Assignment Set – 1

1. What is International Business? Explain the reasons of doing international trade.

Ans: The term international business not just involves the movement of goods and services but
also consists of various concepts, methods, and techniques of doing business. It also involves the
study of various related theories, rules, and regulations to be followed while doing business with
foreign companies or other countries. This section covers in detail the definition and evolution of
international business.
International Business is the process of focusing on resources of the globe and objectives of the
organization on global business opportunities and threats, in order to produce, buy sell, or
exchange goods and services worldwide.
International business is defined as the trading of goods, services, capital, know-how and
technology between two countries and at a global or transnational level. This involves transactions
of economic resources such as capital, labour, skills meant for production of goods and services
at an international level.
Here are seven reasons for international trade:
1. Reduced dependence on your local market
Your home market may be struggling due to economic pressures, but if you go global, you will
have immediate access to a practically unlimited range of customers in areas where there is more
money available to spend, and because different cultures have different wants and needs, you can
diversify your product range to take advantage of these differences.
2. Increased chances of success
Unless you’ve got your pricing wrong, the higher the volume of products you sell, the more profit
you make, and overseas trade is an obvious way to increase sales. In support of this, UK Trade
and Investment (UKTI) claim that companies who go global are 12% more likely to survive and
excel than those who choose not to export.
3. Increased efficiency
Benefit from the economies of scale that the export of your goods can bring – go global and
profitably use up any excess capacity in your business, smoothing the load and avoiding the
seasonal peaks and troughs that are the bane of the production manager’s life.

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4. Increased productivity
Statistics from UK Trade and Investment (UKTI) state that companies involved in overseas trade
can improve their productivity by 34% – imagine that, over a third more with no increase in plant.
5. Economic advantage
Take advantage of currency fluctuations – export when the value of the pound sterling is low
against other currencies, and reap the very real benefits. Words of warning though; watch out for
import tariffs in the country you are exporting to, and keep an eye on the value of sterling. You
don’t want to be caught out by any sudden upsurge in the value of the pound, or you could lose
all the profit you have worked so hard to gain.
6. Innovation
Because you are exporting to a wider range of customers, you will also gain a wider range of
feedback about your products, and this can lead to real benefits. In fact, UKTI statistics show that
businesses believe that exporting leads to innovation – increases in break-through product
development to solve problems and meet the needs of the wider customer base. 53% of
businesses they spoke to said that a new product or service has evolved because of their overseas
trade.
7. Growth
The holy grail for any business, and something that has been lacking for a long time in our
manufacturing industries – more overseas trade = increased growth opportunities, to benefit both
your business and our economy as a whole.
2. Write short note on following:
1. Political Environment in IB
Ans: The Political environment (PE) impacts the economic and legal conditions of a country. This
includes political conditions, general stability and peace in the country and the attitude of the
government towards business. Stable political systems promote business-friendly decisions
towards local businesses and attract foreign investors.
1 Nature of Politics The nature of politics is based on the type of government and the policy of
a country. The Government formulates and implements laws, controls its territory and can enter
into or cancel any agreements with other countries. Therefore, international businesses have to
deal with nations and their authority.
• Sovereignty – Sovereignty refers to the absolute power of the state.
The two problems that immediately arise in concern with sovereignty are:
• The ability to make independent decisions since countries rely on each other for goods, markets,
economic assistance and defence.
• The question of where national sovereignty lies is not clear as it may exist in the head of state,
the parliament, the prime minister, the cabinet or in the ‘people’.
• National interest National interest, as defined by the government, will depend on the cultures,
background, perceptions and experiences of the decision makers involved, which might change
over time and according to circumstances. A nation’s ability to define its interests depends on its

