Master of Business Administration – MBA Semester 4MB0037 – International Business Management Assignment Set- 1

Q.1 what is globalization? What are its benefits? How does globalization help in international business? Give some instances. Answer: Economic "globalization" is a historical process, the result of human innovation and technological progress. It refers to the increasing integration of economies around the world, particularly through trade and financial flows. The term sometimes also refers to the movement of people (labor) and knowledge (technology) across international borders. There are also broader cultural, political and environmental dimensions of globalization that are not covered here. At its most basic, there is nothing mysterious about globalization. The term has come into common usage since the 1980s, reflecting technological advances that have made it easier and quicker to complete international transactions – both trade and financial flows. It refers to an extension beyond national borders of the same market forces that have operated for centuries at all levels of human economic activity – village markets, urban industries, or financial centers. Benefits of globalization: We have moved from a world where the big eat the small to a world where the fast eat the slow, as observed by Klaus Schwab of the Davos World Economic Forum. All economic analysts must agree that the living standards of people have considerably improved through the market growth. With the development in technology and their introduction in the global markets, there is not only a steady increase in the demand for commodities but has also led to greater utilization. Investment sector is witnessing high infusions by more and more people connected to the world's trade happenings with the help of computers. As per statistics, everyday more than $1.5 trillion is now swapped in the world's currency markets and around one-fifth of products and services are generated per year are bought and sold. Buyers of products and services in all nations comprise one huge group who gain from world trade for reasons encompassing opportunity charge, comparative benefit, economical to purchase than to produce, trade's guidelines, stable business and alterations in consumption and production. Compared to others, consumers are likely to profit less from globalization. Another factor which is often considered as a positive outcome of globalization is the lower inflation. This is because the market rivalry stops the businesses from increasing prices unless guaranteed by steady productivity. Technological advancement and productivity expansion are the other benefits of globalization because since 1970s growing international rivalry has triggered the industries to improvise increasingly. Some other benefits of globalization as per statistics • Commerce as a percentage of gross world product has increased in 1986 from 15% to nearly 27% in recent years. • The stock of foreign direct investment resources has increased rapidly as a percentage of gross world product in the past twenty years. • For the purpose of commerce and pleasure, more and more people are crossing national borders. Globally, on average nations in 1950 witnessed just one overseas visitor for every 100 citizens. By the mid-1980s it increased to six and ever since the number has doubled to 12.

has declined.8 billion indicating around 30% of the world population. aspect of globalization. Impact of globalization in international business: • Trade: Developing countries as a whole have increased their share of world trade – from 19 percent in 1971 to 29 percent in 1999.Master of Business Administration – MBA Semester 4MB0037 – International Business Management Assignment Set. but also technical innovation. but in the period 1965-90. More generally. Internet users will quickly touch 1 billion. knowledge about production methods. Direct foreign investment has become the most important category. management techniques. There is also the potential for skills to be transferred back to the developing countries and for wages in those countries to rise.2 What is culture and in the context of international business environment how does it impact international business decisions? . often overlooked. Q. export markets and economic policies is available at very low cost. But the flow of migrants to advanced economies is likely to provide a means through which global wages converge. For instance. and it represents a highly valuable resource for the developing countries. The numbers involved are still quite small. • Capital movements: Chart 3 depicts what many people associate with globalization.1 • Worldwide telephone traffic has tripled since 1991. The number of mobile subscribers has elevated from almost zero to 1. For instance. Most migration occurs between developing countries. The composition of what countries export is also important. sharply increased private capital flows to developing countries during much of the 1990s. • Movement of people: Workers move from one country to another partly to find better employment opportunities. Spread of knowledge (and technology): Information exchange is an integral. Both portfolio investment and bank credit rose but they have been more volatile. the newly industrialized economies (NIEs) of Asia have done well. But Chart 2b shows great variation among the major regions. the proportion of labor forces round the world that was foreign born increased by about one-half. falling sharply in the wake of the financial crises of the late 1990s. The share of primary commodities in world exports – such as food and raw materials – that are often produced by the poorest countries. while Africa as a whole has fared poorly. The strongest rise by far has been in the export of manufactured goods. It also shows that: • The increase followed a particularly "dry" period in the 1980s. and • The composition of private flows has changed dramatically. direct foreign investment brings not only an expansion of the physical capital stock. • Net official flows of "aid" or development assistance have fallen significantly since the early 1980s.

