MS-97

Management Programme

ASSIGNMENT
for
July 2022 and January 2023 sessions

MS – 97: International Business

(Last date of submission for July 2022 session is 31st October, 2022 and for January
2023 session is 30th April, 2023)

School of Management Studies

INDIRA GANDHI NATIONAL OPEN UNIVERSITY
MAIDAN GARHI, NEW DELHI – 110 068
 ASSIGNMENT

Course Code : MS - 97
Course Title : International Business
Assignment Code : MS-97/TMA/JULY/2022
Coverage : All Blocks

Note: Attempt all the questions and submit this assignment to the coordinator of your study
centre. Last date of submission for July 2022 session is 31st October, 2022 and for January
2023 session is 30th April, 2023.

1. Explain the importance and benefits of international business and discuss the challenges
in international business.

2. What are the major factors to be considered in evaluating political environment in a

country? Discuss how such factors could affect international business.

3. Explain the concept and need for strategic alliances. Discuss the comprehensive model of
strategic alliances and networks.

4. Discuss the strategic issues in international operations management.

5. Explain the concept of emerging market economies and their characteristics in detail.

6. Write a detailed note on the following:

a) Intellectual Property Rights (IPRs)

b) E-business and International Supply Chain Management.

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MS 96- Total Quality Management

Q1- Explain the importance and benefits of international business and discuss the challenges in
international business?
ANS- Importance of International Business - International business has many advantages and
benefits for a Production or manufacturing company. With local markets being saturated, many
companies think of expansion via international business. International business as a discipline is of a
recent origin. It is hard to imagine a world without international business. Virtually every nation,
howsoever small it may be, has firms involved in various types of international business activities. It
is through these activities that nations enjoy the benefits of international business by trading in a
variety of goods and services produced around the world and made available locally. International
business, conventionally called as international trade, has been known to exist ever since man
learned to live in an organized manner. India, for instance, is well known for spices. Egyptians had a
significant foreign trade. The fundamental basis of international trade lies in the fact that countries
are endowed by nature with different resources. In recent years, international business has acquired
additional importance for host countries in particular and world economies in general as a result of
developments in the following areas:
Technology Diffusion
Technological developments are transmitted to every corner of the earth through the practice of
international business. This transmission is not only in the form of products and services used every
day, but also in the form of modern management, production, marketing, and logistics systems
employed by domestic as well as international firms. And thanks to the dramatic developments in
communication and information technology, the benefits of such transmissions are shared
worldwide.
Stimulation to Competition
Except in the case of entry through acquisition, the arrival of an international firm in the host
country, either in partnership with a local firm or on its own, may stimulate domestic competition
and lead to increased entrepreneurial challenges, especially in the developing countries.
International firms with superior worldwide experience, knowledge, technology, and other relevant
resources have the ability to offer goods and services often at lower prices and higher quality.
Higher Standard of Living
Availability of a wide range of goods of international quality at competitive prices has brought many
so called “luxury” products within the reach of common man, especially in developing countries.
Thanks to international business, the standard of living in many developing countries has increased
significantly
Impetus for Standardization
Standardization refers to the adoption of norms and practices generally acceptable in world
markets. In some cases, one standard product may be sold throughout the world using similar selling
techniques. Common standards enable easier and more effective comparisons to be made by
consumers and other interested parties, e.g., health and safety authorities. The product
standardization has become an easier option due to diminishing differences in consumer tastes,
preferences, and interests. This is due to advances in technology, telecommunication, transport, and
advertising.
Adapting to International Environment
A business firm operates within its internal and external environment. The internal environment is
one over which the firm has considerable control: the firm determines its own internal
environmental factors by specifying its corporate mission, organizational structure, recruitment
policy, and its relationship with suppliers, etc. The external environment is one over which the firm
has little or no control. Whatever little control the firm may have is usually the consequence of its
market power or collective action by a representative body, such as the Confederation of British
Industries (CBI) in Britain or the Confederation of Indian Industries (CII) in India. The firm must,
therefore, conform to its external environmental factors, whether they be national, international, or
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global, or suffer the consequences of its failure to do so. For example, changes in health and safety
regulations, trade policies, and the legal environment are unavoidable. Nike, one of the world’s
biggest manufacturers of sports and leisure wear, was forced into cancelling its licensing agreement
with one of its Asian licensees suspected of employing child labour
With the increasing internationalization of business activities, the methods of dealing with internal
and external environmental factors tend to become more standardized. The main reason for this
development is that domestic firms aspiring to expand internationally often emulate existing
international firms in adapting to environmental changes. In other words, international business acts
as an instrument for domestic firms to adopt more effective business policies and techniques as a
preparation for going international. For example, many US and European firms have adopted
Japanese management techniques, such as quality circles, the just-in-time system (JIT), and total
quality management (TQM) in order to remain competitive in their own domestic markets in general
and in international market in particular.
Encouragement to Global Business and Economic Reforms
Governments play an important role in the development and promotion of international business
activities. They provide a great variety of financial and non-financial incentives to attract FDI into
their countries, often in competition with their neighbours. The increasing scale of liberalization of
trade and investment, deregulation of domestic industries, and privatization of state-owned
enterprises have the attraction of foreign business as one of its primary objectives. These measures
have created immense international business opportunities. The major impact of international
business in this context has been the encouragement to governments to open up their borders to
international trade and investment, standardize their systems and procedures, adopt internationally
acceptable values and attitudes, particularly with respect to human rights and child labour, and
encourage the development of democratic institutions.
Economic Cooperation and Integration
One of the most fundamental impacts of the process of internationalization since the end of World
War II has been the progressive ending of the isolation of national economies. Gradually more and
more barriers to international trade and investment are being replaced with measures designed to
enhance cooperation and coordination among nation states. The need to cooperate and coordinate
over wider geographical areas has led to the formation of regional groupings in the form of free
trade areas resulting in rapid increase in the growth of international business activities.
BENEFITS OF INTERNATIONAL BUSINESS
Foreign trade gives rise to several advantages, some of which are as follows:
Mutual Exchange: As seen earlier, the countries in foreign trade stand to gain by exchange of goods
and services.
Higher Standard of Living: Because of mutual exchange of products, the citizens of trading countries
can enjoy the goods and services which are not available or cannot be produced in their own
country. For example, in the absence of international trade, the people staying in Arabian Gulf would
have lived a miserable life for want of many essential items like foodstuff, clothing, etc. But thanks
to the international trade, they can sell oil and in return buy whatever they need. This has helped
them to improve their standard of living.
Stabilization of Prices: Prices, it is said, are a function of demand and supply. Naturally, during the
time of natural calamities like flood, famine, etc. the supply of food grain will be affected. Thus,
when a country cannot grow sufficient amount of food-grain required for its domestic consumption,
they have to be imported to maintain adequate supply and prices. The same principle holds good
when there is a surplus of production. The excess production may be exported to maintain prices in
the domestic market.
Specialization: As seen earlier, a country tends to export such product in which it has comparative or
absolute advantage, for example, India in Rice or Gulf countries in oil. When a country keeps on
exporting the same product over a number of years, it leads to specialization.
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Increased Productivity: Because of the geographical specialization and expertise attained, the
country can produce more goods and better quality of goods and services which, in turn, leads to
higher productivity. The excess capacity, if any, of industrial products can be utilized fully. This will
lead to economies of large scale production. The shining example is of Japanese car manufacturers.
Wider Markets: Many firms are attracted towards the international market for the growing
opportunities for their products in other countries. This may be because of the saturation in the
domestic market or because the foreign market may be more profitable.
Economic Development: Due to foreign trade developing countries like India can earn valuable
foreign exchange through exports. The income of the government in the form of customs duty can
also increase. Countries like Japan, UK and USA have achieved economic growth through imports of
raw materials and export of manufactured goods.
Promotion of International Peace: When countries trade with each other and depend upon each
other for their requirements, the tension amongst them gets reduced and a bond of friendship may
develop. This helps in developing the cultural and social relations along with the business relations.

