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 ASSIGNMENT SOLUTIONS GUIDE (2018-2019)
I.B.O.-1
International Marketing Management
Disclaimer/Special Note: These are just the sample of the Answers/Solutions to some of the Questions given in the
Assignments. These Sample Answers/Solutions are prepared by Private Teacher/Tutors/Authors for the help and guidance
of the student to get an idea of how he/she can answer the Questions given the Assignments. We do not claim 100%

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accuracy of these sample answers as these are based on the knowledge and capability of Private Teacher/Tutor. Sample
answers may be seen as the Guide/Help for the reference to prepare the answers of the Questions given in the assignment.
As these solutions and answers are prepared by the private Teacher/Tutor so the chances of error or mistake cannot be

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denied. Any Omission or Error is highly regretted though every care has been taken while preparing these Sample Answers/

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Solutions. Please consult your own Teacher/Tutor before you prepare a Particular Answer and for up-to-date and exact
information, data and solution. Student should must read and refer the official study material provided by the university.

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Q. 1. Critically examine the partial equilibrium theory of trade.

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Ans. Partial equilibrium theory of trade is an extension of basic micro, economic theory of equilibrium. Equilibrium

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price is the price at which both-demand and supply of a commodity are equal or in balance. Partial equilibrium theory

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is based on the assumption of perfect competition, which is characterized by a large number of producers and

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consumers of a commodity. Partial equilibrium theory emphasizes that the society is better off with trade than with
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autarky (no trade) if a government restricts the trade. The society will be deprived with the welfare.
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Partial equilibrium theory may be explained with the help of following diagram:
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Quantity
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In the diagram, quantities are shown on the x-axis while prices are shown on the y-axis. DD is the demand curve
while SS is the supply curve. Both these curves intersect at point A resulting in OP as market price and OQ as
equilibrium quantity. If there is autarky in the country the consumers welfare is equilibrium will be DAP. Now, the
world price of the product is OPw which is lower than domestic (no trade) price OP and the country takes the world
price are given. At world price OPw, the produces will produce OQ2 while consumers will demand OQ1. It implies the
quantity equal to MN or Q2Q1 will be imported. As a result of import, the consumers welfare will increase from DAP
to DNPw. But the import will hurt the domestic firms as their production will come down to OQ2 from OQ. Trade
would increase total social welfare because producers’ loss is less than the consumers’ gain.

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 Now, we take the case when the world price of the product is OPw, which is more than domestic (no trade) price
OP. At world price OPw1, producers will produce OQ4 while the demand is only OQ3. As a result, the producers will
export the product equal to M1N1 because domestic demand is less than the supply.
To sum up, we find that free trade results in increase in total social welfare in both the cases. If there is no trade,
total social welfare (including producers’ gain and consumers’ gain) is PA or OQ. If world price is less than domestic
price (say OPw) total social welfare is PwN or OQ1 in case there is free trade. If world price is more than domestic
price (say OPw1), total social welfare is Pw1 N1 or OQ4 in case there is free trade.
Now we take up a case when the domestic government imposes a tariff at rate t. As a result of this volume of
international trade would decline but volume of domestic production would rise and volume of domestic consumption
will fall. As a consequence producer surplus would rise and consumer surplus would fall. But overall national welfare
would fall because of the dead weight losses from the tariff. This may be shown in the following diagram:
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In the diagram we find that when world price is P , Supply of commodity is OA and demand of commodity is OB.
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There will be import of commodity equal to AB. When, as a result of tariff, world price is made up P (1++), the

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supply of domestic producers will go upto OA' but demand will fall to OB'. The volume of import will shrink to A‘B’.

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As a result, domestic consumer surplus falls, producer surplus rises and the domestic government gets a tariff. In
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addition, there is dead weight loss which accrues to no one. The post tariff total welfare is less than free-trade total

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welfare since net loss to the society is equal to triangular areas namely gfd and hkc.

