Total No. of SEAT No.

:
Questions : 5]
[6025]-44 [Total No. of
P-4263 M.B.A. Pages : 2
307 GE-UL-14 : INTERNATIONAL BUSINESS ENVIRONMENT
- By Pratik Patil

Time : 2 Hours] [Max. Marks :

50
Instructions to the candidates :
1) All questions are compulsory
2) Answer all questions, draw diagrams wherever necessary.

Q1) Remembering (MCQ) (Answer any 5 out of 8)

a) What is value chain.
b) Define Greenfield Investment.
c) What is IFRS?
d) Environment a process.
i) Dynamic ii) Complex
iii) Interactive iv) All of the above
e) Macro environment is also known as .

i) Outside Environment ii) Indirect

Environment
iii) General Environment iv) Social Environment
f) NAFTA means (full form)
g) Define Brexit
h) Define FPI

a) Value Chain:
A value chain is the series of activities a company performs to create and
deliver a product or service, adding value at each step. It encompasses
everything from sourcing raw materials to marketing and after-sales support.

b) Greenfield Investment:
A greenfield investment is the development of a new project or operation
from scratch, typically on undeveloped land. This contrasts with brownfield
investments, which involve revamping or expanding existing facilities.

c) IFRS:
IFRS stands for International Financial Reporting Standards. It's a set of
accounting standards used by many countries around the world to ensure
transparency and comparability of financial information.

d) Environment as a process:
All of the above (iv) accurately describes the environment as a process:
• Dynamic: It constantly changes and evolves.
• Complex: It consists of interconnected systems and elements.
• Interactive: Different components influence each other.

e) Macro environment:
iii) General Environment is the most accurate term for the macro
environment. It refers to the broad, external factors that affect an
organization, such as economic trends, political stability, technological
advancements, and social values.

f) NAFTA:
North American Free Trade Agreement, a trilateral trade agreement between
Canada, Mexico, and the United States.

g) Brexit:
The process of the United Kingdom withdrawing from the European Union.

h) FPI:
Foreign Portfolio Investment. These are investments made by foreign
investors in financial assets of a country, such as stocks, bonds, and mutual
funds.

Q2) Understanding (Answer any 1 out of 2) :

a) Distinguish between Greenfield & brownfield Investments.
Greenfield vs. Brownfield Investments:
Both greenfield and brownfield investments involve capital expenditure, but
they differ significantly in their approach and characteristics:
Greenfield Investments:
• Development from scratch: Building new facilities, infrastructure, and
operations on previously undeveloped land.
 • Greater control: Higher level of customization and design flexibility to
suit specific needs.
• Longer lead times: Construction and development take time, leading to
delayed returns on investment.
• Higher upfront costs: Initial investment can be larger due to the need
for everything from land acquisition to infrastructure development.
• Potentially higher risks: Unforeseen challenges during construction or
market changes can impact success.
• Examples: Building a new factory, establishing a new branch in a
different country, developing a residential complex on vacant land.
Brownfield Investments:
• Revamping existing facilities: Upgrading, expanding, or repurposing
existing infrastructure and operations.
• Quicker turnaround: Existing infrastructure allows for faster
operational start-up.
• Potentially lower costs: Utilizing existing structures can be cheaper
than building entirely new ones.
• Lower level of control: Adapting to existing infrastructure may limit
design flexibility.
• Potential environmental concerns: Remediation of contaminated sites
might be necessary.
• Examples: Renovating an old building into a hotel, acquiring and
expanding a factory, redeveloping a former industrial site into a mixed-
use complex.
Choosing between Greenfield and Brownfield:
The optimal choice depends on various factors, including:
• Project objectives: The level of customization needed and desired
speed of operation.
• Budget constraints: Greenfield projects typically involve higher upfront
costs.
• Existing infrastructure: Availability of suitable existing facilities for
brownfield investment.
• Risk tolerance: Greenfield projects may carry higher uncertainties.

b) Distinguish between FDI and FPI.

