Total No. of Questions SEAT No.

:
: 5]
PA-4643 [Total No. of Pages :
[5946]-3006
2
M.B.A.
307:GE-UL-14 INTERNATIONAL BUSINESS ENVIRONMENT
(2021 Pattern) (Semester - III)

Time : 2 Hours] [Max. Marks : 50

Instructions to the candidates :
1) All questions are compulsory.
2) Answer all questions, draw diagrams wherever necessary.

Q1) Remembering (MCQ) (Answer any 5 out of 8) :

a) Globalisation refers to .
i) A more integrated & interdependent world
ii) Global warming
iii) Less foreign trade & investment
iv) Lower incomes worldwide.
b) Define International Monetary Fund?
c) World Trade Organization was established on .
i) 1st Jan 1995
ii) 3rd Oct 1996
iii) 20th Feb 1994
iv) 1st April 1995
d) Define Digitization?
e) What does the term FDI mean?
f) Define Balance of Payments.
g) Define the term Forex Market.
h) Define Outsourcing.

a) Globalization refers to i) A more integrated & interdependent world.

Globalization is the process of increasing interconnectedness and interdependence

between different countries and regions of the world. This can be seen in the
growth of international trade, investment, and migration, as well as the spread of
technology and culture.

Globalization has both positive and negative effects. On the positive side, it can
lead to economic growth, increased prosperity, and a more peaceful world. On the
negative side, it can lead to job losses, cultural homogenization, and environmental
problems.

b) The International Monetary Fund (IMF) is an international organization that

provides loans to countries experiencing financial difficulties. It was established in
1944 to help stabilize the global financial system and promote economic growth.
The IMF has 190 member countries.

c) The World Trade Organization (WTO) is an international organization that sets

rules for trade between countries. It was established in 1995 to promote free trade
and economic development. The WTO has 164 member countries.

The WTO was established on 1st January 1995.

d) Digitization is the process of converting information into a digital format. This

can be done with text, images, audio, and video. Digitization has made it possible
to store, transmit, and process information much more efficiently. It has also led to
the development of new technologies, such as the internet and online shopping.

e) FDI stands for Foreign Direct Investment. It is when a company in one country
invests in a company in another country. FDI can take many forms, such as buying
a controlling stake in a company, building a new factory, or setting up a joint
venture. FDI can help to boost economic growth and create jobs in both the home
and host countries.

f) The balance of payments is a record of a country's economic transactions with

the rest of the world. It tracks the flow of goods, services, capital, and financial
transfers between a country and other countries. The balance of payments is
important for understanding a country's economic health.

g) The forex market is the largest financial market in the world. It is where
currencies are traded. The forex market is open 24 hours a day, 5 days a week. It is
used by businesses, governments, and individuals to buy and sell currencies.

h) Outsourcing is the practice of hiring a company or individual in another country

to perform a task or service that could be done in-house. Outsourcing is often done
to save money or to access specialized skills or resources that are not available in
the home country.
Q2) Understanding (Answer any 2 out of 3) :

a) Explain the nature & scope of International Business.

• Nature of International Business

International business is the process of conducting business

activities across national borders. It involves the exchange of
goods, services, capital, technology, and knowledge between
different countries. International business can take many forms,
including exporting, importing, licensing, franchising, and
direct investment.

The nature of international business is complex and ever-

changing. It is influenced by a variety of factors, including:

* Economic factors, such as trade barriers, exchange rates, and

interest rates
* Political factors, such as government regulations and political
stability
* Cultural factors, such as language, religion, and customs
* Technological factors, such as the internet and transportation

• Scope of International Business

The scope of international business is vast. It encompasses a

wide range of activities, including:

* **Exporting and importing:** This is the most basic form of

international business. It involves selling goods or services
produced in one country to consumers in another country.
* **Licensing:** This is when a company in one country gives
another company in another country the right to use its brand
name, technology, or other intellectual property in exchange for
a fee.
* **Franchising:** This is a type of licensing where the
franchisor provides the franchisee with a complete business
model, including the brand name, products, marketing, and
operations.
* **Direct investment:** This is when a company in one
country invests in a company in another country. This can take
the form of buying a controlling stake in the company, building
a new factory, or setting up a joint venture.

