International Business

Answer Keys to Important Questions:

Section A
1. Give the meaning of International Human Resource management?
Answer:INTERNATIONAL HUMAN RESOURCE MANAGEMENT (IHRM) is a process of
procuring, allocating, and effectively utilizing human resources in a multinational
corporation, while balancing the integration and differentiation of Human Resource
activities in foreign locations.

2. List out the member countries of SAARC?

Answer:The South Asian Association for Regional Cooperation (SAARC) is the
regional intergovernmental organization and geopolitical union of nations in South
Asia. Its member states include Afghanistan, Bangladesh, Bhutan, India, Nepal, the
Maldives, Pakistan and Sri Lanka. SAARC comprises 3% of the world's area, 21% of
the world's population and 3.8% (US$2.9 trillion)[3] of the global economy, as of
2015.

3. List the members of ASEAN:

Answer: The Association of Southeast Asian Nations, or ASEAN, was established on 8
August 1967 in Bangkok, Thailand. There are 10 permanent members of this
association. The basic objective behind the establishment of this organisation is to
promote economic co-operation in South-East Asia and ensure the economic
stability in this region. Its headquarters is in Jakarta (Indonesia).
India could not become the member of this association due to her geographical
location. India is a part of South-Asia while the ASEAN is an organisation of South-
East Asian Nations. On July 23, 1996; ASEAN gave advisory status to India.
4. What do you mean by International Strategic Management?
Answer:International Strategic Management is a planning process of developing
international strategy in the direction of achieving strategic-fit between the
organization's competence & resources and the global environment under which it
tends to operate. It is an ongoing process that adhere an organization to compete in
an international scenario.
International Strategic Management (ISM) is an ongoing management planning
process aimed at developing strategies to allow an organization to expand abroad
and compete internationally. Strategic planning is used in the process of developing
a particular international strategy.

5. Who are called the expatriates?

Answer: An expatriate is an employee who works and lives in a country other that
that of their national origin. A more common and preferred term to use is assignee,
whether talking about an expatriate or impatriate.An individual living in a country
other than their country of citizenship, often temporarily and for work reasons. If
your employer sends you from your job in its New York office to work for an
extended period in its London office, once you are in London, you would be
considered an expatriate or "expat." 
6. Give the meaning of a global company?
Answer:A Global Firm is a company which has multinational branches and
headquarters in many of the countries. It is also called as International
Firm. It should be duly noted that it is different from a locally based
company selling its products globally or to other countries.
Some of the known examples are Coke, Sony and Microsoft etc.

7. Write note on: technology transfer

Answer:Technology transfer is the process by which technology or knowledge
developed in one place or for one purpose is applied and exploited in another place
for some other purpose.
The term "technology transfer" historically has been associated with federal
activities; however, the process is not restricted to the government. The most
common form of technology transfer occurs between federal laboratories and
nonfederal organizations such as private industry, academia, and state and local
governments.

SECTION B
Answer any 2 each question carries 5marks
8. Write a note on SAARC and its integration with other countries?
Answer:The South Asian Association for Regional Cooperation (SAARC) is an
economic and political organization of eight countries in Southern Asia.In terms of
population, its sphere of influence is the largest of any regional organization: almost
1.5 billion people, the combined population of its member states. It was established
on December 8, 1985 by India, Pakistan, Bangladesh, Sri Lanka, Nepal, Maldives and
Bhutan. In April 2007, at the Association’s 14th summit, Afghanistan became its
eighth member.i. To promote the welfare of the peoples of South Asia and to
improve their quality of life;

ii. To accelerate economic growth, social progress and cultural development in the
region and to provide all individuals the opportunity to live in dignity and to realize
their full potential;

iii. To promote and strengthen collective self-reliance among the countries of South
Asia;

iv. To contribute to mutual trust, understanding and appreciation of one another’s

problems;

v. To promote active collaboration and mutual assistance in the economic, social,

cultural, technical and scientific fields;

vi. To strengthen cooperation with other developing countries;

vii. To strengthen cooperation among themselves in international forums on matters

of common interest; and

viii. To cooperate with international and regional organizations with similar aims and
purposes.

