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1. Amity MBA 4th Sem ASODL International Business Environment
Amity MBA Assignment A
Q1. The world’s poorest countries are at a competitive disadvantage in every sector of their economies.
They have little to export, no capital; their land is of poor quality; often have too many people against
available work opportunities; and are poorly educated. Free trade is not in interest of these countries.
Discuss.
Q2. How do you think the successful conclusion of the multilateral agreement to liberalize regulations
governing FDI will benefit the world economy?
Q3. Discuss the Competitive Advantage Theory of International Trade. How this theory is different from
other theories.
Q4. On what basis countries as classified as low income, middle income and high income countries? Do
you think economic status of a country will influence its global business?
Q5. Explain different types of Economic Systems. What are the major challenges faced by the
command economies while transiting to a market economy?
Q6. Explain the achievement of EU in integrating its member countries. How is formation of EU beneficial
for India?
Q7. How is WTO different from GATT? What are the main issues in the Doha Development Agenda and
what are its implications for the developing countries?
Q8. Write short notes on any three of the following:-
a) Tariff
b) Subsidies and Countervailing Duties
c) Quotas
d) Voluntary Export Restraint
e) Local Content Requirement.
Amity MBA Assignment B
Please read the case study given below and answer questions given at the end.
CASE STUDY

2. The Daewoo Group and the Asian Financial Crisis
In 1999, the Daewoo Group, Korea’s second largest chaebol, or family owned business conglomerate,
collapsed under $57 billion in debt and was forced to split into independent companies. The Asian
Financial crisis and its aftermath finally took its toll on the expansion-minded Daewoo and forced both
Daewoo and the Korean government to decide how to dissolve the chaebol .
Kim Woo-Choong started Daewoo in 1967 as a small textile company with only five employees and
$10,000 as capital. In just 30 years, Mr Kim had grown Daewoo into a diversified company with 250,000
employees worldwide as well as over 30 domestic companies and 300 overseas subsidiaries that
generated sales of more than $100 billion annually. However, some estimates that Daewoo and its
subcontractors employed 2.5 million people in Korea. Although Daewoo started in textiles, it quickly
moved into other fields, first heavy and chemicals industries in the 1970, and then technology intensive
industries in the 1980s. By the end of 1999, Daewoo was organized into six major divisions:
• Trading Division
• Heavy Industry and Shipbuilding
• Construction and Hotel
• Motor Vehicle Division’
• Electronics and Telecommunications
• Finance and Services
However, Daewoo was struggling with its $50 billion debt which was 40 percent greater than in 1998,
equaling 13 percent of Korea’s entire GDP. A good share of that total $10 billion was owed to overseas
creditors. Its debt-to-equity ratio (total debt divided by share-holders equity) in 1999 was 5 to 1, which was
higher than the 4 to 1 average of other large cheabol, but it was significantly higher than the U.S average,
which usually is around 1 to 1 but which rarely climbs above 2 to 1. Of course, there is no way of knowing
the true picture of Daewoo’s financial information because of the climate of secrecy in Korean companies.
In addition it is possible that Daewoo’s estimated debt might be greatly underestimated because no one
knows whether or not the $50 billion figure included debt of foreign subsidiaries.
How did Daewoo get into such a terrible position, and how much did the nature of the Korean economy
and the Asian Financial crisis affect Daewoo?
Korean Economy
The impact of the Asian financial crisis on Korea was partly a result of the economic system of state
intervention adopted by Korea in the mid-1950s. Modeled after the Japanese economic system, the
Korean authoritarian government targeted export growth as the key for the country’s future. Initially, the