In addition to these traditional forms of international business,

there are a number of emerging trends, such as:

* **Globalization of supply chains:** This is the trend of

companies sourcing their goods and services from all over the
world.
* **E-commerce:** This is the buying and selling of goods and
services online. It has made it possible for businesses to reach
customers all over the world.
* **Social media:** This has become a powerful tool for
businesses to connect with customers and partners around the
world.

The scope of international business is constantly evolving. As

new technologies and trends emerge, businesses will need to
adapt their strategies to stay competitive in the global
marketplace.

b) Discuss the process of Internationalization?

The process of internationalization is the process by which a
company expands its operations into foreign markets. It is a
gradual process that typically begins with exporting and then
moves on to more involved forms of internationalization, such
as licensing, franchising, and direct investment.

There are a number of factors that can influence a company's

decision to internationalize. These factors can include:

• The size and growth potential of the foreign market:

Companies are more likely to internationalize if they see
a large and growing market for their products or services.
• The cost of exporting or investing in a foreign market:
The cost of internationalization can vary depending on
the market and the mode of entry. Companies need to
carefully consider the costs and benefits of
internationalization before making a decision.
• The company's resources and capabilities: Companies
need to have the resources and capabilities to successfully
internationalize. This includes having a strong product or
service, a good management team, and the financial
resources to support international expansion.
• The company's risk appetite: Internationalization can be a
risky proposition. Companies need to be willing to take
 risks if they want to be successful in the global
marketplace.

The process of internationalization can be divided into four

stages:

1. Exporting: This is the most basic form of

internationalization. It involves selling goods or services
produced in one country to consumers in another country.
2. Licensing: This is when a company in one country gives
another company in another country the right to use its
brand name, technology, or other intellectual property in
exchange for a fee.
3. Franchising: This is a type of licensing where the
franchisor provides the franchisee with a complete
business model, including the brand name, products,
marketing, and operations.
4. Direct investment: This is when a company in one
country invests in a company in another country. This can
take the form of buying a controlling stake in the
company, building a new factory, or setting up a joint
venture.

The process of internationalization can be a complex and

challenging one. However, it can also be very rewarding.
Companies that are successful in internationalization can
achieve significant growth and profitability.

Here are some of the benefits of internationalization:

• Increased sales and profits: Internationalization can help

companies to reach new customers and markets, which
can lead to increased sales and profits.
• Risk diversification: By expanding into foreign markets,
companies can diversify their risk and reduce their
dependence on a single market.
• Access to new resources: Internationalization can give
companies access to new resources, such as labor, raw
materials, and technology.
• Learning and innovation: Internationalization can help
companies to learn and innovate. By interacting with
different cultures and markets, companies can gain new
insights and ideas that can help them to improve their
 products and services.

However, there are also some challenges associated with

internationalization:

• Costs: Internationalization can be expensive. Companies

need to consider the costs of exporting, licensing,
franchising, and direct investment.
• Risks: Internationalization can be risky. Companies need
to be aware of the political, economic, and cultural risks
associated with doing business in foreign markets.
• Complexity: Internationalization can be complex.
Companies need to develop a strategy for
internationalization and then manage the implementation
of that strategy.
• Competition: Companies face increased competition in
foreign markets. They need to be able to compete with
local companies and with other multinational companies.

Overall, the process of internationalization can be a rewarding

one for companies that are willing to take on the challenges. By
carefully planning and executing their internationalization
strategy, companies can achieve significant growth and
profitability.

c) Describe the Modes of FDI?

There are four main modes of foreign direct investment (FDI):

• Mergers and acquisitions (M&A): This is when a

company in one country buys a controlling stake in a
company in another country. This is the most common
mode of FDI.
• Joint ventures: This is when two or more companies from
different countries agree to share ownership of a new
company. Joint ventures are often used to enter new
markets or to share resources and expertise.
• Greenfield investment: This is when a company in one
country builds a new factory or office in another country.
Greenfield investments are often used to take advantage
of lower costs or to gain access to new markets.
• Other modes: This includes investments in financial
 assets, such as stocks and bonds, and investments in
intellectual property, such as patents and trademarks.

The choice of mode of FDI depends on a number of factors,

including the company's goals, the target market, and the
regulatory environment.