Foreign Direct Investment (FDI) vs. Foreign Portfolio Investment (FPI):

Key Differences
While both FDI and FPI involve investing in a foreign country, they differ
significantly in several aspects:
Target:
• FDI: Focuses on real assets and businesses. Investors acquire
substantial ownership (usually 10% or more) in a foreign company,
gaining control and influence over its operations.
• FPI: Targets financial assets like stocks, bonds, and mutual funds
traded on public exchanges. Investors seek capital appreciation and
dividends without seeking control over the companies they invest in.
Motivation:
• FDI: Aims for long-term growth and strategic benefits. Investors seek
access to new markets, resources, and technologies, and establish a
lasting presence in the foreign country.
• FPI: Primarily driven by short-term financial returns. Investors seek to
capitalize on market fluctuations and generate quick profits through
trading or dividend income.
Investment horizon:
• FDI: Typically involves long-term commitments, often exceeding 5
years. Investors are willing to lock in their capital for potential long-
term gains and strategic advantages.
• FPI: Investments can be short-term or long-term depending on the
investor's strategy and market conditions. Some may hold assets for
years, while others actively trade within days or weeks.
Impact on host country:
• FDI: Brings capital, technology, and expertise to the host country,
contributing to job creation, economic growth, and infrastructure
development.
• FPI: Has a more indirect impact on the host economy. While it
provides access to foreign capital, its contribution to job creation and
infrastructure is less direct.
Volatility:
• FDI: Generally considered less volatile than FPI. Investments are
typically long-term, making them less susceptible to short-term market
fluctuations.
• FPI: More prone to volatility due to its dependence on market
movements. Changes in investor sentiment, economic conditions, or
political events can quickly impact asset prices.
Regulation:
• FDI: Often subject to stricter regulations from the host country,
especially in sensitive sectors like national security or strategic
industries.
 • FPI: Generally faces fewer regulatory hurdles compared to FDI, as it
involves passive participation in the existing financial markets.
Examples:
• FDI: A US company opening a manufacturing plant in China, a
Japanese investor acquiring a majority stake in a European tech startup.
• FPI: An Indian investor buying shares of US technology companies, a
European fund investing in Brazilian bonds.
In summary, FDI and FPI represent distinct types of foreign investments with
different objectives, risks, and impacts on the host country. Understanding
these differences is crucial for both investors and policymakers in assessing
opportunities and managing potential risks associated with cross-border
capital flows.

P.T.O.
 Q3) Answer any one out of 2 :
a) Ethical business practices hare taken a centre stage in modern
businesses. Interpret.
The statement "Ethical business practices have taken center stage in modern
businesses" accurately reflects a significant shift in the corporate landscape.
Here's why:

