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Sunil Solved

Sunil Solved

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Published by Miguel Garcia

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Published by: Miguel Garcia on Jul 16, 2013
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Summer 2013Master of Business Administration- MBA Semester 4MB0053 –International Business Management -4 Credits(Book ID: B1724)Assignment- 60 marks Note: Answer all questions. Kindly note that answers for 10 marks questions should beapproximately of 400 words. Each question is followed by evaluation scheme.Q1. The world economy is globalizing at an accelerating pace. What do you mean byglobalization? Discuss the merits and demerits of Globalization. (meaning of globalization - 2marks, merits- 4 marks, demerits- 4 marks) 10 marksAns: Globalization is the process of international integration arising from the interchange of world views, products, ideas, and other aspects of culture. Put in simple terms, globalizationrefers to processes that increase world-wide exchanges of national and cultural resources.Advances in transportation and telecommunications infrastructure, including the rise of thetelegraph and its posterity the Internet, are major factors in globalization, generating further interdependence of economic and cultural activities.To begin with, globalization has contributed to the world’s economy in many valuableways. The advances in science and technology have allowed businesses to easily cross over territorial boundary lines. Accordingly, companies tend to become more creative, competitivethus raising quality of goods, services and the worlds living standard.Secondly, several companies from the more developed countries have already venture to begin foreign operations or branches to take benefit of the low cost of labor in the poorer countries. This kind of business activity will provide more arrival of cash or asset funds into theless developed countries.However, one cannot reject the harmful effects which have resulting from globalization.One crucial social aspect is the risk and danger of outbreak diseases which can easily be multiplyas the mode transportation is easier and faster in today’s advance society. This is evidenced inthe recent bird’s flu disease which has infected most Asian countries over a short time frame.As large corporations spend or take over many off shore businesses, a modern form of immigration will also change which may fake certain power force on the local governments of 
the less developed countries. Unemployment rates in the more developed regions like Europemay also rise as corporations choose to outsource cheaper work force from Asian countries.
1. Imported goods are available2. The country can produce what it produces best and import the rest3. There is a feeling of an international economy4. The local industries work hard to compete with international firms5. Raw material is available6. The standard of life becomes better 7. More jobs are created8. There is security from famine, disease, etc as international firms intervene.
1. Local industries get dislodged.2. In times of war, there is a problem3. There is political interference and conflicts arise4. The balance of payments is badly affected5. Under developed countries are exploited
Q2. The international trade theories explain the basics behind international trade. Compare theAbsolute and comparative cost advantage theories with the help of example. (explain the 2theories - 6 marks, examples- 4 marks) 10 marksAns:
International trade
is the exchange of capital, goods, andservicesacrossinternational   bordersor territories. In most countries, such trade represents a significant share of gross  domestic product(GDP). While internationaltradehas been present throughout much of history, its economic, social, and political importance has been on the rise in recent centuries.
Comparative advantage
comparative advantage
refers to the ability of a party to produce a particular good or service at a lower marginalandopportunity costover another. Even if one country is more efficient in the production of all goods (absolute advantagein all goods) than the other, both countries will still gain by trading with each other, as long as they have different relativeefficiencies.For example, if, using machinery, a worker in one country can produce both shoes and shirts at 6 per hour, and a worker in a country with less machinery can produce either 2 shoes or 4 shirts inan hour, each country can gain from trade because their internal trade-offs between shoes andshirts are different. The less-efficient country has a comparative advantage in shirts, so it finds itmore efficient to produce shirts and trade them to the more-efficient country for shoes. Withouttrade, itsopportunity costper shoe was 2 shirts; by trading, its cost per shoe can reduce to as lowas 1 shirt depending on how much trade occurs (since the more-efficient country has a 1:1 trade-off). The more-efficient country has a comparative advantage in shoes, so it can gain inefficiency by moving some workers from shirt-production to shoe-production and trading someshoes for shirts. Without trade, its cost to make a shirt was 1 shoe; by trading, its cost per shirtcan go as low as 1/2 shoe depending on how much trade occurs.The net benefits to each country are called thegains from trade.
Absolute advantage
In economics, the principle of 
absolute advantage
refers to the ability of a party (an individual,or firm, or country) to produce more of a good or service than competitors, using the sameamount of resources.Adam Smithfirst described the principle of absolute advantage in thecontext of international trade, using labor as the only input.

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