Here is a brief overview of the four main modes of FDI:

• Mergers and acquisitions (M&A): This is the most

common mode of FDI. It is when a company in one
country buys a controlling stake in a company in another
country. This can give the acquiring company access to
new markets, new technologies, and new resources.
However, M&A can also be expensive and risky.
• Joint ventures: This is when two or more companies from
different countries agree to share ownership of a new
company. Joint ventures can be a good way to enter new
markets or to share resources and expertise. However,
joint ventures can also be complex and time-consuming
to set up.
• Greenfield investment: This is when a company in one
country builds a new factory or office in another country.
Greenfield investments can be a good way to take
advantage of lower costs or to gain access to new
markets. However, greenfield investments can also be
expensive and time-consuming to set up.
• Other modes: This includes investments in financial
assets, such as stocks and bonds, and investments in
intellectual property, such as patents and trademarks.
These modes of FDI are less common than M&A, joint
ventures, and greenfield investments. However, they can
still be a good way for companies to expand into foreign
markets.

The choice of mode of FDI depends on a number of factors,

including the company's goals, the target market, and the
regulatory environment. For example, if a company is looking
to enter a new market quickly and easily, then M&A may be the
best option. However, if a company is looking to build a long-
term presence in a market, then a greenfield investment may be
a better option. The regulatory environment also plays a role in
the choice of mode of FDI. For example, some countries may
 have restrictions on foreign ownership of companies. In these
cases, joint ventures or other modes of FDI may be the only
option.

Overall, the choice of mode of FDI is a complex decision that

should be made on a case-by-case basis. There is no one-size-
fits-all answer.

Q3) Applying (Answer any 1 out of 2) :

a) Demonstrate the role of IMF & World Bank in International Business.
The International Monetary Fund (IMF) and the World Bank (WB) are two of the
most important international organizations for international business. They play a
key role in promoting economic growth and stability around the world, and they
offer a variety of financial assistance and technical support programs to developing
countries.

The IMF is primarily responsible for stabilizing the international monetary system.
It does this by providing loans to countries experiencing balance of payments
difficulties, and by monitoring and advising on economic policies. The IMF also
plays a role in promoting international trade and investment.

The WB is primarily focused on reducing poverty and improving living standards

in developing countries. It does this by providing loans, grants, and technical
assistance to developing countries for projects in a variety of areas, such as
education, health, infrastructure, and agriculture. The WB also works to promote
good governance and economic reform in developing countries.

Both the IMF and the WB have a significant impact on international business. The
IMF's loans can help countries to weather economic crises and to implement
reforms that can improve their business environment. The WB's projects can help
to improve the infrastructure and the human capital in developing countries, which
can make them more attractive destinations for foreign investment.

In addition to their financial assistance programs, the IMF and the WB also offer a
variety of technical assistance programs to developing countries. These programs
can help countries to improve their economic policies, to develop their financial
markets, and to attract foreign investment.

The IMF and the WB are important players in the global economy, and they play a
key role in promoting international business. By providing financial assistance and
technical support to developing countries, they can help to create a more stable and
prosperous world for businesses to operate in.

Here are some specific examples of how the IMF and the WB have helped to
promote international business:

• In 2008, the IMF provided billions of dollars in loans to countries around the
world that were struggling with the financial crisis. These loans helped to
stabilize the global economy and to prevent a more widespread crisis.
• The WB has provided billions of dollars in loans to developing countries for
projects in infrastructure, such as roads, bridges, and airports. These projects
have made it easier for businesses to operate in developing countries and to
reach new markets.
• The WB has also provided technical assistance to developing countries on a
variety of issues, such as trade policy, financial regulation, and corporate
governance. This assistance has helped to improve the business environment
in developing countries and to attract foreign investment.

The IMF and the WB are not without their critics. Some argue that the IMF's
lending policies are too harsh and that they can lead to austerity measures that harm
the poor. Others argue that the WB's projects are often poorly designed and that
they do not always benefit the people they are intended to help.

Despite these criticisms, the IMF and the WB remain important institutions for
international business. They play a key role in promoting economic growth and
stability around the world, and they offer a variety of financial assistance and
technical support programs to developing countries.

b) Sketch the role of Political & Cultural environment in International Business

with suitable examples.
Political and cultural environments play a significant role in international business.
They can affect a company's ability to enter new markets, to conduct its operations,
and to compete with local businesses.