and nudged international business (IB) research into some new trajectories.Master of Business Administration – MBA Semester 4MB0037 – International Business Management Assignment Set. values. and behavioural patterns of a national group – has become increasingly important in the last two decades.1 Culture is defined as the shared patterns of behaviors and interactions. and behavior that depends upon the capacity for symbolic thought and social learning * The set of shared attitudes.. Whereas traditional IB research has been concerned with economic/ legal issues and organizational forms and structures. We then examine novel constructs for characterizing cultures. and the processes underlying cultural changes. Finally. cognitive constructs. few executives can afford to turn a blind eye to global business opportunities. see’ Boyacigiller and Adler’ (1991) and ‘Earley and Gibson’ (2002). Japanese auto-executives monitor carefully what their European and Korean competitors are up to in getting a bigger slice of the Chinese auto-market. 1999). also known as high culture * An integrated pattern of human knowledge. norms. These shared patterns identify the members of a culture group while also distinguishing those of another group. 2002) to group performance (Gibson. . organization or group In this new millennium. It is not our purpose to be comprehensive. The purpose of this Unit is to provide a state-of-the-art review of several recent advances in culture and IB research. and how to enhance the precision of cultural models by pinpointing when the effects of culture are important.1. our goal is to spotlight a few highly promising areas for leapfrogging the field in an increasingly boundary-less business world. and practices that characterizes an institution. which are rarely employed in the field of culture and IB. with an eye toward productive avenues for future research. goals. Executives of Hollywood movie studios need to weigh the appeal of an expensive movie in Europe and Asia as much as in the US before a firm commitment. and affective understanding that are learned through a process of socialization. and that their juxtaposition in the present paper represents our attempt to highlight their importance rather than their coherence as elements of an integrative framework. largely as a result of the classic work of Hofstede (1980). The globalizing wind has broadened the mindsets of executives. For reviews. from capital structure (Chui et al. the importance of national culture – broadly defined as values. One such new trajectory is the concern with national culture. the word "culture" is most commonly used in three basic senses: * Excellence of taste in the fine arts and humanities. extended the geographical reach of firms. beliefs. We first review the issues surrounding cultural convergence and divergence. National culture has been shown to impact on major business activities. which suggests that the topics reviewed are loosely related. we examine the usefulness of experimental methods. A schematic summary of our coverage is given in Table 2. belief.

including India. quotas and other requirements). and Uganda. Moreover. About two-thirds of these gains would accrue to industrial .1 Q. one finding is that the benefits of trade liberalization can exceed the costs by more than a factor of 10. have experienced faster growth and more poverty reduction. without being open to the rest of the world. where the average import tariff has fallen from 30 percent to 10 percent over the past 20 years. identify some commonly observed mistakes in international trade ---Trade Liberalization is the removal or reduction of restrictions or barriers on the free exchange of goods between nations. Opening up their economies to the global economy has been essential in enabling many developing countries to develop competitive advantages in the manufacture of certain products. Indeed. defined by the World Bank as the "new globalizers. Freeing trade frequently benefits the poor especially. those developing countries that lowered tariffs sharply in the 1980s grew more quickly in the 1990s than those that did not." The Benefits of Trade Liberalization Policies that make an economy open to trade and investment with the rest of the world are needed for sustained economic growth. On average. In contrast. No country in recent decades has achieved economic success. inequality among countries has been on the decline since 1990. In these countries. Also. The evidence on this is clear. Countries that have opened their economies in recent years. Vietnam. trade opening (along with opening to foreign direct investment) has been an important element in the economic success of East Asia. in terms of substantial increases in living standards for its people. This includes the removal or reduction of both tariff (duties and surcharges) and non-tariff obstacles (like licensing rules. There is considerable evidence that more outward-oriented countries tend consistently to grow faster than ones that are inward-looking.Master of Business Administration – MBA Semester 4MB0037 – International Business Management Assignment Set. reflecting more rapid economic growth in developing countries." the number of people in absolute poverty declined by over 120 million (14 percent) between 1993 and 1998. often channeled to narrow privileged interests that trade protection provides.3 Explain the meaning of the term ‘trade liberalization’ and advantages. Developing countries can ill-afford the large implicit subsidies. The easing or eradication of these restrictions is often referred to as promoting "free trade. in part the result of trade liberalization. Estimate of the gains from eliminating all barriers to merchandise trade range from US$250 billion to US$680 billion per year. Overall. raising them into the middle class. the increased growth that results from free trade itself tends to increase the incomes of the poor in roughly the same proportion as those of the population as a whole. New jobs are created for unskilled workers. The potential gains from eliminating remaining trade barriers are considerable.