CHALLENGES IN INTERNATIONAL BUSINESS

As seen earlier, international trade differs from domestic trade in a number of aspects. As compared
to domestic trade, foreign trade faces some peculiar/unique difficulties which are as follows:
1-- Distance and High Cost of Transport: International trade is normally carried over a long distance
between the place of manufacture (or origin) and place of consumption, the transport cost may be
huge and hence distance plays a major role in decision-making.
2-- Time Lag: Due to the above factor, it takes much more time to execute an order. It may take
several months to realize the money after the receipt of an order and dispatch of goods. Further,
longer the time lag more is the risk of the cargo being damaged in transit, especially if it is
perishable.
3-- Language, Customs and Laws: Every country has different social, cultural and legal practices.
These differences can create a hindrance in the smooth flow of international trade. Further the
difference in languages can also act as a barrier, for example, while trading with Arabian countries
the knowledge of Arabic would be great advantage. Many a times these differences in language lead
to misunderstanding
4-- Currency and Measurement: Every country has its own currency which is subject to fluctuations
in exchange rates. This fluctuation must be properly understood in terms of the currency in the
domestic market. Further the system of weights and measurements followed in foreign market may
be quite different than the one in the domestic market. For instance, the system followed in India is
Metric System, but USA does not follow the same. One must understand how to convert one into
the other.
5-- Government Control, Regulation and Taxes: Every Government sets its own rules and
regulations for import of goods and services. These rules may differ from commodity to commodity
and from country to country. Depending upon the country of origin, there may be different set of
rules. For example, when EU (European Union) countries trade with each other, they charge
negligible or no import duty. But when these countries trade with outsiders, they charge heavy
duties.
6-- Risk and Uncertainty: Because of all these difficulties mentioned above, exportimport trade is
full of risk and uncertainty and hence needs specialized knowledge.

