IBM535- Past Year Answer (December 2013)

Section A

(a) TPPAs level of economic integration is in the regional integration whereby TPPA is a
free trade deal which would see the reduction and removal of tariff and non-tariff barriers to
the free flow of goods and services as well as factors of production among each other.

(b) Four consequences if the medical and tobacco businesses to be under TPPA agreement
are:

Country are at risk to be sue by the tobacco company for discouraging smoking by
taking steps to reduce tobacco usage.
Cost of medical equipment is expected to increase.
The inclusion of medical business in the free trade deal will not lead to cheaper
medicines.
Tobaccos company would benefit from the free trade deal the most as it will allow
them to claim for breach in trade agreement.

(c) Two advantages of joining the Trans-Pacific Partnership Agreement (TPPA):

Market access- Members of TPPA obtain preferred access to markets of others

members.

Investment- Attract Foreign Direct Investment (FDI) as it will reduced the cost.

Two disadvantages of joining the Trans-Pacific Partnership Agreement (TPPA)

Lock in to Domestic Reforms

Negotiations requires High Resources

PART B
Question 1

(a)

Ethnocentrism:

Tendency to believe that ones ethnic or cultural group is centrally important & that
all other groups are measured in relation to ones own.
Ethnocentric individual will judge other groups relative to their own particular ethnic
group or culture, especially concerning language, behaviour, customs, and religion.

Cultural stereotype

Generalization or assumption that people or a person make about the characteristics of

another individual or all member of a group.
Based on image what people or individuals in that group are like.

(b) 3 reasons for cultural miscommunication:

Different Values
Different Types of Communication Styles
Different Concepts of Time

Question 2

(a) Absolute Advantage

 Countries are differ in their ability to produce goods efficiently.
Countries should specialize in the production of goods that they have an absolute
advantage.
It failed to include other subtle advantage that nation may hold.
Even countries lack of absolute advantage, they still benefit from international trade

Comparative Advantage

It make sense for a country to specialize in the production of those goods that it
produces most efficiently and to buy goods that it produces less efficiently from other
countries.
What important is not the absolute cost of production, but rather the ratio between
how effortlessly the two countries can produce the products.
Focuses on relative efficiency

(b) Porter Diamond Model

1. Factors Endowment
Refer to the condition of production factors such as labour, energy, financial
resources and capital assets in a country
Enhance competition in related industries.
For example, Japan's relative lack of raw materials has spurred miniaturization
and zero-defect manufacturing.
2. Firm Strategy, Structure & Rivalry
Determinants of how organizations are established, structured & managed
which in turn influences domestic competition
For example, shoe and leather industry in Italy. Italy is not only successful
with shoes and leather, but with related products and services such as leather
working machinery, design, etc.

3. Demand Condition
Refers to the demand generated for goods and services in that particular
country based on these characteristics; mixture, scope and growth rate &
mechanism that transmit domestic preferences to foreign markets
 German auto companies have dominated the world when it comes to the high-
performance segment of the world automobile industry; linked to a domestic
market which has traditionally demanded a high level of engineering
performance.

4. Firm Strategy, Structure and Rivalry
Refers to whether there are suppliers who are internationally competitive and
supportive when the domestic market itself is competitive.
For example, the Japanese automobile industry with 8 major competitors
(Honda, Toyota, Suzuki, Isuzu, Nissan, Mazda, Mitsubishi, and Subaru)
provide intense competition in the domestic market, as well as the foreign
markets in which they compete.