MBA 1st International Environment Long Question Answer :- In this Post you will find MBA 1 year related to important questions related to the answer such as the Introduction Micro Business Answer and many other important questions. Long Questions are answer in English Section C
LONG ANSWER QUESTIONS
Q.1. What are the international forces in business environment?
Ans. International Forces in Business Environment: Competitive Intelligence (CI) enables an eation to continually evolve in response to ever-changing conditions. These conditions, or forces, he classified into ten distinct categories. The first two forces described-market and technological Ce d rive the velocity of change. In other words, changes in these areas require your organisation to adant very quickly to take advantage of opportunities and avoid threats. The remaining eight forces affect the complexity of change-the number of issues that may affect an organisation.
1. Market Forces: Market forces are those that affect the supply, demand and price of products and they come in many forms. The competitive Intelligence (CI) team commonly monitors and analyses.
(a) Unmet customer needs, because they can be opportunities for your company to step in
(b) New competitors, especially non-traditionl competitors from other industries.
(C) Mergers and acquisitions that may strengthen a competitor or cause you to lose a supplier or distributor.
(d) Changes in the supply chain and distributors.
2. Technological Forces: Technological forces impact everything from how a product is produced to how a customer uses it and may affect every function in an organisation including what products are developed, how marketing reaches consumers, and how sales are tracked and managed. Technological changes even provide new and more effective ways to handle shipping and logistics. The CI team can play an important role in your company by tracking technological forces and providing insight into how they affect each area of the company.
3. Economic Forces: All sorts of economic events may impact a business, from an economic downturn to sequestration to the government invest in solar energy. The cl team must continually monitor for such events so your organisation is not blindsided by something that negatively affects its bottom line and doesn’t completely miss out on a golden opportunity.
Ideological Forces: To compete in the global marketplace, you need to account for differences in ideologies. In some countries, for example, bribery is not only an accepted but an expected business
Practice. Certain practices that are acceptable in cpitalist economies are shunned in communist or socialist states. In addition, religious beliefs may affect purchase decisions in a particular country or region. Competitive intelligence can play a key role in ensuring that an organisation enters an area without committing a major faux pas.
5. Political and Governmental Forces: In the United States, the government plays a major role in determining how businesses operate, especially in relation to international trade, taxation and regulations. If one’s business has government contracts, these forces may have an even bigger impact. The Cl team needs to keep an eye on any government and political issues that may affect your organisation.
6. Media Forces: The media, including social media, can make or break a company. A bad-news story can go viral in a matter of minutes, and if your organisation fails to deliver an acceptable response, the repercussions can last for months or even years. If the bad news is about a competitor, that could be good news for you, so be prepared to jump on such opportunities. The CI team can help monitor the media so your organisation is not caught off guard in either situation.
7. Psychological/Sociological Forces: Psychological and sociological forces often drive what consumers buy and where and how they buy it. More and more consumers, for example, are purchasing products online and reading reviews before making a purchase. As consumer behaviour evolves, your organisation needs to adapt to serve developing needs and preferences.
8. Moral/Ethical Forces: The safest approach to dealing with moral and ethical forces that impact business is to operate beyond reproach so that consumers hold your organisation in the highest regard, Hire quality people to work for you, associate only with reputable organisat organisation to the highest standards, and always treat everyone (customers, suppliers, distriputors and even competitors) with respect.
Competitive intelligence can help your organisation gain insight into what’s expected and idem behaviours that can get organisations into trouble. It can also heln leaders van organisation that need to be corrected.
9. Weather and other Environmental Force: Environmental issues relate to weather, natural disasters, climate change, pollution, and anything else that could impact business. A hurricane or tornado can completely wipe out businesses. Maior environmental events can disrupt supply chains and increase the costs of raw materials. Part of the CI team’s job is to monitor for events that could impact your organisation and help develop contingency plans in response to such events,
10. Legal/Regulatory Forces: National, state and local laws and regulations may impact everything from where you can set up shop to how much you have to pay your employees and the measures you must take to ensure their safety. Some regulations can be very costly, and failing to honour the regulations may be even more costly. Competitive intelligence can help your organisation monitor for changes in rules and regulations so its leaders are prepared to make the necessary adjustments.
MBA 1st International Environment Long Question Answer Sample Paper Set in English
Q.2. Write a detail note on SEZs.
Ans. Special Economic Zones (SEZs): Considering the need to enhance foreign investment and nromote export from the country and realising the need that level playing field must be made available to the domestic enterprises and manufactures to be made competitive globally, the government had April 2000 announced the introduction of special economic zones policy in the country, deemed to be foreign territory for the purposes of trade operations,
SEZs when operational are expected to offer high quality infrastructure facilities and support services, besides allowing for the duty-free import of capital goods and raw materials. Additionally, attractive fiscal incentives and simpler customs, banking and other procedures are offered in such zones. Setting up of SEZs is also treated as an infrastructure development activity and offer same incentives.