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However for a country having a monopoly power in the world market i.e. power to influence the world price, a
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tariff may not be a bad idea since it may have a positive impact on social welfare. Such a country will not find free

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trade to be the best policy but will find an optimum tariff rate which maximises its social welfare.
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Partial equilibrium theory is criticised on the ground that it focuses on one market while markets are generally

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inter-related. A change in any market has spillover effects on other markets and the change in these other markets
will in turn, have repercussion or feedback effects on the original market. Thus partial equilibrium theory ignores the
interaction between goods. Partial equilibrium theory does not explain the pattern of trade between two countries.

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Inspite of this limitation, partial equilibrium theory is useful since it shows the effect of free trade or a tariff.
Q. 2. Why do Firms become transnational? Discuss various theories explaining emergence of
Transnational Corporations in the world economy.
Ans. UNCTAD defines TNCs “as incorporated or unincorporated enterprises comprising parent enterprises and
their foreign affiliates. A parent enterprise is defined as an enterprise that controls assets of countries other than its
home country usually by owning a certain equity capital stake. An equity capital stake of 10% or more of the ordinary
shares or voting power for an incorporated enterprise as its equivalent for an unincorporated one is normally considered
as a threshhold of the control of assets.” TNC may be defined as a company or an enterprise which operates in a
number of countries and which have production and service facilities outside the country of its origin. The essence of
TNC is that it takes its principal decisions in a global context. For this reason the decisions taken are often outside the
countries in which has operations.

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 Firms become transnational for a number of reasons. The major reasons are as under:
(1) To Protect Themselves–Many firms become transnational when they face the risks and uncertainties of
the domestic market. To reduce and minimize the negative impact of economic changes in the home country, firms
expand their activities to other countries.
(2) To Expand the Market–Many firms find growing world market for their goods and services. As a result of
globalization, most of the countries have removed trade barriers. There are no restrictions like quotas, licences, high
tariffs, administrative barriers etc., on the movement of products and factors. Hence, many firms have started to think
in terms of global market.
(3) To Face Increased Foreign Competition–Many firms have become transnational to face increased
foreign competition and to maintain their world market shares. To counter the competitor’s strategy a firm also
expands its operations in various countries including the home countries of competitors.

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(4) To Reduce Costs–Many firms expand their activities to various countries to ensure the reduction of costs.
When a firm produces and sells its products on large scale, it can eliminate transportation costs and avoid some of the

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selling and distribution costs. Besides, the firm can take advantage of local resources.

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(5) To Reduce Tariff–The governments of some countries want to promote their exports by offering tax concessions,

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and other financial incentives to exporters. Many firms will like to become transnational to overcome tariff walls.
(6) To Take Advantage of Technology Expertise–Many firms become transnational to take advantage of its

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technological superiorities. These firms manufacture goods directly in the foreign market which facilitates acquisition
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of new technology. In this way, these TNCs maintain their international competitiveness.

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Following are the various theories explaining the emergence of TNCs in the world economy:

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(1) Hymer’s Market Imperfections Theory– In 1960 Stephen H. Hymer propounded market imperfections
theory. According to this theory a TNC enjoys certain ownership advantages and controls the foreign direct investment

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through them. According to this theory the prevailing market imperfections were structural imperfections of a

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monopolistic nature which arise due to innovation, superior technology, access to capital, control of distribution system,

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economies of scale, differentiated products and superior management. These factors enable the TNCs to off set the
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disadvantages of their operations in foreign countries. Hymer was basically concerned with the market power of the

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TNCs which restricted the entry of other firms. The market power arises from collusion with others in the industry to

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avoid competition which results in the larger profits. There is one way casual link between the behaviour of the firm

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and the imperfect market structure. The market power is first developed in the domestic country and after the profit

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margin becomes lower in the home country, the firm interests abroad and controls the foreign markets by its patent
rights.

