Student Name: S. Venugopal, Roll No.

520917287, MBA 4th Semester, Subject Code MB0037 International Business Management ( 3 Credits) Assignment Set – 1 ( 60Marks)
Q.1 Discuss the role of WTO. How is it different from GATT? Ans:- WTO: -The World Trade Organisation was established in 1995. It includes 153 countries and is headquartered in Geneva, Switzerland. The WTO has been used to push an expansive array of policies on trade, investment and deregulation that exacerbate the inequality between the North and the South, and among the rich and poor within countries. The WTO enforces some twenty different trade agreements, including the General Agreement on Trade in Services (GATS), the Agreement on Agriculture (AoA) and Trade-Related Intellectual Property Rights (TRIPS). The WTO is inherently undemocratic. Its trade tribunals, working behind closed doors, have ruled against a stunning array of national health and safety, labor, human rights and environmental laws, which have been directly challenged as trade barriers by governments acting on behalf of their corporate clients. National policies and laws found to violate WTO rules must be eliminated or changed or else the violating country faces perpetual trade sanctions that can be in the millions of dollars. Since the WTO's inception in 1995, the vast majority of rulings in trade disputes between member nations have favored powerful industrialized countries. Consequently, many countries, particularly developing countries, feel enormous pressure to weaken their public interest policies whenever a WTO challenge is threatened in order to avoid costly sanctions. A Brief History of GATT : The WTO’s Predecessor, The GATT, Was Established on a Provisional Basis after the Second World War in the wake of other new multilateral institutions dedicated to international economic cooperation – notably the "Britton Woods" institutions now known as the World Bank and the International Monetary Fund. The original 23 GATT countries were among over 50 which agreed a draft Charter for an International Trade Organization (ITO) – a new specialized agency of the United Nations. The Charter was intended to provide not only world trade disciplines but also contained rules relating to employment, commodity agreements, restrictive business practices, international investment and services. In an effort to give an early boost to trade liberalization after the Second World War and to begin to correct the large overhang of protectionist measures which remained in place from the early 1930s-tariff negotiations were opened among the 23 founding GATT "contracting parties" in 1946. This first round of negotiations resulted in 45,000 tariff concessions affecting $10 billion or about one-fifth – of world trade. It was also agreed that the value of these concessions should be protected by early and largely "provisional" acceptance of some of the trade rules in the draft ITO Charter. The tariff concessions and rules together became known as the General Agreement on Tariffs and Trade and entered into force in January 1948. Although the ITO Charter was finally agreed at a UN Conference on Trade and Employment in Havana in March 1948, ratification in national legislatures proved impossible in some cases. When the United States’ government announced, in 1950, that it would not seek Congressional ratification of the Havana Charter, the ITO was effectively dead. Despite its provisional nature, the GATT remained the only multilateral instrument governing international trade from 1948 until the establishment of the WTO. Q.2 What is Globalisation and how it has affected the country? Ans;- What is Globalization:- Economic "globalization" is a historical process, the result of human innovation and technological progress. It refers to the increasing integration of economies around the world, particularly through trade and financial flows. The term sometimes also refers to the movement of people (labor) and knowledge (technology) across international borders. There are also broader cultural, political and environmental dimensions of globalization that are not covered here. At its most basic, there is nothing mysterious about globalization. The term has come into common usage since the 1980s, reflecting technological advances that have made it easier and quicker to complete international transactions – both trade and financial flows. It refers to an extension beyond national borders of the same market forces that have operated for centuries at all levels of human economic activity – village markets, urban industries, or financial centers. Markets promote efficiency through competition and the division of labor – the specialization that allows people and economies to focus on what they do best. Global markets offer greater opportunity for people to tap into more and larger markets around the world. It means that they can have access to more capital flows, technology, cheaper imports, and larger export markets. But markets do not necessarily ensure that the benefits of increased efficiency are shared by all. Countries must be prepared to embrace the policies needed, and in the case of the poorest countries may need the support of the international community as they do so. Globalization and Growth of Global Economy :-The term "globalization" has acquired considerable emotive force. Some view it as a process that is beneficial – a key to future world economic development – and also inevitable and irreversible. Others regard it with hostility, even fear, believing that it increases inequality within and between nations, threatens employment and living standards and thwarts social progress. This brief offers an overview of some aspects of globalization and aims to identify ways in which countries can tap the gains of this process, while remaining realistic about its potential and its risks. Globalization offers extensive opportunities for truly worldwide development but it is not progressing evenly. Some countries are becoming integrated into the global economy more quickly than others. Countries that have been able to integrate are seeing faster growth and reduced poverty. Outward – oriented policies brought dynamism and greater prosperity to much of East Asia, transforming it from one of the poorest

