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MODEL Question - Answers FOR MBA - Semester: IV
MODEL Question - Answers FOR MBA - Semester: IV
MODEL Question
-Answers
FOR
MBA - Semester: IV
(Specialization IB)
BY:
Dr. Bhati Rakesh Kumar
MBA Semester – IV
Subject: 403 (IB) International Business Environment
MODEL Question -Answers
Q1. Enumerate the main elements of culture and explain their significance in international
business environment?
Answer:
Culture can be defined as “the sum total of the beliefs, rules, techniques, institutions, and
artifacts that characterize human populations” or “the collective programming of the mind”
Sociologists generally talk about the socialization process, referring to the influence of parents,
friends, education, and the interaction with other members of a particular society as the basis for one’s
culture. These influences result in learned patterns of behavior common to members of a given society.
The definitions of culture vary according to the focus of interest, the unit of analysis, and the
disciplinary approach (psychology, anthropology, sociology, geography, etc.).
Culture was defined earlier as the symbols, language, beliefs, values, and artifacts that are part of
any society. As this definition suggests, there are two basic components of culture: ideas and symbols
on the one hand and artifacts (material objects) on the other. The first type, called nonmaterial culture,
includes the values, beliefs, symbols, and language that define a society. The second type, called
material culture, includes all the society’s physical objects, such as its tools and technology, clothing,
eating utensils, and means of transportation.
The cultural environment of a foreign nation remains a critical component of the international
business environment, yet it is one of the most difficult to understand. The cultural environment of a
foreign nation involves commonly shared beliefs and values, formed by factors such as language,
religion, geographic location, government, history, and education.
It is common for many international firms to conduct a cultural analysis of a foreign nation as to
better understand these factors and how they affect international business efforts.
Cross-cultural management issues arise in a range of business contexts. Within individual firms,
for example, managers from a foreign parent company need to understand that local employees from
the host country may require different organization structures and HRM procedures. In cross-border
mergers and acquisitions (M&As), realizing the expected synergies very often depends on establishing
structures and procedures that encompass both cultures in a balanced way. Cross-border joint ventures,
alliances, or buyer–supplier relationships between two or more firms also require a cultural compromise.
Finally, for firms to sell successfully to foreign customers requires culturally sensitive adaptations to
products, services, marketing, and advertising.
Despite the various patterns and processes of globalization, cultural differences still remain
important. Even with greater common access, via various media and the Internet, to the same brands,
rock icons, and sports stars, differences remain. Terms like cultural convergence or, simply,
Americanization (the homogenization of global consumer preferences through the ubiquity of
McDonald’s, Coca-Cola, and Ford) overstate the similarities between groups of people around the
world.
Cultures vary and these variations lead to real and significant differences in the ways that
companies operate and people work.Moreover, because of globalization more and more firms are coming
head to head with the added complexity of doing business globally, which stems from the huge amount
of variety in the world that still exists
Q2. Discuss Movements in interest rates and then impact on trade and investment flows.
Answer: All other factors being equal, higher interest rates in a country increase the value of that
country's currency relative to nations offering lower interest rates. However, such simple straight-line
calculations rarely, if ever, exist in foreign exchange. Although interest rates can be a major factor
influencing currency value and exchange rates, the final determination of a currency's exchange rate
with other currencies is the result of a number of interrelated elements that reflect and impact the
overall financial condition of a country in respect to that of other nations.
Generally, higher interest rates increase the value of a given country's currency. The higher interest
rates that can be earned tend to attract foreign investment, increasing the demand for and value of the
home country's currency. Conversely, lower interest rates tend to be unattractive for foreign
investment and decrease the currency's relative value.
However, this simple occurrence is complicated by a host of other factors that impact currency
value and exchange rates. One of the primary complicating factors is the interrelationship that exists
between higher interest rates and inflation. If a country can manage to achieve a successful balance of
increased interest rates without an accompanying increase in inflation, then the value and exchange rate
for its currency is more likely to rise.
Interest rates alone do not determine the value of a currency. Two other factors that are often of
greater importance are political and economic stability and the demand for a country's goods and
services. Factors such as a country's balance of trade between imports and exports can be a much more
crucial determining factor for currency value. Greater demand for a country's products means greater
demand for the country's currency as well. Favorable gross domestic product (GDP) and balance of
trade numbers are key figures that analysts and investors consider in assessing the desirability of
owning a given currency.
Another important factor is a country's level of debt. While they can be managed for some
period of time, high levels of debt eventually lead to higher inflation rates and may ultimately trigger
an official devaluation of a country's currency.
The recent history of the United States clearly illustrates the critical importance of a country's
overall perceived political and economic stability. In recent years, U.S. government and consumer debt
has exploded to new high levels. In an attempt to stimulate the U.S. economy, the Federal Reserve has
maintained interest rates near zero. Despite these facts, the U.S. dollar has enjoyed favorable exchange
rates in relation to the currencies of most other nations. This is partially due to the fact that the U.S.
retains, at least to some extent, the position of being the reserve currency for much of the world. Also,
the U.S. dollar is still perceived as a safe haven in an economically uncertain world. This fact, more so
than interest rates, inflation or other considerations, has proven to be the overriding and determining
factor for the relative value of the U.S. dollar.
For international investors, there are substantial gains to be made from moving money between
different countries with different interest rates.
Suppose the EU and UK both have an interest rate of 0.5%. At that time, it doesn’t make much
difference whether you put savings in the US banks or EU banks.
