MBA (FT) – March/April 2022

MBAFT -6403: GLOBAL BUSINESS ENVIORNMENT

Time: 3 Hours Max. Marks: 70

Note: All questions are compulsory.

Ques 1 : Semiconductors are tiny microprocessor and memory chips used in computers,
phones, cars, and a host of other electronic products. Demand for semiconductor chips surged
in 2020 as the COVID-19 pandemic meant more people working from home, watching more
streaming services, playing more video games and so on, all of which involve products using
chips. The surge in demand resulted in a global shortage of chips, and renewed attention on the
industry, its capacity, and the players involved. While U.S. companies dominate the industry,
producing some 44 percent of the chips they design, a significant share of chip production now
takes place in Japan, Taiwan, and South Korea. China, a relative latecomer to the business, has
vowed to become independent in chip production within just a few years.
Also, When the COVID-19 pandemic hit in early 2020, automakers responded by scaling back
production, a decision that resulted in cancelled orders for chips. Chip makers, in turn,
reduced their own production or switched production to produce chips for other industries.
When the auto industry rebounded more quickly than anticipated, automakers were caught
off guard, without enough chips to produce vehicles to meet demand. Without the chips they
needed to produce their cars, automakers were forced to reduce production and lay off
workers

Ques 1a: In the 1960s, the majority of the world’s semiconductor production took place in the United
States. Today, the United States continues to produce and export chips, but a significant share of
production has moved to Southeast Asia. Why? What changes are likely to the global semiconductor
industry once China develops its own chip production?

Ques 1b: What does the global shortage of semiconductor chips suggest about the future of
supply chains in the auto industry? As the world moves away from traditional combustion
engine vehicles and towards electric vehicles, the number of semiconductor chips required in
each car will go up. Should automakers continue to outsource their chips or move to in-house
production?
(10*2 = 20 marks)

Ques 2 : Vietnam’s economic transformation since the end of the Vietnam War when the north
and south were reunited under Communist rule. After a decade of watching the country slide
into economic crisis, in 1986 the Communist Party made the decision to introduce a series of
reforms designed to move the economy away from the then centrally planned socialist
economy toward a market economy. Reforms were introduced to privatize agricultural land
and dismantle farm collectives. Then, policies that restricted free enterprise were relaxed and
price controls were dropped. In addition, Vietnam reached out to other countries for investment
and entered into trade agreements with neighboring countries and with the United States. The
country even joined the World Trade Organization in 2007.

Vietnam’s efforts at economic reform proved to be hugely successful. In 1986, the country was
one of the poorest in the world with a per capita income of just $100, inflation was at 700
percent, and economic and political life was tightly controlled by the government. By 2016,
GDP per capita on a purchasing parity basis was $6,400, economic growth rates were 6-7
percent annually, and the country was a major exporter of textiles and agricultural goods.
Despite these gains though, the country’s significant problems remain. Corruption is
widespread, the country is dependent on the export of a few commodities, and high levels of
debt plague remaining state-owned enterprises. In addition, the country’s political system
continues to suppress independent political parties, human rights organizations, and labor
unions. A discussion of the case can begin with the following questions:

Ques 2a : Why did Vietnam experience a low economic growth rate in the decade after the end
of the Vietnam War in 1976? Vietnam now has an economy that is growing strongly with low
unemployment and rising living standards. What changes in economic policy have been
responsible for this economic transformation?

Ques 2b : The level of public corruption in Vietnam is high. Why is this the case? How do you
think this affects Vietnam’s economic performance? What should the government do about
this? How do you think a shift toward more democratic institutions will affect economic
progress in Vietnam?
(10*2 = 20 marks)

Ques 3. Nearly 50 years ago, the British luxury apparel maker signed a licensing agreement
with Sanyo Shokai. The agreement allowed Burberry to develop a market in Japan, yet avoid
the cost and risk of doing so. More recently, Burberry ended its licensing arrangement in favor
of opening its own stores in the country. While this new strategy implies that Burberry will
bear all the costs and risk of operating in Japan, it will also regain complete control over how
its brand is used and collect all profits associated with its brand.

Why did Burberry initially choose a licensing strategy to expand its presence in Japan? What
limitations of the licensing strategy became apparent over time? Should Burberry have
expected these drawbacks to arise?
(15 marks)

Ques 4 : Discussing the success of German automaker BMW. The company, which sells cars,
motorcycles, and aircraft engines, has a reputation for streamlined quality and luxury. Selling
about 2.4 million vehicles a year, BMW is a leader in the global auto market. Much of BMW’s
success can be attributed to its emphasis on being innovative in every part of its business. One
example of this is its “product genius” who helps to ensure that customers are satisfied with
their purchase and feel that their money was well spent. In addition to its BMW brand, the
company also owns the British brands, Rolls-Royce and MINI, allowing it to target different
parts of the market. Discuss the role of innovation as a key to BMW’s success. How does this
focus help position BMW for the future? Reflect on the changing dynamics of the global
marketplace and the implications of those changes for BMW.
(15 marks)