Rising Consumer Consciousness: Consumers are increasingly aware of the

social and environmental impact of their purchasing decisions. They're opting
for brands that align with their values and prioritize ethical practices. This
trend is driven by factors like:
• Increased access to information: Social media and investigative
journalism have shed light on unethical corporate practices, prompting
consumer backlash.
• Growing focus on sustainability: Concerns about climate change and
environmental degradation are pushing consumers towards brands
committed to sustainability and responsible sourcing.
• Evolving values: Millennials and Gen Z, who now constitute a major
consumer demographic, prioritize social responsibility and ethical
conduct.
Regulatory Landscape: Governments are implementing stricter regulations to
curb unethical business practices. This includes:
• Anti-corruption laws: Stringent regulations against bribery and fraud
are becoming commonplace globally.
• Environmental regulations: Governments are imposing stricter
environmental norms and holding companies accountable for pollution
and resource depletion.
• Consumer protection laws: Laws are being strengthened to protect
consumers from unfair trade practices and false advertising.
Competitive Advantage: Ethical business practices are no longer just a moral
imperative; they're becoming a competitive advantage. Companies that
prioritize ethical conduct enjoy benefits like:
• Enhanced brand reputation: Consumers are more likely to trust and
advocate for brands with a strong ethical reputation.
• Attracting and retaining talent: Top talent seeks employers who align
with their values, and ethical businesses are better positioned to attract
and retain skilled workers.
• Improved risk management: Ethical practices can mitigate risks
associated with lawsuits, regulatory fines, and reputational damage.
Examples of Ethical Business Practices:
 • Fair labor practices: Ensuring fair wages, safe working conditions, and
respect for employee rights.
• Sustainable sourcing: Procuring materials and resources from
responsible sources that minimize environmental impact.
• Transparency and accountability: Openly communicating business
practices and taking responsibility for any shortcomings.
• Community engagement: Actively contributing to the well-being of the
communities where the business operates.
The Road Ahead: While the focus on ethical business practices is
encouraging, challenges remain. Companies need to move beyond mere
compliance and genuinely embed ethical principles into their core values and
decision-making processes. This requires ongoing efforts to:
• Educate and train employees: Foster a culture of ethics and compliance
within the organization.
• Develop robust ethical frameworks: Establish clear guidelines and
procedures for ethical conduct.
• Promote open communication: Encourage employees to raise concerns
about unethical practices without fear of reprisal.
• Hold themselves accountable: Be transparent about ethical lapses and
take corrective action when necessary.

In conclusion, the growing emphasis on ethical business practices is not just a

passing fad; it's a fundamental shift in how businesses operate in today's
world. By prioritizing ethical conduct, companies can not only build trust and
loyalty with stakeholders but also create a more sustainable and responsible
future for all.

c) CSR initiatives by some leading companies hare helped in

social upliftment. Interpret.
Right! Corporate Social Responsibility (CSR) initiatives by leading
companies have played a significant role in social upliftment across various
sectors. Here's how:
1. Education and Skill Development:
• Microsoft: Launched the Microsoft Philanthropies initiative, providing
digital literacy training and access to technology for underserved
communities. This has equipped individuals with valuable skills for the
digital economy.
• Tata Consultancy Services (TCS): Established the TCS Rural
Development Foundation, which runs education programs in rural
areas, focusing on vocational training and skill development for
 employability. This has empowered rural communities with income-
generating skills.
2. Healthcare and Sanitation:
• GlaxoSmithKline (GSK): The GSK Access to Vaccines program
provides vaccines to children in developing countries, contributing to
reduced child mortality rates.
• Coca-Cola: The Safe Water for Schools initiative installs water
filtration systems and sanitation facilities in schools, promoting
hygiene and preventing waterborne diseases.
3. Environmental Sustainability:
• Unilever: The Sustainable Living Plan focuses on reducing the
environmental footprint of its operations and products. This includes
initiatives like sustainable sourcing, reducing packaging waste, and
promoting renewable energy.
• Patagonia: The 1% for the Planet initiative donates 1% of annual sales
to environmental non-profit organizations, supporting conservation
efforts globally.
4. Disaster Relief and Community Development:
• Google.org: Provides emergency support and resources during natural
disasters through its Crisis Response arm. They also invest in long-term
community development projects.
• Bank of America: The Neighborhood Champions program supports
community development initiatives in low-income neighborhoods,
focusing on areas like affordable housing, education, and economic
opportunity.
These are just a few examples, and the impact of CSR initiatives is far-
reaching. By investing in social good, companies can:
• Improve the lives of millions: Provide essential services, education, and
opportunities to those in need.
• Build trust and reputation: Enhance brand image and attract socially
conscious consumers and investors.
• Boost employee morale: Foster a sense of purpose and engagement
among employees who are proud to work for a company that makes a
positive impact.
• Create a more sustainable future: Address environmental challenges
and promote responsible business practices.
While challenges remain in measuring the true impact of CSR initiatives and
ensuring genuine commitment from corporations, the positive contributions
are undeniable. As responsible corporate citizens become increasingly
important, we can expect CSR to continue playing a crucial role in social
upliftment and progress.
It's important to note that CSR initiatives are not without their critics. Some
argue that they are merely a way for companies to greenwash their image and
deflect attention from negative practices. Others point out that CSR efforts
can be ineffective or even harmful if not implemented thoughtfully and in
collaboration with communities.
However, despite these challenges, the potential benefits of CSR are
significant. When done well, CSR can be a powerful tool for driving positive
change and creating a more just and sustainable world.