Q2- What are the major factors to be considered in evaluating political environment in a country?
Discuss how such factors could affect international business?
ANS- Major factors to be considered in evaluating political environment in a country - The political
environment in international business is elaborate and associated with significant risks that are
worth weighing before engaging in international business. Explore more about the political
environment in international business, including common political factors and their impact.
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An international business entity is a guest of the host country and, therefore, the host country
reserves the right of not only allowing it access but also of expropriating it. It also can influence the
scale and dimensions of the operations through its policies. Political risk is thus the vulnerability of
returns of a project to the political acts of a sovereign government. This definition gives rise to
several issues but the most important issue is that political risk is associated with blockage of funds
and expropriation (or domestication of investment) by the foreign government, for a firm operating
across its national borders. The exporting firm also faces political risks because political
developments also affect the areas of import restriction, tax controls, price controls, exchange
regulations, counter trade etc. which can create a major impact on the value of the exporting firm
and its survival
Let's look at some common political factors that influence the international business landscape. The
type of economic system a country builds is a political choice. Foreign countries often will have
different economic systems from your domestic market, and adjustments often need to be made to
take these differences into account.
For example, a country may operate in a market economy where private individuals own most of
the property and operate most of the businesses. A market economy is usually the best economic
environment for a foreign business because of the protection of private property and contract rights.
Some countries lean more towards a socialist economy where many industries and businesses are
owned by the state. Operating businesses in this environment will be more difficult, but products
can still be produced and sold as people still pick their jobs and earn money.
A few countries operate under a communistic economic system where the state pretty much
controls all aspects of the economy. Conducting business in this environment ranges from difficult to
impossible.
Of course, the reality is that all economies are mixed economies that take parts from two or more of
the 'pure' economic systems. For example, you can conduct business in communist China in Hong
Kong and other special areas where a market economy is allowed to operate.
Businesses also must often contend with different governmental systems. Examples include
democracies, authoritarian governments, and monarchies. Some governments are easier to work
with than others. Democracies, for example, are answerable to their citizens and the rule of law.
Authoritarian regimes are usually answerable to no one, including the law. It is less risky to conduct
business in democracies and constitutional monarchies, a monarchy with a constitution that
protects the public and subjects the monarch to the rule of law, than in countries with authoritarian
regimes.
The next major factor is trade agreements. Countries often enter into trade agreements to help
facilitate trade between them. If your country has entered into a trade agreement with another
country, conducting business in that country will usually be easier and less risky because the trade
agreement will provide some predictability and protection. One great advantage, for example, is
that your products will be subjected to fewer trade barriers that serve as obstacles to exporting your
products into the country.
A trade barrier is simply anything that makes it harder for a company to export products to a foreign
country. Formal trade barriers are enacted by governments for the purpose of restricting imports to
protect a country's domestic industries. Formal trade barriers include tariffs, which are taxes on
imports that help make domestic products more competitive, and product quotas that limit the
number of products imported into the country.
ASSESSING AND MANAGING POLITICAL RISK
Once the existence and the impact of political risk has been noted, it becomes necessary for any
international marketer to assess and manage political risks.
Assessment and management of political risks involve three basic steps:
• Recognising the existence of political risk and its accompanying consequences.
• Developing plans and policies in advance to cope with such risk.
• Maximising compensation in the event of expropriation
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Several indices have been developed to measure country specific risk. They involve taking socio-
economic variables, societal conflict variables and governmental process index into account. But for
an international marketer wishing to undertake a broad analysis, before involving himself into
specifics (the more it is specific the more the time and money it takes) answering the following
questions could be useful What is the current form and system of government? Are the economic
policies stable? Is capital flight taking place? These three steps entail the political risk identification
process.
ASSESSING POLITICAL RISKS
It has been observed, that international managers when entering new markets recognise the
existence of political risk but refuse to give it the required significance. This is more so because
although the existence of political risk has been widely accepted, the definition of political risk does
not explain whether such risk is country specific or firm specific. Here the discussion entails
assessment of both country specific risk and firm specific risk.
Country Specific Risks
Country specific risk refers to risk arising out of doing business with a specific country-
What is the current political system in existence?
What is the stability and permanency of government policy?
What are the encouragements the business firms will receive as a result of political activity?
Answering these questions involves going into the political history of that country to understand
whether it follows a monarchy, dictatorship or parliamentary form of government. Even where
parliamentary form exists, whether their exists a single party, a two patty, a multi-party or a
dominating party system, and what are the ideologies each of these parties have with respect to
business enterprise. Such an analysis can help in the country assessment process. Although such
analysis are carried out by various institutions like S & P, Moodys etc. and are available for public
consumption, most MNCs prefer to undertake their own analysis.
Many countries try to reduce perceived risk by promoting inward investment through the provision
of tax breaks, free ports, enterprise zones etc., which are not tied as in partnering. The key is to look
at what the disadvantages are. If the government mainly wishes to attract the mobile investor, or
overcome say poor local skills, one has to assess what would happen if the scheme was withdrawn
once the capital had been committed. Similarly if viability depends on incentives rather than real
return on investment, the question is, is the venture really worth it?
Firm Specific Risk
Although business units undertake country risk assessment they have realised that political risk does
not manifest itself equally among various firms. This is the major assumption underlying country risk
assessment. It has been observed that sometimes firms in the same country receive differential
treatment as in the case of Cerro Corporation and Macrona Mining Corporation and the Peruvian
government attitude towards them. While Cerro Corporation was expropriated, Macrona Mining
Corporation was encouraged.
A-- Size and Visibility
It has been observed that MNCs like to indulge themselves in business on a large scale to derive the
benefit of economies of scale. They also undertake massive advertisement programmes for creating
brand preferences. This, it has been observed, causes resentment among local businessmen who
feel that the MNC is taking more than its fair share of business. They create pressure on the
government to take steps to restrict MNC’s operations often in the name of protecting domestic
industries
B--Product Handled
The product handled by an MNC or an international business house also influences the attitude a
government will adopt towards it. If the ruling government perceives that the product handled by
the foreign company is crucial for the economic development of the country or it is
socially/strategically important then the attitude might be favourable whereas if the company is
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perceived as undertaking marketing or production of non-essential items then the likelihood of the
attitude being unfavourable is quite high.
The Attitude of the Company
The attitude of the company is also important. A foreign business enterprise must realise that it is a
guest of the host country and is there only on their invitation. If a firm realises this fact then the
political risk is minimised because it will realise that it must contribute to the national goals of the
host country if it wants to continue doing business in that country. In the example of Cerro v/s.
Macrona Mining Corporation both belonging to the mining industry one was encouraged by the
Peruvian government while the other firm was discouraged. This was essentially because Macrona
realised its position as a guest of the country, making contribution to the furtherance of
achievement of national objectives; also making known the fact the role it was playing, whereas
Cerro Corporation undertook no such task and therefore was doled out an unfavourable decision.