4 Explain the product life cycle theory. Recent research in the area has focused on its use in decision making in areas ranging from those as broad as overall strategy to those as narrow as equipment replacement. Developing countries would gain about equally from liberalization of manufacturing and agriculture. But does the product life cycle. countries benefit most from liberalizing their own markets. maturity. The group of lowincome countries. Performance was increased with the addition of the 428 CobraJet in 1968 and Mach I styling in 1969. the automobile has undergone several changes. Product Life Cycle Theory Life cycle theory has been used since the 1970s to describe the behaviour of a product or service from design to obsolescence. really tell the entire story? Consider the Ford Mustang. The typical pattern of a product is represented by a curve divided into four distinct phases: introduction. Since its 1964 introduction. when oil . growth.1 countries. Mistakes: · Failure to obtain export counselling and to develop a master international marketing plan before starting an export business: · Insufficient commitment to overcome the initial difficulties and financial requirements of exporting: · Failure to have a solid agent and or distributor’s agreement: · Blindly chasing orders from around the world · Failure to understand the connection between country risk and the probability of getting export financing · Failure to understand Intellectual Property Rights (IPR): · Insufficient attention to marketing and advertising requirements: · Lack of attention to product adaptation and preparation needs · Failure to obtain legal advice · Failure to understand export licensing requirements Q. Although there are benefits from improved access to other countries’ markets. Moreover. because their economies are more highly protected and because they face higher barriers. the Mustang was detuned in 1974. Then a true muscle car. however. But the amount accruing to developing countries would still be more than twice the level of aid they currently receive. Another substantial change took place in 1971 with the introduction of the highperformance Boss 351.Master of Business Administration – MBA Semester 4MB0037 – International Business Management Assignment Set. and decline. The main benefits for industrial countries would come from the liberalization of their agricultural markets. or PLC. developing countries would gain more from global trade liberalization as a percentage of their GDP than industrial countries. would gain most from agricultural liberalization in industrial countries because of the greater relative importance of agriculture in their economies.

sales are slow. the wheelbase is similar. The firm may either build market share or profitability in the growth phase. is several curves of introduction. called Mustang II. thus creating waves of activity. . Other strategies are to maximize profit by eliminating as many product costs as possible as sales slow. The firm attempts to stay in the growth stage as long as possible. A 302 V-8 is still offered. The strategy is to create widespread awareness. Conventional Life Cycle Theory In the introductory phase. The fourth generation Mustang. With the lower prices come lower profits. and if one looks closely enough. Costs are incurred in building distribution and increasing awareness through heavy promotion. This is typically the longest lasting stage. and production have been recurring elements in each stage of the product life cycle. and competitors begin to drop out. Just as predators react to attractive targets. Here the firm may continue to market the product hoping that competitors will discontinue their products. Let’s begin our discussion of the individual elements with design engineering. Strategies here are to make differential changes that add value to the product and to target new markets. competition begins to build as awareness increases and sales momentum builds. Marketing moves away from promotion through personal selling toward more mass media advertising. has been further refined and is more aerodynamic than its immediate predecessor. end-of-life (EOL) issues must be addressed when the product approaches obsolescence. It is hoped that the investments made in new product introduction pay off and the product or service moves to the growth phase. product marketing. The fact that they change in importance and magnitude requires that they be closely managed. one can see its genesis in the 1964 model. maturity. These elements vary in importance as the product or service moves through its life. process engineering.Master of Business Administration – MBA Semester 4MB0037 – International Business Management Assignment Set. The final stage is decline.1 prices forced a more fuel-efficient redesign. Promotion costs increase significantly. . or else to eliminate the product altogether. and decline. then. Unit manufacturing costs begin to fall as fixed costs are spread over more production units and workers move down the learning curve. with some market leaders holding their position over several decades. The pattern evidenced by the life of the Mustang. Yet it still shares roots with earlier models. Cost reduction is crucial as competitors begin to lower prices and introduce improved versions of the product. introduced as the 1994 model. · Life Cycle Elements Design engineering. growth. Sales growth slows at maturity and the firm moves to defend market position. This is where marketing managers must pay the most attention. In addition.