Salient Features of the Indian SEZ Initiative
Unlike most of the international instances where zones are primarily developed by governments, Indian SEZ policy provides for development of these zones in the government, private or Joint sector. This offers equal opportunity to both Indian and international private developers.
2. for greenfield SEZs, the government has specified a minimum preferable area of 1,000 hectares. However, for sector specific SEZs, there is no restriction of minimum area.
3. 100 per cent FDI is permitted for all investments in SEZs, except for activities which are under the negative list.
4. SEZ units are required to be positive net foreign exchange earners and are not subject to any minimum value addition norms or export obligations.
5. Goods flow into the SEZ area from Domestic Tariff Area (DTA) that will be treated as exports and goods coming from the SEZ area into DTA are treated as imports.
Currently, a number of SEZ projects are coming up in the country. The government has given a go-ahead for around 17 SEZs to be set up in the private sector or the joint sector. Of these, the project at Positra (Gujarat), Vishakhapatnam (Andhra Pradesh), Indore (Madhya Pradesh) and Navi Mumbai Maharashtra) are in advanced stages of planning and development, while the others are preparing to get off the ground.
Incentives and Benefits
Besides providing state-of-the-art infrastructure and access to a large well-trained and skilled Workforce, the SEZ policy also provides enterprises and developers with a favourable and attractive framework of incentives:
1. 100% income tax exemption for a block of five years and an additional 50% tax exemption for two years thereafter.
2. 100% FDI in the manufacturing sector is permitted through automatic route, barring a few sectors.
3. External commercial borrowings by SEZ units upto US$500 million in a year without any estrictions through recognised banking channels.
4. Facility to retain 100% foreign exchange receipts in exchange earners’ foreign currency account.
5. 100% FDI permitted to SEZ franchise in providing basic telephone services in SEZs.
6. No cap on foreign investment for small-scale sert
7. Exemption from industrial licensing requirement for items reserved for the SSI sector
8. Exemption from central excise duties on procurement of capital goods, raw materials consumable spares, etc. from the domestic market.
9. No routine examination by customs for export and import cargo.
10. Facility to realise and repatriate export proceeds within 12 months.
11. Profits allowed to be repatriated without any dividend balancing requirement.
12. Job work on behalf of domestic exporters for direct export allowed.
13. Subcontracting both domestic and international is permitted, this facility is available to jewellery units as well.
14. Exemption from central sales tax and service tax.
15. Facilities to set up off-shore banking units in SEZS.
Incentives to Developers
1. Exemption from duties on import/procurement of goods for the development, operation and maintenance of SEZ.
2. Income tax exemption for a block of 10 years to 15 years.
3. Exemption from service tax..
4. FDI to develop townships within SEZs with residential, education, health care and recreational facilities that are permitted on a case to case basis.
MBA 1st International Environment Long Sample Paper Set in English
Q.3. Write a note on GATT.
Ans. GATT: The General Agreement on Tariffs and Trade (GATT) was the first world-wide multilateral free trade agreement. It was in effect from June 30, 1948, until January 1, 1995, when it was absorbed by the World Trade Organisation (WTO).
Purpose: The purpose of GATT was to eliminate the harmful trade protectionism that sent global trade down to 65% during the great depression.
By removing tariffs, it boosted international trade and restored economic health to the world after the devastation of World War II.
Provisions of GATT: GATT had three main provisions. The most important requirement was that each member must confer most favoured nation status to every other member. That means all members must be treated equally when it come to tariffs. The only exceptions were the special tariffs among members of the British Commonwealth, if the tariff concession causes serious injury to domestic producers, and customs unions.
GATT also prohibited restriction on the number of imports and exports. There were three exceptions:
1. When a government had a surplus of agricultural products.
2. If a country needed to protect its balance of payments because its foreign exchange reserves were low.
3. Developing countries that needed to protect fledgling industries.
In addition, countries could restrict trade for reasons of national security, such as protecting patents, copyrights and public morals.
As more and more developing countries joined GATT, provisions to promote them were added in 1965. Developed countries agreed to give special priorities for eliminating tariffs on imports 0 developing countries to promote their economies. This was in the stronger countries’ best interests in the long-run, as it would increase the number of middle-class consumers throughout the world,
GATT grew out of the Bretton Woods Agreement, which created the World Bank and the Internation Monetary Fund (IMF) to coordinate global economic growth. The third organisation was to be the hig ambitious International Trade Organisation (ITO). The 50 countries that started negotiations wanted
be an agency within the United Nations that would create rules, not just on trade, commodity agreements, business practices, foreign direct investment, and services. The ITO charter was 1948, but the U.S. Congress and some other countries legislatures, refused to ratify it. In 1950, the Truman Administration declared defeat, ending the ITO.
At the same time, 15 countries focused just on negotiating a trade agreement. They successfully agreed on elimination of trade restrictions affecting $10 billion of trade, or a fifth of the world’s total. The deal was signed between 23 countries on October 30, 1947, and put into force on June 30,1948.
Since GATT was technically just an agreement under the provisions of U.S. Reciprocal trade Act of 30,1948. 1934, it didn’t require the approval of Congress. That’s because it was supposed to be replaced by the ITO.