Student Name: S. Venugopal, Roll No. 520917287, MBA 4th Semester, Subject Code MB0037 International Business Management ( 3 Credits) Assignment Set – 1 ( 60Marks)
areas of the world 40 years ago. And as living standards rose, it became possible to make progress on democracy and economic issues such as the environment and work standards. By contrast, in the 1970s and 1980s when many countries in Latin America and Africa pursued inward-oriented policies, their economies stagnated or declined, poverty increased and high inflation became the norm. In many cases, especially Africa, adverse external developments made the problems worse. As these regions changed their policies, their incomes have begun to rise. An important transformation is underway. Encouraging this trend, not reversing it, is the best course for promoting growth, development and poverty reduction. The crises in the emerging markets in the 1990s have made it quite evident that the opportunities of globalization do not come without risks – risks arising from volatile capital movements and the risks of social, economic, and environmental degradation created by poverty. This is not a reason to reverse direction, but for all concerned – in developing countries, in the advanced countries, and of course investors – to embrace policy changes to build strong economies and a stronger world financial system that will produce more rapid growth and ensure that poverty is reduced. How can the developing countries, especially the poorest, be helped to catch up? Does globalization exacerbate inequality or can it help to reduce poverty? And are countries that integrate with the global economy inevitably vulnerable to instability? These are some of the questions covered in the following sections. Globalization is not just a recent phenomenon. Some analysts have argued that the world economy was just as globalized 100 years ago as it is today. But today commerce and financial services are far more developed and deeply integrated than they were at that time. The most striking aspect of this has been the integration of financial markets made possible by modern electronic communication. The 20th century saw unparalleled economic growth, with global per capita GDP increasing almost five-fold. But this growth was not steady – the strongest expansion came during the second half of the century, a period of rapid trade expansion accompanied by trade – and typically somewhat later, financial – liberalization. Chart 1 break the century into four periods. In the inter-war era, the world turned its back on internationalism – or globalization as we now call it – and countries retreated into closed economies, protectionism and pervasive capital controls. This was a major factor in the devastation of this period, when per capita income growth fell to less than 1 percent during 1913-1950. For the rest of the century, even though population grew at an unprecedented pace, per capita income growth was over 2 percent, the fastest pace of all coming during the post – World War boom in the industrial countries. The story of the 20th century was of remarkable average income growth, but it is also quite obvious that the progress was not evenly dispersed. The gaps between rich and poor countries, and rich and poor people within countries, have grown. The richest quarter of the world’s population saw its per capita GDP increase nearly six-fold during the century, while the poorest quarter experienced less than a three-fold increase (Chart 1). Income inequality has clearly increased. But, as noted below, per capita GDP does not tell the whole story. Developing countries: How deeply integrated:- Globalization means that world trade and financial markets are becoming more integrated. But just how far have developing countries been involved in this integration? Their experience in catching up with the advanced economies has been mixed. Chart 2 shows that in some countries, especially in Asia, per capita incomes have been moving quickly toward levels in the industrial countries since 1970. A larger number of developing countries have made only slow progress or have lost ground. In particular, per capita incomes in Africa have declined relative to the industrial countries and in some countries have declined in absolute terms. Chart 2b illustrates part of the explanation: the countries catching up are those where trade has grown strongly. Consider four aspects of globalization:

Trade: Developing countries as a whole have increased their share of world trade – from 19 percent in 1971 to 29 percent in 1999. But Chart 2b shows great variation among the major regions. For instance, the newly industrialized economies (NIEs) of Asia have done well, while Africa as a whole has fared poorly. The composition of what countries export is also important. The strongest rise by far has been in the export of manufactured goods. The share of primary commodities in world exports – such as food and raw materials – that are often produced by the poorest countries, has declined. Capital movements: Chart 3 depicts what many people associate with globalization, sharply increased private capital flows to developing countries during much of the 1990s. It also shows that: 1. 2. 3. the increase followed a particularly "dry" period in the 1980s; net official flows of "aid" or development assistance have fallen significantly since the early 1980s; and the composition of private flows has changed dramatically. Direct foreign investment has become the most important category. Both portfolio investment and bank credit rose but they have been more volatile, falling sharply in the wake of the financial crises of the late 1990s.

