
European suppliers are aggressively gaining market share with their proximity to the market and
perceived better customer support.

Current Demand

The UAE suffers from a shortage of trained medical personnel. There are numerous hospital
construction and renovation programs underway as a result of public and private investment. A
growing medical tourism sector is generating demand for modern facilities with state-of the-art
medical equipment. Medical device production will continue to be low and only limited to basic
items, such as various types of syringes and IV sets.

Barriers

• Registration

The UAE Commercial Companies Law requires that each company established in the UAE
have one or more UAE national partner(s) who hold at least 51% of the company’s capital.
This could change with the recent announcement by the UAE Cabinet that foreign companies
will be allowed to have 100% ownership.

• Customer Price Sensitivity

Most patients who travel to the UAE for healthcare are from the Middle East and North
Africa, Thailand, and India – all of which are cheaper healthcare destinations than the UAE.
The UAE maintains an advantage over these competitor nations middle-to-high income
patients. The UAE must attract patients from the wealthy upper-tier of Africa, the Middle
East, and Asia, which is not easy, as many such patients can afford to go to Europe for
treatment. Where the UAE will be able to outperform European providers is in offering
culturally-suitable care for Muslim patients and high-quality specialized services.
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Conclusion

UAE is a potential place to venture medical product but there is risk and barriers in the same
time. Adviseable to take count all the above mentions advantages and risk equally to balance the
account.

1.
2.

Reference:
3. Lecturers Notes
4. www.piie.com
5. https://hbr.org/2020/05/will-covid-19-have-a-lasting-impact-on-globalization
6. https://www.oecd-ilibrary.org/docserver/9789264060265-en.pdf?
expires=1593590104&id=id&accname=guest&checksum=90C894EDED38150EBEA3F7C2
E96AEF64
7. https://www.bplans.com/medical_equipment_supplies_business_plan/market_analysis_sum
mary_fc.php
8. http://www.nationmaster.com/country-info/stats/Economy/GINI-index
9. https://www.giiresearch.com/report/koan234974-global-rubber-gloves-market- analysis.html

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