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(2) Raymond Vernon’s Product Life Cycle Theory–In 1966 Raymond Vernon propounded Product Life

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Cycle Theory. It deals with the evolution of the US multinationals. According to this theory, there are three stages

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followed in the introduction and establishment of new products in the domestic and foreign markets with emphasis on
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innovation and oligopoly power as being the first basis for export and later for the foreign direct investment. Produces

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life cycle theory examines the various stages in the life cycle of the products innovated by a particular company.
Following are three stages of product:

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(i) I Stage or New Product Stage–The first stage in the sequential development of the product is the new
product stage which emerges in the home country following innovations as a result of intense research and development
activities by the company. The product is introduced in the foreign market through export and the innovating firm

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earns excessive profits both from domestic sales and exports abroad because of its monopoly position. This stage is
also known as emerging oligopoly stage.
(ii) II Stage or Maturing Product Stage–Second stage i.e., maturing product stage arises when the demand in
the foreign countries expands and the host country firms began to produce competing products. The home country
enterprise is induced to invest abroad for taking advantage of its technology and increasing demand for the product.
Since the company specific advantages of the firm controlling the technology are much higher than the local firms, the
production in the host country would be cheaper. It stimulates foreign investment in subsidiaries. This stage is also
known as maturing oligopoly stage.
(iii) III Stage or Standardized Product Stage–Third stage i.e., standardized product stage arises when the
product becomes standardized and competition grows in the world market. TNCs invest even in the underdeveloped
countries where the cost of production is lower. The host country, otherwise, has to import these products form

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abroad because its own production cost is more. The foreign investment may take the from of licensing arrangements
also. This stage is also known as senescent oligopoly stage.
Product life cycle theory is useful in explaining the expansion of the U.S. companies after World War II. But it
has limited application to the firms going international which were motivated by locational advantages. The locational
advantages led to the establishment of assembly plants of automobile in the foreign countries. This theory often
applies to firms dealing with consumer products.
(3) Mark Casson’s Market Failure Theory–John H. Dunning’s “Theory of International Resource Allocation”
states that “between them we believe that these theories help to explain the origin of the Ownership Location and
internalization (OLI) advantages created or acquired by firms and strategic management of theirs.” A TNC is both
multi activity and engages in the internal transfer of intermediate products across national boundaries. A TNC produces
at different points of the value added chain and in different countries. As a result, these firms have to make intra-firm
transactions in addition to inter-firm transactions. This implies the some kind of market failure. Market failure is the
end result of the inability of arm’s length transaction to perform efficiently. Following are three reasons for this
situation:
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(a) Cross-border transactions are subject to differences between international and domestic failure i.e., additional

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risk and uncertainty associated with cross border transactions. Such risks are generally associated with raw materials

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and high technology industries which spend a heavy amount of development costs. There are risks of disruption of

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suppliers and property rights being displaced or abused by foreign licenses.

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(b) Another reason for transactional market failure is that market cannot take account of the benefits and costs

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associated with a particular transaction between buyer and seller which accrue to one or another parties but which
are external to that transaction.
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(c) The third reason for transactional market failure arises whenever the market is not large enough to enable
firms to capture economies of scale because they are facing, an infinitely elastic demand curve. Due to nature of
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demand, firms are not benefitted by the economies relating to production, purchasing, marketing, research and
development, finance, management etc.

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(4) MCMonus’s Transaction Cost Theory–This theory is also known as “Internalization Theory”. This theory

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considers the imperfections of the natural type in foreign markets which are different from the structural imperfections
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of monopolistic nature. According to this theory, TNCs undertake foreign direct investment to raise the efficiency and

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reduce transaction cost like the cost of information, cost of enforcement and cost of bargaining. The price existing in

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the foreign countries may not be based on market forces. If the production is left to the agent in foreign countries, the

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transaction costs maybe excessive because of the generations of non-pecuniary externalities by them. Such

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disadvantages to the company maybe neutralized by adopting a mode of organization which attempts to coordinate

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the different production units in a hierarchical manner. TNCs adopt a hierarchy for reducing the transaction costs.
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Internalization is possible in many ways through horizontal investment as well as vertical investment. Vertical

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investment consists of both backward and for-ward integration. Following are some popular methods of internalization:

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(1) Equity joint ventures

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(2) Spot purchases

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(3) Long-term contracts
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(4) Counter trade

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(5) Turnkey contracts
(6) Franchising
(7) Management contracts.