Throughout the years, rounds of further negotiations on GATT continued, mostly to rfurtner reduce tariffs. In the mid – prounds of further negotiations on GATT continued, mostly to further reduce tariffs. In the mid-1960s, the Kennedy Round added an Anti-Dumping Agreement, and the Tokyo Round in the seventies improved other aspects of trade. The Uruguan round lasted form 1986-1994 and created the world trade organisation (WTO).
GATT and WTO: GATT lives on as the foundation of the WTO. Although the 1947 agreement itself inically defunct, its provisions were incorporated into the GATT 1994 agreement, designed to keep the trade agreements going while the WTO was being set up. The GATT 1994 is itself a component of the WTO Agreement.
Member Countries: The original 23 GATT members were: Australia, Belgium, Brazil, Burma (now Myanmar), Canada, Ceylon, Chile, China, Cuba, Czechoslovakia (now Czech Republic and Slovakia), France, India, Lebanon, Luxemburg, Netherlands New Zealand, Norway, Pakistan, Southern Rhodesia (now Zimbabwe), Syria, South Africa, the United Kingdom and the United States. The membership increased to 100 countries by 1993.
Pros and Cons
Pros: For 47 years, GATT reduced tariffs. This boosted world trade 8% a year during the 1950s and 1960s, faster than world economic growth. Trade grew from $332 billion in 1970 to $3.7 trillion in 1993.
It was seen as such a success that many more countries wanted to join. By 1995, there were 100 members, generating at least 80% of world trade.
By increasing trade, GATT promoted world peace. Before GATT, from 1850 to 1949, the number of wars was ten times greater than after GATT, 1950 to 2000. Before World War II, the chance of a trade alliance lasting was only slightly better than 50/50. By showing how free trade works, GATT inspired other trade agreements, which quadrupled. Significantly, it set the stage for the European Union. With all its problems, the EU has prevented wars between its members. GATT also promoted improved communication by providing incentives to smaller countries to learn English, the language of the world’s largest consumer market. This adoption of a common language reduces misunderstanding It also gives the less developed country a competitive advantage by giving them insight into the developed country’s culture, marketing and product needs.
Cons: However low tariffs destroy some domestic industries, contributing to high unemnlaum in those sectors. Governments subsidised many industries, especially U.S. and European agriculture make them more competitive on a global scale. In the early 1970s, the textile and clothing industries were exempted from GATT. When the Nixon Administration took the US dollar aff in 1973, it lowered the value of the dollar as compared to other currencies fut international price of U.S. exports.
the 1980s the nature of world trade had changed. Financial services became globalised, and foreign direct investment was important. GATT did not address any services.
GATT Hire other free trade agreements, reduced the rights of a nation to rule its own people. The agreement requires them to change domestic laws to gain the trade benefits. For example, India allows companies to create generic versions of drugs without paying a license for fee. This helped the people afford the medicine they needed. India removed this law to conform to international agreements, thus raising the price of drugs for its low-income population
Trade agreements, like GATT, often destabilise small traditional economies. Countries, like the omted States, that subsidise agricultural exports can put local family farmers out of business. Unable to compete with low-cost grains, the farmers migrate to cities looking for work, often in lactories set up by multi-national corporations. However, these factories can move to other countries with lower-cost labour, leaving the farmers unemployed. Farmers that stay often grow opium, coca, or marijuana, just because they can’t grow traditional crops and stay in business. Violence from the drug trade may force them to emigrate to protect themselves and their children.
MBA 1st International Environment Long Question Answer Set in English
Q.4. What is world trade organisation? Explain its objectives and functions. Write the difference between GATT and WTO.
Or Explain the role and functions of WTO.
Or Discuss the mission and functions of WTO.
Ans. WTO and its Objectives: Refer to Section-B, Q.5.
Role of WTO: The World Trade Organisation (WTO) is an international organisation designed by its founders to supervise and liberalise international trade to offer a world trading system.
The World Trade Organisation (WTO) deals with regulation of trade between participating countries, it provides a framework for negotiating and formalising trade agreements, and a dispute resolution process aimed at enforcing participants’ adherence to WTO agreements which are signed by representatives of member governments and certified by their parliaments. Most of the issues that the WTO focuses on are derived from previous trade negotiations, especially from the Uruguay Round (1986-1994)
WTO is a rule-based organisation in which discussion is held in a time bound manner: The WTO’s headquarters is at the Centre William Rappard, Geneva, Switzerland.!
Mission of WTO: The WTO’s stated goal is to improve the welfare of the people of its member countries, specifically by lowering trade barriers and providing a platform for negotiation of trade. Its main mission is to ensure that trade flows as smoothly, predictably and freely as possible. This main mission is further specified in certain core functions serving and safeguarding five fundamental principles, which are the foundation of the multilateral trading system.
Functions of WTO: WTO performs the following functions:
1. Provides a forum for further negotiations for trade liberalisation in the framework of the various agreements concluded.