Q3- Explain the concept and need for strategic alliances. Discuss the comprehensive model of
strategic alliances and networks?
ANS- A strategic alliance is an arrangement between two companies to undertake a mutually
beneficial project while each retains its independence. The agreement is less complex and less
binding than a joint venture, in which two businesses pool resources to create a separate business
entity.A company may enter into a strategic alliance to expand into a new market, improve its
product line, or develop an edge over a competitor. The arrangement allows two businesses to work
toward a common goal that will benefit both. An alliance is the sharing of capabilities between two
or more firms with the intention of enhancing their competitive advantages and/or creating new
business to achieve a mutually beneficial objective. Global alliance is one in which the object is
either to develop a global market presence or to enhance the worldwide competitive capabilities of
the firm. Alliances have existed as both local and global alliances depending on the expansion plan
the organization is working on. Local alliances have existed as joint ventures for long and in India
there have been a few organizations which have tried such local alliances with limited success.
Traditionally, such alliances have existed in the industrial sectors like auto-components, textiles and
food processing. Through the 60’s and 70’s India has been trying to forge joint ventures (JVs)
between the local and foreign counterparts. The Maruti (Government of India) and Suzuki Motor
Company or the Kwality (Delhi based ice-cream company) and Walls (Hindustan Unilever) tie-ups are
some of them. In most cases such joint ventures have proved to be successful, and where the
objectives are clear the company is also able to taste success too. Today, Maruti has sold of its entire
stake to Suzuki, as per the pact when the alliance took place. The government wanted to support
and establish the company and then move out of the segment for the other partner to take charge.
It is one of the most successful joint ventures today; Suzuki Motor Corporation has India as one of
the largest markets, outside Japan
Need for Strategic Alliances
Now the question arises as to why we need strategic alliances!!!! Here are some of the reasons for
using strategic alliances:
1-- Risk Sharing: Especially for larger firms, where the stakes are higher or where the company is
investing in a new business with high entry cost, it always makes sense to do so in alliance.
Particularly, the oil exploration sector where stakes are high even if one is unable to find success.
2-- Economies of Scale and Critical Mass:The pooling of combined resources of two companies helps
to reduce the cost owing to the sharing aspect that it brings in.
3-- Speed of Action: Alliances help firms quickly gain foothold in markets where there are
opportunities building up. In Chinese markets there are several such joint ventures which have been
forged in the last few years owing to the manufacturing efficiencies of the market.
4-- Learning New Skills: The advantages of different firms bringing varied experience and
background to the alliance, which helps the JV to scale new heights
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5-- Exploration: Alliances also help explore new business opportunities. An alliance with a first
mover firm can provide the opportunity to learn about new business.
6-- No Choice: Sometimes due to government regulations or because of the proportion of business
or because either, party is too skeptical to enter into a single entry proposition no choice situation
appears.
The aspect of strategic alliance has been virtually gaining grounds with the turn of the century.
Particularly, for a growing economy like India, in the last twothree years our FDI inflow is less than
FDI outflow. Owing to several alliances some of our Indian companies have forged globally.
Pharmaceuticals, Automobiles, Hospitality, Retailing, and Steel are few sectors where lot has been
written about the Indian alliance story.The current surge in alliances are accounted for a number of
reasons like, deregulation, strengthening of intellectual property laws, globalization, innovation in
alliance design, strategic importance of speed, increased skill in alliance management and alliance
exit, easier communication across long distances and unbundling of the value chain.These reasons
are direct or indirect for the rise of the number of the alliances. In India, for example a large number
of sectors are opening and various industries are getting deregulated, which throws imperatives for
the host countries. The other reasons quoted above also point to a similar situation where the global
alliances being forged are rising in numbers.
CONCEPT OF STRATEGIC ALLIANCES
Strategic alliances are “voluntary agreements between firms involving exchanging, sharing, or co-
developing of products, technologies or services. Strategic alliances are compromises between short
term, pure market transactions and long term complete ownership solutions.
Alliances are of two kinds, contractual and equity based. The former includes co-marketing, research
and development contracts, turnkey projects, strategic suppliers, strategic distributors and
licensing/franchising. They require lower commitments and their scope is limited. Alternatively,
equity based alliances require higher commitments, and includes, strategic investment, cross
shareholding and joint venture. Another important aspect of strategic alliances are strategic
networks, which are essentially kind of joint ventures purely for gaining competitive grounds and
gain from each other’s strengths. The case of RenaultNissan is one such example, where there are no
new off-springs but mutual gain for each other.
Comprehensive Model of Strategic Alliances and Networks
The aspect of strategic alliance is based on the industry based, resource based and institution based
considerations. This is also illustrated in Figure.
According to the Industry Based View most firms are independent players and are interested in
maximizing their own profits. Many firms within the business collaborate within themselves
(horizontal alliances) to gain competitive grounds. Sometimes due to high entry barriers also the
firms align within themselves to enter any market. In many cases the suppliers also collaborate
within themselves to enter new markets. The cartelization helps them to gain foothold in those
markets. Fourth, instead of treating the buyers and distributors as possible threats, establishing
distribution alliances (also called as downstream alliance) may bind Strategic Alliances the local
firms, buyers and distributors together. Finally, the market potential of substitute products may
encourage firms to form strategic alliance and networks to materialize the commercial potential of
these new products.
The Resource Based View covers several aspects of Value, Rarity, Imitability and Organizational
(VRIO) framework aspects of strategic alliance and networks. Strategic alliances and networks must
create value. The strategic alliance and networks reduce costs, risks and uncertainties, it allows firms
to tap into their partner’s complementary assets and provide innovation and learning opportunity
for partners. The second aspect of the framework, rarity has two dimensions, capability rarity and
partner rarity. The capability to handle inter-firm relationships are sometimes referred to as
relational capabilities. This is about the kind of relationship skills which are required to foster trust
and confidence with partners for sustaining in the long run. The partner rarity is about defining key
parameters which will be important for organizations to look forward to while deciding on partners.
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The imitability aspect pertains to two levels, the firm and the alliance/network level. At the firm
level it is about how well the resources and capabilities are imitated by the partners. The second
aspect about the alliance/network is about trust and understanding, which forms the basis of any
successful alliance.
The last factor of the framework, organization, also affects the firm and the alliance. This is about,
how firms over the years develop mechanisms and systems to handle alliances where operations are
varied and large in nature. Especially, for MNE’s there are separate departments which handle all
alliances. These dedicated sections ensure successful running of the alliances and network as a part
of the organization