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in 1979 as an attempt to synthesize the other theories and approaches based on the company specific advantages,
internalization advantages and country specific advantages. Company specific advantages are ownership advantages
such as the superior technology access to capital, organizational and marketing skills, trade marks, brand names,
economies of scale and product differentiation. Country specific advantages are locational advantages such as natural
resources, efficient and skilled low-cost labour, trade barriers, etc. The main propose of the eclectic paradigm is to
provide an analytical he could choose the most suitable approach for his investigation.
The eclectic paradigm provides merely a comprehensive framework. It does not specifically high light the
advantages of competitiveness in the foreign countries. This theory does not take into account any single TNC theory
on priority basis. It points out the circumstances which the investigator should take into account in deciding which
theory would suit his needs.

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 Q. 3. What are the long-term factors affecting the demand for primary commodities? Discuss and
explain major International Commodity Agreements.
Ans. Following are the factors causing instability in prices of commodities:
(1) Inelastic Nature of Supply of Commodities–Commodities have inelastic supply. It is very difficult for the
suppliers to adjust their supply base in respect of commodities. There are many uncontrollable factors like weather,
insufficient storage facilities etc.
(2) Competition from Substitutes–A number of major export items like coffee, tea and cocoa are facing
inter-se competition, i.e. competition among constituents of the same group as well as competition from substitutes. It
is due to change in tastes and dietary habits. Cocoa, coffee and tea are threatened by other chemical and biological
processes like enzymes and fermentation technology. Further, can sugar is being fast replaced by artificial sweetness.
Industrial raw materials such as rubber, jute, cotton and steel face severe competition from synthetics. In the engineering

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plastics has replaced structural steel.
(3) Technological Developments–Introduction of new technologies has led to economies in the use of raw

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material. For example, demand for iron ore has declined use to recycling of metal scrap.

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(4) Low Income Elasticity of Demand–Developing countries produce primarily food-stuffs such as tea,

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coffee, cocoa, etc. which are characterized by low income elasticity of demand. Low income elasticity means that

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the rate of change in demand for a certain rate of change in income is low. It implies that growth in incomes in
developed countries has not been followed by a proportionate increase in demand for foodstuffs. It is due to the fact
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that consumption of foodstuffs has reached saturation levels in most developed countries.

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(5) Growth of Service Sector–Since the beginning of the 1970s, role of the services sector has increased at

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the cost of primary products. Services sector has also affected manufacturing sector leading to reduction in demand
for raw materials.

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Following are major commodities agreements:
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(1) International Natural Rubber Agreement
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(2) International Sugar Agreement

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(3) International Tin Agreement

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(4) International Cocoa Agreement

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(5) International Coffee Agreement

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(6) International Olive Oil Agreement

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(7) International Wheat Agreement

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(1) International Natural Rubber Agreement–International Natural Rubber Agreement was the first agreement
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signed under the UNCTAD integrated programme of commodities. It was concluded on 6th October, 1979 and came

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into operational in November, 1981when the buffer stock manager started buying natural rubber in order to stabilize

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prolonged decline in natural rubber. This agreement uses a buffer stock. The agreement managed to keep prices
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within the specified range in 1981 and 1982 but then had to adjust the range downwards. The agreement got the

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support of producers and consumers. The International Natural Rubber Agreement used buffer stock operation to
maintain prices at specific level. There was expected to be regular review of prices at every 18 month. Sale from

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buffer stock and purchase by buffer stock agency was made on the basis of stipulated price. This agreement met with
mixed success during its operations. The Agreement was partially successful in holding the price within the limit.
(2) International Sugar Agreement–There have been four international sugar agreements in post war period.

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The first agreement came into force in January 1954, the second in 1959. The economic provisions of the latter were
suspended in 1962 following the 1960 Cuba crisis, although the remaining provisions were extended until 1968. The
next agreement, also without economic provisions, was signed in 1968, introduced in 1969 and abandoned in 1973.
The next agreement, again without economic provisions, was agreed in 1977, came into operation in 1978, and ran
with an extension, until the end of 1984 (without the participation of the European community). It has been argued that
it both reduced the export earnings of the developing country compared to a free trade situation and increased the
instability of prices. Mac Bean and Snowden have stated: “This is one market where free competition would in all
likelihood bring the best results in terms of stability, efficiency and inquiry. The ISAs were palliatives diverting attention
from the much greater priority of persuading the rich nations to reduce their protection of best sugar.”
The International Sugar Agreement has probably the worst record of all. Sugar agreement could not achieve
much success due to following reasons:

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 (i) Sugar is produced by developed and developing countries.
(ii) There was differences of opinions on holding stocks.
(3) International Tin Agreement–International Tin Agreement was concluded in 1954 but became effective
only in 1956. It is the mixture of buffer stock and exchange controls. It was renewed regularly in essentially unchanged
form until 1982 when United States and other two countries with drew. The agreement was unable to cope with the
major price fluctuations that occurred when prices went above the ceiling. The controlling authority (the Tin Council)
ran out of money in 1985 and was finally dissolved in 1990.
(4) International Cocoa Agreement–Internatio-nal Cocoa Agreement was signed in 1973 and extended in
1976. It involved a buffer stock and export quotas. The agreement included following provisions:
(a) Minimum price of 23 US cents and maximum price of 32 US cents per year.
(b) A quota adjustment mechanism.
(c) A buffer stock of 2,50,000 tons capacity to be financed through a levy of 1 US cents per pound on exports
and imports of cocoa.
The Agreements could not succeed due to following reasons:
(i) Ivory coast–a major producer did not participate

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(ii) There was lack of adequate resources

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(iii) The buffer stock was completely inactive.

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(5) International Coffee Agreement–This agreement was first established in 1963. This agreement employed

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an export quota system. There was second agreement in 1968 which was terminated in 1972 because there was frost

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damage to the Brazilian crop leading to major price increases and the mechanism collaspsed. After gap of three years

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the third agreement came into force in 1976; the high prices of the late 1970s meant that the export quota provisions
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were applied only near the end of 1980. The fourth agreement (1983) in similar to its predecessor; quotas were
suspended in 1986 because of high prices, but reintroduced in 1987. There have been considerable and highly discounted
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sales outside the agreement. The differences of interest (between large and small procedures, and between producers
and consumers) make it unlikely that it will be very effective.
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(6) International Wheat Agreement–Interna-tional Wheat Agreement a multilateral contract system. The
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first international Wheat agreement was signed in 1949 and was revised or extended in 1953, 1956, 1959 and 1962. It
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was replaced with a new agreement which consisted of the Wheat Trade Convention and Food Aid Convention in
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1967. The current Wheat Trade convention was signed in 1971. It has been renewed regularly. The current Wheat

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Trade convention contains no provisions on prices or on rights and obligations. The Food Aid convention does still
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provide for annual contributions of various grains by a group of developed and grain exporting nations.
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(7) International Olive Oil Agreement–There were two international Olive Oil Agreements. The first agreement
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was signed in 1959. When under the auspices of the UN, 11 members participated of which 9 were exporting
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countries and 2 were importing countries. The duration of the agreement was 4 years. The second agreement was
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signed in 1963 when 11 members participated of which 7 were exporting countries and 4 were importing countries.
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The duration of the agreement was 4 years. An international olive oil council was established in 1963, to make studies
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of the olive oil market, production and prices etc. These agreements aimed at price stabilization through price control.
These agreements have not been successful to the extent. Except a few, all agreements could not achieve their
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objectives due to following reasons:

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(ii) There was lack of consensus in implementing the agreement. Many countries continued their operations

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violating the agreement.
(iii) Holding of buffer stocks has been the point of conflict between countries.
(iv) Many important countries refused to join the agreement.
(v) Commodity agreements covered only seven commodities – cocoa, tin, coffee, olive oil, rubber, sugar and
wheat.
Q. 4. Comment on the following.
(i) Demographic environment does not influence the international business decisions.
Ans. There are a number of factors belonging to demographic environment that can affect a business decision.
Demographics are various traits that can be used to determine product preferences or buying behaviors of consumers.
Most companies identify their key customers through these various traits. They then target consumers with like
characteristics in their advertisements and promotions. Targeting consumers with similar demographic characteristics