2. Administers the new dispute settlement procedure.
3. Establishes and directs a trade policy review mechanism so as to examine the trade policies and practices of the member countries and to suggest measures of reform
4. Cooperating with other international institutions that are involved in global policy making.
5. Undertakes research and publishes information for the international community
6. The WTO shall administer the ‘Trade policy review mechanism:
7. With a view to achieving greater coherence in global economic policy making the WTO shall cooperate, as appropriate, with the IMF and IBRD and its affiliated agencies
Difference between GATT and WTO
1 The GATT was provisional. Its contracting parties never ratified the general agreement, and it contained no provisions for the creation of an organisation
2. The WTO and its agreements are permanent. As an international organisation, the WTO has a sound legal basis because all members have ratified the WTO Agreements, and the agreements themselves describe how the WTO is to function
3. The WTO has ‘Members.’ GATT had ‘Contracting parties, underscoring the fact that officially the GATT was a legal text.
4. The GATT dealt with trade in goods. The WTO deals with trade in services and intellectual property as well.
5. The WTO dispute settlement system is faster and more automatic than the old GATT system Its rulings cannot be blocked.
6. The WTO has introduced a trade policy review mechanism that increases the transparency of members’ trade policies and practices.
MBA 1st International Environment Long Question Answer Sample Paper
Q.5. Discuss the organisational structure of WTO.
Organisational Structure of WTO: The organisational structure of WTO is designed and based on four hierarchical levels. The hierarchies from the top to bottom are described as:
1. Highest level,
2. Second level,
3. Third level,
4. Fourth level
Highest Level: Ministerial Conference
The topmost decision-making body of the WTO is the ministerial conference, which has to meet at least every two years. It brings together all members of the WTO, all of which are countries or separate customs territories. The ministerial conference can make decisions on all matters under any of the multilateral trade agreements.
Second Level: General Council
The daily work of the ministerial conference is handled by three groups: The General Council, The Dispute Settlement Body and The Trade Policy Review Body. All of the three consist of the same membership, representatives of all WTO members but each meets under different rules.
1. The General Council: The general council is the WTO’s highest level decision-making body in Geneva, meets regularly to carry out the functions of the WTO. It has representatives (usually ambassadors or equivalent) from all member governments and has the authority to act on behalf of the ministerial conference which only meets about every two years. The council acts on behalf of the ministerial council on all of the WTO affairs.
2. The Dispute Settlement Body: The dispute settlement body is made up of all member governments, usually represented by ambassadors or equivalent.
3. The WTO General Council: The WTO general council meets as the Trade Policy Review Body (TPRB) to undertake trade policy reviews of members under the TRPM. The TRPB is thus open to all WTO members.
Third Level: Councils for Trade
The councils for trade work under the general council. There are three councils: council for trade in goods, council for trade related aspects of intellectual property rights and council for trade in services: and each council works in different fields. Apart from these three councils, six other bodies report to the general council on issues, such as trade and development, environmentalism, regional trading arrangements and administrative issues. These are:
1. Council for Trade in Goods: The workings of the General Agreement on Tariffs and Trade (CATThich covers international trade in goods, has the responsibility of the council for trade in goods. It is made up of representatives from all WTO member countries
2. Council for Trade Related Aspects of Intellectual Property Rights: information on intellectual property in the WTO, news and official records of the activities of the TRIPS council and details of the WTO’s work with other international organisations in the field.
3. Council for Trade in Services: The council for trade in services operates under the guidance of the general council and is responsible for overseeing the functioning of the General Agreement on Tarde in Servies (GATS). It is open to all WTO members and can create subsidiary bodies as required
Fourth Level: Subsidiary Bodies
There are some subsidiary bodies under each of the three coun
1. The Goods Council: Subsidiary under the council for trade in goods, it has 11 commit consisting of all member countries, dealing with specific subjects, such as agriculture, market access, subsidies, anti dumping measures and so on. Committees include the following
(a) Information Technology Agreement (ITA) Committee.
(b) State Trading Enterprises.
(c) Textiles Monitoring Body (consists of a chairman and 10 members acting under it).
governments inform the WTO about new Groups dealing with notifications process by which governme policies and measures in their countries.!
trade in services which deals with
2. The Services Council: Subsidiary under the council for trade financial services, domestic regulations and other specific commitments,
3. Dispute Settlement Panels and Appellate Body: Subsidiary u body to resolve disputes and the appellate body to deal with appeals.
1. Committees on:
(a) Trade and environment.
(b) Trade and development (sub-committee on least developed countries).
(c) Regional trade agreements.
(d) Balance of payments restrictions.
(e) Budgel, finance and administration.
2. Working Parties on:
3. Working Groups on:
(a) Trade, debt and finance.
(b) Trade and technology transfer
MBA 1st International Environment Long Question Answer Sample Model Paper Set in English
Q.6. Write a short note on globalisation.
(2014-15) Or Discuss the concept of globalisation. Explain globalisation of economy and business.
Or Discuss the features of current globalisation.