Student Name: S. Venugopal, Roll No. 520917287, MBA 4th Semester, Subject Code MB0037 International Business Management ( 3 Credits) Assignment Set – 1 ( 60Marks)

Movement of people: Workers move from one country to another partly to find better employment opportunities. The numbers involved are still quite small, but in the period 1965-90, the proportion of labor forces round the world that was foreign born increased by about one-half. Most migration occurs between developing countries. But the flow of migrants to advanced economies is likely to provide a means through which global wages converge. There is also the potential for skills to be transferred back to the developing countries and for wages in those countries to rise. Spread of knowledge (and technology): Information exchange is an integral, often overlooked, aspect of globalization. For instance, direct foreign investment brings not only an expansion of the physical capital stock, but also technical innovation. More generally, knowledge about production methods, management techniques, export markets and economic policies is available at very low cost, and it represents a highly valuable resource for the developing countries.

The special case of the economies in transition from planned to market economies – they too are becoming more integrated with the global economy – is not explored in much depth here. In fact, the term "transition economy" is losing its usefulness. Some countries (e.g. Poland, Hungary) are converging quite rapidly toward the structure and performance of advanced economies. Others (such as most countries of the former Soviet Union) face long – term structural and institutional issues similar to those faced by developing countries.

Chart 1

Student Name: S. Venugopal, Roll No. 520917287, MBA 4th Semester, Subject Code MB0037 International Business Management ( 3 Credits) Assignment Set – 1 ( 60Marks)

Q. 3 How do you define culture in terms of international Business? The following can be looked as the various aspects of the cultural dichotomies. Ans:-

Table 2.1: Cultural Dichotomies In this new millennium, few executives can afford to turn a blind eye to global business opportunities. Japanese auto-executives monitor carefully what their European and Korean competitors are up to in getting a bigger slice of the Chinese auto-market. Executives of Hollywood movie studios need to weigh the appeal of an expensive movie in Europe and Asia as much as in the US before a firm commitment. The globalizing wind has broadened the mindsets of executives, extended the geographical reach of firms, and nudged international business (IB) research into some new trajectories. One such new trajectory is the concern with national culture. Whereas traditional IB research has been concerned with economic/ legal issues and organizational forms and structures, the importance of national culture – broadly defined as values, beliefs, norms, and behavioural patterns of a national group – has become increasingly important in the last two decades, largely as a result of the classic work of Hofstede (1980). National culture has been shown to impact on major business activities, from capital structure (Chui et al., 2002) to group performance (Gibson, 1999). For reviews, see’ Boyacigiller and Adler’ (1991) and ‘Earley and Gibson’ (2002). 1 Cultural change, convergence and divergence in an era of partial globalization An issue of considerable theoretical significance is concerned with cultural changes and transformations taking place in different parts of the world. In fact, since the landmark study of Haire et al. (1966) and the publication of Industrialism and Industrial Man by Kerr et al. (1960), researchers have continued to search for similarities in culture-specific beliefs and attitudes in various aspects of work related attitudes and behaviours, consumption patterns, and the like. If cultures of the various locales of the world are indeed converging (e.g., Heuer et al., 1999), IBrelated practices would indeed become increasingly similar. Standard, culture-free business practices would eventually emerge, and inefficiencies and complexities associated with divergent beliefs and practices in the past era would disappear. In the following section, we review the evidence on the issue and conclude that such an outlook pertaining to the convergence of various IB practices is overly optimistic. 2 Evolution of partial globalization Globalization refers to a ‘growing economic interdependence among countries, as reflected in the increased cross-border flow of three types of entities: goods and services, capital, and know-how’ (Govindarajan and Gupta, 2001, 4). Few spoke of ‘world economy’ 25 years ago, and the prevalent term was ‘international trade’ (Drucker, 1995). However today, international trade has culminated in the emergence of a global economy, consisting of flows of information, technology, money, and people, and is conducted via government international organizations such as the North American Free Trade Agreement (NAFTA) and the European Community; global organizations such as the International Organization for Standardization (ISO); multinational companies (MNCs); and cross – border alliances in the form of joint ventures, international mergers, and acquisitions. These inter – relationships have enhanced participation in the world economy, and have become a key to domestic economic growth and prosperity (Drucker, 1995, 153). Yet, globalization is not without its misgivings and discontents (Sassan, 1998). A vivid image associated with the G8 summits is the fervent protests against globalization in many parts of the world, as shown in television and reported in the popular media. Strong opposition to globalization usually originates from developing countries that have been hurt by the destabilizing effects of globalization, but in recent times we have also seen heated debates in Western economies triggered by significant loss of professional jobs as a result of off shoring to low – wage countries. Indeed, workers in manufacturing and farming in advanced economies are becoming increasingly wary of globalization, as their

