Questions and case-studies for seminars

Theme 1.
Practical exercises

A TNC specialized in textile manufacturing wants to invest in your country. It

seeks to increase its production capacity through opening a plant there and it
intends to export a part of the products produced in this plant to developed
country markets with the rest to be sold on the host country market.

Find possible arguments in favour (group 1) and possible arguments against

(group 2) the choice of a greenfield investment instead of a merger or
acquisition from the point of view of the host country.

Find the same from the point of view of a TNC (group 3 for greenfield versus

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group 4 for merger or acquisition).

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In the end, discuss your arguments as follows: group 1 with group 4 and group

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2 with group 3. The purpose is for each group to convince the other that
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investment according to its preferred entry mode is the preferable option.
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Privatization-related foreign investment in Bolivia’s telecommunication

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(UNCTAD, 2005: 169)

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Bolivia privatized its long distance telecommunication company ENTEL

through international public bidding, open to national and foreign investors.
ETI Euro Telecom International (an affiliate of Telecom Italia) made the
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winning bid. Through the capitalization of ENTEL, it agreed to inject fresh

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capital equal to US$610 million in the exchange for a 50 per cent share of
equity participation (of the newly enlarged capitalized company) and 100 per
cent management control. These resources were deposited in accounts of
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ENTEL to be used later investment plans and the fulfillment of technical

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(quality) requirements. This arrangement stipulated that the privatized

enterprise could not invest abroad until it had met its commitments to expand
services in rural areas and in public telephone services. Priority had been given
to:

 The installation of telephone services in every community over 350

inhabitants;
 The installation of local services in every community over 10,000 in
habitants;
 The replacement of manual and similar telephone exchanges with digital
ones;

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  A five-fold increase in the number of public telephone booths.

Questions:
 Does the investment made by ETI qualify as FDI? Justify your answer.
 After the privatization, did ENTEL become a foreign affiliate? If yes, what
type?
 What was the entry mode chosen by ETI? Would the alternative have been a
better solution from the investors’ point of view? Discuss in groups and give
arguments.
 What was the host country’s influence on the privatization outcome?
 What are the benefits of this acquisition for ETI?

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Theme 2

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Practical exercise:

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1. Based on the analysis of the articles by Michael Porter and other authors of
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Harvard Business Review (or other relevant sources) mentioned below estimate:

- the ways in which the business environment of modern companies transforms;

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- the ways in which the five forces model of Porter transforms under the pressure
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of modern technologies evolution.

1. Porter M.E., Heppelmann J.E. How smart connected products are

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transforming competition // Harvard Business Rev. – Boston, 2014. – N

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11/12. – Mode of access:https://hbr.org/2014/11/how-smart-connected-

products-are-transforming-competition
2. Porter M.E., Heppelmann J.E. Why every organization needs an
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augmented reality // Harvard Business Rev. – Boston, 2017. – Vol. 95, N

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11/12. – Mode of access: https://hbr.org/2017/11/a-managers-guide-to-

augmented-reality#why-every-organization-needs-an-augmented-reality-
strategy
3. Porter M.E., Heppelmann J.E. How does augmented reality work? //
Harvard Business Rev. – Boston, 2017. – Vol. 95, N 11/12. – Mode of
access: https://hbr.org/2017/11/a-managers-guide-to-augmented-
reality#why-every-organization-needs-an-augmented-reality-strategy
4. Porter M.E., Heppelmann J.E. The battle of the smart glasses //
Harvard Business Rev. – Boston, 2017. – Vol. 95, N 11/12. – Mode of
access: https://hbr.org/2017/11/a-managers-guide-to-augmented-
reality#why-every-organization-needs-an-augmented-reality-strategy

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 5. Morse G. One company’s experience with AR // Harvard Business
Rev. – Boston,2017. – Vol. 95, N 11/12. – Mode of access:
https://hbr.org/2017/11/a-managersguide-to-augmented-reality#why-every-
organization-needs-an-augmented-reality-strategy
6. Augmented reality in the real word // Harvard Business Rev. – Boston,
2017. – Vol. 95, N 11/12. – Mode of access: https://hbr.org/2017/11/a-
managers-guide-toaugmented-reality#why-every-organization-needs-an-
augmented-reality-strategy

2. Based on the materials provided below evaluate prospects of the industries and
segments analyzed in the sources for the Republic of Belarus.
1. Vision 2050 Report // International Air Transportation Association
[Electronic source]. – Montreal – Geneva, 2011. – Mode of access:
http://www.hbs.edu/faculty/Publication

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%20Files/IATA_Vision_2050_d4f5285f-63ed-4793-86e3-a3f6b0fd62cc.pdf

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2. Uenlue, M. Strategy: Porter’s Five Forces explained (plus example

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Uber) / Murat Uenlue // [Electronic source]. – 2018. – March. – Mode of
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access: https://www.innovationtactics.com/porter-five-forces/.
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Theme 3
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BUSINESS GAME
"Evaluation of the interaction of the country (integration association) when
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signing regional agreements"

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Purpose of the game: To teach undergraduates practical skills in the

following areas:
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1) analysis of foreign trade interaction (collection and holding of

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information events; search and selection of potential partners);

2) evaluation of the interaction of the main indicators and indices;
3) the choice of effective forms of interaction with the allocation of certain
product groups, industries.
Conditions of the game:
1. A business game is held in a practical lesson after listening to
undergraduates of the main course.
2. Participants are divided into two groups (country (integration association),
potential partners in a regional agreement).
3. The main interaction parameters for the calculation of the estimate are
initially set.