· Product Marketing New products are usually supported with high advertising budgets to build awareness and . which identifies all the separate parts that make up the product or service to be produced in. Equipment processes. both are linked by manufacturing planning and control systems. with each stage separate from the next.Master of Business Administration – MBA Semester 4MB0037 – International Business Management Assignment Set. · Production Production activity follows demand for the product or service. manufacturing capabilities. and potential revenues are analyzed in the review. This is known as the over-the-wall method of product design and development. conformance to specification. Once the bill of materials analysis is completed. and overall quality must be met. The first step is design engineering. · Process Engineering The process engineering function is responsible for the production system. · Relationships Design engineering. and trained production personnel must be in place. and production are all related. The purpose of presenting the traditional relationship here is to facilitate later comparisons with the fiveelement wave. To that end. Their task is to ensure the efficient production of each part or component. in which the good or service is taken from concept and detail design to prototyping. the operation area. overhead per-unit costs decrease and direct costs increase. where technologies and production methods are evaluated as a system is set into motion. the product flows to production. equipment. where down-stream manufacturing activities. Traditionally. Finally. Idea validation is first. competition. The model is illustrated in Figure 3. Technology. Targets for product cost. or to flow through. the problem of which type of production system to employ may be tackled. tooling.1 · Design Engineering Design engineering is involved in the five phases of the new product introduction (NPI) process. process engineering. Activity begins in earnest during production ramp-up. the first step is a review of the end item bill of materials. Engineers take informal ideas and study the market for needs that are not being met by products currently being offered or planned. such as production planning and scheduling. As customer sales begin to speed up production. which shows that traditional product engineering follows a linear path. take place. The product moves to process engineering. and flow used in manufacturing or service operations. layout. process engineers specify the type of system.

fewer advertising dollars per sales unit are required to encourage demand.6 Do you think WTO is helpful for promoting international business? Give reasons for your answer.5 Discussthe implications of Heckscher-Ohlin theory model. there is a greater chance that disputes will arise.[10 marks] ……. Q. An alternative tactic is to attempt to give new life to the product and risk succumbing to what is known as "The Thomas Lawson Syndrome. more homogenous concentrations within the market and tailor the advertising to those groups. The WTO system helps resolve these disputes peacefully and constructively. A system based on rules rather than power makes life easier for all The WTO cannot claim to make all countries equal.1 encourage an initial purchase. But it does reduce some inequalities. the system does contribute to international peace. Once the product becomes established. and in the numbers of countries and companies trading. and it would be wrong to make too much of it. and if we understand why. 3. in the number of products traded. Nevertheless." ………………… Q. a typical first strategy is to attack it with one theme. One strategy is to cease production and allow inventory levels to drop to zero. · End of Life This element considers what happens when sales decline to the point at which revenues drop to a level that supposedly precludes continued production of a good by the firm. the business may choose to identify smaller. When resources are relatively limited. The system allows disputes to be handled constructively As trade expands in volume. WTO is helpful for promoting international business in the following ways: 1.Master of Business Administration – MBA Semester 4MB0037 – International Business Management Assignment Set. and at the same time freeing the major powers from the complexity of having to negotiate trade agreements with each of their numerous trading partners . 2. we have a clearer picture of what the system actually does. If the target is the entire market. giving smaller countries more voice.. The system helps to keep the peace This sounds like an exaggerated claim.

and they make life simpler for the enterprises directly involved in trade and for the producers of goods and services. which adds to incomes – national incomes and personal incomes. books. clothing and other products that used to be considered exotic. For governments it can often mean good discipline. In practice there is often factual evidence that lower trade barriers have been good for employment. . Trade stimulates economic growth and that can be good news for employment Trade clearly has the potential to create jobs. But the picture is complicated by a number of factors. and everything else in between. are affected by trade policies. They are the result of essential principles at the heart of the system. foods.Master of Business Administration – MBA Semester 4MB0037 – International Business Management Assignment Set. and they cut costs Many of the benefits of the trading system are more difficult to summarize in numbers. movies. the alternative – protectionism – is not the way to tackle employment problems. music. 6. Freer trade cuts the cost of living We are all consumers. The basic principles make the system economically more efficient. The system encourages good government Under WTO rules. 9.1 4. It gives consumers more choice and a broader range of qualities to choose from Think of all the things we can now have because we can import them: fruits and vegetables out of season. The system shields governments from narrow interests The GATT – WTO system which evolved in the second half of the 20th Century helps governments take a more balanced view of trade policy. cut flowers from any part of the world. that means greater certainty and clarity about trading conditions. and so on. Nevertheless. all sorts of household goods. but they are still important. our necessities and luxuries. 7. 8. For businesses. once a commitment has been made to liberalize a sector of trade. The rules also discourage a range of unwise policies. Governments are better – placed to defend themselves against lobbying from narrow interest groups by focusing on trade – offs that are made in the interests of everyone in the economy 10. But some adjustment is necessary. Trade raises incomes Lowering trade barriers allows trade to increase. 5. it is difficult to reverse. The prices we pay for our food and clothing.

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