The Institution Based Considerations include the formal and informal aspect to it. Strategic alliances
and networks function within a set of formal legal and regulatory frameworks. These formal
institutions impact the antitrust concerns and entry mode requirements. They also impose sanctions
and minimum requirements for the market entry modes. Informal institutions centre on collective
norms, supported by a normative pillar. The institutional perspective suggests that because firms act
to enhance or protect their legitimacy, copying other reputable organizations- even without knowing
the direct performance benefits of doing so- may be a low cost way to gain legitimacy. The second
set of informal institutions stress the cognitive pillar, which centres on the internalized, taken for
granted values and beliefs that guide firm behaviour.

Q4- Discuss the strategic issues in international operations management?

ANS- Strategic issues in international operations management -Operations Management is
becoming more and more international in its scope. Even a firm, which markets the
products/services only within domestic market, may be conducting its business operations
internationally like sourcing the input or finished products internationally or manufacturing the
products abroad. A dynamic company will take advantage of the favourable conditions that exist any
where in the world. We may say that International Operations Management refers to the
transformation related activities of an international firm.
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Operations Management of an international business must be well integrated with the corporate
strategy of the firm. In fact corporate strategy of the firm should set the boundaries for planning and
implementation of activities relating to operations management. For example, if a firm is adopting a
differentiation strategy, international operations management must focus on creating goods and
services that are able to build a unique position, different from others/competitors. As such, the
organization’s corporate strategy dictates the strategic issues relating to operations management,
the important ones are —
• International Production Strategies
• International Logistics/Material Management
• International Service Operations
• International Retailing
• International Supply Chain Management
International Production Strategies
International production strategies include various decision areas like sourcing and vertical
integration, standardization of production facilities, outsourcing, technology transfer etc. However,
the success of International Production Strategies depends on ‘4 Cs’, viz. (a) Manufacturing
Compatibility (b) Production Configuration (c) Production Coordination and (d) Control of
Production. All these 4 Cs are now discussed.
A--- Manufacturing Compatibility: Compatibility is the range of consistency between foreign
investment and company’s competitive strategies. Managers must consider following strategies:
1-- Cost minimization/efficiency strategies: The driving force here is to establish economies of scale
and producing in areas with low labour cost. This is the reason behind much of foreign investment in
Asia, Mexico and Eastern Europe. These locations are attractive because of low labour cost, the
availability of cheap materials as well as components and the proximity to the market. We may see
that as the wages rose in Korea, the manufacturing began to shift to other low cost destination like
China, Indonesia, Malaysia, Thailand, Vietnam, etc. China is now the world’s fourth largest industrial
base only behind the USA, Japan and Germany.
2-- Dependability: It is the degree of trust in company’s products; its delivery and price promises.
3-- Quality: Quality refers to the ability of a product or service to consistently meet or exceed
customer’s expectations. Quality offers competitive advantage to a firm. Honda, Nissan and Toyota
captured US market because of the quality only. TQM and quality certification are essential for
success in global arena. Performance reliability, service quality, speed of delivery and consistency are
all important components of quality aspect.
4-- Flexibility: It refers to the ability of the production process to make different kinds of products
and to adjust the volume of output. This relates to the concept of agile manufacturing
5-- Research & Development (R&D): It refers to the organized efforts that are directed towards
increasing scientific knowledge and product or process innovations. Most of the advances in semi-
conductors, communication, medicine and aerospace technology can be attributed to R&D efforts.

B-- Production Configuration: Management of the firm needs to determine the configuration of
production facilities. There are three basic configurations:
1-- Centralized production: Here manufacturing facility is developed at a centralized location, may
be the home country itself and products are offered to different markets.
2-- Regional production: Here one can serve the customer of a particular region only by a specific
production facility.
3-- Multi-domestic approach: When the demand in specific countries become significant, one can
manufacture close to the customers, using country specific production facilities to meet local needs.