Student Name: S. Venugopal, Roll No. 520917287, MBA 4th Semester, Subject Code MB0037 International Business Management ( 3 Credits) Assignment Set – 1 ( 60Marks)
income continues to decline significantly. In parallel to the angry protests against globalization, the flow of goods, services, and investments across national borders has continued to fall after the rapid gains of the 1990s. Furthermore, the creation of regional trade blocs, such as NAFTA, the European Union, and the Association of Southeast Asian Nations, have stimulated discussions about creating other trade zones involving countries in South Asia, Africa, and other parts of the world. Although it is often assumed that countries belonging to the World Trade Organization (WTO) have embraced globalization, the fact is that the world is only partially globalized, at best (Schaeffer, 2003). Many parts of Central Asia and Eastern Europe, including the former republics of the Soviet Union, parts of Latin America, Africa, and parts of South Asia, have been sceptical of globalization (Greider, 1997). In fact, less than 10% of the world’s population is fully globalized (i.e., being active participants in the consumption of global products and services) (Schaeffer, 2003). Therefore, it is imperative that we analyze the issues of cultural convergence and divergence in this partially globalized world. 3 Role of multiculturalism and cultural identity The broad ideological framework of a country, corporation, or situation is the most important determinant of the cultural identity that people develop in a given locale (Triandis, 1994). The ‘melting pot’ ideology suggests that each cultural group loses some of its dominant characteristics in order to become the mainstream: this is assimilation, or what Triandis (1994) calls subtractive multiculturalism. In contrast, when people from a cultural group add appropriate skills and characteristics of other groups, it may be called integration, or additive multiculturalism. Both of these processes are essential for cultural convergence to proceed. However, if there is a significant history of conflict between the cultural groups, it is hard to initiate these processes, as in the case of Israelis and Palestinians. In general, although there has been some research on the typology of animosity against other nations (e.g., Jung et al., 2002), we do not know much about how emotional antagonism against other cultural groups affects trade patterns and intercultural cooperation in a business context. The issues of cultural identity and emotional reactions to other cultural groups in an IB context constitute a significant gap in our research effort in this area. 4 Implications of convergence and divergence issues One message is clear: while convergence in some domains of IB activity is easily noticeable, especially in consumer values and lifestyles, significant divergence of cultures persists. In fact, Hofstede (2001) asserts that mental programs of people around the world do not change rapidly, but remain rather consistent over time. His findings indicate that cultural shifts are relative as opposed to absolute. Although clusters of some countries in given geographical locales (e.g., Argentina, Brazil, Chile) might indicate significant culture shifts towards embracing Anglo values, the changes do not diminish the absolute differences between such countries and those of the Anglo countries (i.e., US, Canada, UK). Huntington, in his ‘The Clash of Civilizations’ (1996), presents the view that there is indeed a resurgence of non-Western cultures around the world, which could result in the redistribution of national power in the conduct of international affairs. The attempt by the Davos group to bring about uniform practices in various aspects of IB and work culture, thereby sustaining the forces of globalization, is certainly worthwhile. However, our analysis suggests that there is no guarantee that such convergence will come about easily, or without long periods of resistance. IB scholars need to understand that although some countries might exhibit strong tendencies toward cultural convergence, as is found in Western countries, there are countries that will reject globalization, not only because of its adverse economic impacts (Greider, 1997) but also because globalization tends to introduce distortions (in their view) in profound cultural syndromes that characterize their national character. 5 Processes of cultural changes In the previous section, we make the point that, through the process of globalization, cultures influence each other and change, but whether or not these changes will bring about cultural convergence is yet to be seen. In this section, we delineate a general model that describes and explains the complex processes underlying cultural changes. As explained before, IB is both an agent and a recipient of cultural change, and for international business to flourish it is important to understand its complex, reciprocal relationships with cultural change. In line with the view of Hofstede (2001) that culture changes very slowly, culture has been treated as a relatively stable characteristic, reflecting a shared knowledge structure that attenuates variability in values, behavioral norms, and patterns of behaviors (Erez and Earley, 1993). Cultural stability helps to reduce ambiguity, and leads to more control over expected behavioral outcomes (Weick and Quinn, 1999; Leana and Barry, 2000). For instance, most existing models of culture and work behaviour assume cultural stability and emphasize the fit between a given culture and certain managerial and motivational practices (Erez and Earley, 1993). High fit means high adaptation of managerial practices to a given culture and, therefore, high effectiveness. The assumption of cultural stability is valid as long as there are no environmental changes that precipitate adaptation and cultural change. Yet, the end of the 20 th century and the beginning of the new millennium have been characterized by turbulent political and economical changes, which instigate cultural changes. In line with this argument, Lewin and Kim (2004), in their comprehensive chapter on adaptation and selection in strategy and change, distinguished between theories driven by the underlying assumption that adaptation is the mechanism to cope with change, and theories driven by the underlying assumption of selection and the survival of the fittest, suggesting that ineffective forms of organization disappear, and new forms emerge. However, although organizational changes as a reaction to environmental changes have been subjected to considerable conceptual analyses, the issue of cultural change at the national level has rarely been addressed. 6 The dynamics of culture as a multi-level, multi-layer construct The proposed model consists of two building blocks. One is a multi-level approach, viewing culture as a multi-level construct that consists of various levels nested within each other from the most macro-level of a global culture, through national cultures, organizational cultures, group cultures, and cultural values that are represented in the self at the individual level, as portrayed in Figure 2.1. The second is based on Schein’s (1992) model viewing culture as a multi – layer construct consisting of the most external layer of observed artifacts and behaviors, the deeper level of values, which is testable by social consensus, and the deepest level of basic assumption, which is invisible and taken for granted. The present model proposes that culture as a multi – layer construct exists at all levels – from the global to the individual – and that at each level change first occurs at the most external layer of behavior, and then, when shared by individuals who belong to the same cultural context, it becomes a shared value that characterizes the aggregated unit (group, organizations, or nations). In the model, the most macro-level is that of a global culture being created by global networks and global institutions that cross national and cultural borders. As exemplified by the effort of the Davos group discussed earlier, global organizational structures need to adopt common rules and procedures in order to have a common ‘language’ for communicating across cultural borders (Kostova, 1999; Kostova and Roth, 2003; Gupta and Govindarajan, 2000). levels of culture.

