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Q 1 - What is globalization and what are its benefits?

Ans: Globalization is a process where businesses are dealt in markets around the world, apart from the local and national markets. According to business terminologies, globalization is defined as ‘the worldwide trend of businesses expanding beyond their domestic boundaries’. It is advantageous for the economy of countries because it promotes prosperity in the countries that embrace globalization. In this section, we will understand globalization, its benefits and challenges.

Benefits of globalization The merits and demerits of globalization are highly debatable. While globalization creates employment opportunities in the host countries, it also exploits labor at a very low cost compared to the home country. Let us consider the benefits and ill-effects of globalization. Benefits of globalization are as follows: 1. Promotes foreign trade and liberalization of economies. Increases the living standards of people in several developing countries through capital investments in developing countries by developed countries.
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Benefits customers as companies outsource to low wage countries

Outsourcing helps the companies to be competitive by keeping the cost low, with increased 2. Productivity.
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Promotes better education and jobs.

Leads to free flow of information and wide acceptance of foreign products, ideas, ethics, and best practices and culture. Provides better quality of products, customer services, and standardized delivery models across countries. Gives better access to finance for corporate and sovereign borrowers. Increases business travel, which in turn leads to a flourishing travel and hospitality industry across the world. Increases sales as the availability of cutting edge technologies and production techniques decrease the cost of production.

Comparative Advantage: 6. If the two countries exchanged two goods at ratio of 1:1.  1.Provides several platforms for international dispute resolutions in business. The reply was affirmative. He used England and Portugal as examples in his demonstration the two goods they produced being wine and cloth. This case is explained using following table: Labour cost of production (in hours) 1 unit of wine 1 unit of cloth Portugal 70 80 England 110 90 . country I gets one unit of goods B by sacrificing only 10 units of labor. which facilitates international trade. Discuss in brief the Absolute and comparative cost advantage theories. whereas it has to give up 20 units of labor if it produced the goods itself. Q2 . Hence it was understood that both countries had large amount of both goods by trading. will there be a need for the countries to trade. Absolute Advantage: Adam Smith (a social philosopher and a pioneer of political economics) argued that nations differ in their ability to manufacture goods efficiently and he saw that a country gains by trading. Ans: 4. In the same manner country II gives up only 10 units of labour to get one units of goods A. whereas it has to give 20 units of labour if it was made by itself. 5. 3.Discuss in brief the Absolute and comparative cost advantage theories. 2. Ricardo (English political economist) questioned Smith’s theory stating if one country is more productive than the other in all lines of production and if country I can produce all goods with less labour costs.

How is culture an integral part of international business. arts. Cross cultural management is defined as the development and application of knowledge about cultures in the practice of international management. 3. Religion. the concept of opportunity cost (OC) is introduced. and other abilities and habits gained by people as part of society. Culture determines every aspect that is from birth to death and everything in between it. civilization. beliefs. morals. Research shows that national ‘‘cultures’’ generally characterize the dominant groups’ values and practices in society. What are its elements? Q 3. What are its elements? Ans: Culture is defined as the art and other signs or demonstrations of human customs.According to him Portugal has an advantage in both areas of manufacture. Conflicting attitudes. Culture is the part of environment. How is culture an integral part of international business. customs. Culture is very important to understand international business. laws. This shows a close relation between culture and international business. but several home based managers handle immigrant groups adjusted into a workforce that offers domestic . Culture affects all the business functions ranging from accounting to finance and from production to service. even though the marginalized groups represent a majority or a minority in the society. To demonstrate that trade between both countries will lead to gains. Cultural elements that relate business The most important cultural components of a country which relate business transactions are:    Language. when people involved have diverse cultural identities. International managers in senior positions do not have direct interaction that is face-to-face with other culture workforce. which human has created. it is the total sum of knowledge. and not of the marginalized groups. Culture is an important factor for practicing international business. and the way of life of a specific society or group. other than their culture. It is the duty of people to respect other cultures.

problem solving. Handling cultural diversity Cultural diversity in a work group offers opportunities and difficulties. creativity. It is used to survey countries where the firm . Describe the tools and methods of country risk analysis. and inspire people from diverse cultures can give the organization spirited advantages in structures of cost. 4. and adjusting to change Cultural diversity offers key chances for joint work and co-operative action. The managers cannot expect to force members of other culture to fit into their cultural customs. The organization’s capability to draw. Any organization that tries to enforce its behavioral customs on unwilling workers from another culture faces conflict. Describe the tools and methods of country risk analysis. The most important aspect to qualify as a manager for positions of international responsibility is communication skills. The factors to be considered in cross cultural management are: Cross cultural management skills The ability to demonstrate a series of behavior is called skill. Ans: Country risk analysis is the evaluation of possible risks and rewards from business experiences in a country. Economy is benefited when the work groups are managed successfully. The managers must adapt to other culture and have the ability to lead its members. Formulating and applying plans for modification. It is functionally linked to achieving a performance goal. the production of two or more individuals or groups working in cooperation is larger than the combined production of their individual work. Q Establishing and applying formal structures. Group work is a joint venture where. which is the main assumption of cross cultural skills learning. Identifying and solving disagreements. save. Identifying the importance of informal structures. The manager has to possess the skills linked with the following:      Providing inspiration and appraisal systems.

In structured qualitative method. in which the scoring needs subjective determinations. Fully qualitative method can be adapted to the unique strengths and problems of the country undergoing evaluation. An increasing number of companies involving in external trade indicate huge business opportunities and promising markets. country risk analysis has become essential for the international creditors and investors. Methods of Country risk Analysis: Fully qualitative method – The fully qualitative method involves a detailed analysis of a country. With globalization. economic. principal component analysis. As applied to country risk analysis. political. and logic analysis and classification and regression tree engaged in international business. the MNC can assess definite employees who have the capability to evaluate the risk characteristics of a particular country. and social upheavals in a foreign country. it is easier to make comparisons between countries as it follows a specific format across countries. and social conditions and prediction. Delphi technique – The technique involves a set of independent opinions without group discussion. Structured qualitative method – The structured method uses a uniform format with predetermined scope. CRA represents the potentially adverse impact of a country’s environment on the multinational corporation’s cash flows and is the probability of loss due to exposure to the political. business executives. This technique was the most popular among the banks during the late seventies. It includes general discussion of a country’s economic. Other quantitative methods – The quantitative models used in statistical studies of country risk analysis can be classified as discriminate analysis. Inspection visits – Involves travelling to a country and conducting meeting with government officials. These meetings clarify any vague opinions the firm has about the country. and avoids countries with excessive risk. and consumers. Country Risk Analysis (CRA) identifies imbalances that increase the risks in a cross-border investment. Checklist method – The checklist method involves scoring the country based on specific variables that can be either quantitative. All business dealings involve risks. in which the scoring does not need personal judgment of the country being scored or qualitative. Tools of country risk analysis: The risk management demands a regular follow up regarding governmental .

Following are the tools recommended: Chain of value – Includes the main countries that sustain trade relationships with the nation. Strength and weakness chart – Focus the key aspects that warn the country.policies. external and internal environment. . outlook provided by rating agencies. Table of macroeconomic variables – Provides alert signals when the behavior of any ratio presents a relevant change. and so on. Table of financial markets performance – Follow up the behavior of bonds and stocks already issued and to be issued. broken by sectors and products.