Ans. Concept of Globalisation The IMF defines globalisation as “The growing economic interdependence world wide through increasing volume and variety of cross border transaction in goods and services and of international capital flows and also through the more rapid and widespread diffusion of technology
We may consider globalisation at two levels viz; at the macro level, (i.e. globalisation of the world economy) and at micro level (t.e. globalisation of the business and the firm).
Globalisation of the world economy is achieved quite obviously, by globalising the national economy
Globalisation of World Economy
The world economy has been emerging as a global or transnational economy. A global or transnational economy is one which transcends the national borders unhindered by artificial restrictions like government, restrictions on trade and factor movement.
Globalisation is a process of development of the world into a single integrated economic unit.
Drucker in his new realities observes that in early or mid seventies – the world economy changed from being international to transnational. According to Drucker the transnational economy IS characterised by the following features:
1 The transnational economy is shaped mainly by money flows rather than by trade in goods and services.
1. In the transnational economy, management has emerged as the decisive factor of production and the traditional factors of production become secondary.
3. In the transnational economy, the goal is market maximisation not profit maximisation.
4. Trade, which increasingly follows investment, is becoming a function of investment.
5. The decision-making power is shifting from the national state to the regional one.
6. There is a genuine and autonomous world economy of money credit and investment flows.
7. Finally, there is a growing pervasiveness of the transnational corporation which sees the entire world as a single market for production and marketing of goods and services.
A growing proportion of the world output is traded internationally and the faster growth of trade then GDP, is bringing about world economic integration
Globalisation of Business
Globalisation in its true sense is a way of corporated life necessitated, facilitated and nourished by the transnationalisation of the world economy and developed strategies. International marketing or international investment does not amount to globalisation unless it is the result of such a global orientation.
Companies which have adopted a global outlook, stop thinking of themselves as who venture abroad and start thinking of themselves as global marketers. The top management and staff are involved in planning of world wide manufacturing facilities, marketing policies, financial flows and logistical systems Executives are trained in world wide manufacturing facilities, not just domestic or international. Management recruited from many countries, components and supplies are rom where they are obtained at least cost and investments are made where the anticipated returns are the greatest.
Features of Current Globalisation
There are several similarities and differences between the two phases of globalisation. The humar development report, 1999, mentions the following as new features of current phase of globalisation:
New Markets: It includes:
1. Growing global markets in services.
2. New financial markets.
3. Deregulation of anti-trust laws and proliferation of mergers and acquisition.
4. Global consumer market with global brands.
New Actors: It includes:
1. MNC integrating their production and marketing.
2. The WTO.
3. An international criminal court system.
4. A booming international network of NGOs.
5. More policy coordination groups. New Rules and Norms:
1. Market economic policies spreading around the world with greater privatisation and liberalisation.
2. Wide spread adoption of democracy.
3. Human right conventions and instruments building up in both.
4. Coverage and number of signatories.
5. Consensus goals and action agenda for development.
6. Conventions and agreements on global environment
7. Multilateral agreement in trade.
8. New multilateral agreement for services.
9. Multilateral agreement on investment.
New Faster and Cheaper Tools of Communication: It includes:
1. Internet and electronic communication.
2. Cellular phones.
3. Fax machines.
5. Computer aided design.
MBA 1st International Environment Long Sample Model Paper Set in English
Q.7. What are the various stages of globalisation? Why do companies go for globalisation?
Ans.Stages of Globalisation
A firm passes through different stages of development before it becomes a truly global corporation. A domestic firm starts its business by exporting goods. Later it may establish joint ventures or subsidiaries abroad.
Ohmae identifies five different stages in the development of a firm into a global corporation:
First Stage: It is the arm’s length service activity of an essentially domestic company which moves into a new market overseas by linking up with local dealers and distributors.
Second Stage: The company takes over these activities on its own.
Third Stage: The domestic based company begins to carry out its own manufacturing, marketing and sales in key foreign markets.
Fourth Stage: The company moves to a full insider position in these markets, supported by a complete business system including R, D and engineering.
Fifth Stage: The company moves towards a genuinely global mode of operation. To make the organisation transnational, a company must denationalise their operation and create a system of values, shared by corporate manager around the globe so as to replace the glue, a nation based orientation once provided.
Essential Conditions for Globalisation
There are however, some essential conditions to be satisfied on the part of the domestic economy as well as the firm for successful globalisation of the business. These are:
1. Business Freedom: There should not be necessary government restrictions which come in the way of globalisation. That is why, the economic liberalisation is regarded as a first step towards facilitating globalisation.
2. Facilities: The extent, to which an enterprise can develop globally from home country-base, depends on the facilities available like the infrastructural facilities.
3. Government Support: Government support may take the firm of policy and procedural reforms, development of common facilities like infrastructure facilities, R and D support financial market reforms and so on.
4. Resources: Resource is one of the important factor which often decides the ability of a firm to globalise. Resourceful companies may find it easier to move ahead in the global market.
5. Competitiveness: The competitive advantage of the company is a very important determinant of success in global business.