Student Name: S. Venugopal, Roll No. 520917287, MBA 4th Semester, Subject Code MB0037 International Business Management ( 3 Credits) Assignment Set – 1 ( 60Marks)
Given the dominance of Western MNCs, the values that dominate the global context are often based on a free market economy, democracy, acceptance and tolerance of diversity, respect of freedom of choice, individual rights, and openness to change (Gupta and Govindarajan, 2000). Below the global level are nested organizations and networks at the national level with their local cultures varying from one nation or network to another. Further down are local organizations, and although all of them share some common values of their national culture, they vary in their local organizational cultures, which are also shaped by the type of industry that they represent, the type of ownership, the values of the founders, etc. Within each organization are sub-units and groups that share the common national and organizational culture, but that differ from each other in their unit culture on the basis of the differences in their functions (e.g., R&D vs manufacturing), their leaders’ values, and the professional and educational level of their members. At the bottom of this structure are individuals who through the process of socialization acquire the cultural values transmitted to them from higher levels of culture. Individuals who belong to the same group share the same values that differentiate them from other groups and create a group – level culture through a bottom-up process of aggregation of shared values. For example, employees of an R&D unit are selected into the unit because of their creative cognitive style and professional expertise. 7 Factors that facilitate cultural change Culture itself influences the level of resistance or acceptance of change. Harzing and Hofstede (1996) proposed that certain cultural values facilitate change, whereas others hinder it. The values of low power distance, low uncertainty avoidance, and individualism facilitate change. Change threatens stability, and introduces uncertainty, and resistance to change will therefore be higher in cultures of high rather than low uncertainty avoidance (Steensma et al., 2000). Change also threatens the power structure, and therefore will be avoided in high power distance cultures. Finally, change breaks the existing harmony, which is highly valued in collectivistic cultures, and therefore will not be easily accepted by collectivists (Levine and Norenzayan, 1999). A recent study by Erez and Gati (2004) examined the effects of three factors on the change process and its outcomes: · the cultural value of individualism – collectivism; · the reward structure and its congruence with the underlying cultural values; and · the degree of ambiguity in the reward structure. The change process examined was a shift from choosing to work alone to a behavioural choice of working as part of a team, and vice versa. Working alone is more prevalent in individualistic cultures, whereas working in teams dominates the collectivistic ones. 8 Understanding when culture matters: increasing the precision of cultural models Beyond exploring new cultural constructs and the dynamic nature of culture, we also argue for the importance of examining contingency factors that enhance or mitigate the effect of national culture. Consider the following scenario. A senior human resource manager in a multinational firm is charged with implementing an integrative training program in several of the firm’s subsidiaries around the globe. Over the term of her career, the manager has been educated about differences in national culture and is sensitive to intercultural opportunities and challenges. At the same time, she understands the strategic need to create a unified global program that serves to further integrate the firm’s basic processes, creating efficiencies and synergies across the remote sites. She approaches the implementation with trepidation. A key challenge is to determine whether the program should be implemented in the same manner in each subsidiary or modified according to the local culture at each site. Put another way, in this complex circumstance, does culture matter? Q4. Explain the advantages and disadvantages in international business. Ans:- Advantages and Disadvantages of International Business Advantages to consider: • Enhance your domestic competitiveness