Political environment

The political environment of a country refers to the system of government, the laws
and regulations, and the political stability of the country. It can have a significant
impact on international business in a number of ways.
 • Government policies: Government policies can affect a company's ability to
enter a new market. For example, some countries have strict regulations on
foreign investment, which can make it difficult for companies to set up
operations in these countries.
• Trade barriers: Government policies can also create trade barriers, such as
tariffs and quotas, which can make it more expensive for companies to
export their goods and services to other countries.
• Political stability: Political instability can create uncertainty for businesses,
which can make it difficult to plan their operations and to make investments.
Cultural environment

The cultural environment of a country refers to the values, beliefs, and customs of
the people in that country. It can also have a significant impact on international
business in a number of ways.

•Communication: Cultural differences can lead to misunderstandings in

communication. For example, what is considered polite in one culture may
be considered rude in another culture.
• Business practices: Cultural differences can also affect business practices.
For example, the way that contracts are negotiated and the way that disputes
are resolved can vary from country to country.
• Customer expectations: Cultural differences can also affect customer
expectations. For example, what customers expect in terms of product
quality, service, and after-sales support can vary from country to country.
Examples

Here are some examples of how political and cultural environments have affected
international business:

• In 2018, the Trump administration imposed tariffs on goods imported from

China. This led to a trade war between the two countries, which disrupted
supply chains and increased costs for businesses on both sides.
• In 2020, the COVID-19 pandemic caused widespread economic disruption
around the world. This led to a decline in international trade and investment,
as businesses struggled to operate in a challenging environment.
• In 2022, the Russian invasion of Ukraine caused a humanitarian crisis and
led to a number of sanctions against Russia. This has had a significant
impact on the Russian economy, and it has also disrupted global energy
markets.

These are just a few examples of how political and cultural environments can affect
international business. Businesses that operate in multiple countries need to be
aware of the political and cultural risks in each market, and they need to develop
strategies to mitigate these risks.

Q4) Analysing (Answer any 1 out of 2) :

a) Critically discuss the impact of outsourcing & global value chains issue
in International Business.
Outsourcing and global value chains (GVCs) are two important trends in
international business. Outsourcing is the practice of hiring a third-party company
to perform a business function that was previously performed in-house. GVCs are
networks of interconnected companies that produce goods and services across
multiple countries.

Outsourcing and GVCs can have a significant impact on international business.

They can help businesses to reduce costs, improve efficiency, and access new
markets. However, they can also lead to job losses in developed countries, as
businesses move their operations to lower-cost countries.

Impact of outsourcing on international business

Outsourcing can have a number of positive impacts on international business. It can

help businesses to:

• Reduce costs: Outsourcing can help businesses to reduce costs by hiring

third-party companies to perform tasks that were previously performed in-
house. This can be especially beneficial for businesses that operate in labor-
intensive industries, such as manufacturing and call centers.
• Improve efficiency: Outsourcing can help businesses to improve efficiency
by tapping into the expertise and skills of third-party companies. This can
lead to better products and services, and it can also help businesses to save
time and money.
• Access new markets: Outsourcing can help businesses to access new markets
by partnering with companies in other countries. This can be especially
beneficial for businesses that are looking to expand into emerging markets.
Impact of GVCs on international business

GVCs can also have a number of positive impacts on international business. They
can help businesses to:

• Reduce costs: GVCs can help businesses to reduce costs by sourcing

components and materials from low-cost countries. This can lead to lower
 production costs, which can be passed on to consumers in the form of lower
prices.
• Improve efficiency: GVCs can help businesses to improve efficiency by
coordinating the production of goods and services across multiple countries.
This can lead to faster delivery times, better quality control, and lower
inventory costs.
• Access new markets: GVCs can help businesses to access new markets by
partnering with companies in other countries. This can be especially
beneficial for businesses that are looking to expand into emerging markets.
Challenges of outsourcing and GVCs

While outsourcing and GVCs can have a number of positive impacts on

international business, they can also pose a number of challenges. These challenges
include:

• Job losses: Outsourcing can lead to job losses in developed countries, as

businesses move their operations to lower-cost countries. This can create
social and economic problems in these countries.
• Security risks: Outsourcing can pose security risks, as businesses may be
sharing sensitive information with third-party companies. This can lead to
data breaches and other security incidents.
• Quality control: Outsourcing can pose quality control risks, as businesses
may not be able to control the quality of products and services that are
produced by third-party companies. This can lead to customer dissatisfaction
and reputational damage.
Conclusion

Outsourcing and GVCs are two important trends in international business. They
can have a significant impact on businesses, both positive and negative. Businesses
need to carefully consider the pros and cons of outsourcing and GVCs before
making a decision about whether to adopt these strategies.

b) “Tariff & Non-Tariff Barriers play a vital role in International Business”.