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helps maximize a company's sales and profits. Income is one demographic variable that can affect businesses. A
company's products usually appeal to certain income groups. For example, premium products such as high-end
woman's clothing usually appeal to women with higher incomes. Conversely, people with comparatively lower incomes
are more sensitive to price and, therefore, may prefer purchasing discount products. People with lower incomes
have less disposable income. Age is another demographic element that impacts businesses. A company's products
and services are more likely to appeal to certain age groups. Younger people under 35 are often the first consumers
to purchase high-tech products like cell phones, electronic books and video games.
(ii) Technology market is not a seller’s market.
Ans. Technology market is a market where technology is purchased of sold for a price. Technology market
consists and firms selling the technology and firms purchasing the technology. Purchasers of technology have three
main reasons for purchasing technology. They are:

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(i) Innovating a new process or a product by a firm is costlier than buying technology in the market. It is often
said that one does not need to invent a wheel again and again.

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(ii) Since a commercially successful technology has already proved its utility the buyer finds it very attractive
to buy the technology.

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(iii) A firm which has no incentive to become a leader in the market either by innovating a new product or a

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new process would find it more convenient to buy the most modern technology from the owner which is
most often a TNC than taking the risk of innovating a similar technology.
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countries i.e. TNCs. The sellers of technology are induced to sell technology because the life cycle of the technology
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is short as a result of fast technological innovations. Technology market is a sellers market because sellers of technology

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are a few large TNCs while the purchasers of technology are a very large number of firms from developing countries.
(iii) Arbitration is not preferred by the parties involved in international business.

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Ans. Arbitration is the favoured method for resolving international commercial disputes between the parties
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involved in international business. With the growth of International Trade and Commerce, there was an increase in
disputes arising out of such transactions being adjudicated through Arbitration. In an international commercial
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arbitration, parties are free to designate the governing law for the substance of the dispute. If the governing law is not

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specified, the arbitral tribunal shall apply the rules of law it considers appropriate in view of the surrounding
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circumstances. Arbitration enables the parties to a contract, to agree that if a dispute arises, a neutral and respected
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third party or parties will be appointed to resolve their dispute in accordance with procedures that they will have a

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large part in devising, in a desired venue, in accordance with a set of arbitration rules they have chosen, with a

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particular set of laws to give the arbitration its legal basis (the lex arbitri) and another set of laws in accordance to
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which the dispute will be resolved (lex causa).
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(iv) Encryption does not convert data into an unintelligible form.
Ans. Cryptography or encryption is a technique to convert data into an unintelligible form which cannot be
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reconverted into the original format without a secret decryption key. Its object is to prevent vital information going into

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the hands of unauthorized persons.

Also add:

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In recent years, there have been numerous reports of confidential data, such as customers' personal records,
being exposed through loss or theft of laptops or backup drives; encrypting such files at rest helps protect them if
physical security measures fail. Encryption is also used to protect data in transit, for example data being transferred

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via networks (e.g. the Internet, e-commerce), mobile telephones, wireless microphones, wireless intercom systems,
Bluetooth devices and bank automatic teller machines. There have been numerous reports of data in transit being
intercepted in recent years.[19] Data should also be encrypted when transmitted across networks in order to protect
against eavesdropping of network traffic by unauthorized users.
Q. 5. Write notes on the following?
(i) Terms of Trade
Ans. Terms of trade refers to ratio of export prices to import prices. In other words, terms of trade means the
quantity of imports that can be bought by a given quantity of a country’s exports. The world terms of trade lie in
between the domestic exchange ratios. The ratio at which a country can trade domestic products for imported
products is the terms of trade. The terms of trade determine how the gains from trade are distributed among trading
partners.

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 (i) Terms of Trade–By terms of trade we mean how may units of one good exchange for another good
between the two trading countries. Terms of trade may have two concepts:
(a) Commodities terms of trade
(b) Factorial terms of trade
(a) Commodity terms of Trade refers to the price of one good (say X) in terms of the other. Let us take an
example, with the resources ‘N’. India and Pakistan have following production possibilities:
Internal
Countries Production Possibility Exchange
Ratio
India 800 X or 400 Y 2X:1Y
China 400 X or 800 Y 1X:2Y

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In autarkies, India’s terms of trade is ½ unit of Y for one unit of X whereas Pakistan’s terms of trade is 2 units
of Y for one unit of X. The equilibrium terms of trade in India and Pakistan will be somewhere between ½ and 2.