However, location of production facility depends on the following factors:

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1-- Country factor: It includes availability of resources (material & manpower), cost of resources,
availability of infrastructure, facility of power, water, transportation, communication, medical care,
education, housing, etc. and culture of land, and law and order situation.
2-- Technology factor: The type of technology a firm uses in its production processes can be decisive
in location design. More specifically, if the fixed cost of setting up a plant is extremely high, a firm
may serve the world market from a single location or from very few locations. Technology may also
make it feasible to perform an activity from multiple locations.
3-- Product factor: This may also influence the location decision. The important ones are “value to
weight ratio” if it is “serving the universal needs”. Electronic components, Pharma products, Gems &
Jewelry etc. have high value to weight ratios, they are expensive but do not weigh much. Even if they
are shipped to any part of the world, their transportation cost accounts for a very small percentage
of the total cost.
4-- Government policies: This has a considerable impact on location decision. Govt. policies include
policies on foreign ownership of production facilities, extent of indigenisation, import restrictions,
currency restrictions, environmental regulations, local product standards, political stability and
labour laws, etc.
5-- Organizational issues: Though, internal to the firm, these issues like business strategy and
organization structure are also determinants of location facility.

C--- Production Co-ordination: This implies linking or integrating activities into a unified system. The
activities include everything along the international supply chain from purchasing to warehousing, to
shipment and to inbound logistics. Perfect co-ordination must also be planned for all the
components of outbound logistics for reaching the customers competitively.
D-- Control of Production: Control may relate to the measuring of performance so that companies
can respond appropriately to changing conditions. Another aspect of control system is the
organizational structure which is meant to coordinate all its activities as per the plan. It is essential
for success to ensure that a company’s strategies must be implemented as per the plan. Strategies
should also be evolved to take care of any deviation from the plan due to various uncontrollable
factors with minimum departure from the planned time and cost.

Q5- Explain the concept of emerging market economies and their characteristics in detail?
ANS the concept of emerging market economies and their characteristics- The common term in
international business parlance is “Emerging Market Economies.” Emerging Market Economies
(EME’s) is the term coined by Antoine W. Van Agtmael of the International Finance Corporation of
World Bank. An emerging market economy is defined as an economy with low to middle per capita
income (www. investopedia.com). Emerging market economies have almost 80% of the world’s
population and constitute 20% of the world’s economies. This classification is relatively loose as it
includes economic giants like China on one hand and countries like Tunisia on the other. Emerging
market economies are hence those economies that have pursued development and reform
programmes and have opened up their market for foreign competition. These economies are in their
transitional phase as they are moving from a closed to an open market economy. Such economies
follow an economic reform programme which focuses on accountability, transparency and equity.
EME’s strived for a relatively less volatile exchange rate, as stability in exchange rate builds
confidence in market, attracts foreign investment and also checks capital flight. Stability of key
economic parameters would facilitate in attracting more resources from donor countries and world
bodies like International Monetary Fund and World Bank. In such economies foreign investment
would flow both in the form of Direct Investment and Portfolio Investment. This will have favourable
impact on country’s stock market and long term investment in key sectors like energy, infrastructure
and ICT. Foreign investors are offered outlet for expansion in the form of land, electricity and
infrastructure by Government of EME’s. They also get access to resources, market and cheap labour.
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The destination country benefits as setting up of such foreign enterprises creates opportunities for
employment generation, technology sharing, developing managerial skills etc. This also helps in
increasing overall production level, gross national product and narrowing the gap between
developed and developing world. Emerging Economies are not free from risk since they are in the
transition phase and not stable. The risk of not meeting the established standards and expectations
could spark unrest like civil war, change in government priorities, nationalization and crash of stock
market. Further, risk could be in the form of political unrest for example, the 1997 Asian Crisis.
EMERGING ECONOMIES: CHARACTERISTICS
A significant number of countries in the developing world are often characterized as emerging
markets. However, those are quite different from least developed countries (LDCs). Although the
two groups may share endemic weaknesses, emerging markets typically reflect significant
propensity for growth while LDCs do not. In reviewing the broad domain of emerging markets, it is
helpful to examine some of the physical and institutional characteristics of immediate relevance to
the strategy maker. The defining features of an emerging market are the development status of its
physical infrastructure (i.e., communications, transportation, electricity, ports, etc.), institutional
infrastructure, socio-political fabric, and economic performance record and potential. Table provides
a synopsis of the key differences between these characteristics while comparing emerging markets
with developed country settings.
FIG - Characteristic Differences in Physical Infrastructure between Developed and Emerging Marke

The level of private sector involvement is limited. Among emerging economies China has spent huge
amount on improving its physical infrastructure.
Institutional Infrastructure: For smooth functioning of business activities strong institutional
infrastructure like legal system, banking system and capital markets is required
Nature of markets:
• High growth expectations
• Investments characterized by a high level of risk and possibility of a high return
• Possess potential to share in early stages of economic growth
• Economic and political conditions are volatile e.g. China and Kenya
• Securities market not well established due to absence of long history of substantial foreign
investment
• Transitional character (with changes taking place in social, political, economic and demographic
dimensions.)
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• High degree of volatility