However, if the UK increased interest rates to 1.5% then you would get a substantially higher
return from saving in a UK bank. Therefore, EU investors may sell Euros and buy Pound Sterling so
that they can gain more interest from their savings.
This increased demand for Pound Sterling will push up the value of the Pound against the Euro.
Even small changes in interest rates can make a significant impact on exchange rates. Increased capital
mobility means it is easier to transfer money across accounts. Money can be moved from one account to
another with ease. Also, the commission from buying dollars will be quite limited making it more
attractive to shift accounts.
Answer: Technology Transfer (also called Transfer of Technology (TOT) and Technology
Commercialization) are the processes by which the information or knowledge related to the
technological aspects travel within the group or between the organizations or entity. Taking this to the
broader scenario, give rise to International technology transfer in which the knowledge travels in
between the countries, which is not only limited to the Knowledge and information, rather includes skill
transferring, methods of manufacturing, physical assets, know-how, and other technical aspects, and
henceforth helps in further development of the technology and innovation, by effectively utilizing the
technology transferred and finally incorporating it.
Technology transfer has been used in the movements of technology from the laboratory to
industry or from one application to another domain application or taking developing countries into
consideration technology transfer helps in growing access to technologies which are related to other
developed countries and henceforth helps in approaching towards the newer technologies and
inventions i.e. from Developed to developing countries.
FORMS OF TECHNOLOGY TRANSFER:
Technology transfer can be classified into vertical and horizontal technology transfer
Vertical transfer refers to transfer of technology where transmission of new technologies is done from
the generation of new technology during the research and development programs into the science and
technology organizations, for instance, to the application related to the industrial and agricultural
sectors, or we can say that vertical transfer is the technology transfer commencing from basic research
to applied research, from applied research to development followed by development to production.
While the horizontal technology transfer is the movement of a well-known technology from
one equipped environment to another (from one company to another) or say refers to the transfer and
use of technology used in one place or organization to another place or organization.
As discussed above generally developed countries follow the route:-
Research -> Development -> Design -> Production
While less advanced and developing countries follow the route:-
Production -> Design -> Development -> Research
Generally there are the reverse trends in the developing countries because the path to be followed
depends upon the transfer, absorption, and adaptation of existing technology
ADVANTAGES
The advantages related to technology transfer comprises of the essential gain to the public who
benefits from the manufactured goods that get to the market and ultimately the availability of the jobs
which results from the improvement and sale of the products so formed.
Technology transfer strengthens industry by identifying new business opportunities which
contributes to enhancing the know-how and competitiveness of the technology providers, which
ultimately results in broadening the business area and re-focusing to the technologies and systems to
serve several different fields. In addition, technology transfer promotes the wider use and awareness of
technology and systems.
Technology transfer brings economic benefits by increasing revenues for both technology
donors and receiver's benefits with new and better products, processes, and services that lead to
increased efficiency and effectiveness, greater market share and increased profits.
Moreover technology transfer helps in earning rewards which is above and beyond the regular
salary which is received through patents, licenses, and other technology transfer awards which help in
benefiting intellectually and professionally through working collaboratively with their peers in the
industrial sector.
DISADVANTAGES
As technology transfer is keen or meant for the business oriented activity, hence forth there can
be the chances to have financial or commercial risk, as we are well aware that Licences can generate the
income, but patent application which are not licensed will only cost money.
Even when the transfer programme related to the technology transfer is successful or in
particular after technology transfer institutional tensions may arise within the organization which may
be in between the recipient of licensing income and those who know they will never make utilizable
inventions. For the sake of remedy in those circumstances Institutional policies can be made aiming to
have partial rearrangement of income received by license between all research groups but, using this
strategy may not eradicate the problem rather in most of the cases discoverer will be frustrated or
disappointed because the income that they have earned is given to other groups. Technology transfer
activities may put researchers in conflict of interest situations, especially when the transfer involves the
creation of the spin- off company, hence Institutions should be aware of these possible dangers.
Moreover problem can be because of non performance of licensee. And may be the licensee has
limited chances beyond the license scope unless future enhancements to patent included in initial
agreement and Unrealistic expectations and demands from licensor.
INDIAN SCENARIO :
Technology in India is growing exponentially and has played an important role in all round
development and growth of economy in the country, India has opted for a wise mix of original and
imported technology. Henceforth "Technology transfer" plays a very important role and is generally
covered by a technology transfer agreement.
Developing countries like India generally not follow the usual path for development with regard
to technologies but use their advantage in the cutting edge technology options which is now available
and put the tools to use this modern technology.
Technology transfer is assumed to get benefits from R&D which is shared with the developing
and underdeveloped countries , so taking this to the point of consideration National research
laboratories is been constructed by the Indian government for the purpose of R&D which is yet to be
commenced by the private sectors.
India generally comprises of Small and medium enterprises and is growing since liberalization,
which has resulted in growth of The multinational enterprises, which in turn is competing with the
international companies which has enhanced the confidence of India. Not only confined to the
pharmaceuticals but is broadly categorized in other areas too such as agriculture, dairy and other
technologies.
Government of India is in the verge to open Technology Transfer Offices, Universities,
institutions which will be funded by central government and will acts as mechanism for transferring or
exporting the research conducted and its outcome to the desired place.
Though some of the Indian Institutes have been already commercializing their research and are
successful in technology transfer in which they have been licensed as technologies to industry.
Moreover, numerous cases of technology transfer are seen in India by various well-known institutions.
.
Q4. Discuss International collaborative arrangements and strategic alliances.