Analyse the statement.
Tariffs and non-tariff barriers (NTBs) are two types of trade barriers that can have
a significant impact on international business. Tariffs are taxes that are imposed on
imports, while NTBs are a variety of other measures that can restrict trade, such as
quotas, regulations, and standards.

Tariffs and NTBs can play a vital role in international business in a number of
ways. They can:
 • Protect domestic industries from foreign competition: Tariffs can help to
protect domestic industries from foreign competition by making imported
goods more expensive. This can help to ensure that domestic businesses can
compete on a level playing field with foreign businesses.
• Raise government revenue: Tariffs can also be used to raise government
revenue. This can be done by setting the tariff rate at a level that generates
the desired amount of revenue.
• Promote economic development: Tariffs can sometimes be used to promote
economic development in specific industries or regions. This can be done by
setting the tariff rate at a level that encourages investment and job creation in
these industries or regions.

However, tariffs and NTBs can also have a number of negative consequences for
international business. They can:

• Increase prices for consumers: Tariffs can increase prices for consumers by
making imported goods more expensive. This can lead to inflation and a
decrease in the standard of living.
• Reduce competition: Tariffs can reduce competition by making it more
difficult for foreign businesses to compete with domestic businesses. This
can lead to higher prices, lower quality, and less innovation.
• Disrupt supply chains: Tariffs can disrupt supply chains by making it more
difficult and expensive to import goods. This can lead to shortages and
higher prices for consumers.

Overall, tariffs and NTBs can play a vital role in international business. However,
they also have a number of negative consequences. Businesses need to carefully
consider the pros and cons of tariffs and NTBs before making a decision about
whether to support or oppose them.

In addition to the economic impacts of tariffs and NTBs, they can also have a
number of political and social impacts. For example, tariffs can lead to trade wars
between countries, which can destabilize the global economy. NTBs can also be
used to discriminate against certain countries or groups of people, which can lead
to tensions and conflict.

Tariffs and NTBs are complex issues with a wide range of implications. Businesses
need to be aware of the potential impacts of these barriers before making decisions
about their international trade strategies.
 Q5) Evaluating/Creating (Answer any 1 out of 2) :
a) Examine the growing concern for ecology in International Business
Environment.
The environment is a major concern for businesses around the world. Businesses
are increasingly being held accountable for their environmental impact, and they
are facing pressure from consumers, investors, and regulators to reduce their
environmental footprint.

This growing concern for ecology in international business environment is due to a

number of factors, including:

• The increasing awareness of climate change: The scientific consensus is that

climate change is real and that it is caused by human activities. This has led
to a growing public demand for businesses to take action to reduce their
carbon emissions and other greenhouse gas emissions.
• The rise of green consumerism: Consumers are increasingly demanding that
businesses adopt sustainable practices. This is leading businesses to develop
more environmentally friendly products and services, and to operate in a
more sustainable way.
• The increasing regulation of environmental standards: Governments around
the world are increasingly regulating businesses to reduce their
environmental impact. This is leading businesses to invest in new
technologies and processes to reduce their emissions and waste.

The growing concern for ecology in international business environment is having a

number of impacts on businesses. Businesses are increasingly:

• Investing in renewable energy: Businesses are investing in renewable energy

sources, such as solar and wind power, to reduce their reliance on fossil
fuels.
• Reducing their waste output: Businesses are reducing their waste output by
recycling and composting, and by using more sustainable materials in their
products.
• Adopting sustainable practices: Businesses are adopting sustainable
practices, such as water conservation and energy efficiency, to reduce their
environmental impact.
• Reporting on their environmental performance: Businesses are reporting on
their environmental performance to demonstrate their commitment to
sustainability.
The growing concern for ecology in international business environment is a
positive development. It is leading businesses to adopt more sustainable practices,
which is good for the environment and for the long-term health of the business.