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 4. The choice of additional indicators, indices by the participants of a
business game independently during the course of work is possible.
5. The participant conducts research, presents data analysis, and evaluates
potential interactions.

Output: The presented data allow to evaluate promising forms of cooperation

between countries (associations), the allocation of potentially effective trade
groups and industries.

Theme 4
Practical exercises

Case study 1: Thailand in Toyota’s global R&D network (UNCTAD, 2005:

145)

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Toyota Motor Corporation founded the “Toyota Technical Center Asia Pacific

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(Thailand)” in Thailand in August 2003. The centre was officially opened in

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May 2005. Toyota has invested 1.1 billion baht (US$27 million) into this centre

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so far. During the two-year preparation for opening, almost all locally recruited
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engineers and scientists were sent to Japan for a training period of 6 to 12
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months.
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When it first opened, the “Toyota Technical Center Asia Pacific (Thailand)”
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employed 275 persons (including 32 Japanese), of which 250 were engineers

and technicians (2 per cent of Toyota’s global R&D staff). The centre has both a
regional mandate for Asia (excluding China) and a global one to carry out R&D
for the parent corporation. The center is in charge of projects in basic research,
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technology development, research on market conditions and design, along with

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testing and evaluation.

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Thailand was chosen as a location for Toyota’s Asian R&D center for various
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reasons. The existence of a manufacturing and sales affiliate there was an

important consideration, although there is no equity or administrative link
between the two units. Other reasons include good local infrastructure, political
stability, favourable geographical location, a skilled labour force and favourable
government policies (including incentives). In the area of policies, outstanding
issues include the eventual exemption from customs duties of materials (such as
motor vehicles) imported for testing, and the provision of full licenses for test-
driving.

Questions:

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  How did the transfer of technology take place in this case? What did it
involve?
 What factors influenced Toyota’s decision to establish its technical centre in
Thailand?
 What are the likely benefits for the host country?

Case study 2: FDI and upgrading competitiveness in the Indian software

industry (UNCTAD, 1999b)

The Indian software export industry, based around Bangalore, Mumbai, Delhi
and Madras, had a significant boost in the initial stages from foreign investors.
In 1985, Citibank established a wholly-owned, export-oriented, offshore
software company in the Santa Cruz Electronics Export Processing Zone in
Mumbai. India’s attractions were twofold: low-cost English-speaking skilled

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labour and a time difference between Europe and North America that allowed

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for almost 24-hour workdays.

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The bulk of FDI in this industry went into what is known in the software
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industry as low-level data entry work. This refers to contracts in which the
client gives software developers exact specifications, and leaves little to the
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discretion or creativity of the programmers. This form of export activity did not,
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however, promise much by way of skill upgrading. An integral part of the

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restructuring of the industry was the attraction of Texas Instruments (TI), which
established its first wholly owned export-oriented subsidiary. In addition to
regulatory accommodation, the Government of India developed the Software
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Technology Parks of India Scheme, where it provided infrastructure, buildings,

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electricity, telecommunications facilities and high-speed satellite links. Not

much after, Hewlett-Packard (HP) set up a 100 per cent owned subsidiary in
Bangalore. In 1990-1991, quantitative restrictions on imports of intermediate
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and capital goods for software exports were abolished.

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The TI and HP investments intervened in the Indian software industry at a

critical stage of its development. Since then, many domestic firms have
developed a reputation for reliable, high quality work at relatively low cost, and
have been able to move beyond simple data entry or on-site services. They have
won higher value-added work where they are entrusted with a whole project
instead of specific components. Others have been able to develop complete
software packages, which are rebadged and sold overseas (similar to the OEM
relationship in consumer electronics).

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 The export competitiveness of the Indian software industry is now well
established. Exports rose rapidly after 1995. The five largest software
companies in India today are domestically owned. TNCs played an important
initial role in mobilizing domestic capabilities. With government assistance and
the removal of import restrictions, domestic companies were then able to
supersede foreign affiliates in terms of export competitiveness.

Questions:
 What were the main factors that attracted FDI in the software industry to
India?
 What was the role of the Government in encouraging FDI in the software
industry and helping domestic firms in the industry build up their export
competitiveness?

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