Q4) Analysing (Answer any 1 out of 2) :

a) “Developed forex markets are necessary for growth in
international trade ‘Analyse the statement.
The statement "Developed forex markets are necessary for growth in
international trade" is partially true. While developed forex markets can
significantly facilitate and support international trade growth, they are not
solely necessary for its existence or even significant expansion.

Here's a breakdown of the arguments for and against the statement:

Arguments for:
• Reduced transaction costs: Developed forex markets offer efficient
mechanisms for exchanging currencies, leading to lower transaction
costs for importers and exporters. This makes cross-border trade more
affordable and competitive.
• Price discovery: Deep and liquid forex markets provide accurate and
transparent pricing for currencies, reducing uncertainty for businesses
engaged in international trade.
• Hedging instruments: Developed markets offer a wider range of
hedging instruments like futures and options, allowing businesses to
manage currency fluctuations and protect their profit margins in
international transactions.
• Increased access to financing: Developed forex markets attract foreign
investment, potentially making trade finance and other forms of
funding more readily available for international trade activities.
• Improved liquidity: Efficient forex markets ensure sufficient
availability of foreign currency, reducing bottlenecks and delays in
cross-border payments.
Arguments against:
• Not a prerequisite: International trade can exist and even thrive without
a fully developed forex market. Countries with less developed markets
often utilize alternative mechanisms like barter trade or regional
currency arrangements.
• Historical examples: Countries like China and India experienced
significant growth in international trade before their forex markets
reached full maturity.
• Technological advancements: Technological innovations like e-
commerce and blockchain are creating alternative financing and
settlement mechanisms, potentially reducing dependence on traditional
forex markets for some forms of international trade.
• Limited impact on certain sectors: Some sectors, like tourism or
resource-based trade, may be less reliant on developed forex markets
and more influenced by factors like consumer demand and resource
availability.
Conclusion:

Developed forex markets undoubtedly play a crucial role in facilitating and

supporting international trade growth. They offer numerous benefits in terms
of cost efficiency, risk management, and access to financing. However, it's
important to recognize that they are not an absolute prerequisite for
international trade to exist or flourish. Other factors, like strong economic
fundamentals, trade agreements, and technological advancements, can also
play significant roles in promoting cross-border trade activities.

Therefore, the statement is partially true. While developed forex markets are
highly beneficial for international trade, their absence does not necessarily
preclude its existence or growth.