9. What are the pitfalls of Strategic Alliance?

Answer: the pitfalls of strategic alliance may be listed as below:

Incompatibility Of Partners

Incompatibility among the partners of a strategic alliances is a primary cause of the

failure of such arrangement. At times, incompatibility can lead to outright conflict,
although typically it merely lead to poor performance of the alliances.

In many case, compatibility problems can be anticipated if the partners carefully

discuss and analyze the reasons why each is entering into the aliances in the first
place. a useful starting point may be meeting beetween top managers of the two
partners to discuss their mutual interest, goals, and beliefs about strategy. the
manner in which the managers are able to cooperate in a strategic alliance.
Obviously, if the partners cannot agree on such basic issues as how much decision -
making power to delegate to the alliance's business unit, what the alliances strategy
should be, how it is to be organised , or how it should be staffed, compromise will
probably be difficult to achieve and the alliance is unlikely to succeed. For example, a
marketing aliances between AT&T and Italy's Olivetti announced with great fanfare
in the mid-1990s quickly failed after the firm could not reach agreement on a
marketing strategy, what they wanted the alliances to accomplish, and how they
planned to work together.

Access To Information

Limited access ti information is another drawback of many strategic alliances. For a

collaboration to work effectively, one partner (or both) may have to provide the
other with information it would prefer to keep secret. it is often difficult to identify
such needs ahead of time; thus a firm may enter into an agreement not anticipating
having to share certain information. when the reality of the situation becomes
apparent, the firm may have to be forth coming with the information or else
compromise the effectiveness of the collaboration.

Conflict Over Distributing Earnings

An Obvious limitation of strategic alliances related to the distribution of earnings.

Because the partners share risks and costs , they also share profits. and example,
General Mills and Nestle split the profits from their European joint venture on a
50/50 basis. basis. of course, this aspect of colaborative arrangements is known
ahead of time and is virtually always negotiated as part of the original agreement.

However, there are other financial considerations beyond the basic distribution of
earning that can cause disagreement. the partners must also agree on the
proportion of the joint earnings that will be distributed to themselves as opposed to
being reinvested in the bussiness, the accounting procedure that will be used to
calculate earnings or profit, and the way transfer pricing will be handled.

Loss Of Autonomy

Another pitfalls of strategic alliance is the potential loss of autonomy. Just as firms
share risks and profits, they also share control, thereby limiting what each can do.
most attempts to introduce new product or services, change the way the alliances
does business, or introduce any other significant organizational change first must be
discussed and negotiated.

At the extreme, a strategic alliances may even be first step toward a takeover. In the
earlier 1980, the Japanese firm fujitsu negotiated a strategic alliances with
International Computers, Ltd .(ICL), a British computer firm. After nine years of
working together, Fujitsu bought 80 percent of ICL. One survey of 150 terminated
strategic alliances found that more than three-fourths ended because a Japanese
firm had taken over its none-Japanese partner. In other cases, partner may accuse
each other of opportunistic behavior, that is, trying to take unfair advantage of each
other. For example a joint venture between the walt Disney Company and Sky
Television, a British pay-TV channel operator, broke down after Sky accused Disney
of Deliberately delaying the supply of promised programming. Disney, in turn ,
accused Sky of proceeding too hastily and without consulting it.

Changing Circumstances

Changing circumstances may also effect the viability of a strategic alliances. the
economic conditions that motivated the cooperative arrangement may no longer
exist., or technological advances may have rendered the agreement obsolete. For
example, in 2008, Siemens announced it wished to terminated its joint venture with
Fujitsu, Fujitsu Siemens Computers (FSC). Although FSC has been one of Europe 's
leading personal computer manufacturers since its creation in1999, Siemens
believed that the future profitability of the joint venture wan unpromising due to
increase competition from Hewlett-Packard, Dell, and Apple. Similarly, the joint
venture between Corning ang Asahi Glass, Asahi Video Product Company, was
terminated in 2003 due to declining demand for the venture's product, cathode ray
tubes for TV sets.