Here are some specific examples of how businesses are responding to the growing
concern for ecology in international business environment:

• Nike: Nike has committed to reducing its greenhouse gas emissions by 30%
by 2030. The company is also investing in renewable energy and sustainable
materials.
• Patagonia: Patagonia is a leading advocate for environmental protection. The
company has a number of initiatives to reduce its environmental impact,
including a program to recycle used clothing.
• Interface: Interface is a flooring company that has committed to becoming
carbon neutral by 2020. The company is investing in new technologies to
reduce its emissions and waste.
• The Body Shop: The Body Shop is a cosmetics company that is committed
to using sustainable ingredients. The company also has a number of
initiatives to reduce its environmental impact, such as a program to recycle
used packaging.

These are just a few examples of how businesses are responding to the growing
concern for ecology in international business environment. Businesses that are able
to adopt sustainable practices will be well-positioned for the future.

b) Evaluate Labour & Environmental issues in International Business.

Labour and environmental issues are two of the most important challenges facing
businesses in the international business environment. These issues can have a
significant impact on the bottom line of businesses, as well as on their reputation
and social responsibility.

Labour issues

Labour issues can arise in international business in a number of ways, including:

• Child labour: Child labour is the employment of children below the age of
15 in hazardous work. It is a serious problem in many countries, and it can
have a number of negative consequences for children, including physical and
psychological harm, educational deprivation, and exploitation.
• Forced labour: Forced labour is the work that is performed under the threat
of punishment. It is a serious violation of human rights, and it can have a
 number of negative consequences for workers, including physical and
psychological harm, debt bondage, and exploitation.
• Discrimination: Discrimination in the workplace is the unfair treatment of
workers on the basis of their race, religion, gender, sexual orientation, or
other personal characteristics. It is a serious problem in many countries, and
it can have a number of negative consequences for workers, including lower
wages, fewer opportunities for advancement, and a hostile work
environment.
Environmental issues

Environmental issues can arise in international business in a number of ways,

including:

• Pollution: Pollution is the release of harmful substances into the

environment. It can have a number of negative consequences for human
health, the environment, and the economy.
• Deforestation: Deforestation is the clearing of forests for human use. It can
have a number of negative consequences for the environment, including
climate change, soil erosion, and the loss of biodiversity.
• Climate change: Climate change is the long-term alteration of temperature
and typical weather patterns in a place. It is caused by human activities, such
as the burning of fossil fuels, and it can have a number of negative
consequences for the environment, the economy, and human health.
The impact of labour and environmental issues

Labour and environmental issues can have a significant impact on the bottom line
of businesses, as well as on their reputation and social responsibility.

• Costs: Labour and environmental issues can increase the costs of doing
business. For example, businesses may have to pay higher wages to avoid
using child labour, or they may have to invest in pollution control equipment
to comply with environmental regulations.
• Reputation: Labour and environmental issues can damage the reputation of a
business. If a business is found to be using child labour or polluting the
environment, it can lose customers, investors, and employees.
• Social responsibility: Businesses have a social responsibility to operate in a
way that is ethical and responsible. This includes respecting the rights of
workers and protecting the environment.
How to address labour and environmental issues

There are a number of things that businesses can do to address labour and
environmental issues in the international business environment. These include:
 • Adopting codes of conduct: Businesses can adopt codes of conduct that
outline their commitment to ethical and responsible business practices. These
codes should cover issues such as child labour, forced labour, discrimination,
and environmental protection.
• Monitoring and enforcing codes of conduct: Businesses should monitor and
enforce their codes of conduct to ensure that they are being complied with.
This can be done through audits, inspections, and whistleblower programs.
• Working with suppliers: Businesses should work with their suppliers to
ensure that they are also complying with labour and environmental
standards. This can be done through training, monitoring, and auditing.
• Supporting non-governmental organizations: Businesses can support non-
governmental organizations (NGOs) that are working to improve labour and
environmental conditions in the countries where they operate.

By taking these steps, businesses can help to address labour and environmental
issues in the international business environment and make a positive contribution to
the world.