6 Orientation: A global orientation on the part of business firm and suitable globalisation strategies is essential for globalisation.
Why do Companies go Global?
There are several reasons why companies go global. The primary motives for growing global areThat there is more money in the overseas of entering market. The other reasons of entering international markets are:
1. The rapid shrinking of time and distance across the globe because of faster communication, seedier transportation, growing financial flows and rapid technological changes have encouraged companies to go global.
2. Cheap labour in other countries attracts foreign investors.
3. An investment portfolio is usually designed to protect its owner from fluctuations in the value or return of any single asset.
4. The nationality of a company may affect its moves for going international.
5. Companies often set up overseas plant to reduce high transportation costs. The higher ratio of the unit cost to selling price for unit, the more significant is the transportation factor.
6. Some companies set up plant overseas so as to be close to their raw materials supply and to market, for their finished products.
7. Development of other spheres also contributes to the increasing internationalisation of the business.
MBA 1st International Environment Long Question Answer Paper Set in English
Q.8. Why do you think is globalisation Important for economy? What are the pros and cons of globalisation?
Ans. Globalisation is important for economy as it has some positive impacts.
Here are four ways that globalisation has had a positive impact on the world economy:
1. More Efficient Markets: Efficient markets should be what every economy strives for. Essentially, the sign of an efficient market is where there is an equilibrium between what buyers are willing to pay for a good or service and what sellers are willing to sell for a good or service.
2. Increased Competition: Anytime that you have multiple producers competing for a hold of the economy, that’s a good sign for consumers, as the quality of goods and services often goes up as a result. When businesses started to venture across international borders, what they often did was introduce a new standard into the global marketplace. Consumers then had more options to choose from. With more competitors to fight over market share, each company has to constantly look to improve their goods or services or create more value for their customers. This means better products and sometimes lower prices, which is always a good thing for buyers.
3. Stabilised Security: When your economy depends largely on another country’s economy, it is hard to imagine either one of the countries attacking the other. In a weird sort of way, globalisation helped heighten world security.
Although this may seem kind of twisted since there is so much violence that still goes on in the world, the fact remains that globalisation has halted many conflicts that could have turned ugly if their country’s financial health didn’t depend on the other.
4. More Wealth Equality throughout the World: Although many Americans contend that their standard of living has gone down because of globalisation, the flip side to this is that hundreds of thousands of people around the world now have jobs, have started their own businesses and can provide comfort for their families. Living in the U.S., we take things like clean water, shelter and plentiful food for granted Our standard of living is so high as compared to many nations that when we can no longer buy frivolous luxuries, we claim that we are poor. Globalisation may have stopped you from her flat screen TV, but it also helped countless people in developing countries put food on their table for their families,
Pros of Globalisation
1. Productivity grows in countries that open up their markets and integrate with outside economias Rich countries gain access to emerging economies. Poor countries gain access to wealthy economies where they can sell their goods and services
2. Lesser developed nations benefit from the increase in investment from foreign countries both financially and through jobs.
3. Global competition and cheap imports help to keep inflation down.
4. Open economies help to spur innovation and new ideas on a global level, creating an effective “Globalisation of ideas
5. Through globalisation, countries can specialise more in what they produce and what they do best.
6. Cultural intermingling means that countries learn more about other cultures, strengthening international bonds and making the independent people’s of the world more open and tolerant towards each other
7. Shared financial interests mean that corporations and governments attempt to solve ecological problems together.
Cons of Globalisation
1. Wages and working conditions everywhere are pushed downwards as companies gravitate towards countries where the wages are the lowest and the workers’ rights are the worst.
2. The environment suffers, as production moves to places where they have less strict rules and regulations about controlling pollution and deforestation etc.
3. Many jobs are outsourced from more developed nations, like the USA, to lower wages economies, such as those in India and China, resulting in high unemployment in the western countries.
4. Globalisation means that economic problems in one part of the world can spread easily and create a worldwide recession.
5. Many of the deals made by more economically developed nations with lesser developed countries are unfairly weighted in favour of the more developed nations. For instance, subsidies to agricultural production by the more developed nations are often kept, making the competition unfair.
6. Globalisation undermines national sovereignties and national governments, as individual countries are increasingly at the mercy of international markets, and multinational corporations grow more powerful and influential.
7. Social welfare schemes are threatened as countries with no safety net and poor safety records undercut prices of goods and services.
MBA 1st International Environment Long Question Answer Sample Model Paper
Q.9. What are the modes to foreign market entry?
Ans. Foreign Market Entry Modes
The decision of how to enter a foreign market can have a significant impact on the results. Expansion into foreign markets can be achieved via the following four mechanisms:
1. Exporting: Exporting is the marketing and direct sale of domestically produced goods in another country. Exporting is a traditional and well-established method of reaching foreign markets. Since exporting does not require that the goods be produced in the target country, no investment in foreign production facilities is required. Most of the costs associated with exporting take the form of marketing expenses.