10. Why do expatriates fail?

Answer:Expatriates fail due to following :
1. Culture Shock
Culture shock is often one of the most typical reasons for expatriate failure. It occurs
where a candidate is not fully prepared for the new culture their assignment
requires them to be a part of, whether there are language barriers, strict laws or
customs or even just a totally unfamiliar climate and daily routine. While an element
of this can be down to a lack of preparation or insufficient information, often the
candidate is simply just not right for the role based on his or her own personality and
needs. Culture shock is most common on assignments based in the Middle East,
where, especially for women, laws and customs can be debilitating. Yet, for those
candidates who are culturally flexible, these assignments can be greatly rewarding.

2. Family Stress
International assignments are already difficult for the individual, and for a family
they can often be even harder. Relocating the entire family is difficult: there needs to
be spousal support, decisions made about schools, daycare, the partner’s career and
even basic things like family health care. Language barriers and housing needs can
become more complicated and rather than just one person’s ability to adapt to a
new culture defining the success of the assignment, it’s an entire family. There are
still opportunities and fantastic experiences to be had by sharing in an international
assignment, but they are not without their risks.

3. The Global Mobility Team

A suitable and well-organized Global Mobility team are essential to the success of an
international assignment. They are responsible for arranging all support for a
candidate: information about the local culture, transport, housing, school searches,
spousal support and many other vital aspects of daily life. If the team fail to supply
adequate information or offer the right support, candidates can often sign up an
assignment very different from what they were expecting, costing companies
thousands in relocation fees.

4. Responsibility Overload
As well as dealing with the responsibilities of a new job, candidates have to adjust to
a new culture and new work environment and the challenges that brings. Trying to
manage local staff can often be difficult due to cultural differences, and often staff
teams can be larger than a candidate may have before been used to. Overload of
responsibility can lead to increased stress, physical exhaustion and emotion impacts
such as anxiety, frustration and anger.

5. Poor Candidate Selection

More often than not, the assignment fails because the corporation has made a poor
choice in candidate. If a selection is based on headquarters criteria, rather than the
assignment needs, or even the candidates needs, the assignment is almost doomed
to fail. While someone may appear to be perfect for the role on paper, their own
personal needs can often make them the worst candidate overall.

There’s a lot to take into consideration when choosing candidates for assignments.
Ultimately a balance needs to be found between a candidates personal needs and
their suitability for the responsibilities of the job itself.

11. Explain the functions of WTO?

Answer:Functions:
The main functions of WTO are discussed below:

Functions of WTO

The former GATT was not really an organization; it was merely a legal arrangement.
On the other hand, the WTO is a new international organization set up as a
permanent body. It is designed to play the role of a watchdog in the spheres of trade
in goods, trade in services, foreign investment, intellectual property rights, etc.
Article III has set out the following five functions of WTO;

(i) The WTO shall facilitate the implementation, administration and operation and
further the objectives of this Agreement and of the Multilateral Trade Agreements,
and shall also provide the frame work for the implementation, administration and
operation of the lateral Trade Agreements.

(ii) The WTO shall provide the forum for negotiations among its members concerning
their multilateral trade relations in matters dealt with under the Agreement in the
Annexes to this Agreement.

(iii) The WTO shall administer the Understanding on Rules and Procedures Governing
the Settlement of Disputes.

(iv) The WTO shall administer Trade Policy Review Mechanism.

(v) With a view to achieving greater coherence in global economic policy making, the
WTO shall cooperate, as appropriate, with the international Monetary Fund (IMF)
and with the International Bank for Reconstruction and Development (IBRD) and its
affiliated agencies.
12. What are the benefits of International Marketing?
Answer: The main advantages of international marketing are discussed below −

Provides higher standard of living

International marketing ensures high standard life style & wealth to citizens of
nations participating in international marketing. Goods that cannot be produced in
home country due to certain geographical restrictions prevailing in the country are
produced by countries which have abundance of raw material required for the
production and also have no restrictions imposed towards production.

Ensures rational & optimum utilization of resources

Logical allocation of resource & ensuring their best use at the international level is
one of the major advantages of international marketing. It invites all the nations to
export whatever is available as surplus. For example, raw material, crude oil,
consumer goods & even machinery & services.

Rapid industrial growth

Demand for new goods is created through international market. This leads to growth
in industrial economy. Industrial development of a nation is guided by international
marketing. For example, new job opportunities, complete utilization of natural
resources, etc.

