INTERNATIONAL BUSINESS XIBMS MBA EXAM ANSWER SHEET

INTERNATIONAL BUSINESS XIBMS MBA EXAM ANSWER SHEET

SUB:  International Business.

 International Business

Section A (8 Marks Each Question) ( Attempt any 5 )

1.       What are basic differences between domestic and international business?

No	International Business	Domestic Business
1.	It is extension of Domestic Business and Marketing Principles remain same.	The Domestic Business Follow the marketing Principles
2.	Difference is customs, cultural factors	No such difference. In a large countries languages likeIndia, we have many languages.
3.	Conduct and selling procedure changes	Selling Procedures remain unaltered
4.	Working environment and management practices change to suit local conditions.	No such changes are necessary
5.	Will have to face restrictions in trade practices, licenses and government rules.	These have little or no impact on Domestic trade.
6.	Long Distances and hence more transaction time.	Short Distances, quick business is possible.
7.	Currency, interest rates, taxation, inflation and economy have impact on trade.	Currency, interest rates, taxation, inflation and economy have little or no impact on Domestic Trade.
8.	MNC’s have perfected principles, procedures and practices at international level	No such experience or exposure.
9.	MNCs take advantage of location economies wherever cheaper resources available.	No such advantage once plant is built it cannot be easily shifted.
10.	Large companies enjoy benefits of experience curve	It is possible to get this benefit through collaborators.
11.	High Volume cost advantage.	Cost Advantage by automation, new methods etc.
12.	Global Standardization	No such advantage
13.	Global business seeks to create new values and global brand image.	No such advantage
14.	Can Shift production bases to different countries whenever there are problems in taxes or markets	No such advantage and get competition from some spurious or SSI Unit who get patronage of Government.

2.       While some see globalization as the avenue to the development of poor nations, others see it intensifying misery and inequalities. Critically examine the above statement in today's context?

3.       Explain - Localisation of global strategy

4.       Explain - Technology contracting (licensing) as an alternative to FDI or ownership strategy.

5.       Explain - Major factors contributing to the success of international strategic alliances.

There are three main success factors that plays a role in International Strategic Alliances. They are Partner Choice, Alliance Composition and Managing the alliance.

Partner Choice

An effective partner helps the firm achieve its strategic goals, which can be market
access, sharing of costs and risks, or gaining access to critical core competencies. In other words, the partner must have capabilities that the firm lacks and that it values.

A good partner also shares the firm’s vision for the purpose of the alliance. A final aspect of a good partner, is one that would be unlikely to try to opportunistically exploit the alliance for its own ends; to rob the firm of its technological know-how while giving away little in return.

The suggestions listed above can be achieved by basing the selection decision on information obtained from former employees, investment bankers or other firms that entered an alliance with the potential partner previously.

Alliances and partner selection are of critical importance and inexperienced organisations often fail to pay enough attention to this, concentrating on their objectives and rationales instead of building a mutually beneficial partnership based on understanding of each other.

Alliance Composition

The alliance should be structured so that the firm’s risks of giving too much away to the partner are reduced to an acceptable level. By implementing the following principles in the alliance, the desired outcome could be achieved:

·   Alliances should make it difficult or impossible to transfer technology that was not meant to be transferred.

·   Contractual safeguards can be written into an alliance agreement to guard against the risk of opportunism by a partner.

·   Both parties can agree in advance to substitute skills and technologies, ensuring a chance for equitable gain.

The risk of opportunism can be reduced, if the firm extracts a significant credible commitment from its partner in advance. For example, investment in a 50/50 Joint Venture constitutes a significant investment in people, equipment and facilities and motivates the partner to make the alliance work.

Managing the Alliance

The main factor that promotes successful partnerships, is to maximize the benefits from
the alliance. One of the most prominent issues when dealing with a foreign partner, is cultural differences. Many differences in management style are attributable to cultural differences, and managers need to make allowances for these in dealing with their partner. There is also believed to be two other contributing factors to the successful managing of the alliance, building trust between partners and learning from partners.

Managing an alliance successful requires building interpersonal relationships between the firm’s managers, also known as “relational capital”. This helps to build trust and facilitate harmonious relations between the firms. Personal relationships also foster an informal management network between the firm.

6.       Explain the role of “Power Distance" in understanding Hofsted's work on cross-cultural prospective. How does this help in managing international environment?

7.       Discuss the relationship between an MNE and its subsidiaries in the context of the "make or buy" decision. What are the implications so far as the organization structure/design is concerned?

8.       Explain the role of bargaining power" in managing negotiations in international business.

Bargaining power is a form of interaction through which individuals, organizations, and governments explicitly try to arrange (or pretend to do so) a new combination of some of their common and conflicting interests. Two types of common interests can be distinguished: (1) an identical common interest in a single arrangement or object which the parties can bring about only, or more easily, by joining together and (2) a complementary interest in an exchange of different objects which the parties cannot obtain by themselves but can only grant to each other.

To realize an identical common interest the parties must agree on the characteristics of the arrangement (concerning which they may have different preferences) and on the division of gains and costs (where their interests usually conflict).

Two nations jointly constructing a dam and two corporations merging into a single firm are examples of such arrangements. Complementary interests are realized through barters, sales, or agreements on mutual tariff concessions. Most international negotiations embrace a combination of identical common interests and complementary interests, whereas business negotiations are predominantly concerned with complementary interests.

The parties may relate their conflicts and common interests explicitly or tacitly. The term “negotiation” usually refers to the explicit process, with proposals and counterproposals. “Tacit bargaining”occurs if the parties deliberately arrange a new combination of common and conflicting interests through hints and guesswork, without explicitly proposing terms for agreement. Tacit bargaining is of great importance in military confrontations, when negotiation may be difficult because of incompatible war aims, domestic opinion, or the lack of diplomatic relations. Tacit bargaining can help to keep the area of hostilities limited, restrain the use of force, and prepare the ground for negotiations to terminate hostilities. These functions of tacit bargaining received little detailed attention until the 1950s, when they were analyzed in connection with studies of limited war, arms control, and military deterrence (Schelling 1960). Negotiation, by contrast, is necessary for more complicated forms of collaboration, for most exchanges, and for any arrangement where an explicit agreement is essential.

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