3. government adopted a strategy of import substitution, and that later gave way to a strategy of “export or
die”. Significant incentives were given to exporters, such as access to low cost money (often borrowed
abroad in dollars and loaned to companies at below market interest rates in Korean won), lower corporate
income taxes, tariff exemptions, tax holidays for domestic suppliers of export firms, reduced rates on
public utilities, and monopoly rights for new export markets. Clearly, the government wanted Korean
companies to export
The chaebol, of which the four largest were Hyundai, Daewoo, Samsung and the L G group, become the
dominant business institutions during the rise in the Korean economy. They were among the largest
companies in the world and were very diversified, as can be seen by the Daewoo’s investment and
business choices. They were held together by ownership, management and family ties. In particular,
family ties played a key role in controlling the chaebol. Until the 1980s, the bank in Korea provided most
of the funding to the chaebol, and were owned and controlled by the government. Because of the
importance of the exporting the chaebol were all tied to general trading companies. The chaebol received
lots of support from the government, and they were very loyal to the government, giving rise to the
charges of corruption.
Most chaebol were initially involved in the light industry, such as textile production, but the government
realized that companies first shift to heavy industry and then to technology industries. Daewoo
transitioned to heavy industry in 1976 when the Korean government asked President Kim to acquire an
ailing industrial firm rather than let the firm go out of business and create unemployment.
Asian Financial Crisis and Its impact on Korea
The country continued to liberalize, and democracy finally came into being in 1988 with the introduction of
a new constitution and the election of Kim Young-Sam, the first democratic president in Korea’s history.
The economy also continued to grow at 5 to 8 percent annually during early to mid-1990s, led primarily by
exports and the World Bank predicted that Korea would have the seventh largest economy in the world by
2020. However, the Asian financial crisis brought that growth to halt. After the Thai’ bhat’ was devalued
on July 2, 1997, the Korean’ won ‘soon followed, and the Korean stock market crashed as well. By the
end of 1997, the South Korean ‘won’ was 46.2 percent lower than its pre devaluation rate. At the time the
crisis hit, Korea’s external debt was estimated to be $110 billion to $150 billion, 60 percent of it maturing
in less than one year. In addition, Korea had another $368 billion of domestic debt.
Korea’s banks had been a tool to state industrial policy, with the government ordering banks to make
loans to certain companies even if they were not healthy. Banks borrowed money in dollars and lent it to
the firms in’ won’, shifting the burden of foreign exchange from the firms to the banks. Hanbo steel and
Kia Motors went bankrupt leaving some banks with huge losses. The Korean ‘won’ fell in the fall of 1997
causing the government to raise interest rate to support the ‘won’ and resulting in more problem loans.
Bad loans at the nine largest financial institutions in Korea ranged from 94 percent to 376 percent of the
banks capital, making the banks technically insolvent.

4. The chaebol were also much overextended. The top five chaebol were in average of 140 businesses,
ranging from semi-conductor manufacture to shipbuilding to auto manufacturing. This was happening
during a time when most companies in the industrial world were selling off unrelated businesses and
focusing on their core competencies. Twenty five of the top 30 chaebol had debt-to-equity ratio of over 5
to 1, as noted earlier. Compare this to Toyota Motor of Japan, which had a debt-to-equity ratio in 1998 of
0.7 to 1.
During this crisis, Korea began to negotiate with the IMF for help. The IMF agreed to help, but only if
Korea raised interest rates to support its currency, reduce its budget deficits, reformed its banks,
restructured its chaebol, improved financial disclosure, devalued the currency (to stimulate export even
more), promoted exports, and restrict imports. In return for a pledge to introduce the reforms, the IMF
released funds to Korea to help it pay off its foreign debt and to keep its bank from going bankrupt. This in
turn brought in more money from foreign banks that were encouraged by Korea’s pledge to reform.
One of the IMF’s key areas was banking reform. The IMF encouraged Korea to open up its banking
sector to foreign investment, hoping that an infusion of foreign banking expertise might help the Korean
banks to make better loans. Of course, foreign banks had made a sizable number of bad loans in Asia as
well. In addition, the IMF encouraged the Korean government to pass good bankruptcy laws to allow bad
companies, including banks to fail. However, IMF hoped that Korean banking institutions would merge,
forming fewer but stronger banks. In addition, the IMF encouraged banking reforms in order to cut the
links between bankers and politics, tighten supervision and regulation of the banking industry, and
improve accounting disclosure.
Impact of the crisis on Daewoo
While the financial crisis was going on, Daewoo’s President Kim ignored the warning signs and continued
to expand. In 1998, a year when the Daewoo Group lost money, it added 14 new firms to its existing 275
subsidiaries. While Samsung and LG were cutting back Daewoo added 40 percent more debt.
Finally Korean President Kim Dae Jung had enough. He ordered the banks to stop lending to chaebol
until they come up with and began to execute a plan to sell off businesses and to focus on their core
competencies. But that didn’t stop Daewoo. TO get access to more money to feed its growth, Daewoo
issued corporate bonds. Which were purchased by Investment Trust Companies (ITCs), finance
companies associated with chaebol. The ITCs purchased nearly $20 billion in corporate bonds.
In early 1999, Daewoo announced a plan to sell off some of its business to comply with government
restructuring requirements before the government took more drastic action, such as nationalization.
However, the plans limped along until July 1999. At that point, with Korea still in deep recession, Daewoo
announced that it would go bankrupt unless its Korean creditors backed it off. It basically could not even
its service its interest payments of $500 million a month, let alone it’s principal. The government
immediately stepped in and froze Daewoo’s loans until November 1999. This shock rippled through
Korea, because nobody thought a chaebol would ever be allowed to collapse. That had never happened
before, and the close ties between government and business were such that is was never expected to