• • • • • • • • •

Increase sales and profits Gain your global market share Reduce dependence on existing markets Exploit international trade technology Extend sales potential of existing products Stabilize seasonal market fluctuations Enhance potential for expansion of your business Sell excess production capacity Maintain cost competitiveness in your domestic market

Disadvantages to keep in mind: • You may need to wait for long-term gains

• • • • • • • •

Hire staff to launch international trading Modify your product or packaging Develop new promotional material Incur added administrative costs Dedicate personnel for traveling Wait long for payments Apply for additional financing Deal with special licenses and regulations

Student Name: S. Venugopal, Roll No. 520917287, MBA 4th Semester, Subject Code MB0037 International Business Management ( 3 Credits) Assignment Set – 1 ( 60Marks)

Q.5 Discuss the PLC theory of international trade Ans:- Product Life Cycle Theory :- Life cycle theory has been used since the 1970s to describe the behaviour of a product or service from design to obsolescence. The typical pattern of a product is represented by a curve divided into four distinct phases: introduction, growth, maturity, and decline. Recent research in the area has focused on its use in decision making in areas ranging from those as broad as overall strategy to those as narrow as equipment replacement. But does the product life cycle, or PLC, really tell the entire story? Consider the Ford Mustang. Since its 1964 introduction, the automobile has undergone several changes. Performance was increased with the addition of the 428 CobraJet in 1968 and Mach I styling in 1969. Another substantial change took place in 1971 with the introduction of the high-performance Boss 351. Then a true muscle car, the Mustang was detuned in 1974, when oil prices forced a more fuel-efficient redesign, called Mustang II. The fourth generation Mustang, introduced as the 1994 model, has been further refined and is more aerodynamic than its immediate predecessor. Yet it still shares roots with earlier models. A 302 V-8 is still offered, the wheelbase is similar, and if one looks closely enough, one can see its genesis in the 1964 model. The pattern evidenced by the life of the Mustang, then, is several curves of introduction, growth, maturity, and decline. Another intriguing example is the C-130 Hercules aircraft manufactured by Lockheed. The company recently announced the sale of 25 "J" models to the Royal Air Force, which is the fifth version of the Hercules originally produced in the 1950s. Although the aircraft resembles its older relatives, the new model features a totally different electronics package and more powerful engines. Here again, the Hercules PLC shows a curve with five local maximum points (swells of activity, in effect), rather than the traditional, single maximum point, PLC curve. The examples above suggest a PLC model represented by waves of product introductions, growth, maturity, and decline. Design engineering, process engineering, product marketing, production, and end-of-life decisions are key elements within the system. Each has its own cycle consisting of varying levels of activity. The waves are triggered by critical decision points during the life of a product, when production, operations, and marketing managers must optimize their collective efforts. The final stage is decline. Here the firm may continue to market the product hoping that competitors will discontinue their products. Other strategies are to maximize profit by eliminating as many product costs as possible as sales slow, or else to eliminate the product altogether. Life Cycle Elements • • • • • • Design Engineering Process Engineering Production Relationships Product Marketing End of Life

