Indian Institute of Foreign Trade, New Delhi

Executive Post Graduate Diploma in International Business (2020-2021 Batch)

Fundamental of International Management
End Term Examination

Duration: 1 ½ Hrs for End Term Exam + 30 Minutes for End term Quiz
Max. Marks: End Term Quiz (20) & End Term Exam (20) = 40 Marks
Instructions
Part 1: Multiple Choice Questions. Answer all questions. All questions carry equal marks.
Part 2: Descriptive Questions, which has two parts Section A & B.
Section A is with five questions, answer any two questions. All questions carry equal marks.
Section B. Case study analysis answers all the questions given below the case study. All
questions carry equal marks
Part 2
Section A. Read each question carefully. Answer any two questions. All question carry equal
marks. 2X5=10 Marks
Q1. Compare the advantages associated with the foreign market entry strategies of exporting,
licensing, and wholly owned subsidiaries. What information would you need to collect and
what factors would you consider when selecting a strategy?
Q2. You are the headquarters executive responsible for the financial aspects of Overall
Corporation. What type of headquarters foreign subsidiary control relationship-
centralization, formalization, or normative integration are you likely to establish? Why?

Q3. Some international quality gurus claim that high quality products or services are those
that are error free. Others claim that high quality exists when customers’ needs are satisfied.
Still others claim that high quality products or services must be innovative. Do you subscribe
to one of these views? If not, how would you define quality? Explain how the choice of a
quality definition affects manager’s behaviour.
Q4. Managers are frequently criticized for focusing too much attention on the achievement of
short term goals. In your opinion, how much attention should be given to long term versus
short term goals? In the event of conflict, which should be given priority? Explain.
Q5. Assume that you are the CEO of an Automobile company. What are the basic environmental
challenges its globalization efforts? Give some specific examples that relate to that automobile
company.
Section B. “Lincoln Electric” Case is given for Critical analysis. Read the case
carefully and answer all the questions given at the end of the case. All questions carry
equal marks.

Imagine having a management system that is so successful people refer to it with capital
letters - the Lincoln Management System - and other businesses benchmark their own
systems by it. That is the situation of Ohio-based Lincoln Electric. For a number of years,
other companies have tried to figure out Lincoln Electric's secret - how management coaxes
maximum productivity and quality from its workers, even during difficult financial times.
Lately, however, Lincoln Electric has been trying to solve a mystery of its own: Why is the
company having such difficulty exporting a management system abroad that has worked so
well at home?
Lincoln Electric is a leading manufacturer of welding products, welding equipment, and
electric motors, with more than $1 billion in sales and 6,000 workers worldwide. The
company's products are used for cutting, manufacturing, and repairing other metal products.
Although it is now a publicly traded company, members of the Lincoln family still own
more than 60 percent of the stock.

Lincoln uses a diverse control approach. Tasks are precisely defined, and individual
employees must exceed strict performance goals in order to achieve top pay. The incentive
and control system is powerful. Production workers are paid on a piece-rate basis, plus merit
pay based on performance. Employees also are eligible for annual bonuses, which fluctuate
according to the company's profits, and they participate in stock purchase plans. A worker's
bonus is based on four factors: work productivity, work quality, dependability, and
cooperation with others. Some factory workers at Lincoln have earned more than $100,000 a
year.

However, the Lincoln system succeeds largely because of an organizational culture based on
openness and trust, shared control, and an egalitarian spirit. To begin with; the company has
earned employee trust with its no layoff policy. In fact, the last time it laid off anyone was in
1951. Although the line between managers and workers at Lincoln is firmly drawn, managers
respect the expertise of production workers and value their contributions to many aspects of
the business. The company has an open-door policy for all top executives, middle managers,
and production workers, and regular face-to-face communication is encouraged. Workers are
expected to challenge management if they believe practices or compensation rates are unfair.
Most workers are hired right out of high school, then trained and cross-trained to perform
different jobs. Some eventually are promoted to executive positions, because Lincoln
believes in promoting from within. Many Lincoln workers stay with the company for life.

One of Lincoln's founders felt that organizations should be based on certain values,
including honesty, trustworthiness, openness, self-management, loyalty, accountability, and
cooperativeness. These values continue to form the core of Lincoln's culture, and
management regularly rewards employees who manifest them. Because Lincoln so
effectively-socializes employees, they exercise a great degree of self-control on the job. Each
supervisor oversees 100 workers, and less tangible rewards complement the piece-rate
incentive system. Pride of workmanship and feelings of involvement, contribution, and
esprit de corps are intrinsic rewards that flourish at Lincoln Electric. Cross-functional teams,
empowered to make decisions, take responsibility for product planning, development, and
marketing. Information about the company's operations and financial performance is openly
shared with workers throughout the company.

Lincoln emphasizes anticipating and solving customer problems. Sales representatives are
given the technical training they need to understand customer needs, help customers
understand and use Lincoln's products, and solve problems. This customer focus is backed
by attention to the production process through the use of strict accountability standards and
formal measurements for productivity, quality, and innovation for all employees. In addition,
a software program called Rhythm helps streamline the flow of goods and materials in the
production process.

Lincoln's system worked so well in the United States that senior executives decided to extend
it overseas. Lincoln built or purchased eleven plants in Japan, South America, and Europe,
with plans to run the plants from the United States using Lincoln's expertise with
management control systems. Managers saw the opportunity to beat local competition by
applying manufacturing control incentive systems to reduce costs and raise production in
plants around the world. The results were abysmal and nearly sunk the company. Managers
at international plants failed to meet their production and financial goals every year-they
exaggerated the goals sent to Lincoln's managers in order to receive more resources,
especially during the recession in Europe and South America. Many overseas managers had
no innate desire to increase sales, and workers were found sleeping on benches because not
enough work was available. The European labor culture was hostile to the piecework and
bonus control system. The huge losses in the international plants, which couldn't seem to
adopt Lincoln's vaunted control systems, meant the company would have to borrow money
to pay U;S. workers' bonuses, or forgo bonuses for the first time in Lincoln's history. Top
managers began to wonder. Had they simply done a poor job of applying the Lincoln
Management System to other cultures, or was it possible that it simply wasn't going to work
abroad?

Questions: 4X2.5=10 Marks

B. 1. What types of control (feed forward, concurrent, or feedback) are illustrated in this
case? Would you characterize Lincoln’s control approach as primarily bureaucratic or
decentralized? Explain your answers?
B. 2. Based on what you’ve just read, what do you think makes the Lincoln System so
successful in the United States?
B. 3. What is the problem with transporting Lincoln’s control systems to other national
cultures? What suggestions would you make to Lincoln’s managers to make future
international manufacturing plants more successful?
B. 4. Should Lincoln borrow money and pay bonuses to avoid breaking trust with its U.S.
workers? Why or why not?
---------------------------------- Best Wishes --------------------------