b) Critically discuss the impact of out sourcing & Global value chain
in International Business.
Outsourcing and Global Value Chains: A Critical Look at their Impact
on International Business
The rise of outsourcing and global value chains (GVCs) has fundamentally
reshaped the landscape of international business. While both offer significant
advantages, their impacts come with a nuanced blend of positive and negative
consequences that merit critical discussion.
Outsourcing:
Definition: Contracting a non-core function or process to a third-party
provider, often located in a different country.
Positives:
• Cost reduction: Access to cheaper labor, raw materials, and production
facilities in developing countries can significantly reduce operational
costs.
• Increased efficiency: Companies can focus on core competencies and
leverage specialized expertise from external providers.
• Improved access to resources: Outsourcing can open doors to new
markets, technologies, and talent pools.
• Enhanced flexibility: Companies can scale operations up or down
quickly by adjusting outsourcing contracts.
Negatives:
• Job losses: Transferring jobs to lower-cost countries can lead to
unemployment and economic hardship in developed nations.
• Loss of control: Outsourcing critical functions can lead to reduced
control over quality, intellectual property, and sensitive information.
• Cultural and communication challenges: Managing cross-cultural
differences and effectively communicating with overseas partners can
be complex.
• Dependence on external providers: Companies become reliant on the
performance and stability of their outsourcing partners.
Global Value Chains:
Definition: A network of interconnected firms across different countries,
specializing in various stages of production and value creation for a final
product.
Positives:
• Increased specialization and efficiency: Firms can focus on their areas
of expertise within the GVC, leading to higher overall productivity and
innovation.
• Reduced trade barriers: GVCs often promote economic integration and
cooperation between countries, leading to lower trade barriers and
increased trade flows.
• Faster product development: Collaboration within GVCs can accelerate
product development cycles and bring new products to market quicker.
• Economic growth: GVCs can contribute to economic growth in
developing countries by creating jobs and attracting foreign investment.
Negatives:
 • Unequal distribution of benefits: Developed countries and large
multinational corporations often capture a larger share of the benefits
generated by GVCs.
• Vulnerability to disruptions: GVCs are complex and susceptible to
disruptions from factors like trade wars, political instability, and natural
disasters.
• Environmental concerns: GVCs can contribute to environmental
degradation due to increased transportation and resource extraction.
• Labor exploitation: Unethical labor practices and poor working
conditions can occur in some parts of GVCs, particularly in developing
countries.
Critical Discussion:
The impact of outsourcing and GVCs on international business is
multifaceted. While they offer undeniable benefits in terms of cost efficiency,
specialization, and market access, their potential downsides in terms of job
losses, inequality, and environmental concerns cannot be ignored.
Moving forward, it is crucial for governments, businesses, and international
organizations to work together to:
• Promote fair and sustainable GVCs: This involves ensuring decent
working conditions, responsible resource management, and equitable
distribution of benefits throughout the value chain.
• Develop policies that mitigate negative impacts: Governments can
implement policies to support displaced workers and strengthen social
safety nets.
• Encourage responsible business practices: Companies should be held
accountable for their actions throughout their supply chains and adopt
ethical sourcing practices.
• Invest in skills development: Workers in developed countries need to
be equipped with the skills and knowledge to compete in the globalized
economy.
By addressing the challenges and promoting responsible practices,
outsourcing and GVCs can continue to drive economic growth and prosperity
in a more equitable and sustainable manner.
Remember: This is a complex topic with ongoing debates and evolving
dynamics. It's important to stay informed about the latest developments and
critically evaluate the arguments presented by different stakeholders.
 Q5) Attempt any one :
a) Evaluate labour & Environmental Issues in International
Business.
Labor and Environmental Issues in International Business: A Balancing
Act
The interconnectedness of the global economy presents immense
opportunities for international businesses, but also brings complex challenges,
particularly concerning labor and environmental issues. Striking a balance
between economic growth, social responsibility, and environmental
sustainability is crucial for businesses operating across borders.
Labor Issues:
• Exploitation and unfair working conditions: Low wages, long hours,
unsafe working environments, and child labor are unfortunately still
prevalent in some parts of the global supply chain.
• Discrimination and lack of worker rights: Freedom of association,
collective bargaining, and protection from discrimination based on
gender, ethnicity, or other factors are not always guaranteed.
• Job losses in developed countries: Automation and outsourcing to
countries with lower labor costs can lead to job losses and economic
hardship in developed nations.
Environmental Issues:
• Pollution and resource depletion: Manufacturing, transportation, and