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power, control over raw materials; scientific and technological knowledge; size, structure health
and education of its population; political stability and society.
• Political Instability Political instability may arise from revolution and insurgency, involvement
in foreign wars, changes in government, bad international relations, falling national income, high
inflation and rising foreign debt, resulting in the physical destruction of a firm’s assets, higher taxes,
import controls and barriers on money leaving the country.
2. Impact of Culture on IB
Ans: Impact of culture on international business: -
A business cannot simply rely on its current method of conducting business when it decides to
take its business at international level. Every country has a set of different variables which can be
new for an offshore company e.g., rules and regulation, taxation, different currency, different
holiday periods etc. Most important consideration in this regard is the difference in culture.
In a study on international negotiations between organizations, Korobkin, R. (2000) maintains that
successful negotiations not only require technical proficiency i.e. communication technique, but
also needs to understand the context in which those negotiations are being done in order to secure
profitable contracts.
Business expansion into international territories can be either through internal growth or by
mergers and acquisitions. There can be a cultural mismatch In the case of internal growth and the
decision to set up a base in a new country from scratch because it takes time learn the culture and
adopt its traits. A merger or an acquisition of an already established company is more beneficial
method of growth internationally as the parent company can gradually learn the norms and beliefs
of the target company through the acquired unit which is being operated according to the local
cultural preferences. (Morosini, 1998)
Lee et al. (2011) studied the impact of culture in international organisations in the context of
expansion into newer regions with different prevailing cultures and concluded that it is vital for
any such organisation with the intention to move into new areas that the cultural differences are
understood and mapped in order to bridge the gap between business units performing in multiple
cultures. The study further proves that a multinational company with presence in many different
cultures will have a smaller cultural gap than an organisation which is operating in a few different
cultures; the reason of this abridged gap is the learning factor from working in different cultures.
The results of Lee et al. (2011) study are not similar to Morisini (1998) as it is shown in the study
that multinational organisations prefer to have new business establishments than acquisitions or
mergers.
3. Write notes on the following:
1. World Trade Organization
Ans: The World Trade Organization (WTO) has over 160 members representing 98 per cent of
world trade. Over 20 countries are seeking to join the WTO. The World Trade Organization
(WTO) is the only global international organization dealing with the rules of trade between nations.
The WTO agreements are negotiated and signed by the world’s trading nations. The WTO helps
in the smooth flow of international trade and provides countries with a constructive platform for
dealing with disputes over trade issues.

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Objective of the WTO:
• To help its members use trade as a means to raise living standards, create jobs and improve
people’s lives
• The WTO operates the global system of trade rules
• Helps in developing countries build their trade capacity
• It also provides a forum for its members to negotiate trade agreements
• To resolve the trade problems, they face with each other.
• The World Bank is an international financial institution that provides loans and grants to the
governments of low-and middle-income countries for the purpose of pursuing capital projects.
The two main goals of the World Bank are ending extreme poverty and boosting shared prosperity.
It was established along with the International Monetary Fund at the 1944 Bretton Woods
Conference. The World Bank is the collective name for five institutions
• The international bank for reconstruction and development
• The international Development Association
• The international finance corporation
• The Multilateral Investment Guarantee Agency
• The International centre for settlement of investment disputes. The IBRD and IDA are owned
by the World Bank. The World Bank is run by a president and 25 executive directors, as well as 29
various vice presidents. IBRD and IDA have 189 and 174 member countries, respectively. The
U.S., Japan, China, Germany and the U.K. have the most voting power.
2. International Labour Organization
Ans: International Labour Organization (ILO) is a specialized agency of the United Nations
that deals with labour issues. It is a tripartite UN Agency, since 1919 and includes 187 member
states. It brings the governments, employers and workers of these member states together. The
headquarters is situated in Geneva, Switzerland. The secretariat includes the people employed by
the organization throughout the world. The secretariat is known as the International Labour
Office. The ILO manages work through three main bodies.
They are:
• International Labour Conference – The members of the ILO meet at the International Labour
Conference every year in June, in Geneva. Two government delegates along with an employer
delegate and a worker delegate represent their respective member state. The technical advisors also
accompany the delegates. The Cabinet Ministers are usually responsible for labour affairs, head
the delegations and present the viewpoint of their government.
The Conference creates and implements standards for international labour. Social and labour
issues are discussed in the Conference. It also assigns the budget of the organization and elects the
Governing Body.
• Governing Body – The executive council of the ILO is known as the Governing Body. It meets
thrice a year in Geneva and takes decisions on the ILO policies. It forms programmes and budgets

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which are submitted to the Conference for adoption. The Governing Body has 28 government
members, 14 employer members and 14 worker members. Ten government seats are permanently
held by states of chief industrial importance.
Taking into consideration the geographical distribution, representatives of other member countries
are elected at the Conference once in every three years. The representatives are elected by the
employers and workers.
• International Labour Office – The permanent secretariat of the International Labour
Organization is the International Labour Office. It is the central point for all activities that are
administered by the governing body. The Office is a center for administration, research and
documentation. It employs more than 1,700 officials from 110 nationalities. The Office also
organizes certain programmes to extend technical help to all member nations. Under this
programme of technical cooperation, around 600 experts undertake missions in all regions of the
world.
Assignment Set – 2
1. What is International Marketing? Explain the types of Global marketing strategies
Ans: International marketing refers to the marketing of goods and products by companies
overseas or across national borderlines. The techniques used while dealing overseas are an
extension of the techniques used in the home country by the company.
3 types of marketing strategies
There are many approaches to global marketing. The three key types of global marketing
approaches include:
1. Standardization
In a standardization strategy, you sell the same products in every location. A standardization
strategy keeps all of the company's control centralized rather than delegating decisions to other
local markets. Some of the benefits of a standardization strategy include the ability to develop
products quicker and easily coordinate activities across locations.
Imagine that you run a luxury purse company, and are choosing to expand the business on a global
scale. Using the standardization strategy, you may sell essentially the same purses at every location.
Less variation in your products/services is important with this strategy. This strategy allows you
to keep your products consistent in every market.
2. International
An international strategy involves importing and exporting products. Using an international
strategy can allow you to work with foreign suppliers and sell to customers around the world while
keeping your physical premises within your home country. Typically, international strategies still
focus on the company's home market while doing some business overseas.
This strategy incorporates ideals from many countries. For context, the physical production of
purses would still occur in your home country, but you would still export some purses
internationally.