Benefits of comparative cost

International marketing ensures comparative cost benefits to all the participating
countries. These countries avail the benefits of division of labor & specialization at
the international level through international marketing.

International cooperation and world peace

Trade relations established through international marketing brings all the nations
closer to one another and gives them the chance to sort out their differences
through mutual understanding. This also encourages countries to work
collaboratively with one another. This thereby designs a cycle wherein developed
countries help developing countries in their developmental activities and this
removes economic disparities and technological gap between the countries.

Facilitates cultural exchange

International marketing makes social & cultural exchange possible between different
countries of the world. Along with the goods, the current trends and fashion
followed in one nation pass to another, thereby developing cultural relation among
nations. Thus, cultural integration is achieved at global level.

Better utilization of surplus production

Goods produced in surplus in one country are shipped to other countries that have
the need for the goods in international marketing. Thus, foreign exchange of
products between exporting country & importing countries meets the needs of each
other. This is only possible if all the participating countries effectively use surplus
goods, service, raw material, etc. In short, the major advantages of international
marketing include effective utilization of surplus domestic production, introduction
of new varieties of goods, improvement in the quality of production & promotion of
mutual co-operation among countries.

Availability of foreign exchange

International marketing eases the availability of foreign exchange required for
importing capital goods, modern technology & many more. Essential imports of
items can be sponsored by the foreign exchange earned due to exports.

Expansion of tertiary sector

International marketing promotes exports of goods from one country to another
encouraging industrial development. Infrastructure facilities are expanded through
international marketing. It indirectly facilitates the use of transport, banking, and
insurance in a country ensuring additional benefits to the national economy.
Special benefits at times of emergency
Whenever a country faces natural calamities like floods & famines, it is supported by
other countries in the international market. The international market provides
emergency supply of goods and services to meet urgent requirements of the country
facing the calamity. This distribution can only be facilitated by a country which has
surplus imports.

A company exporting goods to other foreign countries earns substantial profit

through export operation as domestic marketing is less profitable than international
marketing. The loss a company suffers in domestic marketing can be compensated
from the profit earned through exports in international marketing. Foreign exchange
can be earned by exporting goods to foreign countries. Thus, the profit earned can
be used for the import of essential goods, new machinery, technology, etc. This
would further facilitate large-scale export in future

SECTION C
Answer any One question. It carries 12 Marks
13. Write a note on strategic issues in international operations management?
Answer: STRATEGIC ISSUE IN OPERATION MANAGEMENT When an
international company possesses a particular technology and decides to begin
manufacturing, it needs to adopt a sound operation strategy so as to enjoy competitive
advantage. Manufacturing involves transformation or conversion of new materials and
inputs into good and services. It is therefor associated with activities or decisions
related with manufacturing.
A)The operation strategy in a manufacturing company involves many issues. The
more important among them are: 1. Manufacturing management 2. Procuring 3.
Logistics management 4. Other issues in managing global operations
B)MANUFACTURING MANAGEMENT International manufacturing
management provides an unparalleled opportunity for companies to grow into new
markets while at the same time boosting their competitiveness. However, most of
today’s networks are legacy structures only a fraction was strategically planned.
As a result, there is huge potential to be captured from rethinking traditional
structures, approaches and supply relations, and huge potential for getting it
wrong.
C)FORCES ACCELERATING GLOBAL MANUFACTURING 1.Huge factor
cost differences 2.High growth in emerging markets 3.Lower transaction cost
D)KEY ISSUES IN INTERNATIONAL MANUFACTURING MANAGEMENT
1. Geographical dimension 2. Regulatory regimes dimension 3. Working issues
for labour force 4. Location issues 5. Increase in cost of production
E)LOGISTICS MANAGEMENT GLOBAL LOGISTICS is the process of
planning, implementing and controlling the flow and storage of goods and
services and related information from a point of origin to appoint of consumption
located in a different country. The global logistics function management function
is naturally more complex than the logistics function managed within one
particular country.
F)COMPONENTS OF GLOBAL LOGISTICS 1. International transportation 2.
International insurance 3. Packaging needs 4. International means of payment 5.
Teams of trade 6. The crossing of borders 7. Inventory 8. Environment of
 international logistics
G)INTERNATIONAL LOGISTIC DECISION 1. Warehouse managements 2.
Packaging 3. Inventory management 4. Material handling 5. Information systems
6. Transportation a. railway transportation b. road transportation c. water
transportation d. air transportation 7. insurances
H)PROCURING Global procuring or sourcing occurs when buyers purchase
goods and services from sellers located anywhere in the in the world. Global
sourcing of goods, crops and other commodities has been common for many years
in industries such as manufacturing and agriculture, used as appositive strategy to
reap economic advantage.
I)ENABLING FACTORS OF GLOBAL PROCURING 1. Growing pools of
highly skilled resources 2. State-of-the-art facilities 3. Advances in
telecommunications 4. Improvement in collaborative tools and platforms 5.
Maturing delivery models
J)MODES OF GLOBAL PROCCURING 1. Importation 2. Establishment of
international procurement offices (IPOs) 3. Sourcing through direct investment
K)OTHER ISSUES IN MANAGING GLOBAL OPERATIONS 1. Make or buy
2. International standardisation of production facilities 3. Robotics and flexible
manufacturing 4. Contract manufacturing 5. Strategic role of foreign plants 6.
Managing technology transfers 7. Internationalisation of R&D 8. International
quality standards

