1. Business and Economics
WEEK 12 –
EXAM REVISION

2. EXAM - 50%
100 MARKS
SEMESTER ONE 2014 – MGF 2351
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3. Section A: Short Answer Questions
 ANSWER ONLY 6 – worth 10 (18 min) marks each (60 total – 1hr 48min)
– Question 1: The International Business Environment (Weeks 1 & 2)
– Question 2: Culture in International Business (Week 3)
– Question 3: Theories of International Trade and Investment (Week 4)
– Question 4: The Regulatory Framework (Week 5)
– Question 5: Foreign Direct Investment and the Multinational Enterprise
(Week 6)
– Question 6: Cooperation among Nations (Week 7)
– Question 7: Entry Strategies for Internationalising (Week 10)
– Question 8: Globalisation and International Business (Week 11)
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4. Section B: Essay Questions
 ANSWER ONLY 2:
 1 from each section!
 Worth 20 (36 min) marks each (40 total - 1hr 12min)
– Question 1: Foreign Exchange and the International Monetary
System (Week 8)
– Question 3: The Structure and Strategy of International Business
(Week 9)
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5. Common Pitfalls
 Not answering question
 Not providing examples
 In section 2 ,answering questions from the same topic
 Not answering the required number of questions
Avoid these!
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6. 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
 WE don’t need you to reproduce the exact
textbook definition!
Answering Short Answer Questions

8. ANSWERING ESSAY QUESTIONS
 Must 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.
 Remember to clearly number your questions.
Which section? Which question number?
Mark question number on exam cover
 Begin a new question on a new page.
 Make sure your writing is readable!!
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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!!!

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 Plenty of case studies in the text book
 Also throughout they 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.
Elements of Culture
– Religion
– Political Philosophy
– Economic Philosophy
– Education
– Language
– Social Structure
Hofstede’s Cultural Dimensions
Changing Cultures
– Cultural Convergence
– Cultural Divergence
Society and Nation State
CULTURE

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THEORIES OF INTERNATIONAL TRADE
 What is free trade?
 Classical country-based trade theories
– Mercantilism
– Absolute Advantage
– Comparative Advantage
 Modern firm-based trade theories
– Product Life Cycle Theory
– 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:
– Tariffs
– Subsidies
– Import Quotas
– Voluntary Export Restraints
– Local Content Requirement
– Administrative Policies
– Anti-dumping policies
 The World Trade Organisation
– Purpose
– Benefits
– What do the critics say?

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FDI and the MNE
 What is FDI / What is an MNE?
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
– National Pragmatism

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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.

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 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
 Influences on exchange rate
FOREIGN EXCHANGE AND THE
INTERNATIONAL MONETARY SYSTEM

20.  How Internationalisation
Improves Profitability
– Market Expansion
– Location Economies
– Experience Effects
– Subsidiary Competencies
 Pressures of the Global
Market
– Local Responsiveness
– Cost Reductions
 Strategies for International
Business
– International
– Localisation
– Global Standardisation
– Transnational
 Structures for
International Business
– VERTICAL VS HORIZONTAL
– International Divisional
– Functional
– Product
– Worldwide Area
– Matrix
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STRATEGY AND STRUCTURE

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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
 Countertrade
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

23. LETS PRACTICE
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24. Presentation title 24
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

25. Part B: Long Essay
Question: When expanding globally firms are subjected to two main
types of competitive pressures. What are these? How do these
competitive pressures influence the type of business strategy used by
firms? Discuss using real life examples.
Answering Strategy:
1. UNPACKING
1. Two pressures: Cost and localisation and examples
2. Influence on Business strategy: 4 strategies
3. Examples
2. STRUCTURING
3. WRITING UP
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26.  INTRODUCTION: Firms undertake internationalization and enter global
markets in order to increase their profitability and profit growth firms. In
the global environment they are faced with two main competitive forces:
(1) pressure for cost reduction and (2) pressure for local
responsiveness. Both these competitive pressures impact business
strategy.
 BODY: Define the two terms.
 Business strategy depends upon the relative strength of these
competitive pressures.
 International (LL), Localisation (LH), Global standardization (HL),
and Transnational (HH)
 E.G. :Xerox, Cars, Intel, Caterpillar
 CONCLUSION: Businesses should therefore carefully consider the
competitive forces operating I the global market and then devise and
implement a suitable strategy. They should also be cognizant of the
dynamic nature of these competitive pressures and make necessary
adjustments in business strategy.
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THE END
GOOD LUCK
Teaching Evaluations