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Thus terms of trade means the price of exported goods in terms of imported goods.

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(b) Factorial Terms of trade refers to the ratio between the home country’s wage rate and foreign country’s

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wage rate. In other words, factorial terms of trade means the number of hours of one country’s labour that will

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exchange for one hour of the other country’s labour. Factorial terms of trade is not used frequently because there

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is no exchange of labour between the two countries. International trade determines factorial terms of trade indirectly

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because goods represent labour hours spend in their production.

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It is commodity terms of trade which is widely used and referred as terms of trade. Accordingly, terms of trade

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means the quantity of imports that can be bought by a given quantity of a country’s exports. World’s terms of trade
will lie in between the domestic exchange ratios. Fr
(ii) Strategic alliances and technology transfer

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Ans. Strategic Alliance–Strategic alliance has been becoming more and more popular in international business.

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This form of strategy seeks to enhance the long-term competitive advantage of the firm by forming alliance with its
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competitors, existing or potential in critical areas, instead of competing with each other. The goals are to leverage
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critical capabilities, increase the flow of innovation and increase flexibility in responding to the market and technological
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changes. There are high risks and heavy research and development costs (especially in the area of new technologies)

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and the rapid obsolescence of new products. These factors have forced many TNCs to form technology based

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strategic alliance so that TNCs can share development costs, acquire new technologies and make better use of
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scarce qualified personnel.
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Following are the different types of alliances according to purpose:
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(i) Technology development alliances such as research consortia, simultaneous engineering agreements,
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(ii) Marketing, sales and service alliances.

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(iii) Multiple activity alliances.
Technology development and operations alliances are usually multicountry since these kinds of activities can be
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employed over several countries. The purpose of strategic alliances is to maximize marginal contribution to fixed cost.

w ThTransfer of technology refers to transfer of physical goods i.e. capital goods and transfer of tacit knowledge
i.e., way of producting goods or establishing services from one agency to another agency. Transfer of technology

w
includes transfer of rights to use the patented knowledge, secret knowledge, trademark and brand name. International
transfer of technology means transfer of technology among firms located in different of countries.
There are two forms of technology transfer:
(i) Equity form or internalized form
(ii) Non-equity form or externalized form
Equity form or internalized form refers to investment associated technology transfer where control resides with
the transferor of technology. The transferor normally holds the majority or full equity ownership.
Non-equity form refers to those transfers of technology which are not associated with equity participation, such
as licensing, sub-contracting, strategic alliance etc.

9
 The distinguishing feature between these two forms of technology transferor is that in equity form of technology
transfer or has a significant and continuing financial stake in the success of the affiliate and, thus, sees the affiliate as
an integral part of the global strategy while non-equity form of technology transfer is without equity participation.
(iii) Implied conditions
Ans. Condition refers to a stipulation which forms the very basis of the contract or is essential to the main
purpose of the contract. The breach of condition entitles the buyer to rescind the contract, to reject the goods and
claim damages. Warranty refers to a stipulation collateral or subsidiary to the main purpose of the contract. The
breach of warranty is not considered to be serious and entitles the aggrieved party to claim only damages without any
right to avoid the contract or reject the goods.
Following are the implied conditions in a contract of sale:
(1) Implied condition as to title

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(2) Implied condition of sale by description
(3) Implied condition as to quality or fitness
(4) Implied condition as to merchantable quality
(5) Implied condition as to wholesomeness
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(6) Implied condition in a sale by sample
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(7) Condition implied by custom.
(iv) Utilitarianism
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Ans. According to utilitarianism rightness or wrongness of behaviour is judged by the consequences of these

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actions. Essentially the good or bad that results from an action determines whether the act was right or wrong.

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Utilitarianism is often described as the “greatest good for the greatest number of people”. One alternative could
produce the greatest good while a different alternative could produce some good for the greatest number. For

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example, a company can retrench a minority of workers to make the factory more cost effective so that majority of
workers in employment’s are benefitted.
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