International Business, Pol Economy, Culture, Impacts of globalisation

1. Business and Economics
WEEK 12 –
EXAM REVISION

2. EXAM - 50%
100 Marks
Hurdle requirement
SEMESTER TWO, 2015 – MGF 2351
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3. Section A: Short Answer Questions
 ANSWER ONLY 4 OUT OF 6– worth 10 marks each each worth 7.5
marks (Total 30 marks)
1. Culture in International Business (Week 3)
2. Theories of International Trade and Investment (Week 4)
3. The Regulatory Framework (Week 5)
4. Foreign Direct Investment and the Multinational Enterprise (Week
6)
5. Cooperation among Nations (Week 7)
6. 6.Foreign Exchange and the International Monetary System (Week
8)
7. Strategies of International Business (Week 9)
8. Entry Strategies for Internationalising (Week 10)
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4. Section B: Essay Questions
 ANSWER ONLY 1:
 Section B
Questions drawn from two topics covered in
– Weeks 1,2 & 11
 The International Business Environment
– (Weeks 1 & 2)
 Globalisation and International Business
– (Week 11)
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5. Common Pitfalls
 Not answering question
 Not providing examples
 Not answering the required number of questions
Avoid these!
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6.  Indicate question number clearly (must correspond to the
number on the exam paper)
 Start a new question on a new page
 Write legibly
 Two hour CLOSED book examination
 10 minutes reading time
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8. PRACTICE EXAM
 The practice exam is a carbon copy of the
structure of the final exam.
 Familiarise yourself!
 Actually do it, under timed conditions!!
 Think of other questions that may be asked in the
actual exam..
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 Read the question carefully
 Look for key words
 Address all components of the question
- They will all be assigned marks
 Provide examples
 No need for an essay structure – JUST MAKE IT
CLEAR, Bullet points are also fine, Prefer a
Paragraph
 WE don’t need you to reproduce the exact
textbook definition!
Answering Short Answer Questions

10. ANSWERING ESSAY QUESTIONS
 Use a more formal essay style of writing.
 Do not try to spill out everything you know!!
Remember to look back at the question and ensure
you stay on track.
 Answer all the sub parts in the question.
 Remember to clearly number your questions.
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Use reading time well
– Understand what the question is asking
– Choose which questions you will answer
– Think of examples
If you don’t know, guess!
– You cant lose marks, only gain them!
Relax!!!

12. 12
 Plenty of case studies in the text book
 Also throughout the course we mention
many others!!
 When you are writing your revision notes,
include examples and how they can be used
to support each topic.
 EVERY Exam question requires examples.
 Don’t make up examples!
WHERE TO FIND EXAMPLES??

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 What is a political economy?
– Political, economic, and legal systems of a country are
interdependent
 Political systems
– Collectivism (socialism, communism) vs. individualism
– Democracy vs. totalitarianism (communist, theocratic, right-wing,
and tribal)
 Economic systems
– Command
– Market
– Mixed
INTERNATIONAL BUSINESS
ENVIRONMENT

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 Legal systems
– Common, civil, and theocratic law
 Important issues for international business
– Contract law
– Property Rights and Corruption
– Protection of Intellectual Property
– Product Safety and Liability
 Economic development
– GNI, PPP, HDI
 Transition economies
– Attractiveness, costs, risks
INTERNATIONAL BUSINESS
ENVIRONMENT

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A system of values and norms that are shared among a group of people
and that when taken together constitute a design for living.
Culture, society and the nation-state
Monocultural & multicultural societies, Western, Asian, African
cultures
Cross-cultural literacy
Generalisation, stereotypes, ethnocentrism
Elements of culture
Political and economic philosophy, language, education, religion,
and social structure
Hofstede’s cultural dimensions
Individualism/collectivism, power distance, uncertainty avoidance,
masculinity/femininity, long-term/short-term orientation,
indulgence/restraint
CULTURE

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THEORIES OF INTERNATIONAL TRADE
 What is free trade?
Government does not intervene in matters
relating to trade
 Classical country-based trade theories
– Mercantilism
– Absolute Advantage
– Comparative Advantage
 Modern firm-based trade theories
– Product Life Cycle Theory (Vernon)
– New Trade Theory
– Porter’s National Competitive Advantage

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 Why Governments Intervene in Trade:
 Political
– Protecting jobs and industries
– National security
– Retaliation
– Protecting consumers
– Furthering foreign policy objectives
– Protecting human rights
 Economic
– Infant industry
– Strategic trade policy
THE REGULATORY FRAMEWORK

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THE REGULATORY FRAMEWORK
 How Governments Intervene in Trade/Instruments of Trade
Policy:
– Tariffs
– Subsidies
– Import Quotas
– Voluntary Export Restraints
– Local Content Requirement
– Administrative Policies
– Anti-dumping policies
 The World Trade Organisation
– Purpose
– Benefits
– TRIPS
– What do the critics say?