Design engineering, process engineering, product marketing, and production have been recurring elements in each stage of the product life cycle. In addition, end-of-life (EOL) issues must be addressed when the product approaches obsolescence. These elements vary in importance as the product or service moves through its life, thus creating waves of activity. The fact that they change in importance and magnitude requires that they be closely managed. Let’s begin our discussion of the individual elements with design engineering. According to Emehiser (1991):- An EOL program is a unique opportunity for a manufacturer to sell the legal obligation of supporting a product that is no longer in manufacture. All or part of product support may be assumed, dependent on the amount of finished product in use, anticipated life of the product, spares available, and other considerations. Product support can include parts distribution, service, technical support, quality assurance, and/or continuation engineering. In effect, the EOL Company assumes responsibility for supporting the product or service, which the original manufacturer no longer produces. The former therefore becomes the manufacturer and has its own single-peaked manufacturing cycle. In summary, then, each of the five elements of the product life cycle system has its own cycles. These cycles, or waves, are formed by product decisions that result in varying activity levels among the five elements. Figure 4 provides an initial comparison between the traditional product life cycle and the five-element wave. Q.6 What are the three stages of evolution of MNC Ans;- MNCs or “multinational corporations” are businesses that operate in more than one country. Usually these companies have a center of operations or some head office in one country, with sub-offices and/or other facilities located in other countries. These facilities may be

Student Name: S. Venugopal, Roll No. 520917287, MBA 4th Semester, Subject Code MB0037 International Business Management ( 3 Credits) Assignment Set – 1 ( 60Marks)
connected to the head office or parent company through a merger or as some form of subsidiary company. Multinational Corporations are large companies that can do business locally and internationally. Most multinational corporations operating today come from the US, Japan, and Western Europe. Popular brands we know today are products of multinational corporations. These brands include Coca-Cola – the best known softdrink brand in many countries, Nike – known worldwide for quality shoes and apparel, Honda – car and motorcycle maker from Japan, and many others. Multinational corporations penetrate new markets or countries through business mergers or acquisitions, sequential market entry, and/or joint ventures with other smaller businesses. Coming in as a foreign investment, MNCs capitalize on their size and resources to take over companies in a new country. With tightening competition, many MNCs are in the lookout for companies to acquire or merge with, not only to boost sales but also to gain market share from other industry players. Sequential Market Entry is also one option for MNCs to gain presence in a new market. In this way, one MNC may opt to start small and invest in one product at a time. Little by little, the product line will be increased to boost presence in the area. MNCs also do joint ventures with existing players in a particular country. In this way, the venture partner may retain some autonomy from the ‘parent’ MNC while enjoying the benefits of technology and/or expertise transfer. Many agree that the entry of multinational corporations can greatly help the economy of a particular country. But skeptics also believe that MNCs are selfish and are only concerned of their business bottom line. They are seen as too large and too powerful as many of them have some sort of influence over governments, which will lead to exploitation especially to developing economies. Three Stages of Evolution 1. Export stage • • • initial inquiries Þ firms rely on export agents expansion of export sales further expansion Þ foreign sales branch or assembly operations (to save transport cost)

2. Foreign Production Stage : There is a limit to foreign sales (tariffs, NTBs) DFI versus Licensing :- Once the firm chooses foreign production as a method of delivering goods to foreign markets, it must decide whether to establish a foreign production subsidiary or license the technology to a foreign firm. Licensing :- Licensing is usually first experience (because it is easy) e.g.: Kentucky Fried Chicken in the U.K. • • • it does not require any capital expenditure it is not risky payment = a fixed % of sales

Problem: the mother firm cannot exercise any managerial control over the licensee (it is independent) The licensee may transfer industrial secrets to another independent firm, thereby creating a rival. Direct Investment :- It requires the decision of top management because it is a critical step. • • • • it is risky (lack of information) (US firms tend to establish subsidiaries in Canada first. Singer Manufacturing Company established its foreign plants in Scotland and Australia in the 1850s) plants are established in several countries licensing is switched from independent producers to its subsidiaries. export continues

3. Multinational Stage The company becomes a multinational enterprise when it begins to plan, organize and coordinate production, marketing, R&D, financing, and staffing. For each of these operations, the firm must find the best location.

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