Exporting commonly requires coordination among four players:
(C) Transport provider
2. Licensing: Licensing essentially permits a company in the target country to use the property of the licensor. Such property usually is intangible, such as tradem techniques. The licensee pays a fee in exchange for the rights to use the for technical assistance.
Because little investment on the part of the licensor is requrird, incensigh has the potential to provide a very large ROI. However, because the licensee produces and markets returns from manufacturing and marketing activities may be lost.
3. Joint Venture: There are five common objectives in a joint venture: market entry, risk/ reward sharing, technology sharing and joint product development, and conforming to government regulations. Other benefits include political connections and distribution en depend on relationships.
include political connections and distribution channel access that may
Such alliances often are favourable when:
(a) The partners’ strategic goals converge while their competitive goals diverge,
(c) Partners’ are able to learn from one another while limiting access to their own proprietary skills.
The key issues to consider in a joint venture are ownership control, length of agreement, pricing technology transfer, local firm capabilities and resources, and government intentions.
Potential problems include:
(a) Conflict over asymmetric new investments.
(b) Mistrust over proprietary knowledge.
(C) Performance ambiguity-how to split the pie.
(d) Lack of parent firm support.
(e) Cultural clashes.
(f) If, how, and when to terminate the relationship.
Joint ventures have conflicting pressures to cooperate and compete:
(a) Strategic imperative: the partners want to maximise the advantage gained for the joint venture, but they also want to maximise their own competitive position.
(b) The joint venture attempts to develop shared resources, but each firm wants to develop and protect its own proprietary resources.
(c) The joint venture is controlled through negotiations and coordination processes, while each firm would like to have hierarchical control.
4. Foreign Direct Investment: Foreign Direct Investment (FDI) is the direct ownership of facilities in the target country. It involves the transfer of resources including capital, technology and personnel. Direct foreign investment may be made through the acquisition of an existing entity or the establishment of a new enterprise.
Direct ownership provides a high degree of control in the operations and the ability to better know and competitive environment. However, it requires a high level of resources and a high degree of commitment.
MBA 1st International Environment Long Sample Model Paper Set in English
Q.10. Discuss about LPG model.
Ans. LPG Medal. After Independence in 1947, Indian government had a main problem to develop Economy and to solve this issue. it followed LPG Model. The Growth and Economic conditions of India in that time were not very good, because we did not have proper resources for the development, not in terms of natural resources but in terms of financial and industrial development. At that time, India needed the path of economics planning and for that was adopted ‘Five Year Plan’ concept taken from Russia and felt It that it will provide a fast development like Russia, under the view of the socialistic Pattern society. And India had practiced a number of restrictions ever since the introduction of the first pattern society. Industrial policy resolution in 1948.
1. Liberalisation: It is defined as making economics free to to enter in the market and establish venture in the country. As we know that earlier periods were known as License Raj. As a result of the restrictions in the past, India’s performance in the global market has been very dismal, i.e. we ha never reached even the 1% in the global market. We have vast natural l resources with high- efficiency labour, but after all this we were still contributing with 0.53% till 1992. There were many problems liberalisation.
Impact before liberalisation:
(a) the low annual growth rate of the economy of India before 1980, which stagnated around 3.5% from 1950s to 1980s, while per capita income averaged 1.37 grew by 5%, Indonesia by 9%, Thailand by 9%, South Korea by 10% and in taiwan by 12%
(b) Only four or five licenses would be given for steel, power and communications. License owners built up huge powerful empires.
(C) A huge public sector emerged. State-owned enterprises made large losses.
(d) Infrastructure investment was poor because of the public sector monopoly.
(e) License Raj established the ‘Irresponsible, self-perpetuating bureaucracy that still exists
throughout much of the country and corruption flourished under this system.
After liberalisation India is in second world of development and become the 7 largest economies which contributed 1.3 trillion in the world’s GDP. Dr. Manmohan Singh, our former finance minister has opened the way of free economy in our country which leads to the great development of our country.
2. Privatisation: Privatisation is defined as the situation when the control of economy is shifted from public to a private hand. India is leading towards privatisation from government raj. As a result it leads in the development of country 500 faster than previous. Now India is in the situation of world’s fastest developing economy and it may be a chance that India will be at the top till 2050.
3. Globalisation: Globalisation describes the process by which regional economies, societies and cultures have become integrated through a global network of communication, transportation and trade. The term is sometimes used to refer specifically to economic globalisation-the integration of national economies into the international economy through trade, foreign direct investment, capital flows, migration and the spread of technology. However, globalisation is usually recognised as being driven by a combination of economic, technological, sociocultural, political and biological factors.
MBA 1st International Environment Long Question Answer Sample Model Paper Set
Q.11. Give the advantages and limitations of MNCs.
Ans. Advantages and Limitations of MNCs:
Advantages of MNCs from the Viewpoint of Host Country
We propose to examine the advantages and limitations of MNCs from the viewpoint of the host country. In fact, advantages of MNCs make for the case in favour of MNCs while limitations of MNCs become the case against MNCs.