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FDI and the MNE
 What is FDI / What is an MNE?
Trends and direction of FDI
Flows of FDI increased, North-North, now increasingly
North-South, increasing in service sector
Forms of FDI
–Greenfield Investment
–Mergers and Acquisitions
Why Choose FDI over other modes of entry?
Benefits/Costs of FDI to home and host nations
Political Ideology
–Radical view
–Free Market View

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COOPERATION BETWEEN NATIONS
 What is economic integration?
 Different types of economic integration
– Bi-lateral, multi-lateral, regional, international
 Why pursue economic integration?
– Nation-state perspective
– Business perspective
 Trade related concepts
– Trade creation, diversion, and deflection
 Different levels of economic integration
– Free trade area, customs union, common market, economic union,
and political union. Examples of each.

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 International monetary System
 WWII, Bretton Woods, IMF, World Bank
 What is the Foreign Exchange Market?
– Currency conversion
– Insure again foreign exchange risk
 Types of Foreign Exchange Systems
– Floating
– Pegged
– Dirty float
– Fixed
 Role of the IMF
 Monetary union
FOREIGN EXCHANGE AND THE
INTERNATIONAL MONETARY SYSTEM

22.  Demand and supply of foreign exchange
Occurs for multiple reasons
 Influences on exchange rates
Free market forces, government intervention, IMF
 Monetary union (e.g. Euro)
Benefits and costs
 Factors influencing currency fluctuations
Interest rates, inflation rates, market expectations
International Monetary Fund (IMF)
Manage & control global financial flows, lender of last resort,
moral hazard
World Bank
Providing loans for economic development
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23.  What is strategy?
Profitability and profit growth;
low cost vs. differentiation
 Configuration of firm
operations
Primary activities (R&D,
marketing, production,
customer service)
Support activities (HRM,
logistics, information
systems)
 How Internationalisation
Improves Profitability
–Market Expansion
–Location Economies
–Experience Effects
–Subsidiary Competencies
 Pressures of the Global
Market
– Local Responsiveness
– Cost Reductions/COST
EFFICIENCY
 Strategies for International
Business
– International
– Localisation
– Global Standardisation
– Transnational
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STRATEGIES OF IB

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 Which market?
 When to enter?
 On what scale?
 How to enter?
– Exporting, turnkey projects, licencing, franchising, joint ventures,
FDI
– Consider core competencies
– Pressures for cost reduction vs. local responsiveness
 Core competencies and entry mode
– Technological know-how vs. managerial know-how
• Pressures for cost reduction and entry mode
– Exporting or wholly owned subsidiaries
ENTRY STRATEGIES

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GLOBALISATION
 What is globalisation? Production and Market, Interconnected
and Interdependent economy.
 Drivers of Globalisation
– Declining trade barriers
– Technology
– Environmental standards
– Civil society
– Culture
 Global governance and institutions
– WTO, IMF, UN, World Bank
 Debate on Globalisation (Preble article)
– Jobs
– Inequality and poverty
– National sovereignty and cultural diversity
– The natural environment

26. LETS PRACTICE
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27. Presentation title 27
SHORT ESSAY:
Question: Identify the three types of economic systems. Explain the
differences and similarities between them. Use valid examples in your
answer.
The three economic systems are: Command Economy, Market Economy
Mixed Economy. They are different from each other with respect to
“ownership”, “role of government” and “type of government system”.
Free Market Command Mixed
Resources are owned
privately. The consumers
and firms decide the
allocation of resources.
Government has no
control over the
economy. E.g. USA
Resources are owned by
the government. The
government decides the
allocation of resources;
that is what to produce,
how to produce and for
whom to produce. Firms
are not very efficient as
they do not earn profits.
E.g. Soviet Union, Cuba
Resources are owned
both privately and by the
government. Important
sectors like
health,medical,education
are under the government
and less important ones
are under private
ownership. Eg.India

28. Your Turn
What are the four basic strategies that firms use to compete in
international markets? Under what conditions is each strategy most
appropriate? Use valid real-life examples in your answer.
Why is Vernon's product life-cycle theory considered not relevant for
explaining modern patterns of international trade and investment? Use
valid real-life examples in your answer.
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29. Part B: Long Essay
Question: The degree to which a country’s political system is
individualist or collectivist is critical in determining a firm’s ability to
enter and succeed in that market as an international business.
Critically discuss this statement with the use of relevant theory and
real-life examples.
Answering Strategy:
1.UNPACKING
1. Key Terms and definitions
2. Impact of individualism
3. Impact of collectivism
4. Examples
2. STRUCTURING
3. WRITING UP
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THE END
GOOD LUCK