14.Explain the functions of NAFTA?

Answer:The North American Free Trade Agreement or NAFTA, which came into force
on January 1, 1994, is not just another treaty that aims to facilitate trade between its
member nations. It is one of the world’s most powerful and successful treaties
comprising the United States, Canada and Mexico.

The North American Agreement for Labor Cooperation (NAALC) and North American
Agreement for Economic Cooperation (NAAEC) are major additions to this treaty.
Following the unfortunate September 11/2001 attack in the US, the Security and
Prosperity Partnership of North America (SPPNA) was also added to NAFTA.

Interestingly, the goods that are traded between the NAFTA members feature labels.
These labels are printed in three languages, namely, English, Spanish and French. No
doubt, NAFTA has been highly beneficial for consumers, farmers and ranchers.

How NAFTA Works

The major functions of NAFTA are:

 Eliminate trade barriers in various service sectors belonging to its member

nations.
 Reduce high Mexican tariffs and help to promote agricultural exports.
 Assist firms spanning the three nations to bid on government contracts.
 Assure fair market value to investors by reducing risk and offering the same legal
rights that are enjoyed by local investors.
 Help investors to claim against a government by offering legal help.

NAFTA: Achievements
 The achievements of NAFTA are:

Spanning 1992 to 2007, agricultural exports grew from the US to Canada and Mexico
at 156%

From 1993 to 2007, there was percentage increment of goods exports by 231% to
the U.S from Canada and Mexico

In 2006, the export of services from the US to Mexico and Canada increased from
$25 billion to $62 billion (125%). The same period witnessed increase in services
export reach $37 billion from Canada and Mexico

In 2006, the U.S. foreign direct investment (FDI) increased to $331 billion in Canada
and Mexico

15.Explain various levels of economic integration?

Answer:

Economic integration can be classified in five additive levels:

 Free trade. Tariffs (a tax imposed on imported goods) between member countries are
significantly reduced, some abolished altogether. Each member country keeps its own
tariffs in regard to third countries. The general goal of free trade agreements is to
develop economies of scale and comparative advantages, which promotes economic
efficiency.
 Custom union. Sets common external tariffs among member countries, implying that
the same tariffs are applied to third countries; a common trade regime is achieved.
Custom unions are particularly useful to level the competitive playing field and
address the problem of re-exports (using preferential tariffs in one country to enter
another country).
 Common market. Services and capital are free to move within member countries,
expanding scale economies and comparative advantages. However, each national
market has its own regulations such as product standards.
 Economic union (single market). All tariffs are removed for trade between member
countries, creating an uniform (single) market. There is also free movements of labor,
enabling workers in a member country is able to move and work in another member
country. Monetary and fiscal policies between member countries are harmonized,
which implies a level of political integration. A further step concerns a monetary
union where a common currency is used, such as with the European Union (Euro).
 Political union. Represents the potentially most advanced form of integration with a
common government and were the sovereignty of member country is significantly
reduced. Only found within nation states, such as federations where there is a central
government and regions having a level of autonomy.