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3. Multinational
When you use a multinational strategy, you can cater your products to each individual market. This
includes physical business locations and staff based in these various locations. The key benefit of
using a multinational strategy is the ability to alter the business to individual locations.
Using the multinational strategy, you create different luxury purses for each location that you sell.
More variation in your products/services is important with this strategy. This allows you to adjust
your purses to appeal to different markets. Prices may also vary depending on the demographic or
the demand for the product in a market.
2. What is FDI? Elaborate on the various types of foreign investment.
Ans: Foreign Direct investment involve those investors who make long term investments such as
‘Joint Ventures’ with local companies or through ‘acquiring or purchasing the local company’ or
starting the ‘Green Field Projects’ in order to tap the country’s innate potential in the desired areas
of economic activity. Foreign direct investors seek controlling stakes in the company they invest
in.
Foreign investment can be commonly classified into two types:-
Foreign Direct Investment and Foreign Portfolio Investment.
1. FDI or Foreign Direct Investment refers to capital investment made into new projects or
greenfield projects such as new factories, infrastructure projects pertaining to roads, flyover
construction etc.
FDI can be in the form of:-
a) Green field investment which are completely new projects.
b) Brown field investment is investing in a Sick unit that needs complete restructuring.
c) Acquisition in which a foreign investor acquires an existing and running Indian unit.
d) Joint venture in which a foreign investor joins hands with local firms to manufacture in an
agreed proportion
2. Foreign portfolio investment refers to an investment made by a foreign investor in the country
or region’s financial instrument, such as investment in the market or stock investing. Portfolio
investment includes depository receipts, FII’s and Foreign Currency Convertible Bonds.
a. Depository receipts: buying depository receipts in the form of Global Depository Receipts or
American Depository Receipts or Indian Depository Receipts etc.
b. FII’s: Portfolio investment forms the major chunk by making investment in the existing ‘stocks’
of the local companies in stock exchanges by Foreign Institutional Investors, popularly known as
FIIs.
c. Foreign Currency Convertible Bonds: Foreign portfolio investment can also be in the form
of Foreign Currency Convertible Bonds, popularly known as FCCBs. Foreign direct and portfolio
investment is diagrammed and discussed below:

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3. Write notes on the following:
A. Strategic Planning Process
Ans: Strategic planning process involves allocation of resources to firms to fulfill their long-term
goals. Any business plan can be classified into three types. They are:
Strategic planning: This planning process is the best among the three business planning
processes. It is a long-term process that the business owners utilize to unveil their business’ vision
and mission. It also determines a gateway for business owners for achieving their goals. Strategic
planning fulfills the mission and the overall goals of the firm.
Whereas, the other two are rather more short-term and are used sometimes without any relation
to the long-term business goals. However, these three kinds of planning work well when used
within a strategic plan.
B. Code of conduct in MNCs
Ans: The code of conduct for MNCs refers to a set of rules that guides corporate behavior. These
rules prescribe the duties and limitations of all employees, including the manager. The top
management must communicate the code of conduct to all members of the organization along
with their commitment to enforcing the code.
Some of the ethical requirements for international companies are as follows:-
• Respect basic human rights.
• Minimize any negative impact on local economic policies.
• Maintain high standards of local political involvement.
• Transfer technology.
• Protect the environment.
• Protect the consumer.
• Employ labor practices that are not exploitative.
When a manager of an international firm faces an ethical problem, certain models help in solving
these ethical issues. Figure depicts the process flow for ethical decision making in an MNC.
The first task is to consider the ethical and legal consequences of the issue and whether the action
or its consequences are in accordance with the law, both in the home and host country.
Steps in Ethical Decision Making
The second task is to perform an ethical analysis, followed by a cultural and a personal ethical
analysis. An international manager begins with these analyses at different stages, but at some point,
a personal moral judgment is made. If the answer is negative to any of the first three questions,
the decision making is deferred.