• Dynamic nature of emerging markets i.e. they move from current economic condition to greater
institutional and policy maturity.
Capital Markets: In a country like India the capital markets have evolved over the years. The
Financial Sector reforms in 1991 and 1997 initiated by the Narsimham Committee and then the
recent Raghuram Rajan report all are attempts to improve the financial market scenario in India. The
Rakesh Mohan Committee report on infrastructure finance is also another step toward the reforms.
In most emerging economies, there is often a dual standard with respect to regulatory compliance;
that is, most often the subsidiaries of foreign firms are held at higher standards. For example,
foreign banks operating in India have historically been subject to much more intensive reporting
requirements than have the local banks.
Subsidies: Government in emerging markets supports domestic business through subsidies. It
exercises regulatory control over MNC’s as a protection against competition. In India, Maruti Suzuki
is one such story, where the company started off as a 50:50 joint venture of Maruti (Govt. of India)
and Suzuki Motor Corporation. But, now the government has off-loaded its entire equity to Suzuki
and the company has been able to take up the challenge gradually. The fertilizer industry in India is
another example where the subsidy forms an important part of the sector. Subsidies are integral to
the sector as a substantial part of the sector relies on imports.
Legal Infrastructure: There is very limited confidence in legal infrastructure of emerging economies
as it offers protection in case of intellectual property rights. This curtails investment by MNE’s in
leading sectors like pharmaceuticals, high technology and bio- sciences. In India, for instance, the
judicial process is a long drawn procedure and takes ages to settle dispute. Also aspects of law
related to IPR in India are not as evolved as in the West; hence several companies may feel wary of
approaching the market.
Political instability and corruption: Emerging economies are characterized by political instability, red
tapism, bureaucratic and political hurdles. In emerging markets, complying with archaic regulations
can be a major challenge. In Mumbai (India) it takes 30 different clearances and approvals to start a
small corner store. It takes 152 days to start a business in Brazil and 151 days in Indonesia, compared
to 3 days in Canada and 2 days in Australia.

Q6- Write a detailed note on the following?