5. happen. The shock of Daewoo’s announcement negatively affected the corporate bond market, and the
ITCs came under pressure because of their huge exposure to Daewoo. Negotiations in Korea involved 60
banks, some owned by the government, others in the private sector. On September 16, 1999, Daewoo
asked its foreign creditors for a moratorium on interest payments until March 2000, so the instability
spread to the international markets.
Daewoo’s Future
By the end of 1999, Daewoo’s President Kim was left with few options to solve Daewoo’s problems. One
possibility was to dismantle Daewoo and let it have only auto related businesses. All of the other
businesses would be sold off to domestic or foreign investors, and the name would be changed to
something other than Daewoo. Another option for President Kim was to sell some of Daewoo’s auto
assets. Ford, DaimlerChrysler and General Motors showed interest, but selling Daewoo Motor, the
second largest automaker in Korea, would be a big blow to the country.
As the Korean economy began to recover in 1999, some felt that the chaebol should weather the storm
and not allow themselves to be broken up. However, President Kim Dae Jung had mandated that the
chaebol get their debt-to-equity ratios from 5 to 1 to 2 to1 by the end of 1999, and that goal seemed
impossible unless there was a huge infusion of equity capital or either a write off of debt through debt
restructuring with the banks or selling off of debt-laden business to others. Under immense pressure
caused by the debt and by accusations of fraud and embezzlement, President Kim Woo-Choong
abandoned his company and fled the country. The government separated the Daewoo subsidiaries and
worked with creditors to convert the debt into equity, to set up subsidiaries on debt workout programs and
to look for buyers.
After a year of negotiations, General Motors purchased a portion of the $1.2 billion Daewoo Motors in
April 2002for $400 million. It agreed to keep only three manufacturing plants- two in Korea and one in
Vietnam- leaving creditors scrambling to sell its other plants in Eastern Europe, Asia and the Middle East.
By mid-2202, the Korean economy was showing promising signs of recovery and reform. In 2001, the
economy grew by 3 percent and was expected to grow by 5 to 6 percent in 2002. The government has
done away with debt-based management of the large chaebol and is working to dissolve the large
conglomerates to better compete internationally. Of the top 30 chaebol that existed prior to the economic
crisis only 14 remain.
The improving economy helped General Motors make its decision to purchase Daewoo Motor, but GM is
faced with new decision: How to market Daewoo cars and reduce the $830 million of Daewoo debt.
Should GM continue selling Daewoo cars in the United States and Europe and compete with its own
brands? Without increasing its debt, will it be able to restore 37% share of the market in Korea?
Please give your answer in at least 25 words and press save and continue button.
Q1. What are the key mistakes Kim Woo-Choong made in formulating and implementing Daewoo’s
strategy and how did the economic crisis in Korea and in rest of Asia affect that strategy?

6. Q2. How would you describe Korea’s economic system before its economy was affected by the Asian
Financial crisis? What was the role of IMF in reforming the economic system in Korea?
Amity MBA Assignment C
1. Ricardian Model Assumptions
2. Which of the following is not a form of Non Tariff Barrier?
3. For a US trader a direct quote will be—
4. Which of the following is an example of depreciation of Indian Rupee?
5. A currency is said to be at a premium when—
6. Which of the following statement describes the Heckscher-Ohlin Theory?
7. “If US is capital rich and innovation increases the productivity of capital, then labor
intensive industries in US will get hurt” is--
8. Which of the following is not part of Current Account transactions of a country?
9. In an economy which out of the following is not the reasons for internal debt i.e. excess of
government expenses over revenue are—
10. Which of the following is not an underlying principle of GATT?
11. Which of the following is not an objective of NAFTA?
12. Which of the following is not a type of regional economic integration?
13. EU is an example of which type of regional economic integration?
14. Which of the following is an example of regional trade agreement among Asian Countries?
15. Which of the following is not founder member country of ASEAN?
16. GATT was formed in which year and by how many countries?
17. Which of the following is not an example of Quantitative Restriction on trade?
18. India is an example of which type of Economic System—
19. In a command economy or centrally planned economy--
20. Which of the following economic indicator is used to rank countries in terms of their individual
wealth by World Bank?
21. Dumping which is a type of non tariff barriers means—
22. Which of the following pair is wrongly matched?
23. According to Porter, which of the following factors will not help in determining the Global
Competitive Advantage of the company
24. Observation that “US exports were less capital intensive the US imports” which is the
contradiction to the HO model is known as—
25. In which type of trade agreement no duties are charged on imports from member
countries?
26. GATT stands for—
27. Which of the following was not an achievement of the Uruguay Round of negotiations?
28. Which of the following countries is not a member of ASEAN?
29. Glasnost and Perestroika were introduced by which Soviet Leader?
30. Which of the following country was first to disintegrate from Soviet Republic?
31. Which if the following country was not the member of the European Coal and Steel Community
(ECSC)?
32. Neo-mercantilist theory is different from the Mercantilist theory as neo-mercantilist theory
proposes that—
33. WTO was formed during which round of negotiations?

7. 34. Which of the following is an example of cross exchange rate?
35. How inflation and Exchange rate are related to each other?
36. External Debt is measured as—
37. What does transition to market economy means?
38. Which of the following countries is not a member of MERCOSUR?
39. What is a convertible currency?
40. Currency Speculation is done to—
We Also Provide SYNOPSIS AND PROJECT.
Contact www.kimsharma.co.in for best and lowest cost solution or
Email: amitymbaassignment@gmail.com
Call: 9971223030