1. Employment Generation: MNCs create large scale employment opportunities in host countries. This is a big advantage of MNCs for countries where there is a lot of unemployment.
2. Automatic Inflow of Foreign Capital: MNCs bring in much needed capital for the rapid development of developing countries. In fact, with the entry of MNCs, inflow of foreign capital is automatic. As a result of the entry of MNCs, India, e.g. has attracted foreign investment with several million dollars.
3. Proper Use of Idle Resources: Because of their advanced technical knowledge, MNCs are in a position to properly utilise idle physical and human resources of the host country. This results in an increase in the national income of the host country,
4. Improvement in Balance of Payment Position: MNCs help the host countries to increase their exports. As such, they help the host country to improve upon its balance of payment position.
5. Technical Development: MNCs carry the advantages of technical development to host countries. In fact, MNCS are a vehicle for transference of technical development from one Because of MNCs poor host countries also begin to develop technically.
6. Managerial Development: MNCs employ latest managemen TECHNIQUES. People employed by MNCs do a lot of research in management. In a way, they help to professionalise management along latest lines of management theory and practice. This leads to managerial development in host countries.
7. End of Local Monopolies: The entry of MNCs leads to competition in the host countries. Local monopolies of host countries either start improving their products or reduce their prices. Thus, MNCs put an end to exploitative practices of local monopolists. As a matter of fact, MNCs compel domestic companics to improve their efficiency and quality
In India, many Indian companies acquired ISO-9000 quality certificates, due to fear of competition posed by MNCs.
8. Improvement in Standard of Living: By providing super quality products and services, MNCS help to improve the standard of living of people of host countries.
9. Promotion of international Brotherhood and Culture: MNCs integrate economies of various nations with the world economy. Through their international dealings, MNCs promote international brotherhood and culture and pave way for world peace and prosperity.
Limitations of MNCs from the Viewpoint of Host Country
These are as follows:
1. Danger for Domestic Industries: MNCs, because of their vast economic power, pose a danger to domestic industries; which are still in the process of development. Domestic industries cannot race challenges posed by MNCs. Many domestic industries have to wind up, as a result of threat from MNCS. Thus, MNCs give a setback to the economic growth of host countries.
2. Repatriation of Profits: (Repatriation of profits means sending profits to their country).
MNCs earn huge profits. Repatriation of profits by MNCs adversely affects the foreign exchange reserves of the host country which means that a large amount of foreign exchange goes out of relationships between parent the host country.
3. No Benefit to Poor People: MNCs produce only those things, which are used by the rich. Therefore, poor people of host countries do not get, generally, any benefit out of MNCs.
4. Danger to Independence: Initially MNCs help the government of the host country, in a number of ways and then gradually start interfering in the political affairs of the host country. There is, then, an implicit danger to the independence of the host country, in the long-run.
5. Disregard of the National Interests of the Host Country: MNCs invest in most profitable sectors and disregard the national goals and priorities of the host country. They do not care for the development of backward regions and never care to solve chronic problems of the host country like unemployment and poverty.
6. Misuse of Mighty Status: MNCs are powerful economic entities. They can afford to bear losses for a long while in the hope of earning huge profits once they have ended local competition and achieved monopoly. This may be the worst strategy of MNCs to wipe off local competitors from the host country.
7. Careless Exploitation of Natural Resources: MNCs tend to use the natural resources of the host country carelessly. They cause rapid depletion of some of the non-renewable natural resources of the host country. In this way, MNCS cause a permanent damage to the economic development of the host country.
8. Selfish Promotion of Alien Culture: MNCs tend to promote alien culture in host country to
Sell their products. They make people forget about their own cultural heritage. In India, e.g. MNCS have created a taste for synthetic food, soft drinks. etc. This promotion of foreign culture Dy MNCS is injurious to the health of people also.
9. Exploitation of People, in a Systematic Manner: MNCs join hands with big business houses of host country and emerge as powerful monopolies. This leads to concentration of economic power only in a few hands. Gradually these monopolies make it their birth right to exploit poor people and enrich themselves at the cost of the poor working class.
Advantages & Limitations from the Viewpoint of the Home Country
Advantages: Some of the advantages of the MNCs from the viewpoint of the home country are:
1. MNCs usually get raw-materials and labour supplies from host countries at lower prices; especially when host countries are backward or developing economies.
2. MNCs can widen their market for goods by selling in host countries and increase their profits. They usually have good earnings by way of dividends earned from operations in host countries.
3. Through operating in many countries and providing quality services, MNCs add to their international goodwill on which they can capitalise, in the long-run.
Limitations: Some of the limitations of MNCs from the viewpoint of home country may be:
1. There may be loss of employment in the home country, due to spreading manufacturing and marketing operations in other countries.
2. MNCs face severe problems of managing cultural diversity. This might distract managements’ attention from main business issues, causing loss to the home country.
3. MNCs may face severe competition from bigger MNCs in international markets. Their attention and finances might be more devoted to wasteful counter and competitive advertising resulting in higher marketing costs and lesser profits for the home country.