resource extraction associated with international trade can contribute to
air and water pollution, soil degradation, and depletion of natural
resources.
• Climate change: Greenhouse gas emissions from various stages of
international business activities contribute to climate change, with its
far-reaching consequences.
• Loss of biodiversity: Habitat destruction and unsustainable resource use
can threaten ecosystems and species diversity.
Impacts on Businesses:
• Reputational damage: Consumers and investors are increasingly
concerned about ethical sourcing and environmental practices.
Negative publicity associated with labor or environmental issues can
damage a company's reputation and brand image.
• Regulatory risks: Governments are implementing stricter regulations
and ‫ ﻗﻮاﻧﯿﻦ‬to address labor and environmental concerns. Non-
compliance can lead to fines, penalties, and even market access
restrictions.
 • Supply chain disruptions: Labor strikes, environmental protests, and
natural disasters can disrupt supply chains and lead to production
delays and financial losses.
Addressing the Challenges:
• Corporate Social Responsibility (CSR): Businesses can adopt and
implement CSR policies that prioritize ethical labor practices,
responsible sourcing, and environmental sustainability.
• Transparency and accountability: Companies should be transparent
about their supply chains and take responsibility for the social and
environmental impacts of their operations.
• Collaboration and partnerships: Multi-stakeholder collaborations
involving governments, businesses, NGOs, and international
organizations can develop and implement effective solutions to address
labor and environmental challenges.
• Investing in clean technologies: Transitioning to cleaner production
processes, renewable energy sources, and resource-efficient practices
can minimize environmental impact.
Moving Forward:
Addressing labor and environmental issues in international business requires a
collective effort. By prioritizing responsible practices, adopting sustainable
solutions, and fostering collaboration, businesses can contribute to a more
equitable and sustainable global economy.
Remember: This is an ongoing conversation with evolving dynamics. Staying
informed about the latest developments, regulations, and best practices is
crucial for businesses to navigate these challenges effectively.
b) ‘Stable political & legal environment is essential to attract
investment’. Evaluate the statement.
The statement "A stable political and legal environment is essential to attract
investment" holds significant truth, but requires nuance and context for a
complete evaluation. While stability certainly plays a crucial role, other
factors also contribute to a country's attractiveness for investors.
Arguments supporting the statement:
• Reduced risk and uncertainty: Stable political and legal environments
offer predictability and security for investors. They are less likely to
face sudden policy changes, political upheaval, or arbitrary legal
interventions, making their investments more secure.
• Stronger institutions: Stable environments often indicate robust
institutions like an independent judiciary, transparent regulatory
frameworks, and effective enforcement mechanisms. These factors
build trust and confidence among investors.
 • Improved access to resources and markets: Political stability often
fosters economic stability, leading to better infrastructure, skilled
workforce, and access to natural resources. This makes the country a
more attractive destination for businesses seeking to expand their
operations.
• Enhanced investor confidence: A reputation for stability attracts not
only domestic but also foreign investors. Positive news narratives and
strong credit ratings further bolster a country's appeal.
Image representing reduced risk and uncertainty:
Arguments to consider:
• Not the sole factor: While stability is crucial, other factors like market
size, economic growth potential, natural resources, and skilled
workforce also influence investment decisions. A stable but
economically stagnant country might not attract as much investment as
a less stable but rapidly growing one.
• Relative stability: Stability is often relative. Investors compare
potential investment destinations and may choose a country that is
more stable than its immediate neighbors, even if it doesn't meet the
highest standards of absolute stability.
• Nature of investment: Different types of investments have varying risk
tolerances. Short-term, speculative investments might be less
concerned with long-term stability than long-term infrastructure
projects.
• Government policies: Even in stable environments, government
policies like high taxes, restrictive regulations, or lack of incentives can
deter investment.
Image representing relative stability:
Conclusion:
A stable political and legal environment is undoubtedly a significant factor in
attracting investment. It provides a foundation of predictability, security, and
trust that is essential for businesses to thrive. However, it's important to
recognize that stability is not the only factor at play, and its relative
importance can vary depending on the specific context and type of
investment. Countries seeking to attract investment should focus on creating a
comprehensive environment that is not only stable but also offers strong
economic prospects, skilled workforce, and favorable policies.
By understanding the multifaceted nature of investment decisions and
focusing on building a holistic environment that caters to various needs,
countries can effectively position themselves as attractive destinations for
both domestic and foreign investment.