A--Intellectual Property Rights (IPRs)
ANS - Intellectual property rights are the rights given to persons over the creations of their minds.
They usually give the creator an exclusive right over the use of his/her creation for a certain period
of time. According to WTO IPRs are the rights given to persons over the creation of their mind.
IPR is the basic mechanism for controlling knowledge access by way of providing formal set- up,
access controls on depersonalized knowledge created with the intent of furthering innovation. The
innovation once codified from the tacit knowledge of its creators is normally considered as a public
good. The reason is that the innovation and knowledge once created can be used by others. IPRs are
the rights to persons for their creations which they can use for a certain period of time. It includes
creations like artwork, designs, inventions, names, symbols etc. IP relates to inventions, and
industrial designs. Trademarks come under the domain of industrial property, whereas copyright
covers literary and artistic work and related designs. IPR infringement involves the use of protected
intellectual property right without the authorization of the owner of the right. However, global
business environment and the use of intellectual property mainly fall under patents, copyrights and
trademarks. There has been a lot of research around these areas of intellectual property. The
Unitarian theory revolves around chosen action to enable greatest good for greatest number. The
Labour theory asserts the right of the person who has put in the efforts in any kind of creation, and
the Personality theory supports the satisfaction of human needs by way of property rights.
PR related Processes
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An entity which owes the invention gets the patent which helps the entity to leverage that by way of
making, using and selling the invention. The patents are given to inventions that are useful, noble
and non-obvious and for a specific period of time and typically for 20 years. A trade mark typically
belongs to a company, product or concept, picture, symbol by way of a unique name creating a
unique identity. The trademark owner can leverage the trademark. The trade marks must be
registered with the specified offices in the respective states to receive the IPR protection. Some of
the best practices of IPR registered companies are that the internal controls over IPRs are in writing
and includes procedures for monitoring and feedback. There is a division or a department within the
organization to look after IPR laws and guidelines. There are written internal control procedures for
assigning duties and tasks to a position rather than a specific person. It is seen that a periodic review
is done of the transactions having IPR implications. The royalties, proceeds and indebt payments
related to the use of IPR are accounted for wherever applicable and included in the price actually
paid or payable. The communication exists between different departments to ensure that the
information related to IPR issue is disseminated. The responsibilities of the Import Manager include
holding the responsibility for adherence to IPR laws and guidelines. He/she must ensure that the
staff involved in international business transactions have knowledge on the current issues and
revelations relating to IPR. The accounting and finance departments properly account for royalties,
proceeds and indirect payments related to the use of IPR and where applicable these payments are
included in the price actually paid or payable.
Managing IPRs in International Business
In the context of international transactions, the import manager should conduct quality control
reviews of its suppliers located in other countries to look for items bearing marks that could involve
potential infringements of registered and recorded trademarks. The import department should
maintain data about imported merchandise mapped to the IPR and its specific requirements. This
data should be updated on regular basis. The copy right is a sort of protection for the people who
develop designs, artwork, pictures, literary work, software, music and the like. All these areas are
properly regulated at the state and inter-governmental levels because it is important that goods and
services which cut across boundaries need such kind of protection for sustainability of innovation
and creativity. The World Intellectual Property Organization (WIPO) is a specialized agency and an
inter-governmental organization of the United Nations. It is dedicated to developing a balanced and
accessible international intellectual property (IP) system, which rewards creativity, stimulates
innovation and contributes to economic development while safeguarding the public interest. The
statistics from the WIPO indicate that the global as well as local companies are very much
progressive towards getting more patents in their own countries and internationally as a matter of
strategy and protection of their interests. The corporate world keeps watching each others’ nose in
the area of intellectual property so that they can sustain their competitive edge based on
innovation. Trade-related aspects of Intellectual Property Rights (TRIPS) are a WTO initiative to
create a level playing field in the domain of intellectual property. The Agreement established
minimum levels of protection that each government has to give to the intellectual property of fellow
WTO members. It specifies enforcement procedures, remedies and dispute resolution procedures.
The agreement emphasises enhancing social and economic welfare benefiting both the procedure
and the users. Despite the stress on technical innovation, many advocates of trade liberalization
regard TRIPS as a bad policy owing to TRIPS’ wealth redistribution effects (moving money from
people in developing countries to copyright and patent owners in developed countries) and its
imposition of artificial scarcity on the citizens of countries that would otherwise have had weaker
intellectual property laws.
B-- E-business and International Supply Chain Management.
ANS-The term Supply Chain Management is defined as management of processes in coherent ways
which are aimed at customer order fulfillment in the most optimized way. To achieve this all
impediments to customer satisfaction are eliminated between ultimate customer and the raw
material supplier. Along side the efforts to focus on customer satisfaction, the customer retention
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processes are proactively identified, mapped, streamlined and implemented. The processes are set
up or improvised to minimize fixed cost components and automate routine processes and even
unstructured decision making processes with the help of advanced computing software on top of
networked systems in a progressive corporate. The trust as mentioned above, essential for e-
business and e-commerce to sustain is achieved through proper transparency features wrapped with
necessary security and privacy layers. All this by default helps cut on time and wastage. As a result,
the orders are fulfilled according to desired time lines, at a lesser cost with a better quality.
The growing global economy and increasing free trade across borders has redefined the dynamics of
competition for modern organisations. With product life cycles shortening and worldwide
commercial competition increasing, success depends on adopting state-of-the art, effective global
supply chain management (SCM) approaches. The corporates have been trying to understand and
experience e-business technology applications which can be used to develop world class supply
chain networks. Various companies have benefited by the E-Business way of managing processes
across the supply chain. An earliest example is DELL Inc. Micheal Dell, founder of Dell Inc. operated
web based direct to consumer model in PC computer market for the first time. The whole process of
one level marketing channel with customers on web integrated tightly with suppliers of computer
parts at the backend enabled Dell to drastically shorten the fulfilment cycle, higher customer
satisfaction and less cost for carrying lesser inventory. Over time, the progressive corporate has
spread its scope across the globe and have distributed their supply chain operations across to get
leverage of both, comparative advantage and information technology enablers. The product being
consumed in India may be assembled in Bangalore, but its parts may have been manufactured in
dozens or hundreds of cities across the globe. Similarly, some small organisations may leverage
internet power for some of its processes in its entire supply chain; may be to get orders, track
information, provide post sales services, etc.
The planners and decision makers in organisations need to understand how e-business and e-
commerce can be used effectively to reduce operational costs and increase efficiencies. The
business-focused unit achieves this goal by exploring information-related problems, both internal
and external to businesses. Online solutions to these problems are explored in such areas as human
resources, manufacturing, customer relationship management, and supply chain management.
Supply Chain Management using digital capabilities and advancements has generated a lot of
interest over the last 10-15 years. The decision at any point of E-Business the chain, whether in the
domestic space or internal, affects rest of the stakeholders in the process with variable impact.
There is a general view that companies need to be globally competitive in the domestic market
because of the growing liberalization, especially in the case of India. The companies face acute
competition here as well as in the international markets. It has become imperative for companies to
improve the processes so as to reduce the cost and enhance the value addition through better
quality output in both, products and services.
E-business and e-commerce enable players in the supply chain processes to understand, predict and
respond at the appropriate time towards unforeseen changes and mitigate risk to save costs and
stop downturn. It helps to secure the best outcome on the purchase side as well as sale side, by
making collaborations efficient and effective. Utilities of digital advancements like mediating
technology, universalities, network externalities, distribution channel, time moderator, information
asymmetry shrinker, infinite virtual capacity, low cost standard, creative destroyer, and transaction-
cost reducer come into play in different combinations and make the process efficient and effective.
On the purchase side activities like vendor search, criteria discovery, selection, transportation,
warehousing, clearing, quality validation documentation, payment, etc., can be improvised with the
help of e-business and e-commerce power. The coordination utility of e-business way of doing things
helps real-time collaboration for various decisions and activities beyond transactions among the
supply chain partners on internet.
Supply chain management effectiveness and efficiency is mainly dependent on management of
inventory, transportation facility and information. However, the efficiency of first three areas of
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management is again dependent on information leverage. Information helps to make the decision-
maker alert and informed about the possibilities, opportunities and risk. Therefore, information
technology including web based support is being extensively used in most of the progressive
companies to handle various levels of supply chain issues. It helps to make everything visible across
the chain so that the stakeholders face least inertia to access relevant information to take effective
decisions faster. Supply chain transactions that involve e-business include flow of information,
material and money. Companies have been using e-business for their supply chain transactions for
various reasons like knowing and providing relevant information in the order fulfillment process,
negotiating prices and contracts with customers and suppliers, getting orders, tracking and post
delivery services. E-business in various cases is also being used for conducting financial transactions.
For various multinational companies whose sales and business executives are spread across the
globe, digital media is used to provide product information, sales guidelines, service questions,
knowledge, etc., to facilitate them get the leads, negotiate and satisfy their clients/customers.
Internet also enables pro-active customers to search, scan and select companies and products once
the supplier hosts its information on the web.